UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
(Mark One)
FORM 10-K
(Mark One)
☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 20162019

or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________________ to _________________

Commission File Number 001-13646
lcii-20191231_g1.jpg
LCI INDUSTRIES
(Exact name of registrant as specified in its charter)

For the transition period from              to             
Commission file number 001-13646
Delaware
13-3250533
(Exact name of registrant as specified in its charter)

Delaware13-3250533
(State or other jurisdiction of(I.R.S. Employer
incorporation or organization)Identification Number)
3501 County Road 6 East46514
Elkhart, Indiana Indiana(Zip Code)
(Address of principal executive offices)
(574) 535-1125
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbols(s)
Name of each exchange
on which registered
Common Stock, $.01 par valueLCIINew York Stock Exchange


Securities registered pursuant to Section 12(g) of the Act:None
None



Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☐☒    No  ☒☐


Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ☐    No  ☒


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232-405232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.)    Yes  ☒    No  ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229-405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ☐


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☒         Accelerated filer ☐

Non-accelerated filer ☐ (Do not check if a smaller reporting company)         Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒


The aggregate market value of the voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold as of the last business day of the registrant’s most recently completed second fiscal quarter was $1,940,584,601.$1,663,932,960. The registrant has no non-voting common equity.


The number of shares outstanding of the registrant’s common stock, as of the latest practicable date (February 15, 2017)14, 2020), was 24,756,22925,046,413 shares.


DOCUMENTS INCORPORATED BY REFERENCE


Portions of the Proxy Statement with respect tofor the 20172020 Annual Meeting of Stockholders to be held on May 25, 2017 is21, 2020 are incorporated by reference into Items 10, 11, 12, 13 and 14Part III of Part III.this Annual Report on Form 10-K.




SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS


This Annual Report on Form 10-K 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 Stockcommon stock, the impact of legal proceedings, and other matters. Statements in this Form 10-K that are not historical facts are “forward-looking statements” for the purpose of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, and involve a number of risks and uncertainties.


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, and financial condition, whenever they occur in this Form 10-K are necessarily estimates reflecting the best judgment of the Company’s senior management at the time such statements were made. There are a number of factors, many of which are beyond the Company’s control, which could cause actual results and events to differ materially from those described in the forward-looking statements. These factors include, in addition to other matters described in this Form 10-K, pricing pressures due to domestic and foreign competition, costs and availability of, and tariffs on, raw materials (particularly steel and aluminum) and other components, seasonality and cyclicality in the industries to which we sell our products, availability of credit for financing the retail and wholesale purchase of products for which we sell our components, inventory levels of retail dealers and manufacturers, availability of transportation for products for which we sell our components, the financial condition of our customers, the financial condition of retail dealers of products for which we sell our components, retention and concentration of significant customers, the costs, pace of and successful integration of acquisitions and other growth initiatives, availability and costs of production facilities and labor, employee benefits, employee retention, realization and impact of expansion plans, efficiency improvements and cost reductions, the disruption of business resulting from natural disasters or other unforeseen events, the successful entry into new markets, the costs of compliance with environmental laws, laws of foreign jurisdictions in which we operate, other operational and financial risks related to conducting business internationally, and increased governmental regulation and oversight, information technology performance and security, the ability to protect intellectual property, warranty and product liability claims or product recalls, interest rates, oil and gasoline prices, and availability, the impact of international, national and regional economic conditions and consumer confidence on the retail sale of products for which we sell our components, and other risks and uncertainties discussed more fully under the caption “Risk Factors” in this Annual Report on Form 10-K, and in our subsequent filings with the Securities and Exchange Commission.Commission (“SEC”). Readers of this report are cautioned not to place undue reliance on these forward-looking statements, since there can be no assurance that these forward-looking statements will prove to be accurate. The Company disclaims any obligation or undertaking to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made, except as required by law.




INDUSTRY AND MARKET DATA


Certain market and industry data and forecasts included in this report were obtained from independent market research, industry publications and surveys, governmental agencies and publicly available information. Industry surveys, publications and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. We believe the data from such third-party sources to be reliable. However, we have not independently verified any of such data and cannot guarantee its accuracy or completeness. Similarly, internal market research and industry forecasts, which we believe to be reliable based upon our management’s knowledge of the market and the industry, have not been verified by any independent sources. While we are not aware of any misstatements regarding the market or industry data presented herein, our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the headings “Special Note Regarding Forward-Looking Statements,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this report.


1

LCI INDUSTRIES


TABLE OF CONTENTS






Page
PART I –
ITEM 1 - BUSINESS
6
ITEM 1A - RISK FACTORS
1112
ITEM 1B - UNRESOLVED STAFF COMMENTS
1822
ITEM 2 - PROPERTIES
1922
ITEM 3 - LEGAL PROCEEDINGS
2023
ITEM 4 - MINE SAFETY DISCLOSURES
2023
PART II –
ITEM 5 - MARKET FOR REGISTRANT'SREGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
2124
ITEM 6 - SELECTED FINANCIAL DATA
2225
ITEM 7 - MANAGEMENT'SMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
2225
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
3837
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
3938
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
72
ITEM 9A - CONTROLS AND PROCEDURES
72
ITEM 9B - OTHER INFORMATION
73
PART III –
ITEM 10 - DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
73
ITEM 11 - EXECUTIVE COMPENSATION
73


ITEM 11 - EXECUTIVE COMPENSATION
73
4

ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
73
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
7374
ITEM 14 - PRINCIPAL ACCOUNTING FEES AND SERVICES
74
PART IV –
ITEM 15 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES
74
ITEM 16 - FORM 10-K SUMMARY
77
SIGNATURES
78
EXHIBIT 23 - CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
EXHIBIT 31.1 - SECTION 302 CEO CERTIFICATION
EXHIBIT 31.2 - SECTION 302 CFO CERTIFICATION
EXHIBIT 32.1 - SECTION 906 CEO CERTIFICATION
EXHIBIT 32.2 - SECTION 906 CFO CERTIFICATION



5

PART I


Item 1. BUSINESS.


Summary
LCI Industries (“LCII” and collectively with its subsidiaries, the “Company”“Company,” the “Registrant,” “we,” “us,” or the “Registrant”“our”), through its wholly-owned subsidiary, Lippert Components, Inc. and its subsidiaries (collectively, “Lippert Components” or “LCI”), supplies, domestically and internationally, a broad array of engineered components for the leading original equipment manufacturers (“OEMs”) in the recreation and transportation product markets, consisting of recreational vehicles (“RVs”) and adjacent industries including buses; trailers used to haul boats, livestock, equipment and other cargo; trucks; pontoon boats; trains; manufactured homes; and modular housing. The Company also supplies engineered components to the related aftermarkets of these industries, primarily by selling to retail dealers, wholesale distributors, and service centers.


LCI’s products include steel chassis and related components; axles and suspension solutions; slide-out mechanisms and solutions; thermoformed bath, kitchen and other products; vinyl, aluminum and frameless windows; manual, electric and hydraulic stabilizer and leveling systems; furniture and mattresses; entry, luggage, patio, and ramp doors; electric and manual entry steps; awningsawning and awning accessories; branded towing products; truck accessories; electronic components; televisions and sound systems; navigation systems; backup cameras; appliances; and other accessories.
The Company has two reportable segments: the original equipment manufacturers segment (the “OEM Segment”) and the aftermarket segment (the “Aftermarket Segment”). The OEM Segment accounted for 92 percent of consolidated net sales for 2016, and the Aftermarket Segment accounted for 8 percent of consolidated net sales for 2016. Approximately 71 percent of the Company’s OEM Segment net sales in 2016 were of products sold to manufacturers of travel trailer and fifth-wheel RVs.
The Company is focused on profitable growth in its industries, both organic and through acquisitions. In order to support this growth, over the past several years the Company has expanded its geographic market and product lines, consolidated manufacturing facilities, and integrated manufacturing, distribution, and administrative functions. At December 31, 2016,2019, the Company operated 48over 90 manufacturing and distribution facilities located throughout the United StatesNorth America and in Canada and Italy,Europe, and reported consolidated net sales of $1.7$2.4 billion for the year ended December 31, 2016.2019.
The Company was incorporated under the laws of Delaware on March 20, 1984, and is the successor to Drew National Corporation, which was incorporated under the laws of Delaware in 1962. The Company’s principal executive and administrative offices are located at 3501 County Road 6 East, Elkhart, Indiana 46514; telephone number (574) 535-1125; website www.lci1.com; e-mail LCII@lci1.com. The Company makes available free of charge on its website its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K (and amendments to those reports) filed or furnished with the SEC as soon as reasonably practicable after such materials are electronically filed.filed or furnished.


Recent Developments


Sales and Profits

Consolidated net sales for the year ended December 31, 2016 increased to2019 were $2.4 billion, a record $1.7 billion, 20decline of 4 percent higher thanfrom the consolidated net sales for the year ended December 31, 20152018 of $1.4$2.5 billion. AcquisitionsThe decrease in year-over-year net sales reflects a continuation of lower RV wholesale shipments seen throughout the year as dealers continued to correct their inventory levels, partially offset by continued growth in the Company's adjacent industries OEM, aftermarket and international markets. Net sales from acquisitions completed by the Company in 2016 added $64over the twelve months ended December 31, 2019 contributed $93 million in net sales. A 15 percent increase in industry-wide wholesale shipments of travel trailer and fifth-wheel RVs, the Company’s primary OEM market, as well as increased content per RV unit, positively impacted net sales growth. Further, the Company organically increased sales to adjacent industries and the aftermarket. 2019.
Net income for the full-year 2016 increased to $129.72019 was $146.5 million, or $5.20$5.84 per diluted share, up fromcompared to net income of $74.3$148.6 million, or $3.02$5.83 per diluted share, in 2015.2018. Net income for 2018 included one-time non-cash charges of $0.6 million ($0.03 per diluted share) related to the impact of the Tax Cuts and Jobs Act (the “TCJA”). Excluding the estimated impact of the TCJA, adjusted net income was $149.2 million, or $5.86 per diluted share, in 2018. Adjusted net income and adjusted net income per diluted share are non-GAAP financial measures. See “Non-GAAP Measures” included in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional information regarding the Company's use of non-GAAP financial measures and reconciliations to the most directly comparable financial measures prepared in accordance with generally accepted accounting principles (“GAAP”).
In Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the Company describes in detail the increasechange in its sales and profits during 2016.2019.


6

Customer Concentrations

Thor Industries, Inc. (“Thor”), a customer of both segments, accounted for 27 percent, 31 percent, and 38 percent of the Company’s consolidated net sales for the years ended December 31, 2019, 2018, and 2017, respectively. Berkshire Hathaway Inc. (through its subsidiaries Forest River, Inc. and Clayton Homes, Inc.), a customer of both segments, accounted for 21 percent, 23 percent, and 25 percent of the Company’s consolidated net sales for the years ended December 31, 2019, 2018, and 2017, respectively. No other customer accounted for more than 10 percent of consolidated net sales in the years ended December 31, 2019, 2018, and 2017. International sales, primarily in Europe and Australia, and export sales represented approximately six percent, four percent, and two percent of consolidated net sales in 2019, 2018, and 2017, respectively.

Acquisitions

During 2016 and early 2017, the Company completed six acquisitions:


In January 2016, the Company acquired the business and certain assets of the pontoon furniture manufacturing operation of Highwater Marine, LLC (“Highwater”), a leading manufacturer of pontoon and other recreational boats located in Elkhart, Indiana. The purchase price was $10.0 million paid at closing.



In February 2016, the Company acquired the business and certain assets of Flair Interiors, Inc. (“Flair”), a manufacturer of RV furniture located in Goshen, Indiana. The purchase price was $8.1 million paid at closing.

In May 2016,2020, the Company acquired 100 percent of the equity interestinterests of Project 2000 S.r.l. (“Project 2000”Polyplastic Group B.V. (with its subsidiaries “Polyplastic”), a manufacturer of innovative, space-saving bed lifts and retractable steps, located near Florence, Italy.premier window supplier to the caravaning industry, headquartered in Rotterdam, Netherlands. The purchase price was $18.8$97.6 million, paid at closing,net of cash acquired, plus contingent consideration based on future sales by this operation. The results of the acquired business will be included primarily in the Company’s OEM Segment. The Company is in the process of determining the fair value of the assets acquired and liabilities assumed for the opening balance sheet.


During 2019, the Company completed seven acquisitions:

In November 2016, the Company acquired the business, manufacturing facility and certain assets of the seating and chassis components business of Atwood Mobile Products, LLC (“Atwood”), a subsidiary of Dometic Group, located in Elkhart, Indiana. The purchase price was $12.5 million paid at closing.

In November 2016, the Company acquired the service centers and related business of Camping Connection, Inc., an RV repair and service provider located in Myrtle Beach, South Carolina and Kissimmee, Florida. The purchase price was $2.0 million paid at closing.

In February 2017,December 2019, the Company acquired 100 percent of the outstanding sharesequity interests of Sessa Klein S.p.A. (“SessaKlein”CURT Acquisition Holdings, Inc. (with its subsidiaries, “CURT”), a leading manufacturer and distributor of branded towing products and truck accessories for the aftermarket, headquartered in Eau Claire, Wisconsin. The purchase price was $337.6 million, net of cash acquired, and is subject to potential post-closing adjustments related to net working capital.

In November 2019, the Company acquired the PWR-ARM brand and electric powered Bimini business assets of Schwintek, Inc. (“PWR-ARM”), a premier electric sunshade solution for pontoon and smaller power boats. The purchase price was $45.0 million, which includes holdback payments of $5.0 million.

In October 2019, the Company acquired substantially all of the business assets (collectively referred to under the business name “SureShade”) of Rodan Enterprises, LLC, a designer and manufacturer of highly engineered side windowsunshade systems for both high speedthe outdoor recreation industry in North America and commuter trains, located near Varese,Europe headquartered in Philadelphia, Pennsylvania. The purchase price was $14.0 million, subject to certain adjustments and a holdback of $1.4 million for indemnity matters and certain potential post-closing adjustments related to net working capital.

In August 2019, the Company acquired 100 percent of the equity interests of Ciesse Holdings S.r.l. and related entities (collectively, “Ciesse”), a supplier of railway interior products and systems, headquartered in Rignano sull’Arno, Italy. The purchase price was $8.5$5.4 million, paid at closing, plus contingent consideration basednet of cash acquired.

In August 2019, the Company acquired 100 percent of the equity interests of Lewmar Marine Ltd. and related entities (collectively, “Lewmar”), a supplier of leisure marine equipment, headquartered in Havant, United Kingdom. The purchase price was $43.2 million, net of cash acquired.

In June 2019, the Company acquired 100 percent of the equity interests of Lavet S.r.l. (“Lavet”), a manufacturer of window blind systems for European leisure vehicles, headquartered in Siena, Italy. The purchase price was $2.4 million, net of cash acquired.

In June 2019, the Company acquired 100 percent of the equity interests of Femto Engineering S.r.l. and related entities (collectively, “Femto”), an engineering company with a focus on futuredesigning and manufacturing of plastic moldings, headquartered in San Casciano, Italy. The purchase price was $6.5 million, net of cash acquired.

Diversification Strategy

The Company is executing a strategic initiative to diversify the markets it serves away from the historical concentration within the North American RV industry. The Company's goal is to have 60 percent of net sales be generated outside of the North American RV industry by this operation.the year 2022. Approximately 42 percent of net sales for the year ended December 31, 2019 were generated outside of the North American RV market.




7

Other Developments


On December 19, 2019, the Company entered into an amendment to its amended credit agreement with several banks, which provided, among other things, for an incremental term loan in the amount of $300.0 million, which the Company borrowed to fund a portion of the purchase price for the acquisition of CURT. The credit agreement was also modified to allow the Company to request an increase to the facility of up to an additional $300.0 million as an increase to the revolving credit facility or one, or more, incremental term loan facilities upon approval of the lenders and the Company receiving certain other consents. As a result of the new incremental term loan, the total borrowing capacity under the credit agreement increased from $600.0 million to $900.0 million.

In March 2016,August 2019, the Company initiated a regular quarterly dividendand Furrion Limited (“Furrion”) agreed to terminate their exclusive distribution and supply agreement effective December 31, 2019, and transition all sale and distribution of $0.30 per share, which was increased later in the year to $0.50 per share. During 2016, total dividends of $1.40 per share of common stock, representing an aggregate of $34.4 million, were paid to stockholders.

In December 2016,Furrion products then handled by the Company announced a changeto Furrion. Effective January 1, 2020, Furrion is responsible for distributing its products directly to the customer and assumed all responsibilities previously carried out by the Company relating to Furrion products. Upon termination of the Company’s corporate nameagreement, Furrion agreed to LCI Industriespurchase from Drew Industries Incorporated. Lippert Components’ business has grown considerably over the past decade,Company all non-obsolete stock and certain obsolete and slow-moving stock of Furrion products at the new corporate name was selectedcost paid by the Company. Net sales of Furrion products were $100.4 million to better align the investment community withOEM Segment and $29.0 million to the strengthAftermarket Segment in 2019. These sales will not be recurring in 2020 following the termination of the LCI brand in the industries it serves.agreement.


OEM Segment


Through its wholly-owned subsidiaries, the Company manufactures orand distributes a broad array of engineered components for the leading OEMs in the recreation and transportation product markets, consisting of RVs and adjacent industries, including buses; trailers used to haul boats, livestock, equipment and other cargo; trucks; pontoon boats; trains; manufactured homes; and modular housing.


In 2016,2019, the OEM Segment represented 9288 percent of the Company’s consolidated net sales and 9083 percent of consolidated segment operating profit. Approximately 7161 percent of the Company’s OEM Segment net sales in 20162019 were of products to manufacturers of travel trailer and fifth-wheel RVs. RVs may be motorized (motorhomes) or towable (travel trailers, fifth-wheel travel trailers, folding camping trailers and truck campers).


Raw materials used by the Company’s OEM Segment, consisting primarily of steel (coil, sheet, tube, and I-beam), extruded aluminum, glass, wood, fabric, and foam, are available from a number of sources, both domestic and foreign.


Operations of the Company’s OEM Segment consist primarily of fabricating, welding, thermoforming, painting, sewing, and assembling components into finished products. The Company’s OEM Segment operations are conducted at 48 manufacturing and warehousedistribution facilities throughout the United States,North America and in Canada and Italy,Europe, strategically located in proximity to the customers they serve. See Item 2. “Properties.”


The Company’s OEM Segment products are sold primarily to major manufacturers of RVs such as Thor Industries, Inc. (symbol: THO), Forest River, Inc. (a Berkshire Hathaway company, symbol: BRKA), Winnebago Industries, Inc. (symbol: WGO) and other RV OEMs, and to manufacturers in other adjacent industries.industries, including buses; trailers used to haul boats, livestock, equipment and other cargo; trucks; boats; trains; manufactured homes; and modular housing.


The RV industry is highly competitive, both among manufacturers of RVs and the suppliers of RV components, generally with low barriers to entry other than compliance with industry standards, codes and safety requirements, and the initial capital investment required to establish manufacturing operations. The Company competes with several other component suppliers on a regional and national basis with respect to a broad array of components for both towable and motorized RVs.The Company’s operations compete on the basis of product quality and reliability, product innovation, price, customer service, and customer satisfaction. Although definitive information is not readily available, the Company believes with respect to itsit is a leading supplier for towable RVs for the following principal RV products (i) itproducts:
● windows,● axles,
● doors,● furniture,
● chassis,● leveling systems, and
● slide-out mechanisms,● awnings.

In addition to LCI, Dexter Axle Company is thealso a leading supplier of windowsaxles and doors for towable RVs; (ii) it is the leading supplier of chassis and slide-out mechanisms


for towable RVs; (iii) the leading suppliers of axles for towable RVs are the Company and Dexter Axle Company; (iv) it is the leading supplier of furniture for towable RVs, and the Company competes with several other manufacturers; (v) the Company is the leading supplier of leveling systems for towable RVs; and (vi) the leading suppliers of awnings for towable RVs are the Company, Carefree of Colorado and Dometic Corporation.Corporation are also leading suppliers of awnings.


8

OEM Segment net sales to adjacent industries increased 7 percent from $614.6 million in 2018 to $659.6 million in 2019, or 32 percent and 27 percent of total OEM Segment net sales in 2019 and 2018, respectively. Within adjacent industries, OEM marine net sales were $167.5 million in 2019, an increase of $13.4 million compared to 2018.

The Company’s market share of the market for its products in adjacent industries cannot be readily determined; however, OEM Segment net salesthe Company continues to adjacent industries increased from $275 million in 2015 to $332 million in 2016, 21 percent of total OEM Segment net sales. The Company has mademake investments in people, technology, and equipment to increase its share of the market in adjacent industries and is committed to continueexpanding its presence in these expansion efforts.industries.


Detailed narrative information about the results of operations of the OEM Segment is included in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Financial information relating to the Company’s business segments is included in Note 14 of the Notes to Consolidated Financial Statements in Item 8 of this Report.


Aftermarket Segment


Many of the Company’s OEM Segment products are also sold through various aftermarket channels, including dealerships, warehouse distributors and service centers, as well as direct to retail customers. The Company has teams dedicated to product training and marketing support for its Aftermarket Segment customers. The Company also supports twomultiple call centers to provide quick responses to customers for both product delivery and technical support. This support is designed for a rapid response to critical repairs so customer downtime is minimized. The Aftermarket Segment also includes the sale of replacement glass and awnings to fulfill insurance claims.claims, biminis, covers, buoys, and fenders to the marine industry, and towing products and truck accessories. Many of the optional upgrades and non-critical replacements for RVs are purchased outside the normal product selling seasons, thereby causing these Aftermarket Segment sales to be counter-seasonal.


According to the Recreation Vehicle Industry Association (“RVIA”), current estimated RV ownership hadin the United States has increased to nearlyover nine million units. Additionally, as a result of a vibrant secondary market, one thirdone-third of current owners purchased their RV new while the remaining two-thirds purchased a previously owned RV. This vibrant secondary market is a key driver for the aftermarket sales, as the Company anticipates owners of previously owned RVs will likely upgrade their units as well as replace parts and accessories which have been subjected to normal wear and tear.


Aftermarket Segment net sales increased 20 percent from $103$233.2 million in 20152018 to $131$279.6 million in 2016.2019. The Company continues to make investments in people and technology to grow the Aftermarket Segment and is committed to continue these expansion efforts.


In December 2019, the Company acquired CURT, a leading manufacturer and distributor of branded towing products and truck accessories for the aftermarket. CURT maintains a robust product portfolio comprised of thousands of SKUs across various product lines, including hitches, towing electricals, ball mounts, and cargo management. CURT brands include CURT, Aries, Luverne, Retrac, and UWS. CURT's net sales were $268 million for the year ended December 31, 2019.

Detailed narrative information about the results of operations of the Aftermarket Segment is included in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Financial information relating to the Company’s business segments is included in Note 14 of the Notes to Consolidated Financial Statements in Item 8 of this Report.


Sales and Marketing


The Company’s sales activities are related to developing new customer relationships and maintaining existing customer relationships, primarily through the quality and reliability of its products, innovation, price, customer service, and customer satisfaction. As a result of the Company’s strategic decision to increase its sales to the aftermarket and adjacent industries, as well as expand into international markets, the Company has increased its annual marketing and advertising expenditures over the past few years, which were approximately $3$6.4 million, $4.1 million, and $3.2 million in 2016.2019, 2018, and 2017, respectively.


The Company has several supply agreements or other arrangements with certain of its customers that provide for prices of various products to be fixed for periods generally not in excess of eighteen months; however, in certain cases the Company has the right to renegotiate the prices on sixty-days’ notice. The Company has agreements with certain customers that indexes their pricing to select commodities. Both the OEM Segment and the Aftermarket Segment typically ship products on average within one to two weeks of receipt of orders from their customers and, as a result, neither segment has any significant backlog.


9

Capacity

In 2016, the Company’s facilities operated at an average of approximately 55 percent of their practical capacity, assuming at least two shifts of production at all facilities. However, while certain facilities could add a second shift of production in the short term, the Company has found this to be inefficient over the long term. Capacity varies significantly based on seasonal demand, as well as by facility, product line and geographic region, with certain facilities at times operating below 50 percent utilization, and other facilities at times operating above 90 percent utilization.




At December 31, 2016,2019, the Company operated 48over 90 manufacturing and distribution facilities across North America and forEurope. For most products, the Company has the ability to fill demand in excess of capacity at individual facilitiesdemand by shifting production to other facilities, but the Company would incur additional freight costs. Capital expenditures for 2016 were $45 million, and included approximately $25 million of “replacement” capital expenditures and approximately $20 million of “growth” capital expenditures.usually at an increased cost. The ability to expandadjust capacity in certain product areas if necessary, as well as the potential to reallocatethrough lean manufacturing and automation initiatives, reallocation of existing resources and/or additional capital expenditures is monitored regularly by management in an effort to help ensure the Company can maintainachieve a high level of production efficiencies throughout its operations.efficiency and return on invested capital. The Company has adequate capacity to meet projected demand. Capital expenditures for 2019 were $58 million, which included normal replacement expenditures along with $21 million in automation investments and over $24 million in capacity investments for operational improvements.


Seasonality


Most industries where the Company sells products or where its products are used historically have been seasonal and generally at the highest levels when the weather is moderate. Accordingly, the Company’s sales and profits have generally been the highest in the second quarter and lowest in the fourth quarter. However, because of fluctuations in dealer inventories, the impact of international, national, and regional economic conditions and consumer confidence on retail sales of RVsrecreation and othertransportation products for which the Company sells its components, the timing of dealer orders, as well as the impact of severe weather conditions on the timing of industry-wide shipments from time to time, current and future seasonal industry trends may be different than in prior years. Additionally, sales of certain components to the aftermarket channels of these industries tend to be counter-seasonal.


International


Over the past several years, the Company has been gradually growing international sales, primarily in Europe and Australia, and international and export sales represented approximately 2six percent, 1four percent, and 1two percent of consolidated net sales in 2016, 20152019, 2018, and 2014,2017, respectively. The Company continues to focus on developing products tailored for international RVrecreation and transportation markets. The Company participates in the largest RV shows in Europe and has been receiving positive feedback on its products, especially its proprietary slide-out products. The Company has spent more than two years developing three slide-out systems suited to the needs of the European market, which were recently featured on new RV models. As a result, the Company believes it will see additional orders from European RV OEMs. The Company’s Director of International Business Developmentinternational business development team spends time in Australia, Europe, and other international markets, assessing the dynamics of the local marketplace, building relationships with OEMs and helping the Company introduce its existing products and develop new products for those markets, with the goal of identifying long-term growth opportunities. The Company estimates the addressable market for annual net sales of its products outside of North America to be $750 million.over $1 billion. Financial information relating to certain of the Company’s international acquisitions is included in Note 3 of the Notes to Consolidated Financial Statements in Item 8 of this Report.

In May 2016, the Company acquired Project 2000 S.r.l., a manufacturer of motorized entry steps, bed lifts and RV accessories located near Florence, Italy, as a foundation for LCI in the European RV market. In February 2017, the Company also acquired Sessa Klein S.p.A., a manufacturer of highly engineered side window systems for both high speed and commuter trains located near Varese, Italy. The acquisition of Sessa Klein introduces the Company to a new adjacent industry for the European and U.S. train markets, and, the Company believes, will accelerate the opportunities to expand LCI's product offerings for the European RV market.


Intellectual Property


The Company holds over 200approximately 350 United States and foreign patents and has nearly 60approximately 100 patent applications pending that relate to various products sold by the Company. The Company has also granted certain licenses that permit third parties to manufacture and sell products in consideration for royalty payments.


From time to time, the Company has received notices or claims it may be infringing certain patent or other intellectual property rights of others, and the Company has given notices to, or asserted claims against, others that they may be infringing certain patent or other intellectual property rights of the Company. The Company believes its patents are valuable and vigorously protects its patents when appropriate.


Research and Development


The Company strives to be an industry leader in product innovation and is focused on developing new products, as well as improving existing products. Research and development expenditures are expensed as they are incurred. Research and development expenses were approximately $9$14 million, $8$16 million, and $5$14 million in 2016, 20152019, 2018, and 2014,2017, respectively.


Regulatory Matters


We are subject to numerous federal, state and local regulations governing the manufacture and sale of our products.products in the United States. Sales and manufacturing operations in foreign countries may beoutside the United States are subject to similar regulations.




Rules promulgated under the Transportation Recall Enhancement, Accountability and Documentation Act (the “Tread Act”) require manufacturers of motor vehicles and certain motor vehicle related equipment to regularly make reports and submit documents
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and certain historical data to the National Highway Traffic Safety Administration (“NHTSA”) of the United States Department of Transportation (“DOT”) to enhance motor vehicle safety, and to respond to requests for information relating to specific complaints or incidents.


Trailers produced by the Company for hauling boats, personal watercraft, snowmobiles and equipment must comply with Federal Motor Vehicle Safety Standards (“FMVSS”) promulgated by NHTSA relating to lighting, braking, wheels, tires and other vehicle systems.


Windows and doors produced by the Company for the RV industry must comply with regulations promulgated by NHTSA governing safety glass performance, egress ability, door hinge and lock systems, egress window retention hardware, and baggage door ventilation. Windows produced by the Company for buses also must comply with FMVSS promulgated by NHTSA.


Upholstered products and mattresses produced by the Company for RVs and buses must comply with FMVSS promulgated by NHTSA regarding flammability. In addition, upholstered products and mattresses produced by the Company for RVs must comply with regulations promulgated by the Consumer ProductsProduct Safety Commission regarding flammability, as well as standards for toxic chemical levels and labeling requirements promulgated by the California Office of Environmental Health Hazard Assessment. Plywood, particleboard and fiberboard used in RV products are required to comply with standards for formaldehyde emission levels promulgated by the California Air Resources Board and adopted by the RVIA.


Windows and entry doors produced by the Company for manufactured homes must comply with performance and construction regulations promulgated by the U.S. Department of Housing and Urban Development (“HUD”) and by the American Architectural Manufacturers Association relating to air and water infiltration, structural integrity, thermal performance, emergency exit conformance, and hurricane resistance. Certain of the Company’s products must also comply with the International Code Council standards, such as the IRC (International Residential Code), the IBC (International Building Code), and the IECC (International Energy Conservation Code) as well as state and local building codes. Thermoformed bath products manufactured by the Company for manufactured homes must comply with performance and construction regulations promulgated by HUD.


The Company believes it is currently operating in compliance, in all material respects, with applicable laws and regulations and has made reports and submitted information as required. The Company does not believe the expense of compliance with these laws and regulations, as currently in effect, will have a material effect on the Company's operations, financial condition or competitive position; however, there can be no assurance this trend will continue as health and safety laws, regulations or other pertinent requirements evolve.


Environmental


The Company’s operations are subject to certain federal, state and local regulatory requirements relating to the use, storage, discharge, transport and disposal of hazardous materials used during the manufacturing processes. Although the Company believes its operations have been consistent with prevailing industry standards, and are in substantial compliance with applicable environmental laws and regulations, one or more of the Company’s current or former operating sites, or adjacent sites owned by third-parties,third parties, have been affected, and may in the future be affected, by releases of hazardous materials. As a result, the Company may incur expenditures for future investigation and remediation of these sites, including in conjunction with voluntary remediation programs or third partythird-party claims. In the past, environmental compliance costs have not had, and are not expected in the future to have, a material effect on the Company’s operations or financial condition; however, there can be no assurance that this trend will continue.


Employees


The numberAs of persons employed full-time byDecember 31, 2019, the Company at December 31, 2016 was 7,654, compared to 6,576 and 6,187 at December 31, 2015 and 2014, respectively. The total at December 31, 2016 included 6,295 in manufacturing, 337 in transportation, 103 in sales, 230 in customer support and servicing, and 689 in administration.had approximately 10,500 full-time employees. None of the employees of the Company in the U.S. are subject to collective bargaining agreements.agreements, although certain international employees are covered by national labor laws. The Company believes that relations with its employees are good.



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Information About our Executive Officers


The following table sets forth our executive officers as of December 31, 2016:
2019:
NamePosition
NamePosition
Jason D. LippertChief Executive Officer and Director
Scott T. MerenessPresident
Brian M. HallChief Financial Officer
Robert A. KuhnsAndrew J. NamenyeVice President – Chief Legal Officer and Secretary
Jamie M. SchnurChief Administrative OfficerGroup President – Aftermarket
Nick C. FletcherChief Human Resources Officer


Officers are elected annually by the Board of Directors. There are no family relationships between or among any of the executive officers or Directorsdirectors of the Company. Additional information with respect to the Company’s Directorsdirectors is included in the Company’s Proxy Statement for the Annual Meeting of Stockholders to be held on May 25, 2017.21, 2020.


JASON D. LIPPERT (age 44)47) became Chief Executive Officer of the Company effective May 10, 2013, and has been Chief Executive Officer of Lippert Components since February 2003. Mr. Lippert has over 20 years of experience with LCII and its subsidiaries,the Company, and has served in a wide range of leadership positions.

SCOTT T. MERENESS (age 45) became President of the Company effective May 10, 2013, and has been President of Lippert Components since July 2010. Mr. Mereness has over 20 years of experience with LCII and its subsidiaries, and has served in a wide range of leadership positions.


BRIAN M. HALL (age 42)45) joined the Company in March 2013, and has served as Corporate Controller sincefrom June 2013 until January 2017, and has served as Chief Financial Officer of the Company since November 2016. Prior to joining the Company, he spent more than 16 years in public accounting.


ROBERT A. KUHNSANDREW J. NAMENYE (age 51)39) joined the Company in March 2013,September 2017, and has been Vice President – Chief Legal Officer and Secretary since July 2013.November 2017. Prior to joining the Company, he was held roles in senior level positions at Thor Industries, Inc. and All American Group, Inc. (f/k/a partner in the Minneapolis office of DorseyCoachmen Industries), and practiced law at Barnes & Whitney LLP, a full-service global law firm.Thornburg LLP.


JAMIE M. SCHNUR (age 45)48) became Group President – Aftermarket of the Company in October 2019. Previously, he served as Chief Administrative Officer of the Company effectivebeginning in May 2013. Mr. Schnur has over 20 years of experience with the Company, and has served in a wide range of leadership positions with Lippert Components.


NICK C. FLETCHER (age 56)59) joined the Company in February 2013 as Vice President of Human Resources. Since January 2015, he has been Chief Human Resources Officer. Prior to joining the Company, Mr. Fletcher provided consulting services and held roles in senior level positions at American Commercial Lines, Continental Tire, Wabash National, Siemens and TRW.


Other Officers

KIP A. EMENHISER (age 46) joined the Company in January 2017, and has been Vice President of Finance since September 2019 and Corporate Controller and our principal accounting officer since March 2017. Prior to joining the Company, he held various roles including Senior Vice President of Finance, Chief Accounting Officer, and Vice President and Corporate Controller at Press Ganey Associates, Inc. Mr. Emenhiser is a Certified Public Accountant.

Item 1A. RISK FACTORS.


The following risk factors should be considered carefully in addition to the other information contained in this Annual Report on Form 10-K. The risks and uncertainties described below are not the only ones we face, but represent the most significant risk factors that we believe may adversely affect the RV and other industries we supply our products to, as well as our business, operations or financial position. The risks and uncertainties discussed in this report are not exclusive and other risk factors that we may consider immaterial or do not anticipate may emerge as significant risks and uncertainties.


Industry Risk Factors


Economic and business factors beyond our control, including cyclicality and seasonality in the industries where we sell our products, could lead to fluctuations in our operating results.


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The RV, recreational boat and other markets where we sell many of our products or where our products are used, have been characterized by cycles of growth and contraction in consumer demand, often because the purchase of such products areis viewed as a consumer discretionary purchase. Periods of economic recession have adversely affected, and could again adversely affect, our operating results. Companies in these industries are subject to volatility in production levels, shipments, sales, and operating results due to changes in external factors such as general economic conditions, including credit availability, consumer

confidence, employment rates, prevailing interest rates, inflation, fuel prices, and other economic conditions affecting consumer demand and discretionary consumer spending, as well as demographic and political changes, all of which are beyond our control. Consequently, our operating results for any prior period may not be indicative of results for any future period.


Additionally, manufacturing operations in most of the industries where we sell our products or where our products are used historically have been seasonal. However, because of fluctuations in dealer inventories, the impact of international, national, and regional economic conditions and consumer confidence on retail sales of products which include our components, and other factors, current and future seasonal industry trends may be different than in prior years. Unusually severe weather conditions in some geographic areas may also, from time to time, impact the timing of industry-wide shipments from one period to another.


Reductions in the availability of wholesale financing limits the inventories carried by retail dealers of RVs and other products which use our components, which would cause reduced production by our customers, and therefore reduced demand for our products.


Retail dealers of RVs and other products which use our components generally finance their purchases of inventory with financing known as floor-plan financing provided by lending institutions. A dealer’s ability to obtain financing is significantly affected by the number of lending institutions offering floor planning,floor-plan financing, and by an institution’s lending limits, which are beyond our control. Reduction in the availability of floor-plan financing has in the past caused, and would in the future again likely cause, many dealers to reduce inventories, which would result in reduced production by OEMs, and consequently resultingresult in reduced demand for our products. Moreover, dealers which are unable to obtain adequate financing could cease operations. Their remaining inventories would likely be sold at discounts, disrupting the market. Such sales have historically caused a decline in orders for new inventory, which reduced demand for our products.products, and which could recur in the future.


Conditions in the credit market could limit the ability of consumers to obtain retail financing for RVs and other products which use our components, resulting in reduced demand for our products.


Retail consumers who purchase RVs and other products which use our components generally obtain retail financing from third partythird-party lenders. The availability, terms, and cost of retail financing depend on the lending practices of financial institutions, governmental policies, and economic and other conditions, all of which are beyond our control. Restrictions on the availability of consumer financing and increases in the costs of such financing have in the past limited, and could again limit, the ability of consumers to purchase such discretionary products, which would result in reduced production of such products by our customers, and therefore reduce demand for our products.


Excess inventories at dealers and manufacturers can cause a decline in the demand for our products.


Dealers and manufacturers could accumulate unsold inventory. High levels of unsold inventory have in the past caused, and would cause, a reduction in orders, which would likely cause a decline in demand for our products.


Gasoline shortages, or high prices for gasoline, could lead to reduced demand for our products.


Fuel shortages, and substantial increases in the price of fuel, have had an adverse effect on the RV industry as a whole in the past, and could again in the future. Travel trailer and fifth-wheel RVs, components for which represented approximately 7161 percent of our OEM Segment net sales in 2016,2019, are usually towed by light trucks or SUVs. Generally, these vehicles use more fuel than automobiles, particularly while towing RVs or other trailers. High prices for gasoline, or anticipation of potential fuel shortages, can affect consumer use and purchase of light trucks and SUVs, which could result in reduced demand for travel trailer and fifth-wheel RVs, and therefore reduced demand for our products.


Company-Specific Risk Factors


A significant percentage of our sales are concentrated in the RV industry, and declines in industry-wide wholesale shipments of travel trailer and fifth-wheel RVs could reduce demand for our products and adversely impact our operating results and financial condition.


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In 2016,2019, the OEM Segment represented 9288 percent of our consolidated net sales, and 9083 percent of consolidated segment operating profit. Approximately 7161 percent of our OEM Segment net sales in 20162019 were of products to manufacturers of travel trailer and fifth-wheel RVs. While we measure our OEM Segment sales against industry-wide wholesale shipment statistics, the underlying health of the RV industry is determined by retail demand. Retail sales of RVs historically have been closely tied to general economic conditions, as well as consumer confidence which was above historical averages in 2016.confidence. Declines in industry-

wideindustry-wide wholesale shipments of travel trailer and fifth-wheel RVs could reduce demand for our products and adversely affect our operating results and financial condition.


Although we have a large number of customers, theThe loss of any key customer, accounting for more than 10 percent of our consolidated net salesor a significant reduction in purchases by such customers, could have aan adverse material adverse impact on our operating results.


Two customers of both the OEM Segment and the Aftermarket Segment accounted for 6348 percent of our consolidated net sales in 2016.2019. The loss of either of these customers or other significant customers, or a substantial reduction in sales to any such customer, would have aan adverse material adverse impact on our operating results and financial condition. In addition, we generally do not have long-term agreements with our customers and cannot predict that we will maintain our current relationships with these customers or that we will continue to supply them at current levels.


Volatile raw material costs could adversely impact our financial condition and operating results.


The prices we pay for steelSteel and aluminum represented approximately 45 percent and 15 percent, respectively, of our raw material costs in 2016. These,2019. The prices of these, and other key raw materials, have historically been volatile and can fluctuate dramatically with changes in the global demand and supply for such products.


Because competition and business conditions may limit the amount or timing of increases in raw material costs that can be passed through to our customers in the form of sales price increases, future increases in raw material costs could adversely impact our financial condition and operating results. Conversely, as raw material costs decline, we may not be able to maintain selling prices consistent with higher cost raw materials in our inventory, which could adversely affect our operating results.


Inadequate or interrupted supply of raw materials or components used to make our products could adversely impact our financial condition and operating results.


Our business depends on our ability to source raw materials, such as steel, aluminum, glass, wood, fabric and foam, and certain components such as electric motors, televisions and appliances, in a timely and cost efficient manner. Most materials and components are readily available from a variety of sources. However, a few key components are currently produced by only a small group of quality suppliers that have the capacity to supply large quantities. If raw materials or components that are used in manufacturing our products or for which we act as a distributor, particularly those which we import, become unavailable, or if the supply of these raw materials and components is interrupted or delayed, our manufacturing and distribution operations could be adversely affected. We currently import,affected, which could adversely impact our financial condition and operating results.

In 2019, we imported, or purchasepurchased from suppliers who import,imported, approximately 2530 percent of our raw materials and components. Additionally, we have the exclusive right to distribute Furrion’s complete line of electronics and appliance products to OEMs and aftermarket customers in the RV, specialty vehicle, utility trailer, horse trailer, marine, transit bus and school bus industries throughout the United States and Canada, which products are imported from China. Consequently, we rely on the free flow of goods through open and operational ports and on a consistent basis for a significant portion of our raw materials and components. Adverse political conditions, trade embargoes, increased tariffs or import duties, inclement weather, natural disasters, epidemics, public health crises, war, terrorism or labor disputes at various ports or otherwise adversely impacting our suppliers create significant risks for our business, particularly if these conditions or disputes result in work slowdowns, lockouts, strikes, facilities closures, supply chain interruptions, or other disruptions, and could have an adverse impact on our operating results if we are unable to fulfill customer orders or are required to accumulate excess inventory or find alternate sources of supply, if available, at higher costs.


We import a portion of our raw materials and the components we sell, and the effect of foreign exchange rates could adversely affect our operating results.


We negotiate for the purchase of a significant portion of raw materials and semi-finished components with suppliers that are not located in the United States. As such, the prices we pay in part are dependent upon the rate of exchange for USU.S. Dollars versus the currency of the local supplier. A dramatic weakening of the USU.S. Dollar could increase our cost of goods soldsales, and such cost increases may not be offset through price increases for our products, adversely impacting our margins.


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Changes in consumer preferences relating to our products, or the inability to develop innovative new products, could cause reduced sales.


Changes in consumer preferences for RV, manufactured housing and recreational boat models, and for the components we make for such products, occur over time. Our inability to anticipate changes in consumer preferences for such products, or delays in responding to such changes, could reduce demand for our products and adversely affect our net sales and operating results. Similarly, we believe our ability to remain competitive also depends on our ability to develop innovative new products or enhancedenhance features of existing products. Delays in the introduction or market acceptance of new products or product features could have an adverse effect on our net sales and operating results.


Competitive pressures could reduce demand for our products or impact our sales prices.


The industries in which we are engaged are highly competitive and generally characterized by low barriers to entry, and we have numerous existing and potential competitors. Competition is based primarily upon product quality and reliability, product innovation, price, customer service, and customer satisfaction.

Competitive pressures have, from time to time, resulted in a reduction of our profit margins and/or reduction in our market share. Domestic and foreign competitors may lower prices on products which currently compete with our products, or develop product improvements, which could reduce demand for our products or cause us to reduce prices for our products. Sustained increases in these competitive pressures could have aan adverse material adverse effect on our results of operations. In addition, the manufacture by our customers themselves of products supplied by us could reduce demand for our products and adversely affect our operating results and financial condition.


Increases in demand could result in difficulty obtaining additional skilled labor, and available capacity may initially not be utilized efficiently.


In certain geographic regions in which we have a larger concentration of manufacturing facilities, we have experienced, and could again experience, shortages of qualified employees. Competition for skilled workers, especially during improving economic times, may increase the cost of our labor and create employee retention and recruitment challenges, as employees with knowledge and experience have the ability to change employers relatively easily. If such conditions become extreme, we may not be able to increase production to timely satisfy demand, and may initially incur higher labor and production costs, which could adversely impact our operating results and financial condition.


We may incur unexpected expenses, or face unanticipated delays and other obstacles, in connection with expansion plans or investments we make in our business, which could adversely impact our operating results.


It may take longer than initially anticipated for us to realize expected results from investments in research and development or acquired businesses, as well as initiatives we have implemented to increase capacity and improve production efficiencies, automation, customer service and other aspects of our business, or we may incur unexpected expenses in connection with these matters. Expansion plans may involve the acquisition of existing manufacturing facilities that require upgrades and improvements or the need to build new manufacturing facilities. Such activities may be delayed or incur unanticipated costs which could have an adverse effect on our operating results. Similarly, competition for desirable production facilities, especially during times of increasing production, may increase the cost of acquiring production facilities or limit the availability of obtaining such facilities. In addition, the start-up of operations in new facilities may incur unanticipated costs and inefficiencies which may adversely affect our profitability during the ramp up of production in those facilities. Delays in the construction, re-configuration or relocation of facilities could result in an adverse impact to our operating results or a loss of market share.


In addition, to the extent our expansion plans involve acquisitions or joint ventures, we may not be able to successfully identify suitable acquisition or joint venture opportunities or complete any acquisition, combination, joint venture, or other transaction on acceptable terms. Our identification of suitable acquisition candidates and joint venture opportunities and the integration of acquired business operations involve risks inherent in assessing the values, strengths, weaknesses, risks, and profitability of these opportunities, as well as significant financial, management and related resources that would otherwise be used for the ongoing development of our existing operations and internal expansion.

Natural disasters, whether or not caused by climate change, unusual weather conditions, epidemic outbreaks, terrorist acts, and political events could disrupt our business and result in lower sales and otherwise adversely affect our financial performance.


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Our facilities may be affected by natural disasters, such as tornadoes, hurricanes, fires, floods, earthquakes, and unusual weather conditions, as well as other external events such as epidemic outbreaks, terrorist attacks, or disruptive political events, any one of which could adversely affect our business and result in lower sales. In the event that one of our manufacturing or distribution facilities was affected by a disaster or other event, we could be forced to shift production to one of our other facilities, which we may not be able to do effectively or at all, or to cease operations. Although we maintain insurance for damage to our property and disruption of our business from casualties, such insurance may not be sufficient to cover all of our potential losses. Any disruption in our manufacturing capacity could have an adverse impact on our ability to produce sufficient inventory of our products or may require us to incur additional expenses in order to produce sufficient inventory, and therefore, may adversely affect our net sales and operating results. Any disruption or delay at our manufacturing or distribution facilities or customer service centers could impair our ability to meet the demands of our customers, and our customers may cancel orders with us or purchase products from our competitors, which could adversely affect our business and operating results.


Further, as a result of pandemic outbreaks, including the recent outbreak of respiratory illness caused by a novel coronavirus first identified in China, businesses can be shut down, supply chains can be interrupted, slowed or rendered inoperable and individuals can become ill, quarantined or otherwise unable to work and/or travel due to health reasons or governmental restrictions. Such outbreaks could result in the operations of our third-party manufacturers and suppliers being disrupted or suspended, or could interfere with our supply chain, which could have an adverse effect on our business. See also the risk factor “Inadequate or interrupted supply of raw materials or components used to make our products could adversely impact our financial condition and operating results.” In addition, a significant outbreak of contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could affect demand for our products and likely impact our operating results.

We have recently entered new markets in orderan effort to enhance our growth potential. Uncertaintiespotential, and uncertainties with respect to these new markets could impact our operating results.


We are a leading supplier of components for RVs and currently have a significant share of the market for certain of our products, which limits ourOur ability to expand our market share for those products.our products that are used as components for RVs is limited. We have made investments in orderan effort to expand the sale of our products in adjacent industries, such as buses, trucks, pontoon boats and trains, where we may have less familiarity with OEM or consumer preferences and could encounter difficulties in attracting customers due to a reduced level of familiarity with our brands. We have also made investments to expand the sale of our products in the aftermarket of our industries, and are

exploring opportunities to increase export sales of our products to international markets. These investments involve significant resources, put a strain on our administrative, operational, and financial capabilities and carry a risk of failure. Limited operating experience or limited brand recognition in new markets may limit our business expansion strategy. Lack of demand for our products in these markets or competitive pressures requiring us to lower prices for our products could adversely impact our business growth in these markets and our results of operations.


As we grow, we will face the risk that our existing resources and systems, including management resources, accounting and finance personnel and operating systems, may be inadequate to support our growth. We cannot assure you that we will be able to retain the personnel or make the changes in our systems that may be required to support our growth. Failure to secure these resources and implement these systems on a timely basis could have an adverse effect on our results of operations. In addition, hiring additional personnel and implementing changes and enhancements to our systems will require capital expenditures and other increased costs that could also have an adverse impact on our results of operations.

If acquired businesses are not successfully integrated into our operations, our financial condition and operating results could be adversely impacted.


We have completed several business acquisitions and may continue to engage in acquisitions or similar activities, such as joint ventures and other business transactions. Our ability to grow through acquisitions will depend, in part, on the availability of suitable candidates at acceptable prices, terms, and conditions, our ability to compete effectively for acquisition candidates, and the availability of capital and personnel to complete such acquisitions and run the acquired business effectively. Such acquisitions, joint ventures and other business transactions involve potential risks, including:
•the failure to successfully integrate personnel, departments and systems, including IT and accounting systems, technologies, books and records, and procedures,procedures;
•the need for additional investments post-acquisition that could be greater than anticipated,anticipated;
•the assumption of liabilities of the acquired businesses that could be greater than anticipated,anticipated;
•incorrect estimates made in the accounting for acquisitions, incurrence of non-recurring charges, and write-off of significant amounts of goodwill or other assets that could adversely affect our operating results,results;
•unforeseen difficulties related to entering geographic regions or industries in which we do not have prior experience; and
•the potential loss of key employees or existing customers or adverse effects on existing business relationships with suppliers and customers.
Integrating acquired operations is a significant challenge and there is no assurance that we will be able to manage the integrations successfully. If we are unable to efficiently integrate these businesses, the attention of our management could be
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diverted from our existing operations and the ability of the management teams at these business units to meet operational and financial expectations could be adversely impacted, which could impair our ability to execute our business plans. Failure to successfully integrate acquired operations or to realize the expected benefits of such acquisitions may have an adverse impact on our results of operations and financial condition.


As we expand our business internationally, we will beare subject to new operational and financial risks.


We have been gradually growing sales overseas primarily in Europe and Australia, and export sales represented approximately 2 percent, 1 percent and 1 percent of consolidated net sales in 2016, 2015 and 2014, respectively. We plan to continue pursuing international opportunities. In May 2016, we acquired Project 2000 S.r.l., a manufacturerNine of motorized entry steps, bed liftsour acquisitions since 2017 are headquartered in Europe or have international operations and RV accessories, located near Florence, Italy, as a foundation for LCI in the European RV market. In February 2017, we also acquired Sessa Klein S.p.A., a manufacturer of highly engineered side window systems for both high speed and commuter trains, located near Varese, Italy. The acquisition of Sessa Klein introduces us to a new adjacent industry for the European and U.S. train markets, and, we believe, will accelerate the opportunities to expand our product offerings for the European RV market.customers.


BusinessConducting business outside of the United States is subject to various risks, many of which are beyond our control, including:
•adverse political and economic conditions; changes in
•trade protection measures, including tariffs, trade restrictions, trade agreements, and taxation;
•difficulties in managing or overseeing foreign operations and agents;
•differences in regulatory environments, including complex data privacy and labor relations laws, as well as differences in labor practices and market practices;
•cultural and linguistic differences;
•foreign currency fluctuations and fluctuations;
•limitations on the repatriation of funds because of foreign exchange controls;
•different liability standards;
•potentially longer payment cycles;
•different credit risks;
•different technology risks;
•the uncertainty surrounding the implementation and effects of Brexit;
•political, social and economic instability and uncertainty, including sovereign debt issues; and
•intellectual property laws of countries which do not protect our rights in our intellectual property to the same extent as the laws of the United States.

The occurrence or consequences of any of these factors may have an adverse impact on our operating results and financial condition, as well as impact our ability to operate in international markets.


The loss of key management could reduce our ability to execute our business strategy and could adversely affect our business and results of operations.



We are dependent on the knowledge, experience, and skill of our leadership team. The loss of the services of one or more key managers or the failure to attract or retain qualified managerial, technical, sales and marketing, operations and customer service staff could impair our ability to conduct and manage our business and execute our business strategy, which would have an adverse effect on our business, financial condition and results of operations.


Our business is subject to numerous international, federal, state and local regulations, and increased costs of compliance, failure in our compliance efforts, or events beyond our control could result in damages, expenses, or liabilities that could adversely impact our financial condition and operating results.
We are subject to numerous federal, state and local regulations governing the manufacture and sale of our products, including regulations and standards promulgated by the National Highway Traffic Safety Administration (“NHTSA”)NHTSA of the United States Department of Transportation (“DOT”),DOT, the Consumer Products Safety Commission, the United States Department of Housing and Urban Development (“HUD”),HUD, and consumer safety standards promulgated by state regulatory agencies and industry associations. The failure to comply with present or future regulations and standards could subject us to lawsuits, administrative penalties, and civil remedies, including fines, injunctions, and recalls of our products. Sales and manufacturing operations in foreign countries may be subject to similar regulations. Any major recalls of our products, voluntary or involuntary, could adversely impact our reputation, net sales, financial condition and operating results. Changes in laws or regulations that impose additional regulatory requirements on us could increase our cost of doing business or restrict our actions, causing our results of operations to be adversely affected. In addition, ourOur failure to comply with present or future regulations and standards could result in fines, penalties, recalls, or injunctions being imposed on us, administrative penalties, potential civil and criminal liability, suspension of sales or production, or cessation of operations.


Further, certain other U.S. and foreign laws and regulations affect our activities. Areas of our business affected by such laws and regulations include, but are not limited to, labor, advertising, consumer protection, quality of services, warranty, product liability, real estate, intellectual property, tax, import and export duties, tariffs, competition, environmental, and health and safety. We are also subject to compliance with the U.S. Foreign Corrupt Practices Act (“FCPA”), and other anti-corruption and anti-bribery laws applicable to our operations. Compliance with these laws and others may be onerous and costly, at times, and may
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be inconsistent from jurisdiction to jurisdiction, which further complicates compliance efforts. Violations of these laws and regulations could lead to significant penalties, including restraints on our export or import privileges, monetary fines, criminal proceedings and regulatory or other actions that could adversely affect our results of operations. We have instituted various policies and procedures to ensure compliance. However, we cannot assure you that our employees, contractors, vendors or our agents will not violate such laws and regulations or our policies and procedures.procedures related to compliance.


In addition, potentially significant expenditures could be required in order to comply with evolving healthcare, health and safety laws, regulations or other pertinent requirements that may be adopted or imposed in the future by governmental authorities. Our operating profit margin in 2016 was impacted by higher health insurance costs, largely due to increased employee participation, which we believe is largely due to the new healthcare requirements, and operating profit will likely continue to be impacted in future periods.


Our risk management policies and procedures may not be fully effective in achieving their purposes.


Our policies, procedures, controls and oversight to monitor and manage our enterprise risks may not be fully effective in achieving their purpose and may leave exposure to identified or unidentified risks. Past or future misconduct by our employees, contractors, vendors, or vendorsagents could result in violations of law by us, regulatory sanctions and/or serious reputational harm or financial harm. We monitor our policies, procedures and controls; however, we cannot assure you that our policies, procedures, and controls will be sufficient to prevent all forms of misconduct. We review our compensation policies and practices as part of our overall enterprise risk management program, but it is possible that our compensation policies could incentivize inappropriate risk taking or misconduct. If such inappropriate risks or misconduct occurs, it is possible that it could have an adverse effect on our results of operations and/or our financial condition.


Our operations are subject to certain environmental laws and regulations, and costs of compliance, investigation, or remediation of environmental conditions could have an adverse effect on our business and results of operations.


Our operations are also subject to certain complex federal, state and local environmental laws and regulations relating to air, water, and noise pollution and the use, storage, discharge and disposal of hazardous materials used during the manufacturing processes. Under certain of these laws, namely the Comprehensive Environmental Response, Compensation, and Liability Act and its state counterparts, liability for investigation and remediation of hazardous substance contamination at currently or formerly owned or operated facilities or at third-party waste disposal sites is joint and several. Our failureFailure to comply with these regulations could cause us to become subject to fines and penalties or otherwise have an adverse impact on our business. Although we believe that our operations and facilities have been and are being operated in compliance, in all material respects, with such laws and

regulations, one or more of our current or former operating sites, or adjacent sites owned by third-parties, have been affected, and may in the future be affected, by releases of hazardous materials. As a result, we may incur expenditures for future investigation and remediation, including in conjunction with voluntary remediation programs or third partythird-party claims. If other potentially responsible persons (“PRPs”) are unable or otherwise not obligated to contribute to remediation costs, we could be held responsible for their portion of the remediation costs, and those costs could be material. The operation of our manufacturing facilities entails risks, and we cannot assure you that our costs in relation to these environmental matters or compliance with environmental laws in general will not have an adverse effect on our business and results of operations.
We may not be able to protect our intellectual property and may be subject to infringement claims.

We rely on certain trademarks, patents and patents,other intellectual property rights, including contractual rights with third parties. Our success depends, in part, on our ability to protect our intellectual property against dilution, infringement, and competitive pressure by defending our intellectual property rights. To protect our property rights, weWe rely on intellectual property laws of the U.S., European Union, Canada, and other countries, as well as contractual and other legal rights, for the protection of our property rights. However, we cannot assure you that these measures will be successful in any given instance, particularly in countries outside the U.S. We endeavor to protect our rights; however,or that third parties maywill not infringe upon our intellectual property rights. We may be forced to take steps to protect our rights, including through litigation. Thislitigation, which could result in a significant expenditure of funds and a diversion of resources. The inability to protect our intellectual property rights could result in competitors manufacturing and marketing similar products which could adversely affect our market share and results of operations. Competitors may challenge, invalidate, or avoid the application of our existing or future intellectual property rights that we receive or license. We
From time to time, we receive notices or claims that we may also be subject to claims by third parties, seeking to enforce their claimedinfringing certain patent or other intellectual property rights. The lossrights of protection for ourothers. While it is not possible to predict the outcome of patent and other intellectual property litigation, such litigation could result in our payment of significant monetary damages and/or royalty payments, negatively impact our ability to sell current or future products, reduce the market value of our products and services, lower our profits, and could otherwise have an adverse effect on our business, financial condition or results of operation. From time to time, we also face claims of misappropriation by a third party that believes we or our employees have inappropriately obtained and used trade secrets or other confidential information of such third parties. Claims that we have misappropriated the trade secrets or other confidential

18

information of third parties could result in our payment of significant monetary damages, and we could be prevented from further using such trade secrets or confidential information, limiting our ability to develop our products, any of which may have an adverse effect on our business, financial condition, results of operations, and prospects.

Compliance with conflict mineral disclosure requirements will createcreates additional compliance cost and may create reputational challenges.


The SEC adopted rules pursuant to Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act setting forth new disclosure requirements concerning the use or potential use of certain minerals, deemed conflict minerals (tantalum, tin, gold and tungsten), that are mined from the Democratic Republic of Congo and adjoining countries. These requirements necessitate due diligence efforts on our part to assess whether such minerals are used in our products in order to make the relevant required annual disclosures that began in May 2014. We have incurred costs and diverted internal resources to comply with these disclosure requirements, including for diligence to determine the sources of those minerals that may be used in or necessary to the production of our products. Compliance costs are expected to continue in future periods, subject to any regulatory changes implemented by the newcurrent administration in Washington, D.C. Further action or clarification from the SEC or a court regarding required disclosures could result in reputational challenges that could impact future sales if we determine that certain of our products contain minerals not determined to be conflict free or if we are unable to sufficiently verify the origins for all conflict minerals used in our products and are required to make such disclosures.


If our information technology systems fail to perform adequately or are breached, our operations could be disrupted and it could adversely affect our business, reputation and results of operationoperations.
The efficient operation of our business depends on our information technology systems. We rely on our information technology systems to effectively manage our business data, inventory, supply chain, order entry and fulfillment, manufacturing, distribution, warranty administration, invoicing, collection of payments, and other business processes. We use information systems to report and support the audit of our operational and financial results. Additionally, we rely upon information systems in our sales, marketing, human resources, and communication efforts. The failure of our information technology systems to perform as we anticipate could disrupt our business and could result in transaction errors, processing inefficiencies, and the loss of sales and customers, causing our business and results of operations to suffer.
In addition, our information technology systems may be vulnerable to damage, interruption or interruptionunauthorized access from circumstances beyond our control, including fire, natural disasters, security breaches, telecommunications failures, computer viruses, hackers, phishing attempts, cyber-attacks, ransomware and other malware, payment fraud, and other manipulation or improper use of our systems. Any such events could result in legal claims or proceedings, liability or penalties under privacy laws, disruption in operations, and damage to our reputation, which could adversely affect our business. Due to our reliance on our information systems, we have established various levels of security, backup and disaster recovery procedures. Further, we have selected and have begunbeen implementing a new enterprise resource planning (“ERP”) system, the full implementation of which is expected to take several years; however, there may be other challenges and risks as we upgrade and standardize our ERP system on a company-wide basis.
Cyber-attacks, such as those involving the deployment of malware, are increasing in frequency, sophistication, and intensity and have become increasingly difficult to detect. We have an information security team that deploys the latest firewalls and constantly monitors and continually updates our security protections to mitigate these risks, but despite these ongoing efforts, we cannot assure you that they will be effective or will work as designed. If we fail to maintain or protect our information systems and data integrity effectively, we could: lose existing customers; have difficulty attracting new customers; suffer outages or disruptions in our operations or supply chains; have difficulty preventing, detecting, and controlling fraud; have disputes with customers and suppliers; have regulatory sanctions or penalties imposed; incur increased operating expenses; incur expenses or lose revenues as a result of a data privacy breach; or suffer other adverse consequences.
If we fail to comply with data privacy and security laws and regulations, we could face substantial penalties and our business, operations, and financial condition could be adversely affected.
We are subject to various data privacy and security laws and regulations. A number of U.S. states have enacted data privacy and security laws and regulations that govern the collection, use, disclosure, transfer, storage, disposal, and protection of personal information, such as social security numbers, financial information and other information. For example, several U.S. territories and all 50 states now have data breach laws that require timely notification to individuals, and at times regulators, the media or credit reporting agencies, if a company has experienced the unauthorized access or acquisition of personal information. Other state laws include the California Consumer Privacy Act (the “CCPA”), which largely took effect on January 1, 2020. The CCPA, among other things, contains new disclosure obligations for businesses that collect personal information about California residents and affords those individuals numerous rights relating to their personal information that
19

may affect our ability to use personal information or share it with our business partners. Other states have considered and/or enacted privacy laws like the CCPA. We will continue to monitor and assess the impact of these state laws, which may impose substantial penalties for violations, impose significant costs for investigations and compliance, allow private class-action litigation and carry significant potential liability for our business.
Outside of the U.S., data protection laws, including the EU General Data Protection Regulation (the “GDPR”), also apply to some of our operations in [the countries in which we provide services to our customers]. Legal requirements in these countries relating to the collection, storage, processing and transfer of personal data continue to evolve. The GDPR imposes, among other things, data protection requirements that include strict obligations and restrictions on the ability to collect, analyze and transfer EU personal data, a requirement for prompt notice of data breaches to data subjects and supervisory authorities in certain circumstances, and possible substantial fines for any violations (including possible fines for certain violations of up to the greater of 20 million Euros or 4% of total worldwide annual revenue). Governmental authorities around the world have enacted similar types of legislative and regulatory requirements concerning data protection, and additional governments are considering similar legal frameworks.
The interpretation and enforcement of the laws and regulations described above are uncertain and subject to change, and may require substantial costs to monitor and implement compliance with those or any additional requirements. Failure to comply with U.S. and international data protection laws and regulations could result in government enforcement actions (which could include substantial civil and/or criminal penalties), private litigation and/or adverse publicity and could negatively affect our operating results and business.
Additionally, because we accept debit and credit cards for payment, we are subject to the Payment Card Industry Data Security Standard (the “PCI Standard”), issued by the Payment Card Industry Security Standards Council. The PCI Standard contains compliance guidelines with regard to our security surrounding the physical and electronic storage, processing, and

transmission of cardholder data. Complying with the PCI Standard and implementing related procedures, technology, and information security measures requires significant resources and ongoing attention. Costs and potential problems and interruptions associated with the implementation of new or upgraded systems and technology such as those necessary to maintain compliance with the PCI Standard or with maintenance or adequate support of existing systems could also disrupt or reduce the efficiency of our operations. Any material interruptions or failures in our payment-related systems could have an adverse effect on our business, financial condition and results of operations.

We could incur warranty claims in excess of reserves.


We receive warranty claims from our customers in the ordinary course of our business. Although we maintain reserves for such claims, which to date have been adequate, there can be no assurance that warranty expense levels will remain at current levels or that such reserves will continue to be adequate. A significant increase in warranty claims exceeding our current warranty expense levels could have an adverse effect on our results of operations and financial condition.


In addition to the costs associated with the contractual warranty coverage provided on our products, we also occasionally incur costs as a result of additional service actions not covered by our warranties, including product recalls and customer satisfaction actions. Although we estimate and reserve for the cost of these service actions, there can be no assurance that expense levels will remain at current levels or such reserves will continue to be adequate.


We may be subject to product liability claims if people or property are harmed by the products we sell.


Some of the products we sell may expose us to product liability claims relating to personal injury, death, or property damage, and may require product recalls or other actions. Although we maintain liability and product recall insurance, we cannot be certain that our coverage will be adequate for liabilities actually incurred or that insurance will continue to be available to us on economically reasonable terms, or at all. In addition, even if a product liability claim is not successful or is not fully pursued, the negative publicity surrounding a product recall or any assertion that our products caused property damage or personal injury could damage our brand identity and our reputation with existing and potential consumers and have an adverse effect on our business, financial condition and results of operations.


We could incur asset impairment charges for goodwill, intangible assets or other long-lived assets.


A portion of our total assets as of December 31, 2016 are2019 was comprised of goodwill, intangible assets and other long-lived assets. At least annually, we review goodwill for impairment. Long-lived assets, identifiable intangible assets and goodwill are also reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable from future cash flows. These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition, sale or disposition of a significant portion of the
20

business, or other factors. If the carrying value of a long-lived asset is considered impaired, an impairment charge is recorded for the amount by which the carrying value of the long-lived asset exceeds its fair value. Our determination of future cash flows, future recoverability, and fair value of our long-lived assets includes significant estimates and assumptions. Changes in those estimates or assumptions or lower than anticipated future financial performance may result in the identification of an impaired asset and a non-cash impairment charge, which could be material. Any such charge could adversely affect our operating results and financial condition.


We may become more leveraged.

Financing for our investments is typically provided through a combination of currently available cash and cash equivalents, term loans, and use of our revolving credit facility. The incurrence of indebtedness may cause us to become more leveraged, which could (1) require us to dedicate a greater portion of our cash flow to the payment of debt service, (2) make us more vulnerable to a downturn in the economy, (3) limit our ability to obtain additional financing, or (4) negatively affect our outlook by one or more of our lenders.

We are subject to covenants in our debt agreements that may restrict or limit our operations and acquisitions and our failure to comply with the covenants in our debt agreements could have an adverse material impact on our business, results of operations and financial condition.

Our debt agreements contain various covenants, restrictions, and events of default. Among other things, these provisions require us to maintain certain financial ratios, including a maximum net leverage ratio and a minimum debt service coverage ratio, and impose certain limits on our ability to incur indebtedness, create liens, and make investments or acquisitions. Breaches of these covenants could result in defaults under the instruments governing the applicable indebtedness, which may permit the lenders under these debt agreements to exercise remedies. These defaults could have an adverse material impact on our business, results of operations and financial condition.

An increase in interest rates could adversely impact our financial condition, results of operations and cash flows.

Our financial condition, results of operations and cash flows could be significantly affected by changes in interest rates and actions taken by the Federal Reserve or changes in the London Interbank Offered Rate (“LIBOR”) or its replacement. Future increases in market interest rates would increase our interest expense. Borrowings under our Amended Credit Agreement currently bear interest at variable rates based on either an Alternate Base Rate or an Adjusted LIBOR plus, in each case, an applicable margin. In July 2017, the U.K. Financial Conduct Authority announced that, after the end of 2021, it would no longer persuade or compel contributing banks to make rate submissions to the ICE Benchmark Administration (together with any successor to the ICE Benchmark Administrator, the “IBA”) for purposes of the IBA setting the LIBOR. As a result, it is possible that commencing in 2022, the LIBOR may no longer be available or may no longer be deemed an appropriate reference rate upon which to determine the interest rate on eurocurrency loans. While our Amended Credit Agreement provides a mechanism for determining an alternative rate of interest in the event that LIBOR is no longer available, any such alternative, successor, or replacement rate may not be similar to, or produce the same value or economic equivalence of, LIBOR or have the same volume or liquidity as did LIBOR prior to its discontinuance or unavailability, which may increase our overall interest expense. In addition, there can be no assurance that we will be able to reach an agreement with the administrative agent for our lenders on any such replacement benchmark before experiencing adverse effects due to changes in interest rates, if at all. We will continue to monitor the situation and address the potential reference rate changes in future debt obligations that we may incur.

Although we currently pay regular quarterly dividends on our common stock, we cannot assure you that we will continue to pay a regular quarterly dividend.

In March 2016, our Board of Directors approved the commencement of a dividend program under which we have paid regular quarterly cash dividends to holders of our common stock. Our ability to pay dividends, and our Board of Directors’ determination to maintain our current dividend policy, will depend on a number of factors, including:
•the state of our business, competition, and changes in our industry;
•changes in the factors, assumptions, and other considerations made by our Board of Directors in reviewing and revising our dividend policy;
•our future results of operations, financial condition, liquidity needs, and capital resources;
•limitations in our debt agreements; and
•our various expected cash needs, including cash interest and principal payments on our indebtedness, capital expenditures, the purchase price of acquisitions, and taxes.
21

Each of the factors listed above could negatively affect our ability to pay dividends in accordance with our dividend policy or at all. In addition, our Board of Directors may elect to suspend or alter the current dividend policy at any time.

Although we have initiated a stock repurchase program, we cannot assure you that we will continue to repurchase shares or that we will repurchase shares at favorable prices.

In October 2018, our Board of Directors authorized a stock repurchase program granting the Company authority to repurchase up to $150.0 million of the Company’s common stock over a three-year period. The amount and timing of share repurchases are subject to capital availability and our determination that share repurchases are in the best interest of our shareholders. In addition, any share repurchases must comply with all respective laws and any agreements applicable to the repurchase of shares, including our debt agreements. Our ability to repurchase shares will depend upon, among other factors, our cash balances and potential future capital requirements for strategic investments, our results of operations, our financial condition, and other factors beyond our control that we may deem relevant. A reduction in repurchases, or the completion of our stock repurchase program, could have a negative impact on our stock price. Additionally, we can provide no assurance that we will repurchase shares at favorable prices, if at all.

Our stock price may be volatile.


The price of our common stock may fluctuate widely, depending upon a number of factors, many of which are beyond our control. These factors include:
•the perceived prospects of our business and our industries as a whole;
•differences between our actual financial and operating results and those expected by investors and analysts;
•changes in analysts’ recommendations or projections;
•changes affecting the availability of financing in the wholesale and consumer lending markets;
•actions or announcements by competitors;
•changes in laws and regulations affecting our business;
•the regulatory environment in which we operate; gain or loss of significant customers;
•significant sales of shares by a principal stockholder;
•activity under our stock repurchase program;
•changes in key personnel;
•actions taken by stockholders that may be contrary to our Board of DirectorDirectors’ recommendations; and
•changes in general economic or market conditions.
In addition, stock markets generally experience significant price and volume volatility from time to time, which may adversely affect the market price of our common stock for reasons unrelated to our performance.


Item 1B. UNRESOLVED STAFF COMMENTS.


None.




Item 2. PROPERTIES.


The Company’s manufacturing operations are conducted at facilities that are used for both manufacturing and warehousing.distribution. Many of the properties listed manufacture and warehouse products sold through both the OEM Segment and Aftermarket Segment. Square footageSegment and are included in the OEM Segment in the table below. The Company believes that substantially all of its properties are in generally good condition and there is not allocated across the segments.sufficient capacity to meet current and projected manufacturing and distribution requirements. In addition, the Company maintains administrative facilities used for corporate and administrative functions. The Company’s primary administrative offices are located in Elkhart and Goshen,Mishawaka, Indiana. Total administrative space company-widecompany-
22

wide aggregates approximately 251,000500,000 square feet. At December 31, 2016,2019, the Company’s properties were as follows:
CityState/ProvinceSquare FeetOwnedLeased
Double SpringsAlabama109,000
☑
GilbertArizona11,600
☑
RialtoCalifornia62,700
☑
LakelandFlorida15,000
☑
KissimmeeFlorida4,246
☑
FitzgeraldGeorgia79,000
☑
NampaIdaho125,000
☑
NampaIdaho83,500
☑
NampaIdaho22,000
☑
Twin FallsIdaho16,060
☑
GoshenIndiana410,000
☑
South BendIndiana379,902
☑
GoshenIndiana355,960
☑
GoshenIndiana341,000
☑
ElkhartIndiana308,864
☑
ElkhartIndiana250,000
☑
ElkhartIndiana160,000
☑
GoshenIndiana153,200
☑
GoshenIndiana144,500
☑
Fort WayneIndiana140,000
☑
MiddleburyIndiana122,226
☑
AuburnIndiana119,000
☑
GoshenIndiana118,125
☑
GoshenIndiana110,000
☑
ElkhartIndiana102,900
☑
MiddleburyIndiana101,776
☑
GoshenIndiana95,960
☑
ElkhartIndiana92,000
☑
GoshenIndiana87,800
☑
ElkhartIndiana87,000
☑
GoshenIndiana74,200
☑
HoweIndiana60,000
☑
GoshenIndiana53,500
☑
ElkhartIndiana28,000
☑
GoshenIndiana22,000
☑
ElkhartIndiana18,000
☑
MillersburgIndiana10,000
☑
CalenzanoItaly15,000
☑
Sterling HeightsMichigan37,018
☑


CityState/ProvinceSquare FeetOwnedLeased
Jackson CenterOhio12,000
☑
PendletonOregon56,800
☑
McMinnvilleOregon35,700
☑
DenverPennsylvania40,200
☑
GranbyQuebec65,000
☑
ChesterSouth Carolina108,600
☑
GaffneySouth Carolina55,000
☑
Myrtle BeachSouth Carolina9,800
☑
SpringfieldTennessee60,000
☑
WaxahachieTexas195,000
☑
KaysvilleUtah70,000
☑
5,234,137
(1)
____________________________
(1)At December 31, 2015, the Company used an aggregate of 4,791,182 square feet for manufacturing and warehousing.

At December 31, 2016, the Company maintainedkey property holdings are summarized in the following facilities, or partial facilities, not currently used in production. The Elkhart property lease expires in May 2017table:
SegmentTypeNorth America FacilitiesEurope FacilitiesTotal Facilities*Owned Facilities
OEM
Manufacturing (a)
53146734
Other (b)
125174
Aftermarket
Manufacturing (a)
2—2—
Other (b)
19—191
Total861910539

(a)  Includes multi-activity sites which are predominately manufacturing
(b) Includes engineering, administrative, and the remaining properties are currently leased to third parties.distribution locations
(*) Excludes three unutilized facilities

CityState/ProvinceSquare FeetOwnedLeased
PhoenixArizona61,000
☑
MishawakaIndiana332,356
☑
ElkhartIndiana144,000
☑
South BendIndiana134,235
☑
MishawakaIndiana107,600
☑
779,191

Item 3. LEGAL PROCEEDINGS.


In the normal course of business, the Company is subject to proceedings, lawsuits, regulatory agency inquiries, and other claims. All such matters are subject to uncertainties and outcomes that are not predictable with assurance. While these matters could materially affect operating results when resolved in future periods, it is management’s opinionmanagement believes that, after final disposition, including anticipated insurance recoveries in certain cases, any monetary liability or financial impact to the Company beyond that provided for in the Consolidated Balance Sheet as of December 31, 2016,2019, would not be material to the Company’s financial position or annual results of operations.


Item 4. MINE SAFETY DISCLOSURES.


Not applicable.


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PART II


Item 5. MARKET FOR REGISTRANT'SREGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.


Market and Stockholders

As of January 31, 2017,February 14, 2020, there were 343274 holders of the Company’s common stock, in addition to beneficial owners of shares held in broker and nominee names. The Company’s common stock trades on the New York Stock Exchange under the symbol “LCII”.


Information concerningThe table and related information required for the high and low closing prices ofEquity Compensation Plan is incorporated by reference from the information contained under the caption “Equity Compensation Plan Information” in the Company’s common stock for each quarter during 20162020 Proxy Statement.

Dividends and 2015 is set forth inShare Repurchases

See Note 1612 - Stockholders’ Equity of the Notes to Consolidated Financial Statements in(Part II, Item 8 of this Report.

Equity Compensation Plan Information as ofForm 10-K) for further discussion regarding dividends and share repurchases. There were no share repurchases for the year ended December 31, 2016:2019.

Plan category
Number of securities
to be issued upon
exercise of outstanding
options, warrants
and rights
 
 
Weighted average
exercise price of outstanding options, warrants and rights
 
 
 
 
Number of securities
remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
 (a)(b)(c)
Equity compensation plans approved by security holders765,949$0.601,049,752
Equity compensation plans not approved by security holdersN/AN/AN/A
Total765,949$0.601,049,752

Pursuant to the LCI Industries Equity Award and Incentive Plan, As Amended and Restated (the “Plan”), which was approved by stockholders in May 2011, the Company may grant to its directors, employees, and consultants equity-based awards, such as stock options, restricted stock and deferred stock units. The number of shares available for granting awards under the Plan was 1,049,752 at December 31, 2016, and 1,305,440 at December 31, 2015. The Plan is the Company’s only equity compensation plan.

In each of 2014 and 2015, the Company paid a special cash dividend of $2.00 per share to holders of record of its common stock. In 2016, the Company initiated athe payment of regular quarterly dividend of $0.30 per share, which was increased later in the year to $0.50 per share. During 2016, total dividends of $1.40 per share of common stock, representing an aggregate of $34.4 million, were paid to stockholders.

dividends. Future dividend policy with respect to the common stock will be determined by the Board of Directors of the Company in light of prevailing financial needs and earnings of the Company and other relevant factors. The Company’s dividend policy is not subject to specific restrictionsfactors, including any limitations in its financingour debt agreements, but rather is limited bysuch as maintenance of certain of the debt covenant calculations.financial ratios.



24

Item 6. SELECTED FINANCIAL DATA.


The following table summarizes certain selected historical financial and operating information of the Company and is derived from the Company’s Consolidated Financial Statements. Historical financial data may not be indicative of the Company’s future performance. The information set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements and Notes thereto included in Item 7 and Item 8 of this Report, respectively.
Year Ended December 31,
(In thousands, except per share amounts)20192018201720162015
Operating Data:
Net sales$2,371,482  $2,475,807  $2,147,770  $1,678,898  $1,403,066  
Operating profit200,210  198,788  214,281  200,850  116,254  
Income before income taxes191,414  192,352  212,844  199,172  114,369  
Provision for income taxes(1)
44,905  43,801  79,960  69,501  40,024  
Net income(1)
146,509  148,551  132,884  129,671  74,345  
Net income per common share:
Basic(1)
$5.86  $5.90  $5.31  $5.26  $3.06  
Diluted(1)
5.84  5.83  5.24  5.20  3.02  
Cash dividends per common share$2.55  $2.35  $2.05  $1.40  $2.00  
Financial Data:
Net working capital$399,533  $349,069  $235,066  $218,043  $146,964  
Total assets1,862,595  1,243,893  945,858  786,904  622,856  
Long-term obligations(2)
790,665  360,056  111,100  87,284  85,419  
Stockholders’ equity800,672  706,255  652,745  550,269  438,575  

(1) Amounts include a one-time non-cash charge of $0.6 million ($0.03 per diluted share) and $13.2 million ($0.52 per diluted share) related to the impact of the TCJA for the years ended December 31, 2018 and 2017, respectively. See “Provision for Income Taxes” and “Non-GAAP Measures” included in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further information related to the impact of the TCJA and for additional information regarding the Company’s use of non-GAAP financial measures and reconciliations to the most directly comparable GAAP financial measures.

(2) Long-term obligations at December 31, 2019 include $79.8 million of operating lease obligations following the Company's adoption of ASC 842 - Leases on January 1, 2019.

  Year Ended December 31,
(In thousands, except per share amounts) 2016 2015 2014 2013 2012
           
Operating Data:          
Net sales $1,678,898
 $1,403,066
 $1,190,782
 $1,015,576
 $901,123
Severance $—
 $3,716
 $—
 $—
 $—
Sale of extrusion assets $—
 $—
 $1,954
 $—
 $—
Executive succession $—
 $—
 $—
 $1,876
 $1,456
Operating profit $200,850
 $116,254
 $95,487
 $78,298
 $58,132
Income before income taxes $199,172
 $114,369
 $95,057
 $77,947
 $57,802
Provision for income taxes $69,501
 $40,024
 $32,791
 $27,828
 $20,462
Net income $129,671
 $74,345
 $62,266
 $50,119
 $37,340
           
Net income per common share:          
Basic $5.26
 $3.06
 $2.60
 $2.15
 $1.66
Diluted $5.20
 $3.02
 $2.56
 $2.11
 $1.64
           
Cash dividends per common share $1.40
 $2.00
 $2.00
 $—
 $2.00
           
Financial Data:          
Net working capital $218,043
 $146,964
 $100,451
 $107,339
 $84,243
Total assets $786,904
 $622,856
 $543,841
 $453,184
 $373,868
Long-term obligations $87,284
 $85,419
 $41,758
 $21,380
 $19,843
Stockholders’ equity $550,269
 $438,575
 $394,898
 $313,613
 $284,245

Item 7. MANAGEMENT'SMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.


This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Company’s Consolidated Financial Statements and Notes thereto included in Item 8 of this Report.


LCI Industries (“LCII”, and collectively with its subsidiaries, the “Company”),The Company, through its wholly-owned subsidiary, Lippert Components, Inc. and its subsidiaries (collectively, “Lippert Components” or “LCI”),LCI, supplies, domestically and internationally, a broad array of engineered components for the leading original equipment manufacturers (“OEMs”)OEMs in the recreation and transportation product markets, consisting of recreational vehicles (“RVs”)RVs and adjacent industries including buses; trailers used to haul boats, livestock, equipment and other cargo; trucks; pontoon boats; trains; manufactured homes; and modular housing. The Company also supplies engineered components to the related aftermarkets of these industries, primarily by selling to retail dealers, wholesale distributors, and service centers.


The Company previously hadhas two reportable segments, the recreational vehicle products segment (the “RV Segment”) and the manufactured housing products segment (the “MH Segment”). The Company has recently increased its focus on the significant opportunities in the aftermarket for its products, primarily sales to retail dealers, wholesale distributors and service centers. Additionally, over the past several years, sales of components for manufactured homes have become a smaller part of the Company’s business, largely due to the growth the Company has experienced with respect to its components sold to customers for traditional recreational vehicles as well as the expanded use of its components in other non-RV applications, which we refer to as adjacent industries. Unit growth for MH Segment products has also been lower over the last decade, primarily due to the real estate, credit and economic environment, including the availability of site built homes at stable prices and high interest rate spreads between conventional mortgages for site-built homes and loans for manufactured homes. In response to these changes in


the Company’s business, subsequent to March 31, 2016, the Company modified its internal reporting structure, reflecting a change in how its chief operating decision maker (“CODM”) assesses the performance of the Company’s operating results and makes decisions about resource allocations. The Company’s new reportable segments are the OEM Segment and the Aftermarket Segment. Intersegment sales are insignificant. At December 31, 2016,2019, the Company operated 48over 90 manufacturing and distribution facilities located throughout the United StatesNorth America and in Canada and Italy.Europe.


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Net sales and operating profit were as follows for the years ended December 31:
(In thousands)201920182017
Net sales:
OEM Segment:
RV OEMs:
Travel trailers and fifth-wheels$1,276,718  $1,440,730  $1,405,983  
Motorhomes155,623  187,297  159,417  
Adjacent Industries OEMs659,560  614,589  411,223  
Total OEM Segment net sales2,091,901  2,242,616  1,976,623  
Aftermarket Segment:
Total Aftermarket Segment net sales279,581  233,191  171,147  
Total net sales$2,371,482  $2,475,807  $2,147,770  
Operating profit:
OEM Segment$165,290  $167,459  $190,276  
Aftermarket Segment34,920  31,329  24,005  
Total operating profit$200,210  $198,788  $214,281  
(In thousands)2016 2015 2014
Net sales:     
OEM Segment:     
RV OEMs:     
Travel trailers and fifth-wheels$1,099,882
 $938,787
 $841,497
Motorhomes116,191
 86,513
 70,332
Adjacent industries OEMs332,018
 274,760
 215,197
Total OEM Segment net sales1,548,091
 1,300,060
 1,127,026
Aftermarket Segment:     
Total Aftermarket Segment net sales130,807
 103,006
 63,756
Total net sales$1,678,898
 $1,403,066
 $1,190,782
      
Operating profit:     
OEM Segment$180,850
 $105,224
 $88,744
Aftermarket Segment20,000
 14,746
 8,697
Total segment operating profit200,850
 119,970
 97,441
Severance—
 (3,716) —
Sale of extrusion assets—
 —
 (1,954)
Total operating profit$200,850
 $116,254
 $95,487


Corporate expenses are allocated between the segments based upon net sales. Accretion related to contingent consideration is included in the segment to which it relates.


Net sales and operating profit by segment, as a percent of the total, were as follows for the years ended December 31:
201920182017
Net sales:
OEM Segment88%  91%  92%  
Aftermarket Segment12%  9%  8%  
Total net sales100%  100%  100%  
Operating Profit:
OEM Segment83%  84%  89%  
Aftermarket Segment17%  16%  11%  
Total segment operating profit100%  100%  100%  
 2016 2015 2014
Net sales:     
OEM Segment92% 93% 95%
Aftermarket Segment8% 7% 5%
Total net sales100% 100% 100%
      
Operating Profit:     
OEM Segment90% 88% 91%
Aftermarket Segment10% 12% 9%
Total segment operating profit100% 100% 100%


Operating profit margin by segment was as follows for the years ended December 31:
201920182017
OEM Segment7.9%  7.5%  9.6%  
Aftermarket Segment12.5%  13.4%  14.0%  
 2016 2015 2014
OEM Segment11.7% 8.1% 7.9%
Aftermarket Segment15.3% 14.3% 13.6%


The Company’s OEM Segment manufactures orand distributes a broad array of engineered components for the leading OEMs of RVs and adjacent industries, including buses; trailers used to haul boats, livestock, equipment and other cargo; trucks; pontoon boats; trains; manufactured homes; and modular housing. Approximately 7161 percent of the Company’s OEM Segment net sales for the year ended December 31, 20162019 were of components for travel trailer and fifth-wheel RVs, including:


● Steel chassis and related components● FurnitureEntry, luggage, patio and mattressesramp doors
● Axles and suspension solutions● Furniture and mattresses
● Slide-out mechanisms and solutions● Electric and manual entry steps
● Slide-out mechanisms and solutions● Awnings and awning accessories
● Thermoformed bath, kitchen and other products● Electronic componentsAwnings and awning accessories
● Vinyl, aluminum and frameless windows● AppliancesElectronic components
● Manual, electric and hydraulic stabilizer and 

   leveling systems		● Televisions, sound systems, navigation 
   systems and backup cameras
● Entry, luggage, patio and ramp doors● Other accessories


The Aftermarket Segment supplies many of these components to the related aftermarket channels of the RV and adjacent industries, primarily to retail dealers, wholesale distributors, and service centers. The Aftermarket Segment also
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includes the sale of replacement glass and awnings to fulfill insurance claims.

Most industries where the Company sells products or where its products are used historically have been seasonalclaims, biminis, covers, buoys, and are generally at the highest levels when the weather is moderate. Accordingly, the Company’s sales and profits have generally been the highest in the second quarter and lowest in the fourth quarter. However, because of fluctuations in dealer inventories, the impact of international, national and regional economic conditions and consumer confidence on retail sales of RVs and other products for which the Company sells its components, the timing of dealer orders, and the impact of severe weather conditions on the timing of industry-wide shipments from time to time, current and future seasonal industry trends may be different than in prior years. Additionally, sales of componentsfenders to the aftermarket channelsmarine industry, and towing products and truck accessories.

Diversification Strategy

The Company is executing a strategic initiative to diversify the markets it serves away from the historical concentration within the North American RV industry. The Company's goal is to have 60 percent of these industries tend tonet sales be counter-seasonal.generated outside of the North American RV industry by the year 2022. Approximately 42 percent of net sales for the year ended December 31, 2019 were generated outside of the North American RV market.


INDUSTRY BACKGROUND


OEM Segment


North American Recreational Vehicle Industry


An RV is a vehicle designed as temporary living quarters for recreational, camping, travel or seasonal use. RVs may be motorized (motorhomes) or towable (travel trailers, fifth-wheel travel trailers, folding camping trailers and truck campers).
The annual sales cycle for the RV industry generally starts in October after the “Open House” in Elkhart, Indiana where many of the largest RV OEMs display product to RV retail dealers and ends after the conclusion of the summer selling season in September in the following calendar year. Between October and March, industry-wide wholesale shipments of travel trailer and fifth-wheel RVs have historically exceeded retail sales as dealers build inventories to support anticipated sales. Between April and September, the spring and summer selling seasons, retail sales of travel trailer and fifth-wheel RVs have historically exceeded industry-wide wholesale shipments. Based onAlthough 2019 saw a disruption of wholesale shipments as dealers attempted to normalize their inventory levels, the strength ofCompany expects wholesale and retail sales and the current outlook from several RV OEMs and their dealer networks, most industry analysts continuevolumes to report that RV dealer inventory ismore closely align in line with anticipated retail demand.2020.
According to the Recreation Vehicle Industry Association (“RVIA”),RVIA, industry-wide wholesale shipments from the United States of travel trailer and fifth-wheel RVs in 2016,2019, the Company’s primary RV market, increased 15decreased 16 percent to 362,700349,500 units, compared to 2015, as2018. The decrease was a result of:
Anof an estimated 33,300 unit increase28,800 units, or seven percent, decrease in retail demandsales in 2016, or 11 percent,2019, as compared to 2015. In addition,2018, and an effort to normalize retail inventories as evidenced by RV dealers decreasing inventory levels by an estimated 45,100 units for 2019, compared to a decrease in inventory levels of 8,300 units in 2018. Retail demand is typically revised upward in subsequent months, primarily due to delayed RV registrations.
RV dealers increasing inventory levels by an estimated 12,300 units in 2016, compared to the decrease in inventory levels of 2,700 units in 2015.

While the Company measures its OEM Segment RV sales against industry-wide wholesale shipment statistics, the underlying health of the RV industry is determined by retail demand. A comparison of the number of units and the year-over-year percentage change in industry-wide wholesale shipments and retail sales of travel trailers and fifth-wheel RVs, as reported by Statistical Surveys, Inc., as well as the resulting estimated change in dealer inventories, for both the United States and Canada, is as follows:

WholesaleRetail
Estimated Unit
Impact on
Dealer Inventories
UnitsChangeUnitsChange
Year ended December 31, 2019349,500  (16)% 394,600  (7)% (45,100) 
Year ended December 31, 2018415,100  (3)% 423,400  6%  (8,300) 
Year ended December 31, 2017429,500  15%  401,200  11%  28,300  

 Wholesale Retail 
Estimated Unit
Impact on
Dealer
 Units Change Units Change Inventories
Year ended December 31, 2016362,700
 15% 350,400 11% 12,300
Year ended December 31, 2015314,400
 5% 317,100 14% (2,700)
Year ended December 31, 2014298,900
 12% 277,300 11% 21,600


According to the RVIA, industry-wide wholesale shipments of motorhome RVs in 2016 increased 162019 decreased 19 percent to 54,80046,700 units compared to 2015.2018. Retail demand for motorhome RVs also increased 11decreased 13 percent in 2016,2019, following a 15one percent increasedecrease in retail demand in 2015.2018.
The RVIA has projected a modest increasedecrease in industry-wide wholesale shipments of travel trailer and fifth-wheel RVs for 2017.2020. Several RV OEMs, however, are introducing new product lines and additional features, and adding production capacity.features. Retail sales of RVs historically have been closely tied to general economic conditions, as well as consumer confidence, which was above historical averages in 2016. Additionally, retail sales of travel trailer and fifth-wheel RVs have increased in 84 of the last 86 months on a year-over-year basis.2019. Industry resources report strong attendance and high consumer interest at RV shows around the United States and Canada in late 2016 and into early 2017.2020, thus far.
Although future retail demand is inherently uncertain, RV industry fundamentals in 2016, including generally low unemployment, low fuel prices and available credit for dealers and RV consumers, were strong, as evidenced by the estimated 11 percent increase in industry-wide retail sales of travel trailer and fifth-wheel RVs. The Company believes the strong RV industry fundamentals, aided by product innovation, demographic tailwinds, industry promotion and the advent of stronger dealer networks, are positive signs for 2017. The Company also remains confident in its ability to exceed industry growth rates through new product introductions, market share gains, aftermarket sales, acquisitions and ongoing investments in research and development, engineering, quality and customer service.
Over the long term, the Company expects RV industry sales to be aided by positive demographics and the continued popularity of the “RV Lifestyle”. The number of consumers between the ages of 55 and 70 are projected to total 56 million by 2020,
27 percent higher than in 2010, according to U.S. Census figures, and one in ten vehicle-owning households between the ages of 50 and 64 own at least one RV. The RVIA reported much of the success of the RV industry has been driven by the Baby Boomer generation. The size of that generation is beginning to wane, and younger generations, Generation X and Millennials are becoming more relevant to future industry growth. Generation X and Millennials are more diverse, requiring new and creative marketing approaches to attract them to the RV industry. The RVIA has an advertising campaign promoting the “RV Lifestyle” targeted at both parents aged 30 - 49 with children at home, as well as couples aged 50 - 64 with no children at home. In addition, the RV OEMs have developed more entry level units, specifically targeting younger families, in both towables and motorhomes. The popularity of traveling in RVs to NASCAR and other sporting events, more family-oriented domestic vacations, and using RVs as second homes, are trends that could continue to motivate consumer demand for RVs. RVIA studies indicate RV vacations cost significantly less than other forms of vacation travel, even when factoring in fuel prices and the cost of RV ownership. More details can be found at www.RVIA.org.


Adjacent Industries


The Company’s portfolio of products used in RVs can also be used in other applications, including buses; trailers used to haul boats, livestock, equipment and other cargo; trucks; pontoon boats; trains; manufactured homes; and modular housing (collectively, “Adjacent Industries”). In many cases, OEM customers of the Adjacent Industries are affiliated with RV OEMs through related subsidiaries. The Company believes there are significant opportunities in these Adjacent Industries and, as a result, fourfive of the last sixseven 2019 business acquisitions completed by the Company were focused in Adjacent Industries.


The estimated potential content per unit the Company may supply to the Adjacent Industries varies by OEM product and differs from RVs. As a means to understand the potential of each of these markets, management reviews the number of retail units sold. The following are key target markets for Adjacent Industries component sales:


•Enclosed trailers. According to Statistical Surveys, approximately 176,000, 184,000208,400, 217,500, and 174,000210,200 enclosed trailers were sold in 2016, 20152019, 2018, and 2014,2017, respectively.
Pontoon•Traditional power boats. Statistical Surveys also reported approximately 44,800, 41,300282,500, 210,500, and 38,500203,200 traditional power boats were sold in 2019, 2018, and 2017, respectively. Traditional power boats include bass, deck, jet, pontoon, ski-wake, and other boats. Included in this total, Statistical Surveys reported approximately 57,100, 58,600, and 55,000 pontoon boats were sold in 2016, 20152019, 2018, and 2014,2017, respectively.


•School buses. According to Wards Communications and R.L. Polk & Co.,School Bus Fleet, there were approximately 32,800, 29,600 and 28,20044,400 school buses sold in 2016, 2015each of 2019, 2018, and 2014, respectively.2017.
•Manufactured housing. According to the Institute for Building Technology and Safety, there were approximately 81,100, 70,50094,600, 96,600, and 64,30092,900 manufactured home wholesale shipments in 2016, 20152019, 2018, and 2014,2017, respectively.


Aftermarket Segment


Many of the Company’s OEM Segment products are also sold through various aftermarket channels, including dealerships, warehousewholesale distributors, and service centers, as well as direct to retail customers.customers via the Internet. This includes discretionary accessories and replacement service parts. The Company has teams dedicated to product technical and installation training andas well as marketing support for its Aftermarket Segment customers. The Company also supports twomultiple call centers to provide quick responses to customers for both product delivery and technical support. This support is designed for a rapid response to critical repairs, so customer downtime is minimized. The Aftermarket Segment also includes the sale of replacement glass and awnings to fulfill insurance claims.claims, biminis, covers, buoys, and fenders to the marine industry, and towing products and truck accessories. Many of the optional upgrades and non-critical replacements for RVs are purchased outside the normal product selling seasons, thereby causing certain Aftermarket Segment sales to be counter-seasonal.


According to the RVIA, current estimated RV ownership hadin the United States has increased to nearlyover nine million units. Additionally, as a result of a vibrant secondary market, one thirdone-third of current owners purchased their RV new while the remaining two-thirds purchased a previously owned RV. This vibrant secondary market is a key driver for the aftermarket sales, as the Company anticipates owners of previously owned RVs will likely upgrade their units as well as replace parts and accessories which have been subjected to normal wear and tear.


RESULTS OF OPERATIONS


Year Ended December 31, 20162019 Compared to Year Ended December 31, 20152018


Consolidated Highlights


•Consolidated net sales for the full-year 2019 were $2.4 billion, four percent lower than consolidated net sales for the full-year 2018 of $2.5 billion. The decrease in year-over-year net sales reflects a continuation of lower RV wholesale shipments seen throughout the year as dealers continued to correct their inventory levels, partially offset by continued growth in the Company's adjacent industries OEM, aftermarket and international markets. Net sales from acquisitions completed by the Company contributed $93.0 million in 2019.
•Net income for the full-year 2019 decreased to $146.5 million, down from net income of $148.6 million in 2018, while earnings per share increased to $5.84 per diluted share for 2019 compared to $5.83 per diluted share in 2018. Net income for 2018 included one-time non-cash charges of $0.6 million ($0.03 per diluted share), related to the impact of the TCJA. Excluding the estimated impact of the TCJA, adjusted net income was $149.2 million, or $5.86 per diluted share, in 2018. Adjusted net income and adjusted net income per diluted share are non-GAAP
28

financial measures. See “Non-GAAP Measures” for additional information regarding the Company’s use of non-GAAP financial measures and a reconciliation to the most directly comparable GAAP financial measures.
•Consolidated operating profit during 2019 increased one percent, to $200.2 million from $198.8 million in 2018. Operating profit margin increased to 8.4 percent in 2019 from 8.0 percent in 2018.
•The cost of aluminum and steel used in certain of the Company’s manufactured components continued to decrease in 2019 from peak costs during the second and third quarter of 2018 and have favorably impacted margins while being offset, in part, by contractual reductions in customer selling prices that are indexed to select commodities. Raw material costs continue to fluctuate and are expected to remain volatile.
•Labor costs were favorable in 2019 as the Company seeks to continuously manage its labor cost while supporting the operations of the business. Lean manufacturing teams continue working to reduce cost and implement processes to better utilize manufacturing capacity. The Company has also reduced direct labor attrition, which improves efficiency and reduces other costs associated with workforce turnover.
•The effective tax rate of 23.5 percent for the full-year 2019 was higher than the prior year, primarily due to a year-over-year reduction in the excess tax benefits related to the vesting of equity-based compensation awards, as discussed below under “Provision for Income Taxes.”
•In 2019, the Company paid quarterly dividends aggregating $2.55 per share, or $63.8 million.

OEM Segment

Net sales of the OEM Segment in 2019 decreased 7 percent, or $150.7 million, compared to 2018. Net sales of components to OEMs were to the following markets for the years ended December 31:
(In thousands)20192018Change
RV OEMs:
Travel trailers and fifth-wheels$1,276,718  $1,440,730  (11)% 
Motorhomes155,623  187,297  (17)% 
Adjacent Industries OEMs659,560  614,589  7%  
Total OEM Segment net sales$2,091,901  $2,242,616  (7)% 

According to the RVIA, industry-wide wholesale shipments for the years ended December 31, were:
20192018Change
Travel trailer and fifth-wheel RVs349,500  415,100  (16)% 
Motorhomes46,700  57,600  (19)% 

The trend in the Company’s average product content per RV produced is an indicator of the Company’s overall market share of components for new RVs. The Company’s average product content per type of RV, calculated based upon the Company’s net sales of components to domestic RV OEMs for the different types of RVs produced for the twelve months ended December 31, divided by the industry-wide wholesale shipments of the different product mix of RVs for the same period, was:
Content per:20192018Change
Travel trailer and fifth-wheel RV$3,618  $3,449  5%  
Motorhome$2,364  $2,491  (5)% 

The Company’s average product content per type of RV excludes international sales and sales to the Aftermarket Segment and Adjacent Industries. Content per RV is impacted by market share gains, acquisitions, new product introductions, and changes in selling prices for the Company’s products, as well as changes in the types of RVs produced industry-wide.
The Company’s decrease in net sales to RV OEMs of travel trailers, fifth-wheel, and motorhome components during 2019 related to declines in industry-wide wholesale unit shipments. The net sales decrease was partially offset by pricing changes of targeted products and content gains in travel trailers and fifth-wheels during 2019. Motorized content was impacted by a continued market shift to smaller units in 2019.

The Company’s net sales to Adjacent Industries OEMs increased during 2019, primarily due to acquisitions completed in 2019 and market share gains. OEM marine net sales were $167.5 million in 2019, an increase of $13.4 million compared to 2018, primarily due to acquisitions completed in 2019 and 2018. The Company continues to believe there are significant opportunities in Adjacent Industries.

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Operating profit of the OEM Segment was $165.3 million in 2019, a decrease of $2.2 million compared to 2018. The operating profit margin of the OEM Segment increased to 7.9 percent in 2019 compared to 7.5 percent in 2018 and was positively impacted by:
•Pricing changes of targeted products, resulting in an increase to net sales of $40.0 million in 2019 compared to 2018.
•Investments over the past several years to improve operating efficiencies, including lean manufacturing initiatives, increased use of automation, and employee retention initiatives, which reduced direct labor costs by $15.0 million during 2019 compared to 2018.
•Reductions in insurance related costs of $11.2 million in 2019.
Partially offset by:
•Fixed costs being spread over an OEM Segment sales base that decreased by $150.7 million.
•Increases in incentive compensation of $10.4 million as a result of improved operating margin.
•Investments in selling and administration resources of $8.8 million to support the complexities of international growth and acquisition-related costs.
•Higher production facility costs due to investments to expand capacity over the past couple of years, which increased expenses by $5.8 million in 2019.

Aftermarket Segment

Net sales of the Aftermarket Segment in 2019 increased 20 percent, or $46.4 million, compared to 2018. Net sales of components in the Aftermarket Segment were as follows for the years ended December 31:
(In thousands)20192018Change
Total Aftermarket Segment net sales$279,581  $233,191  20%  

The Company’s net sales to the Aftermarket Segment increased during 2019 primarily due to increases in market share, acquisitions which contributed approximately $20.0 million in sales, and the Company’s focus on building out well qualified, customer-focused teams, and infrastructure to service this market.

Operating profit of the Aftermarket Segment was $34.9 million in 2019, an increase of $3.6 million compared to 2018. The operating profit margin of the Aftermarket Segment was 12.5 percent in 2019, compared to 13.4 percent in 2018, and was negatively impacted by:
•Increase in sales of lower margin Furrion product which negatively impacted operating profit by $1.8 million.
•Higher production facility costs due to investments to expand capacity over the past couple of years, which increased expenses by $1.6 million in 2019.
•Acquisition integration costs, which reduced operating profit by $1.0 million.
Partially offset by:
•Fixed costs being spread over an Aftermarket Segment sales base that increased by $46.4 million.

Year Ended December 31, 2018 Compared to Year Ended December 31, 2017

Consolidated Highlights

•Consolidated net sales for the year ended December 31, 20162018 increased to a record $1.7$2.5 billion, 2015 percent higher than consolidated net sales for the year ended December 31, 20152017 of $1.4$2.1 billion. AcquisitionsThe increase in year-over-year sales reflects growth across the Company’s segments, as well as acquisitions completed by the Company in 2016over the twelve months ended December 31, 2018 which added $64$231.4 million in net sales. The 15 percent increase in industry-wide wholesale shipments of travel trailer and fifth-wheel RVs, LCI’s primary OEM market, as well as increased content per RV unit, positively impacted net sales growth in 2016. Further, the Company organically increased sales to adjacent industries and the aftermarket.
•Net income for the full-year 20162018 increased to $129.7$148.6 million, or $5.20$5.83 per diluted share, up from net income of $74.3$132.9 million, or $3.02$5.24 per diluted share, in 2015.2017. Net income for 2018 and 2017 included one-time non-cash charges of $0.6 million ($0.03 per diluted share) and $13.2 million ($0.52 per diluted share), respectively, related to the impact of the TCJA. Excluding the estimated impact of the TCJA, adjusted net income was $149.2 million, or $5.86 per diluted share, in 2018, compared to $146.1 million, or $5.76 per diluted share, in 2017. Adjusted net income and adjusted net income per diluted share are non-GAAP financial measures. See “Non-GAAP Measures”
30

for additional information regarding the Company’s use of non-GAAP financial measures and a reconciliation to the most directly comparable GAAP financial measures.
•Consolidated operating profitsprofit during 2016 increased 732018 decreased seven percent, to $200.9$198.8 million from $116.3$214.3 million in 2015.2017. Operating profit margin increaseddecreased to 12.08.0 percent in 20162018 from 8.310.0 percent in 2015.2017.
•The cost of aluminum and steel used in certain of the Company’s manufactured components increased throughout 2018 from lows in 2016 and 2015, having a large impact on operating profits. Raw material costs continue to fluctuate and are expected to remain volatile.
•The Company continues to take actions to improve its cost structure. The Company seeks to continuously manage its labor cost, particularly indirect labor, while supporting the growth of the business. Lean manufacturing teams continue working to reduce costcosts and implement processes to better utilize available floorspace. The Company has also reduced direct labor attrition, which improves efficiency and reduces other costs associated with workforce turnover.
The cost of aluminum and steel used in certain of the Company’s manufactured components declined during the second half of 2015 and continued into 2016; however, certain commodities have experienced cost increases in the second half of 2016 from market low points. Raw material costs continue to fluctuate and are expected to remain volatile.
•During 2016,2018, the Company completed five acquisitions, allfour acquisitions:
•In November 2018, the Company acquired the business and certain assets of which have been accretive to earnings:the furniture manufacturing operation of Smoker Craft, Inc., a leading pontoon, aluminum fishing, and fiberglass boat manufacturer located in New Paris, Indiana. The purchase price was $28.1 million paid at closing.
Camping Connection -- A Myrtle Beach, South Carolina and Kissimmee, Florida RV repair and service provider, with estimated annual sales•In June 2018, the Company acquired 100 percent of $2 million, completed November 2016;
Atwood Seating and Chassis Components -- An Elkhart, Indiana-based seating and chassis components businessthe equity interests of Atwood Mobile Products,ST. LA. S.r.l., a subsidiary of Dometic Group, with estimated annual sales of $30 million, completed November 2016;
Project 2000 S.r.l. -- An Italian manufacturer of innovative, space-saving bed lifts and retractable steps, with estimated annual salesother RV components for the European caravan market, headquartered in Pontedera, Italy. The purchase price was $14.8 million, net of $14 million, completed May 2016;cash acquired, paid at closing.
Flair Interiors -- A Goshen, Indiana-based manufacturer•In February 2018, the Company acquired substantially all of RV furniture, with estimated annual salesthe business assets of $25 million, completed February 2016; and


Highwater Marine Furniture -- An Elkhart, Indiana-based marine furniture operation providing furniture solutions for Highwater Marine, LLC,Hehr International Inc., a manufacturer of pontoon boats. Estimated annual saleswindows and tempered and laminated glass for the RV, transit, specialty vehicle, and other adjacent industries, headquartered in Los Angeles, California. The purchase price was $51.5 million paid at closing.
•In January 2018, the Company acquired 100 percent of the equity interests of Taylor Made Group, LLC, a marine furniture operation were $20supplier to boat builders and the aftermarket, as well as a key supplier to a host of other industrial end markets, headquartered in Gloversville, New York. The purchase price was $90.4 million, completed January 2016.net of cash acquired, paid at closing.
•Integration activities for these acquired businesses are underway and proceeding in line with established plans. The Company plans to grow sales and leverage its purchasing power, manufacturing capabilities, engineering expertise and design resources to improve the cost structure of the acquired operations.
Return on equity for 2016, which is calculated by taking net income over equity, improved to 26.0 percent, from the 18.4 percent return on equity in 2015.
•In April, June and September 2016,March 2018, the Company paid a quarterly dividend of $0.30$0.55 per share, aggregating $7.3 million, $7.4 million$13.9 million. In June, September and $7.4 million, respectively. In December 2016,2018, the Company paid a quarterly dividend of $0.50$0.60 per share, aggregating $12.4 million.$15.1 million, $15.1 million and $15.2 million, respectively.

•In 2018, the Company repurchased 0.4 million of its common shares for $28.7 million of the authorized $150.0 million under its new stock repurchase program.

OEM Segment


Net sales of the OEM Segment in 20162018 increased 1913 percent, or $248$266.0 million, compared to 2015.2017. Net sales of components to OEMs were to the following markets for the years endingended December 31:
(In thousands)20182017Change
RV OEMs:
Travel trailers and fifth-wheels$1,440,730  $1,405,983  2%  
Motorhomes187,297  159,417  17%  
Adjacent industries614,589  411,223  49%  
Total OEM Segment net sales$2,242,616  $1,976,623  13%  
(In thousands)2016 2015 Change
RV OEMs:     
Travel trailers and fifth-wheels$1,099,882
 $938,787
 17%
Motorhomes116,191
 86,513
 34%
Adjacent industries OEMs332,018
 274,760
 21%
Total OEM Segment net sales$1,548,091
 $1,300,060
 19%


According to the RVIA, industry-wide wholesale shipments for the years ended December 31, were:
20182017Change
Travel trailer and fifth-wheel RVs415,100  429,500  (3)% 
Motorhomes57,600  62,600  (8)% 

31
 2016 2015 Change
Travel trailer and fifth-wheel RVs362,700
 314,400
 15%
Motorhomes54,800
 47,300
 16%


The Company’s net sales growth in components for travel trailer and fifth-wheel RVs during 2016 exceeded the increase in2018 outperformed industry-wide wholesale shipments of travel trailer and fifth-wheel RVs during the same period primarily due to acquisitions completed in 2016.market share gains as a result of price increases, new product introductions and customer penetration.


The Company’s net sales growth in components for motorhomes during 2016 exceeded the increase in2018 outperformed industry-wide wholesale shipments of motorhomes during the same period primarily due to acquisitions and market share gains and acquisitions completed in 2016.2018. Over the past few years, the Company has been expanding its product line of components for motorhomes in order to increase its customer base and market penetration, and further growth is expected.penetration.


The trend in the Company’s average product content per RV produced is an indicator of the Company’s overall market share of components for new RVs. The Company’s average product content per type of RV, calculated based upon the Company’s net sales of components to RV OEMs for the different types of RVs produced for the years ended December 31, divided by the industry-wide wholesale shipments of the different types of RVs for the same period, was:
Content per:20182017Change
Travel trailer and fifth-wheel RV$3,449  $3,263  6%  
Motorhome$2,491  $2,219  12%  
Content per:2016 2015 Change
Travel trailer and fifth-wheel RV$3,022
 $2,987
 1%
Motorhome$2,011
 $1,810
 11%

The Company’s average product content per type of RV excludes international sales and sales to the Aftermarket Segment and Adjacent Industries. Content per RV is impacted by market share gains, acquisitions, new product introductions, and changes in selling prices for the Company’s products, as well as changes in the types of RVs produced industry-wide.

The Company’s net OEM sales to Adjacent Industries increased during 20162018 primarily due to market share gains and acquisitions completed in 2016 and 2015. The Company continues to believe there are significant opportunities in Adjacent Industries.



2018.
Operating profit of the OEM Segment was $180.9$167.5 million in 2016, an improvement2018, a decrease of $75.6$22.8 million compared to 2015.2017. The operating profit margin of the OEM Segment in 2016 was negatively impacted by:
Better fixed cost absorption by spreading fixed costs over a $248 million larger sales base.
Increasing sales to Adjacent Industries OEMs.
Lower•Higher material costs for certain raw materials. Steel, aluminum and foam costs continued to increase in 2018 primarily driven by tariffs and tariff speculation on steel and aluminum, which increased material costs declinedby $53.7 million in the second half of 2015 and continued into 2016. Costs for these commodities experienced some increases in the second and third quarters of 2016.2018. Material costs which are subject to global supply and demand forces, as well as tariff changes, and are expected to remain volatile.
Sales mix•The Company made significant investments over the past couple of years in manufacturing capacity, in both facilities and pricingpersonnel, to prepare for the expected increase in net sales in 2018 and beyond. Rent, utilities, and depreciation expense negatively impacted operating profit by $12.7 million in 2018 as a result of expansion of manufacturing capacity. In addition to these investments, the Company has made improvements in marketing, human resources, engineering, customer service and other critical departments. The Company also added the teams from acquired businesses, and expenses were negatively impacted by amortization costs of intangible assets related to those businesses, which were $1.4 million in 2018.
•Higher labor costs. While the Company seeks to continuously manage its labor cost, it has added staff to support the growth of the business. Additionally, competition for skilled workers has continued to tighten the labor market which has increased the cost of labor. Overall compensation, including benefits, negatively impacted operating profit by $22.4 million in 2018.
Partially offset by:
•Pricing changes of certain products, including increasedresulting in an increase of $65.7 million in net sales for 2018 compared to 2017.
•Increased sales to higher margin Adjacent Industries OEMs of fifth-wheel products$203.4 million, from $411.2 million in 2017 to $614.6 million in 2018, which has a higher margin.improved operating profit by $1.4 million in 2018.
Indirect labor cost•Cost savings initiated in the fourth quarter of 2015related to reduce such costs on an annualized basis.
Investmentsinvestments over the past several years to increase capacity and improve operating efficiencies. Further, the Company has implemented efficiency improvements,efficiencies, including lean manufacturing initiatives, increased use of automation and employee retention initiatives. The Company has also reduced direct labor attrition which improves efficiency and reduces other costs associated with workforce turnover.
Lower group health and workers’ compensation claims. The Company actively works to manage and reduce these costs, however, these costs remain subject to fluctuation.
Partially offset by:
Fixed costs which were approximately $6 million to $7 million higher than in 2015. Over the past couple of years, the Company made significant investments in manufacturing capacity, both facilities and personnel, to prepare for the expected increase in net sales in 2016 and beyond. In addition to investments in fixed costs to expand manufacturing capacity, the Company has made improvements in marketing, human resources, engineering, customer service and other critical departments. The Company also added the teams from acquired businesses, as well as amortization costs of intangible assets related to those businesses.
While the Company seeks to continuously manage its labor cost, it has added staff to support the growth of the business. The results also reflect variable compensation increases based on achieving profitability targets.


Aftermarket Segment


Net sales of the Aftermarket Segment in 20162018 increased 2736 percent, or $28$62.0 million, compared to the same period of 2015.2017. Net sales of components in the Aftermarket Segment were as follows for the years ended December 31:
32

(In thousands) 2016 2015 Change(In thousands)20182017Change
Total Aftermarket Segment net sales $130,807
 $103,006
 27%Total Aftermarket Segment net sales$233,191  $171,147  36%  


The Company’s net sales to the Aftermarket Segment increased during 20162018 primarily due to the Company’s focus on building out well qualified, customer-focused teamsacquisitions and infrastructure to service this market. With an estimated nine million households in North America owning an RV and the Company’s increasing content per unit, the Company continues to believe there are significant opportunities in the RV aftermarket as the components sold to OEMs are subject to normal wear and tear over time.

Operating profit of the Aftermarket Segment was $20.0 million in 2016, an increase of $5.3 million compared to 2015, primarily due to the increase in net sales and the higher margins traditionally experienced in aftermarket channels. As indicated, this business is still in an early growth stage and the Company has added staff to support anticipated growth and anticipates further cost increases in this area as it builds up the capabilities of this business.

Year Ended December 31, 2015 Compared to Year Ended December 31, 2014

Consolidated Highlights

Consolidated net sales for the year ended December 31, 2015 increased to $1.4 billion, 18 percent higher than the year ended December 31, 2014. Acquisitions completed by the Company in 2015, as well as the Furrion Limited (“Furrion”) distribution and supply agreement for premium electronics (the “Furrion Agreement”), added $52 million in net sales in 2015. The five percent increase in industry-wide wholesale shipments of travel trailer and fifth-wheel RVs, the Company’s primary OEM market, as well as increased content per unit through market share gains, positively impacted net sales growth in 2015. Further, the Company organically increased sales to adjacent industries and the aftermarket.


For the full-year 2015, the Company’s net income increased to $74.3 million, or $3.02 per diluted share, up from net income of $62.3 million, or $2.56 per diluted share, in 2014.
Consolidated operating profits during 2015 increased 22 percent, to $116.3 million from $95.5 million in 2014. Operating profit margin increased to 8.3 percent in 2015 from 8.0 percent in 2014.
Raw material costs continued to fluctuate. In particular, aluminum rose nearly 20 percent during the second half of 2014, and dropped during the second half of 2015. Similarly, the cost of steel used in certain of the Company’s manufactured components dropped during the course of 2015.
During 2015, the Company completed three acquisitions:
Signature Seating -- A Ft. Wayne, Indiana-based manufacturer of furniture solutions for fresh water boat manufacturers, primarily pontoon boats, with annual sales of approximately $16 million;
Spectal Industries -- A Quebec, Canada-based manufacturer of windows and doors primarily for school buses, as well as commercial buses, emergency vehicles, trucks, agricultural equipment and RVs, with annual sales of $25 million; and
EA Technologies -- An Elkhart, Indiana-based manufacturer of custom steel and aluminum parts and provider of electro-deposition (‘e-coat’) and powder coating services for RV, bus, medium-duty truck, automotive, recreational marine, specialty and utility trailer, and military applications, with annual sales of $17 million.
For 2015, the Company achieved an 18.4 percent return on equity, an improvement from the 17.5 percent return on equity in 2014.
In April 2015, the Company paid a special dividend of $2.00 per share, aggregating $48.2 million.

OEM Segment

Net sales of the OEM Segment in 2015 increased 15 percent, or $173 million, compared to 2014. Net sales of components to OEMs were to the following markets for the years ending December 31:
(In thousands) 2015 2014 Change
RV OEMs:      
Travel trailers and fifth-wheels $938,787
 $841,497
 12%
Motorhomes 86,513
 70,332
 23%
Adjacent industries 274,760
 215,197
 28%
Total OEM Segment net sales $1,300,060
 $1,127,026
 15%

According to the RVIA, industry-wide wholesale shipments for the years ended December 31, were:
  2015 2014 Change
Travel trailer and fifth-wheel RVs 314,400
 298,900
 5%
Motorhomes 47,300
 43,900
 8%

The Company’s net sales growth in components for travel trailer and fifth-wheel RVs during 2015 exceeded the increase in industry-wide wholesale shipments of travel trailer and fifth-wheel RVs during the same period primarily due market shares gains and acquisitions completed in 2015.

The Company’s net sales growth in components for motorhomes during 2015 exceeded the increase in industry-wide wholesale shipments of motorhomes during the same period primarily due to market share gains and an acquisition completed in 2014. Over the past few years, the Company has been expanding its product line of components for motorhomes in order to increase its customer base and market penetration, and further growth is expected.

The trend in the Company’s average product content per RV produced is an indicator of the Company’s overall market share of components for new RVs. The Company’s average product content per type of RV, calculated based upon the Company’s net sales of components to RV OEMs for the different types of RVs produced for the years ended December 31, divided by the industry-wide wholesale shipments of the different types of RVs for the same period, was:
Content per: 2015 2014 Change
Travel trailer and fifth-wheel RV $2,987
 $2,816
 6%
Motorhome $1,810
 $1,602
 13%



The Company’s average product content per type of RV excludes sales to the Aftermarket and Adjacent Industries. Content per RV is impacted by market share gains, acquisitions, new product introductions, and changes in selling prices for the Company’s products, as well as changes in the types of RVs produced industry-wide.

The Company’s net OEM sales to Adjacent Industries increased during 2015 primarily due to market share gains and acquisitions completed in 2015.

Operating profit of the OEM Segment was $105.2 million in 2015, an improvement of $16.5 million compared to 2014. The operating profit margin of the OEM Segment in 2015 was impacted by:
Fixed costs which were approximately $15 to $20 million higher than in 2014. Over the past couple of years, the Company made significant investments in manufacturing capacity, both facilities and personnel, to prepare for the expected increase in net sales in 2015 and beyond. In addition to investments in fixed costs to expand manufacturing capacity, the Company made improvements in marketing, human resources, engineering, customer service and other critical departments. The Company also added the teams from acquired businesses as well as related amortization of intangible assets. As industry-wide wholesale shipments growth slowed from multi-year double-digit rates to mid-single-digit rates, the Company evaluated its expenses and in the fourth quarter of 2015 initiated a focused program to reduce indirect labor costs to improve operating leverage. Annual cost savings of approximately $8 to $10 million were identified and implemented late in 2015 and came from aligning staff levels more closely to anticipated growth.
An increase in stock-based compensation of approximately $3.2 million due to the implementation of the new 2015 compensation program for management.
Sales mix changes of its products, including lower sales of fifth-wheel products.
A charge of $1.5 million related to environmental costs.
A voluntary safety recall of the Company’s double and triple Coach Steps, for which the Company recorded a reserve of $1.1 million for the contingent obligation in selling, general and administrative expenses.
Partially offset by:
Investments over the past several years to increase capacity and improve operating efficiencies, which benefit operating results. The Company added capacity ahead of projected demand, which enabled it to efficiently fulfill customer orders as demand increased. Further, the Company implemented additional efficiency improvements, including lean, automation and employee retention initiatives to improve operating efficiencies going forward.
Lower material costs for certain raw material inputs. After increasing in the latter part of 2014, steel and aluminum costs declined over the course of 2015.
Better fixed costs absorption by spreading fixed costs over a $173 million larger sales base.

Aftermarket Segment

Net sales of the Aftermarket Segment in 2015 increased 62 percent, or $39 million, compared to the same period of 2014. Net sales of components were as follows for the years ended December 31:
(In thousands) 2015 2014 Change
Total Aftermarket Segment net sales $103,006
 $63,756
 62%

The Company’s net sales to the Aftermarket increased during 2015 primarily due to the Company’s focus on building out well qualified, customer-focused teams and infrastructure to service this market.


Operating profit of the Aftermarket Segment was $15$31.3 million in 2015,2018, an increase of $6$7.3 million compared to 2014,2017, primarily due to the increase in net sales and the higher margins traditionally experienced in aftermarket channels. As indicated, this business is still in an early growth stage and the Company added staff to support anticipated growth.

Sale of Extrusion Assets

In April 2014, the Company entered into a six-year aluminum extrusion supply agreement, and concurrently sold certain aluminum extrusion assets. The Company recorded a pre-tax loss of $2.0 million in the second quarter of 2014 on the salesales. Operating profit margin of the aluminum extrusion-related assets. In connection with the sale, the Company received $0.3 million at closing and a $7.2 million note receivable collectible over the next four years, recorded at its present value of $6.4 million on the date of closing. DuringAftermarket Segment was 13.4 percent in 2018, compared to 14.0 percent in 2017.



2016 - 2014, the Company received installments of $5.8 million under the note. At December 31, 2016, the present value of the remaining amount due under the note receivable was $1.4 million.

In July 2015, the Company agreed to terminate the supply agreement, and as consideration the Company received a $2.0 million note receivable collectible in 2019 and 2020. The Company recorded this note receivable at its present value of $1.6 million and a corresponding gain of $1.6 million in the 2015 third quarter. At December 31, 2016, the present value of the remaining amount due under the note receivable was $1.7 million.

Severance

In 2015, the Company initiated a focused program to reduce indirect labor costs. In connection with this cost reduction program and certain changes at the executive level, the Company incurred severance charges of $3.7 million.

Provision for Income Taxes


The effective income tax rate for 20162019 was 34.923.5 percent compared to 35.022.8 percent in 2015. Both 20162018. The effective tax rate of 23.5 percent for the full-year 2019 was higher than the prior year, primarily due to a year-over-year reduction in the excess tax benefits related to the vesting of equity-based compensation awards. During the fourth quarter of 2018, the Company finalized its tax accounting for the TCJA and 2015 benefitedpursuant to Staff Accounting Bulletin No. 118 (“SAB 118”) recorded a one-time non-cash charge of $0.6 million related to adjustments to deferred tax amounts provisionally recorded in the prior year. During the fourth quarter of 2017, the Company recorded a provisional one-time non-cash charge of $13.2 million related to the enactment of the TCJA. The charge resulted from federal and statethe re-measurement of the Company’s deferred tax credits,assets considering the TCJA’s newly enacted tax rates. This provisional amount was subject to adjustment during the measurement period of up to one year following the December 2017 enactment of the TCJA, as wellprovided by SEC guidance. Excluding the one-time charge, the Company’s effective tax rate for 2018 was 22.5 percent compared to 31.4 percent for 2017, as referenced in the reversal“Non-GAAP Measures” section. The 2018 effective tax rate, adjusted for the impact of federal and state tax reserves,TCJA, was lower than 2017 primarily due to the closure ofreduction in the statutes of limitation of federal and stateU.S. corporate income tax years, with a larger benefit in 2016. rate.

The Company estimates the 20172020 effective income tax rate to be approximately 3424 percent to 3626 percent.


The
Non-GAAP Measures

In addition to reporting financial results in accordance with U.S. GAAP, the Company also has included in this Annual Report on Form 10-K non-GAAP measures that adjust for the impact of enactment of the TCJA. This item represented a significant charge that impacted the Company’s financial results in 2017 and, to a lesser extent, in 2018. Net income, earnings per diluted share, the provision for income taxes and the effective income tax rate are all measures for 2015which the Company provides the reported GAAP measure and an adjusted measure. The adjusted measures are not in accordance with, nor are they a substitute for, GAAP measures. The Company considers these non-GAAP measures in evaluating and managing the Company’s operations. The Company believes that discussion of results adjusted for this item is meaningful to investors as it provides a useful analysis of ongoing underlying operating trends. In addition, from time to time, certain of these non-GAAP measures may also be used in our compensation programs. The determination of these non-GAAP financial measures may not be comparable to the determination of similarly titled measures used by other companies. The following are reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures.
Twelve months ended December 31, 2018
(In thousands, except per share amounts)Income before income taxes  Provision for income taxes  Net income  Effective tax rate  Diluted earnings per share
As reported GAAP$192,352  $43,801  $148,551  23 %$5.83  
Impact of TCJA (1)
—  (612) 612  (1)%0.03  
Adjusted non-GAAP$192,352  $43,189  $149,163  22 %$5.86  
33

Twelve months ended December 31, 2017
(In thousands, except per share amounts)Income before income taxes  Provision for income taxes  Net income  Effective tax rate  Diluted earnings per share
As reported GAAP$212,844  $79,960  $132,884  38 %$5.24  
Impact of TCJA (1)
—  (13,209) 13,209  (7)%0.52  
Adjusted non-GAAP$212,844  $66,751  $146,093  31 %$5.76  
(1) During the fourth quarter of 2018, the Company finalized its tax accounting for the TCJA and pursuant to SAB 118 recorded a one-time non-cash charge of $0.6 million related to adjustments to deferred tax amounts provisionally recorded in the prior year. During the fourth quarter of 2017, the Company recorded a provisional one-time non-cash charge of $13.2 million related to the enactment of the TCJA. The charge resulted from the re-measurement of the Company’s deferred tax assets considering the TCJA’s newly enacted tax rates. This provisional amount was 35.0 percent comparedsubject to 34.5 percent in 2014.adjustment during the measurement period of up to one year following the December 2017 enactment of the TCJA, as provided by SEC guidance.


LIQUIDITY AND CAPITAL RESOURCES


The Consolidated Statements of Cash Flows reflect the following for the years ended December 31:
(In thousands)201920182017
Net cash flows provided by operating activities$269,525  $156,608  $152,702  
Net cash flows used in investing activities(503,834) (302,795) (145,875) 
Net cash flows provided by (used in) financing activities254,971  135,066  (66,948) 
Effect of exchange rate changes on cash and cash equivalents(231) —  —  
Net increase (decrease) in cash and cash equivalents$20,431  $(11,121) $(60,121) 
(In thousands) 2016 2015 2014
Net cash flows provided by operating activities $203,407
 $95,018
 $107,020
Net cash flows used for investing activities (91,707) (66,116) (144,074)
Net cash flows used for financing activities (37,835) (16,601) (29,222)
Net increase (decrease) in cash and cash equivalents $73,865
 $12,301
 $(66,276)


Cash Flows from Operations

Net cash flows fromprovided by operating activities were $269.5 million in 2016 were $108.42019, compared to $156.6 million higherin 2018. Changes in net assets and liabilities, net of acquisitions of businesses, in 2019 generated $117.1 million more cash than in 2015, primarily due to:
A $56.5 million increase in the change for accounts payable and accrued expenses and other liabilities in 2016 compared to2018. This was partially offset by a $37.1$4.2 million decrease in 2015, primarily due to the increases in sales, production and earnings, as well as the timing of these payments.
A $55.3 million increase in net income, in 2016 compared to 2015.
A smaller increase in the changeadjusted for inventories of $23.4 million in 2016 compared to 2015. The increase in inventories in 2016 was primarily due to increases in sourced products and acquisitions completed in 2016. Inventory turnover for 2016 increased to 7.5 turns compared to 6.9 turns for 2015. The Company is working to improve inventory turnover, however, inventory turns may trend lower due to growth in product categories such as imported furniture and Furrion electronics.
Increases in non-cash charges against net income in 2016 including:
A $4.5 million increase in depreciation and amortization, primarily due to investments in acquisitions and capital expenditures.
A $1.4 million increase in stock-based compensation in 2016 compared to 2015.
Partially offset by:
A $13.9 million increase in accounts receivable in 2016 compared to a $2.1 million decrease in 2015, primarily due to an increase in days sales outstanding to 16 at December 31, 2016, compared to 14 at December 31, 2015.
A higher increase in the change for prepaid expense, deferred taxes, and other assetsnon-cash items. Reduced inventory levels driven by lower commodity prices and reductions in Furrion inventory during 2019 were the primary sources of $13.3 millioncash generated from reductions in 2016 compared to 2015. The increase in 2016 was primarily due to a $4.5 million higher tax receivable at December 31, 2016, as well as an increase in short-term deposits related to 2017 capital expenditures and inventory.net assets.



Over the long term, based on the Company’s historical collection and payment patterns, as well as inventory turnover, and also giving consideration to emerging trends and changes to the sales mix, the Company expects working capital to increase or decrease equivalent to approximately 10 to 15 percent of the increase or decrease, respectively, in net sales. However, there are many factors that can impact this relationship, especially in the short term.


Depreciation and amortization was $46.2$75.4 million in 2016,2019, and is expected to be approximately $50$105 million to $55$110 million for fiscal year 2017.in 2020. Non-cash stock-based compensation in 20162019 was $15.7 million, including $0.3 million of deferred stock units issued to certain executive officers in lieu of cash for a portion of their 2015 incentive compensation in accordance with their compensation arrangements.$16.1 million. Non-cash stock-based compensation is expected to be approximately $17$16 million to $19$21 million in 2017.2020.

Net cash flows fromprovided by operating activities in 2015 were $12.0 million lower than in 2014, primarily due to:
A larger increase in the change for inventories of $9.3$156.6 million in 20152018, compared to 2014.$152.7 million in 2017. The increase in inventories in 2015 was primarily due to increases in sourced products, including inventory to support the Furrion Agreement (discussed immediately below) and acquisitions completed in 2015. A portion of the increase in inventory was also due to strategic positions to take advantage of favorable market conditions and included the strategic onboarding of a new supplier. Inventory turnover for 2015 decreased to 6.9 turns compared to 8.2 turns for 2014.
In July 2015, the Company entered into a 6-year exclusive distribution and supply agreement with Furrion Limited (“Furrion”), a Hong Kong based firm that designs, engineers and manufactures premium electronics. In connection with this agreement, the Company acquired Furrion’s current inventory, as well as Furrion’s deposits on inventory scheduled for delivery, for approximately $11 million.
A $5.9 million decrease in accounts payable and accrued expenses and other liabilities in 2015 compared to a $31.2 million increase in 2014, primarily due to increased imports and other prepaid inventories, efforts to increase consignments, as well as the timing of purchases.
Partially offset by:
A $12.1$25.2 million increase in net income, adjusted for non-cash items, partially offset by a $21.3 million use of cash for net assets and liabilities. Inventory growth was the primary use of cash in 2015 compared to 2014.
Increases in non-cash charges against net income in 2015 including:
A $9.0 million increase in depreciation and amortization primarilyassets due to investmentshedge buying of raw materials, the rapid industry slow-down at the end of 2018, and purchases in acquisitions and capital expenditures.advance of the Chinese New Year.
A $3.2 million increase in stock-based compensation in 2015 compared to 2014.
An increase in deferred taxes of $1.1 million in 2015 compared to a $5.5 million decrease in 2014 due to an increase in certain expenses currently not deductible for tax purposes in 2015.
Net cash flows from operating activities in 2014 were $24.3 million higher than in 2013, primarily due to:
A $12.1 million increase in net income in 2014 compared to 2013.
A $24.0 million larger increase in the change for accounts payable and accrued expenses and other liabilities in 2014 compared to 2013, primarily due to the increases in sales, production and earnings, as well as the timing of these payments.
An $8.5 million smaller increase in the change for accounts receivable in 2014 compared to 2013, primarily due to a decrease in days sales outstanding to 15 at December 31, 2014, compared to 17 at December 31, 2013.
A $5.1 million increase in depreciation and amortization primarily due to the acquisitions completed during 2014 and capital expenditures over the last couple years.
Partially offset by:
An $18.5 million larger increase in the change for inventories in 2014 as compared to 2013. The larger increase in inventories in 2014 was primarily to support the 41 percent increase in net sales in January 2015. Higher raw material costs and increased lead time on imports also contributed to the increase in inventory. Inventory turnover for 2014 improved to 8.2 turns compared to 7.9 turns for 2013.
An increase in deferred taxes of $5.5 million in 2014 compared to a $0.3 million decrease in 2013 due to an increase in certain expenses not currently deductible for tax purposes in 2014.
Cash Flows from Investing Activities
Cash flows used forin investing activities of $91.7$503.8 million in 20162019 were primarily comprised of $48.7$447.8 million for the acquisition of businesses and $44.7$58.2 million for capital expenditures. Cash flows used in investing activities of $302.8 million in 2018 were primarily comprised of $184.8 million for the acquisition of businesses and $119.8 million for capital expenditures.

34


In January 2016,Cash flows used in investing activities of $145.9 million in 2017 were primarily comprised of $87.2 million for capital expenditures and $60.6 million for the Company acquired the business and certain assetsacquisition of the pontoon furniture manufacturing operation of Highwater Marine, LLC (“Highwater”), a leading manufacturer of pontoon and other recreational boats located in Elkhart, Indiana. The purchase price was $10.0 million paid at closing.
In February 2016, the Company acquired the business and certain assets of Flair Interiors, Inc. (“Flair”), a manufacturer of RV furniture located in Goshen, Indiana. The purchase price was $8.1 million paid at closing.
In May 2016, the Company acquired 100 percent of the equity interest of Project 2000 S.r.l. (“Project 2000”), a manufacturer of innovative, space-saving bed lifts and retractable steps, located near Florence, Italy. The purchase price was $18.8 million paid at closing, plus contingent consideration based on future sales by this operation.
In November 2016, the Company acquired the business, manufacturing facility and certain assets of the seating and chassis components business of Atwood Mobile Products, LLC (“Atwood”), a subsidiary of Dometic Group, located in Elkhart, Indiana. The purchase price was $12.5 million paid at closing.
In November 2016, the Company acquired the service centers and related business of Camping Connection, Inc., an RV repair and service provider located in Myrtle Beach, South Carolina and Kissimmee, Florida. The purchase price was $2.0 million paid at closing.businesses.
The Company’s capital expenditures are primarily for replacement and growth. Over the long term, based on the Company’s historical capital expenditures, the replacement portion has averaged approximately 2one to two percent of net sales, while the growth portion has averaged approximately 8two to 11three percent of the annual increase in net sales. However, there are many factors that can impact the actual spending compared to these historical averages. In 2016 and 2015 capital expenditures of $44.7 million and $29.0 million, respectively, were in line with historical averages.
The 20162019 capital expenditures and acquisitions were funded by cash from operations and periodic borrowings under the Company’s line of credit and $50 million of Senior Promissory Notes issued under the “shelf-loan” facility with Prudential.agreement. Capital expenditures and acquisitions in 20172020 are expected to be funded primarily from cash generated from operations, as well as periodic borrowings under the Company’s line of credit.revolving credit facility.
Cash flows used for investing activities of $66.1 million in 2015 were primarily comprised of $29.0 million for capital expenditures and $41.1 million for the acquisition of businesses.

In January 2015, the Company acquired the business and certain assets of EA Technologies, LLC (“EA Technologies”), a manufacturer of custom steel and aluminum parts and provider of electro-deposition (‘e-coat’) and powder coating services for RV, bus, medium-duty truck, automotive, recreational marine, specialty and utility trailer, and military applications. The purchase price was $9.2 million, of which $6.6 million was paid in the fourth quarter of 2014, with the balance paid at closing.

In April 2015, the Company acquired the business and certain assets of Industries Spectal, Inc. (“Spectal”), a Quebec, Canada-based manufacturer of windows and doors primarily for school buses, as well as commercial buses, emergency vehicles, trucks, agricultural equipment and RVs. The purchase price was $22.3 million paid at closing, plus contingent consideration based on future sales of this operation.
In August 2015, the Company acquired the business and certain assets of Roehm Marine, LLC, also known as Signature Seating (“Signature”), a manufacturer of furniture solutions for fresh water boat manufacturers, primarily pontoon boats. The purchase price was $16.0 million paid at closing, plus contingent consideration based on future sales of this operation.
Cash flows used for investing activities of $144.1 million in 2014 were primarily comprised of $42.5 million for capital expenditures and $106.8 million for the acquisition of businesses.
In February 2014, the Company acquired IDS, a designer, developer and manufacturer of electronic systems encompassing a wide variety of RV applications. IDS also manufactures electronic systems for automotive, medical and industrial applications. The purchase price was $35.9 million, of which $34.2 million was paid at closing, with the balance to be paid out annually over the subsequent three years, plus contingent consideration based on future sales of this operation.
In March 2014, the Company acquired the business and certain assets of Star Design, LLC, which manufactures thermoformed sheet plastic products for the RV, bus and specialty vehicle industries. The purchase price was $12.2 million paid at closing.
In June 2014, the Company acquired the RV business of Actuant Corporation, which manufactures leveling systems, slide-out mechanisms and steps, primarily for motorhome RVs, under the Power Gear and Kwikee brands. The purchase price was $35.5 million, paid at closing.


In August 2014, the Company acquired the business and certain assets of Duncan Systems, Inc., an aftermarket distributor of replacement motorhome windshields, awnings, and RV, heavy truck and specialty vehicle glass and windows, primarily to fulfill insurance claims. The purchase price was $18.0 million paid at closing, plus contingent consideration based on future sales of this operation.

Cash Flows from Financing Activities

Cash flows provided by financing activities in 2019 primarily included term loan borrowings of $300.0 million, net borrowings on the revolving credit facility of $26.5 million, partially offset by the payment of dividends to stockholders of $63.8 million, and $8.1 million from the vesting of stock-based awards, net of shares tendered for the payment of taxes.
Cash flows provided by financing activities in 2018 primarily included net borrowings on the revolving credit facility of $240.1 million offset by the payment of dividends to stockholders of $59.3 million, repurchases of common stock of $28.7 million under the stock repurchase program, and $16.1��million from the vesting of stock-based awards, net of shares tendered for the payment of taxes.
Cash flows used forin financing activities in 20162017 primarily included the payment of dividends to stockholders of $34.4$51.1 million, paid$10.5 million from the vesting of stock-based awards, net of shares tendered for the payment of taxes, and $5.3 million in payments for contingent consideration related to stockholders.acquisitions. The Company had no outstanding borrowings under the line ofrevolving credit facility as of December 31, 2016,2017, but borrowings reached a high of $33.0$9.8 million during 2016. In addition, the Company made $4.9 million in payments for contingent consideration related to acquisitions.
Cash flows used for financing activities in 2015 included the payment of a special dividend of $2.00 per share of the Company’s Common Stock, representing an aggregate of $48.2 million, paid to stockholders of record as of March 27, 2015, partially offset by a net increase in indebtedness of $34.4 million. The increase in indebtedness included new debt comprised of $50.0 million of Senior Promissory Notes drawn in March 2015 under the Prudential Investment Management, Inc. “shelf-loan” facility, partially offset by a $15.7 million decrease in debt due to paying down the Company’s line of credit. The Company had no outstanding borrowings under the line of credit as of December 31, 2015, but borrowings reached a high of $71.6 million during 2015. In addition, in 2015, the Company made $4.0 million in payments for contingent consideration related to acquisitions.
Cash flows used for financing activities in 2014 included the payment of a special dividend of $2.00 per share of the Company’s Common Stock, representing an aggregate of $46.7 million, paid to stockholders of record as of December 20, 2013, partially offset by a net increase in indebtedness of $15.7 million. The increase in indebtedness was due to borrowings under the Company’s line of credit. In addition, in 2014, the Company received $5.8 million in cash and the related tax benefits from the exercise of stock-based compensation, offset by $3.7 million in payments for contingent consideration related to acquisitions.2017.
In connection with certain business acquisitions, if established sales targets for the acquired products are achieved, the Company is contractually obligated to pay additional cash consideration. The Company has recorded a $9.2$4.4 million liability for the aggregate fair value of these expected contingent consideration liabilities at December 31, 2016, including $5.8 million recorded as a current liability.2019. For further information, see Note 11 of the Notes to the Consolidated Financial Statements.
On February 24, 2014, the Company entered into a $75.0 million line of credit (the “Credit Agreement”) with JPMorgan Chase Bank, N.A. and Wells Fargo Bank, N.A. On March 3, 2015, in accordance with the termsCredit Facilities
See Note 8 of the Credit Agreement, the Company increased its line of credit by $25.0 million to $100.0 million. Interest on borrowings under the line of credit was designated from time to time by the Company as either (i) the Prime Rate, minus a rate ranging from 0.75 to 1.0 percent (minus 1.0 percent at December 31, 2015), but not less than 1.5 percent, or (ii) LIBOR, plus additional interest ranging from 1.75 to 2.0 percent (plus 1.75 percent at December 31, 2015) depending on the Company’s performance and financial condition.
On April 27, 2016, the Company announced the refinancing of its line of credit through an agreement with JPMorgan Chase Bank, N.A., Wells Fargo Bank, N.A., Bank of America, N.A., and 1st Source Bank. The agreement amends and restates the existing line of credit, which was scheduled to expire on January 1, 2019, and now expires on April 27, 2021 (the “Amended Credit Agreement”). In connection with this amendment and restatement, the line of credit was increased from $100.0 million to $200.0 million, and contains a feature allowing the Company to draw up to $50.0 million in approved foreign currencies, including Australian dollars, Canadian dollars, pound sterling and euros. The maximum borrowings under the line of credit can be further increased by $125.0 million, subject to certain conditions. At December 31, 2016 and 2015, the Company had $2.5 million and $2.7 million, respectively, in outstanding, but undrawn, standby letters of credit under the line of credit. Availability under the Company’s line of credit was $197.5 million at December 31, 2016.
On February 24, 2014, the Company also entered into a $150.0 million “shelf-loan” facility with Prudential Investment Management, Inc. and its affiliates (“Prudential”). The facility provides for Prudential to consider purchasing, at the Company’s request, in one or a series of transactions, Senior Promissory Notes of the Company in the aggregate principal amount of up to $150.0 million, to mature no more than 12 years after the date of original issue of each Senior Promissory Note. On March 20, 2015, the Company issued $50.0 million of Senior Promissory Notes to PrudentialConsolidated Financial Statements for a termdescription of five years, at a fixed interest rate of 3.35 percent per annum, payable quarterly in arrears, of which the entire amount was outstanding at December 31, 2016. At December 31, 2016, the fair value of the Company’s long-term debt approximates the carrying value, as estimated using quoted market prices and discounted future cash flows based on similar borrowing arrangements.our credit facilities.
On April 27, 2016, the Company also amended and restated its “shelf-loan” facility with Prudential to conform certain covenants and other terms to the Amended Credit Agreement. Prudential has no obligation to purchase the Senior Promissory Notes. Interest payable on the Senior Promissory Notes will be at rates determined by Prudential within five business days after


the Company issues a request to Prudential. Availability under the Company’s “shelf-loan” facility, subject to the approval of Prudential, was $100.0 million at December 31, 2016.
Pursuant to the Amended Credit Agreement and “shelf-loan” facility, the Company is required to maintain minimum interest and fixed charge coverages, and to meet certain other financial requirements. At December 31, 2016 and 2015, the Company was in compliance with all such requirements, and expects to remain in compliance for the next twelve months.
Availability under both the Amended Credit Agreement and the “shelf-loan” facility is subject to a maximum leverage ratio covenant which limits the amount of consolidated outstanding indebtedness to 2.5 times the trailing twelve-month EBITDA, as defined. This limitation did not impact the Company’s borrowing availability at December 31, 2016. The remaining availability under these facilities was $297.5 million at December 31, 2016. The undrawn “shelf-loan” facility expired February 24, 2017, and the Company and Prudential are currently discussing renewal terms. The Company believes the availability under the revolving credit facility under the Amended Credit Agreement is(as defined in Note 8 of the Notes to Consolidated Financial Statements), along with its cash flows from operations, are adequate to finance the Company’s anticipated cash requirements for the next twelve months.
Additional information on the Company’s Credit Agreement
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Contractual Obligations and “shelf-loan” facility is included in Note 9 of the Notes to the Consolidated Financial Statements.Commitments
Future minimum commitments relating to the Company’s contractual obligations at December 31, 20162019 were as follows:
Payments due by period
Less thanMore than
(In thousands)Total1 year1-3 years3-5 years5 yearsOther
Total indebtedness$630,789  $17,883  $88,067  $513,517  $11,322  $—  
Interest on fixed rate
indebtedness (a)
46,302  17,695  21,973  6,634  —  —  
Operating leases122,342  26,764  40,073  22,428  33,077  —  
Employment contracts (b)
22,667  16,777  5,732  158  —  —  
Deferred compensation (c)
30,479  211  8,181  3,732  8,616  9,739  
Contingent consideration and holdback payments (d)
11,965  5,130  4,102  1,513  1,220  —  
Purchase obligations (e)
150,036  147,535  1,863  638  —  —  
Taxes (f)
7,900  7,900  —  —  —  —  
Total$1,022,480  $239,895  $169,991  $548,620  $54,235  $9,739  
 Payments due by period
   Less than     More than  
(In thousands)Total 1 year 1-3 years 3-5 years 5 years Other
Total indebtedness$50,000
 $—
 $—
 $50,000
 $—
 $—
Interest on fixed rate
indebtedness (a)
5,388
 1,675
 3,350
 363
 —
 —
Operating leases40,503
 9,388
 14,046
 9,052
 8,017
 —
Employment contracts (b)
7,441
 7,070
 221
 150
 —
 —
Deferred compensation (c)
13,574
 160
 609
 3,486
 5,380
 3,939
Royalty agreements and contingent consideration payments (d)
11,639
 6,252
 2,275
 1,560
 1,552
 —
Purchase obligations (e)
539,891
 300,741
 238,280
 870
 —
 —
Taxes (f)
3,100
 3,100
 —
 —
 —
 —
Total$671,536
 $328,386
 $258,781
 $65,481
 $14,949
 $3,939


(a)The Company has used the contractual payment dates and the fixed interest rates in effect as of December 31, 2016, to determine the estimated future interest payments for fixed rate indebtedness.
(b)Includes amounts payable under employment contracts and arrangements, and retirement and severance agreements.
(c)Includes amounts payable under deferred compensation arrangements. The Other column represents the liability for deferred compensation for employees that have elected to receive payment upon separation from service from the Company.
(d)Comprised of estimated future contingent consideration payments for which a liability has been recorded in connection with business acquisitions.
(e)Primarily comprised of (i) purchase orders issued in the normal course of business and (ii) long term purchase commitments, for which the Company has estimated the expected future obligation based on current prices and usage.
(f)Represents unrecognized tax benefits, as well as related interest and penalties.

a.The Company has used the contractual payment dates and the fixed interest rates in effect as of December31,2019, to determine the estimated future interest payments for fixed rate indebtedness.
Theseb.Includes amounts payable under employment contracts and arrangements, and retirement and severance agreements.
c.Includes amounts payable under deferred compensation arrangements. The Other column represents the liability for deferred compensation for employees that have elected to receive payment upon separation from service from the Company.
d.Comprised of estimated future contingent consideration payments for which a liability has been recorded in connection with business acquisitions.
e.Primarily comprised of (i) purchase orders issued in the normal course of business and (ii) long term purchase commitments, for which the Company has estimated the expected future obligation based on current prices and usage.
f.Represents unrecognized tax benefits, as well as related interest and penalties.

Commitments are described more fully in the Notes to Consolidated Financial Statements.


CORPORATE GOVERNANCE


The Company is in compliance with the corporate governance requirements of the Securities and Exchange Commission (“SEC”)SEC and the New York Stock Exchange. The Company’s governance documents and committee charters and key practices have been posted to the Company’s website (www.lci1.com) and are updated periodically. The website also contains, or provides direct links to, all SEC filings, press releases and investor presentations. The Company has also established a Whistleblower Policy, which includes a toll-free hotline (877-373-9123) to report complaints about the Company’s accounting, internal controls, auditing matters or other concerns. The Whistleblower Policy and procedure for complaints can be found on the Company’s website (www.lci1.com).




CONTINGENCIES


Additional information required by this item is included under Item 3 of Part I of this Annual Report on Form 10-K.


CRITICAL ACCOUNTING POLICIES


The Company’s Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which requires certain estimates and assumptions to be made that affect the amounts and disclosures reported in those financial statements and the related accompanying notes. Actual results could differ from these estimates and assumptions. The following critical accounting policies, some of which are impacted significantly by judgments, assumptions and estimates, affect the Company’s Consolidated Financial Statements. Management has discussed
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the development and selection of its critical accounting policies with the Audit Committee of the Company’s Board of Directors and the Audit Committee has reviewed the disclosure presented below relating to the critical accounting policies.

Inventories

Inventories (finished goods, work in process and raw materials) are stated at the lower of cost, determined on a first-in, first-out basis, or market. Cost is determined based solely on those charges incurred in the acquisition and production of the related inventory (i.e. material, labor and manufacturing overhead costs). The Company estimates an inventory reserve for excess quantities and obsolete items based on specific identification and historical write-offs, taking into account future demand and market conditions. To the extent actual demand or market conditions in the future differ from original estimates, adjustments to recorded inventory reserves may be required.

Self-Insurance

The Company is self-insured for certain health and workers’ compensation benefits up to certain stop-loss limits. Such costs are accrued based on known claims and an estimate of incurred, but not reported (“IBNR”) claims. IBNR claims are estimated using historical lag information and other data provided by third-party claims administrators. This estimation process is subjective, and to the extent actual results differ from original estimates, adjustments to recorded accruals may be required.


Warranty


The Company provides warranty terms based upon the type of product sold. The Company estimates the warranty accrual based upon various factors, including (i) historical warranty costs, (ii) current trends, (iii) product mix, and (iv) sales. The accounting for warranty accruals requires the Company to make assumptions and judgments, and to the extent actual results differ from original estimates, adjustments to recorded accruals may be required.

Income Taxes

The Company’s tax provision is based on pre-tax income, statutory tax rates, federal and state tax credits, and tax planning strategies. Significant management judgment is required in determining the tax provision and in evaluating the Company’s tax position. The Company establishes additional provisions for income taxes when, despite the belief the tax positions are fully supportable, there remain certain tax positions that are likely to be challenged and may or may not be sustained on review by tax authorities. The Company adjusts these tax accruals in light of changing facts and circumstances. The effective tax rate in a given financial statement period may be materially impacted by changes in the expected outcome of tax audits. The Company’s accompanying Consolidated Balance Sheets also include deferred tax assets resulting from deductible temporary differences, which are expected to reduce future taxable income. These assets are based on management’s estimate of realizability, which is reassessed each quarter based upon the Company’s forecast of future taxable income. Failure to achieve forecasted taxable income could affect the ultimate realization of certain deferred tax assets, and may result in the recognition of a valuation reserve. For additional information, see Note 10 of the Notes to Consolidated Financial Statements.


Fair Value of Net Assets of Acquired Businesses


The Company values the assets and liabilities associated with the acquisitions of businesses on the respective acquisition dates. Depending upon the type of asset or liability acquired, the Company uses different valuation techniques in determining the fair value. Those techniques include comparable market prices, long-term sales, profitability and cash flow forecasts, assumptions regarding future industry-specific economic and market conditions and a market participant’s weighted average cost of capital, as well as other techniques as circumstances required.require. By their nature, these assumptions require judgment, and if management had


chosen different assumptions, the fair value of net assets of acquired businesses would have been different. For further information on acquired assets and liabilities, see Notes 2 and 133 of the Notes to Consolidated Financial Statements.

Impairment of Long-Lived Assets, including Other Intangible Assets and Goodwill

The Company performs recoverability and impairment tests of noncurrent assets in accordance with accounting principles generally accepted in the United States. For certain assets, recoverability and/or impairment tests are required only when conditions exist that indicate the carrying value may not be recoverable. When such events or circumstances occur, the Company assesses the recoverability of long-lived assets by determining whether the carrying value will be recovered through the expected undiscounted future cash flows resulting from the use of the asset. In the event the sum of the expected undiscounted future cash flows is less than the carrying value of the asset, an impairment loss equal to the excess of the asset’s carrying value over its fair value would be recorded.

For other assets, impairment tests are required at least annually, or more frequently, if events or circumstances indicate that an asset may be impaired. The impairment test for other assets consists of an assessment of qualitative factors. If such qualitative factors do not support that the fair value of the reporting unit is greater than the carrying amount, the Company then uses a discounted cash flow model to estimate the fair value of the reporting unit.

The Company’s assessment of the recoverability and impairment tests of noncurrent assets involve critical accounting estimates. These estimates require significant management judgment, include inherent uncertainties and are often interdependent; therefore, they do not change in isolation. Factors that management must estimate include, among others, the economic life of the asset, sales volume, pricing, cost of raw materials, delivery costs, inflation, cost of capital, tax rates, capital spending and proceeds from the sale of assets. These factors are even more difficult to predict when financial markets are highly volatile. The estimates management uses when assessing the recoverability of noncurrent assets are consistent with those management uses in its internal planning. When performing impairment tests, management estimates the fair values of the assets using management’s best assumptions, which is believed to be consistent with what a hypothetical marketplace participant would use. Estimates and assumptions used in these tests are evaluated and updated as appropriate. The variability of these factors depends on a number of conditions, including uncertainty about future events, and thus accounting estimates may change from period to period. If other assumptions and estimates had been used when these tests were performed, impairment charges could have resulted. As mentioned above, these factors do not change in isolation and, therefore, the Company does not believe it is practicable or meaningful to present the impact of changing a single factor. Furthermore, if management uses different assumptions or if different conditions occur in future periods, future impairment charges could result.

Contingent Consideration Payments

In connection with several acquisitions, in addition to the cash paid at closing, additional payments could be required depending upon the level of sales generated from certain of the acquired products. The fair value of the aggregate estimated contingent consideration payments has been recorded as a liability in the Consolidated Balance Sheets. Each quarter, the Company is required to re-evaluate the fair value of the liability for the estimated contingent consideration payments for such acquisitions. The fair value of the contingent consideration payments is estimated using a discounted cash flow model. This model involves the use of estimates and significant judgments that are based on a number of factors including sales of certain products, future business plans, economic projections, weighted average cost of capital, and market data. Actual results may differ from forecasted results.

Other Estimates

The Company makes a number of other estimates and judgments in the ordinary course of business including, but not limited to, those related to product returns, sales and purchase rebates, accounts receivable, lease terminations, asset retirement obligations, long-lived assets, executive succession, post-retirement benefits, stock-based compensation, segment allocations, environmental liabilities, contingencies and litigation. Establishing reserves for these matters requires management’s estimate and judgment with regard to risk and ultimate liability or realization. As a result, these estimates are based on management’s current understanding of the underlying facts and circumstances and may also be developed in conjunction with outside advisors, as appropriate. Due to uncertainties related to the ultimate outcome of these issues or the possibilities of changes in the underlying facts and circumstances, actual results and events could differ significantly from management estimates.


New Accounting Pronouncements


Information required by this item is included in Note 152 of the Notes to the Consolidated Financial Statements.




INFLATION


The prices of key raw materials, consisting primarily of steel and aluminum, and components used by the Company which are made from these raw materials, are influenced by demand and other factors specific to these commodities, rather than being directly affected by inflationary pressures. Prices of these commodities have historically been volatile, and over the past few months prices have continued to fluctuate. The Company did not experience any significant increases in its labor costs in 20162019 related to inflation.


Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

At December 31, 2019, the Company had $566.2 million of borrowings outstanding on its variable rate revolving credit facility and incremental term loan. Assuming consistent borrowing levels and an increase of 100 basis points in the interest rate for borrowings of a similar nature subsequent to December 31, 2019, future cash flows would be reduced by approximately $5.7 million per annum.
At December 31, 2016,2019, the Company had $49.9$50.0 million of fixed rate debt outstanding. Assuming there is ana decrease of 100 basis points in the interest rate for borrowings of a similar nature subsequent to December 31, 2016,2019, which the Company becomes unable to capitalize on in the short-term as a result of the structure of its fixed rate financing, future cash flows would be approximately $0.3$0.5 million lower per annum than if the fixed rate financing could be obtained at current market rates.


The Company is also exposed to changes in the prices of raw materials, specifically steel and aluminum. The Company has, from time to time, entered into derivative instruments for the purpose of managing a portion of the exposures associated with fluctuations in steel and aluminum prices. While these derivative instruments are subject to fluctuations in value, these fluctuations are generally offset by the changes in fair value of the underlying exposures. See Note 13 of the Notes to Consolidated Financial Statements for a more detailed discussion of derivative instruments.


The Company has historically been able to obtain sales price increases to partially offset the majority of raw material cost increases. However, there can be no assurance future cost increases, if any, can be partially or fully passed on to customers, or that the timing of such sales price increases will match raw material cost increases.


Additional information required by this item is included under the caption “Inflation” in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of this Report.


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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.


Report of Independent Registered Public Accounting Firm


TheTo the Stockholders and Board of Directors and Stockholders
LCI Industries:


Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheets of LCI Industries and subsidiaries (the “Company”)Company) as of December 31, 20162019 and 2015, and2018, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows and stockholders’ equity for each of the years in the three-year period ended December 31, 2016.2019, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2016,2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Commission.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

The Company completed the CURT Acquisition Holdings, Inc. (CURT), Lewmar Marine Ltd. (Lewmar), Rodan Enterprises, LLC (SureShade), Ciesse Holdings S.r.l (Ciesse), Lavet S.r.l. (Lavet), and Femto Engineering S.r.l. (Femto) acquisitions during 2019, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2019, CURT, Lewmar, SureShade, Ciesse, Lavet, and Femto internal control over financial reporting associated with total assets of $568 million and total revenues of $65.4 million included in the consolidated financial statements of the Company as of and for the year ended December 31, 2019. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of CURT, Lewmar, SureShade, Ciesse, Lavet, and Femto.

Change in Accounting Principle

As discussed in Note 10 to the consolidated financial statements, the Company changed its method of accounting for leases effective January 1, 2019 due to the adoption of Accounting Standards Update 2016-02, Leases (Topic 842), and all related amendments, which established Accounting Standards Codification Topic 842, Leases.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Management’sManagement’s Annual Report on Internal Control over Financial Reporting.”

Our responsibility is to express an opinion on thesethe Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.


We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the consolidated financial statements, assessingstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, andas well as evaluating the overall presentation of the consolidated financial statement presentation.statements. Our audit of internal
38

control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.


Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.


Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


In our opinion,Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements referredthat were communicated or required to above present fairly,be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in all material respects,any way our opinion on the consolidated financial positionstatements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Evaluation of LCI Industriesacquisition date fair value of customer relationship intangible assets

As discussed in Note 3 to the consolidated financial statements, during fiscal year 2019, the Company acquired CURT for approximately $337.6 million. As a result of this transaction, the Company acquired $112 million of customer relationship intangible assets. The Company determined the fair value of customer relationships based on a discounted cash flow analyses that required the Company to make assumptions regarding cash flow forecasts, the customer attrition rate and subsidiariesthe discount rate used in the valuation.

We identified the evaluation of the acquisition-date fair value of acquired customer relationship intangible assets as a critical audit matter. Evaluating the forecasted cash flow, customer attrition rate and discount rate assumptions required specialized skills and knowledge, and there was limited observable market information. Additionally, the acquisition date fair value of customer relationships was sensitive to changes in the assumptions used in the forecasted cash flows, specifically as it relates to customer attrition rates.

The primary procedures we performed to address this critical audit matter included the following. We tested certain internal controls over the Company’s acquisition-date fair value process, including controls related to the development of the relevant assumptions as identified above. We performed sensitivity analyses over the cash flow forecasts, customer attrition rate and discount rate assumptions to assess their impact on the Company’s determination of the fair value of the acquired customer relationship intangible assets. We evaluated the cash flow forecast by comparing it to the historical results of the acquired entity, industry benchmarks and publicly available market data, and the cash flow forecast and customer attrition rate of previous acquisitions made by the Company. In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in:

–evaluating the Company’s discount rate, by comparing it against a discount rate range that was independently developed using publicly available market data for comparable entities; and
–testing the estimate of the customer relationship intangible assets fair value using the Company’s cash flow assumptions and an independently developed discount rate, and comparing the result to the Company’s fair value estimate.

39

Estimation of product warranty accrual

As discussed in Notes 2 and 6 to the consolidated financial statements, the Company’s product warranty accrual as of December 31, 20162019 was $47.2 million. The Company provides warranty terms based upon the type of product sold and 2015,estimates the amount of warranty costs associated with future product warranty claims, which are accrued at the time revenue is recognized. The estimate of the likelihood and cost of future claims considers various factors, including historical warranty costs, current trends, product mix and sales.

We identified the evaluation of the likelihood and cost of future claims that are used to estimate the product warranty accrual as a critical audit matter. The likelihood and cost of future claims in the calculation were challenging to test as minor changes to those factors and assumptions had a significant effect on the Company’s estimation of the accrual.

The primary procedures we performed to address this critical audit matter included the following. We tested certain internal controls over the Company’s product warranty accrual process including controls over the likelihood and cost of future claim assumptions used as inputs to the estimate. We identified and considered the relevance, reliability, and sufficiency of the sources of data used by the Company in developing the estimate. We developed an estimate of the product warranty accrual, based on actual warranty claims relative to sales for the period, and compared the results of their operations and their cash flows for each ofto the years inCompany’s product warranty accrual estimate. We compared the three-year period ended December 31, 2016, in conformity with U.S. generally accepted accounting principles. Also in our opinion,Company’s historical product warranty estimates to actual results to assess the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control – Integrated Framework (2013) issued byCompany’s ability to accurately estimate the Committee of Sponsoring Organizations of the Treadway Commission (COSO).product warranty accrual.



/s/ KPMG LLP


We have served as the Company’s auditor since 1980.

Chicago, Illinois
February 28, 201727, 2020





40

LCI INDUSTRIES
CONSOLIDATED STATEMENTS OF INCOME




Year Ended December 31,
201920182017
(In thousands, except per share amounts)
Net sales$2,371,482  $2,475,807  $2,147,770  
Cost of sales1,832,280  1,955,463  1,654,656  
Gross profit539,202  520,344  493,114  
Selling, general and administrative expenses338,992  321,556  278,833  
Operating profit200,210  198,788  214,281  
Interest expense, net8,796  6,436  1,437  
Income before income taxes191,414  192,352  212,844  
Provision for income taxes44,905  43,801  79,960  
Net income$146,509  $148,551  $132,884  
Net income per common share:
Basic$5.86  $5.90  $5.31  
Diluted$5.84  $5.83  $5.24  
Weighted average common shares outstanding:
Basic24,998  25,178  25,020  
Diluted25,093  25,463  25,375  
 Year ended December 31,
 2016 2015 2014
(In thousands, except per share amounts)     
      
Net sales$1,678,898
 $1,403,066
 $1,190,782
Cost of sales1,249,995
 1,097,064
 935,859
Gross profit428,903
 306,002
 254,923
Selling, general and administrative expenses228,053
 186,032
 157,482
Severance—
 3,716
 —
Sale of extrusion assets—
 —
 1,954
Operating profit200,850
 116,254
 95,487
Interest expense, net1,678
 1,885
 430
Income before income taxes199,172
 114,369
 95,057
Provision for income taxes69,501
 40,024
 32,791
Net income$129,671
 $74,345
 $62,266
      
Net income per common share:     
Basic$5.26
 $3.06
 $2.60
Diluted$5.20
 $3.02
 $2.56
      
Weighted average common shares outstanding:     
Basic24,631
 24,295
 23,911
Diluted24,933
 24,650
 24,334



The accompanying notes are an integral part of these Consolidated Financial Statements.


LCI INDUSTRIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 Year Ended December 31,
 2016 2015 2014
(In thousands)     
      
Consolidated net income$129,671
 $74,345
 $62,266
Other comprehensive loss:     
Net foreign currency translation adjustment(1,798) —
 —
Total comprehensive income$127,873
 $74,345
 $62,266


The accompanying notes are an integral part of these Consolidated Financial Statements.



41

LCI INDUSTRIES
CONSOLIDATED BALANCE SHEETSSTATEMENTS OF COMPREHENSIVE INCOME




Year Ended December 31,
 201920182017
(In thousands)  
Net income$146,509  $148,551  $132,884  
Other comprehensive income (loss):
Net foreign currency translation adjustment4,262  (3,936) 4,237  
Unrealized loss on fair value of derivative instruments(534) (1,108) —  
Total comprehensive income$150,237  $143,507  $137,121  
 December 31,
 2016 2015
(In thousands, except per share amount)   
    
ASSETS   
Current assets   
Cash and cash equivalents$86,170
 $12,305
Accounts receivable, net57,374
 41,509
Inventories, net188,743
 170,834
Prepaid expenses and other current assets35,107
 21,178
Total current assets367,394
 245,826
Fixed assets, net172,748
 150,600
Goodwill89,198
 83,619
Other intangible assets, net112,943
 100,935
Deferred taxes31,989
 29,391
Other assets12,632
 12,485
Total assets$786,904
 $622,856
    
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Current liabilities   
Accounts payable, trade$50,616
 $29,700
Accrued expenses and other current liabilities98,735
 69,162
Total current liabilities149,351
 98,862
Long-term indebtedness49,949
 49,910
Other long-term liabilities37,335
 35,509
Total liabilities236,635
 184,281
    
Stockholders’ equity   
Common stock, par value $.01 per share: authorized   
75,000 shares; issued 27,434 shares at December 31, 2016   
and 27,039 shares at December 31, 2015274
 270
Paid-in capital185,981
 166,566
Retained earnings395,279
 301,206
Accumulated other comprehensive loss(1,798) —
Stockholders’ equity before treasury stock579,736
 468,042
Treasury stock, at cost, 2,684 shares at December 31, 2016   
and December 31, 2015(29,467) (29,467)
Total stockholders’ equity550,269
 438,575
Total liabilities and stockholders’ equity$786,904
 $622,856



The accompanying notes are an integral part of these Consolidated Financial Statements.



42

LCI INDUSTRIES
CONSOLIDATED STATEMENTS OF CASH FLOWSBALANCE SHEETS

 Year Ended December 31,
 2016 2015 2014
(In thousands)     
Cash flows from operating activities:     
Net income$129,671
 $74,345
 $62,266
Adjustments to reconcile net income to cash flows provided by operating activities:     
Depreciation and amortization46,167
 41,624
 32,596
Stock-based compensation expense15,420
 14,043
 10,817
Deferred taxes(2,598) 1,062
 (5,493)
Other non-cash items1,540
 1,335
 2,796
Changes in assets and liabilities, net of acquisitions of businesses:     
Accounts receivable, net(13,899) 2,082
 (606)
Inventories, net(7,856) (31,276) (21,940)
Prepaid expenses and other assets(15,553) (2,249) (4,610)
Accounts payable, trade18,800
 (21,783) 21,269
Accrued expenses and other liabilities31,715
 15,835
 9,925
Net cash flows provided by operating activities203,407
 95,018
 107,020
Cash flows from investing activities:     
Capital expenditures(44,671) (28,989) (42,458)
Acquisitions of businesses, net of cash acquired(48,725) (41,058) (106,782)
Proceeds from note receivable2,000
 2,000
 1,750
Proceeds from sales of fixed assets698
 2,337
 3,587
Other investing activities(1,009) (406) (171)
Net cash flows used for investing activities(91,707) (66,116) (144,074)
Cash flows from financing activities:     
Exercise of stock-based awards, net of shares tendered for
payment of taxes		2,574
 1,470
 5,769
Proceeds from line of credit borrowings81,458
 614,629
 425,330
Repayments under line of credit borrowings(81,458) (630,279) (409,680)
Payment of dividends(34,437) (48,227) (46,706)
Proceeds from shelf-loan borrowing—
 50,000
 —
Payment of contingent consideration related to acquisitions(4,944) (3,974) (3,739)
Other financing activities(1,028) (220) (196)
Net cash flows used for financing activities(37,835) (16,601) (29,222)
      
Net increase (decrease) in cash and cash equivalents73,865
 12,301
 (66,276)
      
Cash and cash equivalents at beginning of year12,305
 4
 66,280
Cash and cash equivalents at end of year$86,170
 $12,305
 $4
      
Supplemental disclosure of cash flow information:     
Cash paid during the year for:     
Interest$1,992
 $2,113
 $641
Income taxes, net of refunds$65,792
 $33,782
 $30,947


December 31,
20192018
(In thousands, except per share amount)
ASSETS
Current assets
Cash and cash equivalents$35,359  $14,928  
Accounts receivable, net of allowances of $3,144 and $1,895 at
December 31, 2019 and 2018, respectively
199,976  121,812  
Inventories, net393,607  340,615  
Prepaid expenses and other current assets41,849  49,296  
Total current assets670,791  526,651  
Fixed assets, net366,309  322,876  
Goodwill351,114  180,168  
Other intangible assets, net341,426  176,342  
Operating lease right-of-use assets98,774  —  
Deferred taxes—  10,948  
Other assets34,181  26,908  
Total assets$1,862,595  $1,243,893  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current maturities of long-term indebtedness$17,883  $596  
Accounts payable, trade99,262  78,354  
Current portion of operating lease obligations21,693  —  
Accrued expenses and other current liabilities132,420  98,632  
Total current liabilities271,258  177,582  
Long-term indebtedness612,906  293,528  
Operating lease obligations79,848  —  
Deferred taxes35,740  8,501  
Other long-term liabilities62,171  58,027  
Total liabilities1,061,923  537,638  
Stockholders’ equity
Common stock, par value $.01 per share: authorized
75,000 shares; issued 28,133 shares at December 31, 2019
and 27,948 shares at December 31, 2018281  280  
Paid-in capital212,485  203,246  
Retained earnings644,945  563,496  
Accumulated other comprehensive income (loss)1,123  (2,605) 
Stockholders’ equity before treasury stock858,834  764,417  
Treasury stock, at cost, 3,087 shares at December 31, 2019 and 2018(58,162) (58,162) 
Total stockholders’ equity800,672  706,255  
Total liabilities and stockholders’ equity$1,862,595  $1,243,893  

The accompanying notes are an integral part of these Consolidated Financial Statements.



43

LCI INDUSTRIES
CONSOLIDATED STATEMENTSTATEMENTS OF STOCKHOLDERS’ EQUITYCASH FLOWS

Year Ended December 31,
201920182017
(In thousands)
Cash flows from operating activities:
Net income$146,509  $148,551  $132,884  
Adjustments to reconcile net income to cash flows provided by operating activities:
Depreciation and amortization75,358  67,526  54,727  
Stock-based compensation expense16,077  14,065  20,036  
Deferred taxes3,416  13,874  6,808  
Other non-cash items(1,553) (13) 4,371  
Changes in assets and liabilities, net of acquisitions of businesses:
Accounts receivable, net(25,452) (11,352) (12,601) 
Inventories, net57,790  (34,730) (78,698) 
Prepaid expenses and other assets6,882  (17,691) (10,898) 
Accounts payable, trade(12,189) (17,335) 20,727  
Accrued expenses and other liabilities2,687  (6,287) 15,346  
Net cash flows provided by operating activities269,525  156,608  152,702  
Cash flows from investing activities:
Capital expenditures(58,202) (119,827) (87,221) 
Acquisitions of businesses, net of cash acquired(447,764) (184,792) (60,588) 
Other investing activities2,132  1,824  1,934  
Net cash flows used in investing activities(503,834) (302,795) (145,875) 
Cash flows from financing activities:
Vesting of stock-based awards, net of shares tendered for payment of taxes(8,084) (16,097) (10,531) 
Proceeds from revolving credit facility borrowings655,387  1,387,013  28,130  
Repayments under revolving credit facility borrowings(628,891) (1,146,953) (28,130) 
Proceeds from term loan borrowings300,000  —  —  
Proceeds from other borrowings—  4,509  —  
Payment of dividends(63,813) (59,270) (51,057) 
Payment of contingent consideration related to acquisitions(10) (3,068) (5,301) 
Repurchases of common stock—  (28,695) —  
Other financing activities382  (2,373) (59) 
Net cash flows provided by (used in) financing activities254,971  135,066  (66,948) 
Effect of exchange rate changes on cash and cash equivalents(231) —  —  
Net increase (decrease) in cash and cash equivalents20,431  (11,121) (60,121) 
Cash and cash equivalents at beginning of period14,928  26,049  86,170  
Cash and cash equivalents at end of period$35,359  $14,928  $26,049  
Supplemental disclosure of cash flow information:
Cash paid during the period for interest$9,143  $5,645  $1,650  
Cash paid during the period for income taxes, net of refunds$37,836  $39,991  $53,620  
Purchase of property and equipment in accrued expenses$3,417  $385  $2,640  
 
Common
Stock
Paid-in
Capital
Retained
Earnings
Accumulated Other Comprehensive Loss
Treasury
Stock
Total
Stockholders’
Equity
(In thousands, except shares and per share amounts)      
Balance - December 31, 2013$261
$126,360
$216,459
$—
$(29,467)$313,613
Net income—
—
62,266
—
—
62,266
Issuance of 476,047 shares of common stock pursuant to stock-based awards4
2,298
—
—
—
2,302
Income tax benefit relating to issuance of common stock pursuant to stock-based awards—
3,914
—
—
—
3,914
Stock-based compensation expense—
10,817
—
—
—
10,817
Issuance of 43,188 deferred stock units relating to prior year compensation—
1,986
—
—
—
1,986
Dividend equivalents on stock-based awards—
1,811
(1,811)—
—
—
Balance - December 31, 2014265
147,186
276,914
—
(29,467)394,898
Net income—
—
74,345
—
—
74,345
Issuance of 505,312 shares of common stock pursuant to stock-based awards, net of shares tendered for payment of taxes5
(7,563)—
—
—
(7,558)
Income tax benefit relating to issuance of common stock pursuant to stock-based awards—
9,028
—
—
—
9,028
Stock-based compensation expense—
14,043
—
—
—
14,043
Issuance of 36,578 deferred stock units relating to prior year compensation—
2,046
—
—
—
2,046
Special cash dividend ($2.00 per share)—
—
(48,227)—
—
(48,227)
Dividend equivalents on stock-based awards—
1,826
(1,826)—
—
—
Balance - December 31, 2015270
166,566
301,206
—
(29,467)438,575
Net income—
—
129,671
—
—
129,671
Issuance of 395,274 shares of common stock pursuant to stock-based awards, net of shares tendered for payment of taxes4
(5,413)—
—
—
(5,409)
Income tax benefit relating to issuance of common stock pursuant to stock-based awards—
7,983
—
—
—
7,983
Stock-based compensation expense—
15,420
—
—
—
15,420
Issuance of 4,784 deferred stock units relating to prior year compensation—
264
—
—
—
264
Other comprehensive loss—
—
—
(1,798)—
(1,798)
Cash dividends ($1.40 per share)—
—
(34,437)—
—
(34,437)
Dividend equivalents on stock-based awards—
1,161
(1,161)—
—
—
Balance - December 31, 2016$274
$185,981
$395,279
$(1,798)$(29,467)$550,269


The accompanying notes are an integral part of these Consolidated Financial Statements.


44

LCI INDUSTRIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(In thousands, except shares and per share amounts)
Common
Stock
Paid-in
Capital
Retained
Earnings
Accumulated Other Comprehensive (Loss) Income
Treasury
Stock
Total
Stockholders’
Equity
Balance - January 1, 2017$274  $185,981  $395,279  $(1,798) $(29,467) $550,269  
Net income—  —  132,884  —  —  132,884  
Issuance of 239,854 shares of common stock pursuant to stock-based awards, net of shares tendered for payment of taxes
3  (10,534) —  —  —  (10,531) 
Stock-based compensation expense—  20,036  —  —  —  20,036  
Issuance of 63,677 deferred stock units relating to prior year compensation
—  6,907  —  —  —  6,907  
Other comprehensive income—  —  —  4,237  —  4,237  
Cash dividends ($2.05 per share)
—  —  (51,057) —  —  (51,057) 
Dividend equivalents on stock-based awards—  1,600  (1,600) —  —  —  
Balance - December 31, 2017277  203,990  475,506  2,439  (29,467) 652,745  
Net income—  —  148,551  —  —  148,551  
Issuance of 274,177 shares of common stock pursuant to stock-based awards, net of shares tendered for payment of taxes
3  (16,100) —  —  —  (16,097) 
Stock-based compensation expense—  14,065  —  —  —  14,065  
Repurchase of 402,570 shares of common stock
—  —  —  —  (28,695) (28,695) 
Other comprehensive loss—  —  —  (5,044) —  (5,044) 
Cash dividends ($2.35 per share)—  —  (59,270) —  —  (59,270) 
Dividend equivalents on stock-based awards—  1,291  (1,291) —  —  —  
Balance - December 31, 2018280  203,246  563,496  (2,605) (58,162) 706,255  
Net income—  —  146,509  —  —  146,509  
Issuance of 185,020 shares of common stock pursuant to stock-based awards, net of shares tendered for payment of taxes1  (8,085) —  —  —  (8,084) 
Stock-based compensation expense—  16,077  —  —  —  16,077  
Other comprehensive income—  —  —  3,728  —  3,728  
Cash dividends ($2.55 per share)—  —  (63,813) —  —  (63,813) 
Dividend equivalents on stock-based awards—  1,247  (1,247) —  —  —  
Balance - December 31, 2019$281  $212,485  $644,945  $1,123  $(58,162) $800,672  

The accompanying notes are an integral part of these Consolidated Financial Statements.
45

LCI INDUSTRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




1. SUMMARYBASIS OF SIGNIFICANT ACCOUNTING POLICIESPRESENTATION

Basis of Presentation


The Consolidated Financial Statements include the accounts of LCI Industries and its wholly-owned subsidiaries (“LCII” and collectively with its subsidiaries, the “Company”). LCII has no0 unconsolidated subsidiaries. LCII, through its wholly-owned subsidiary, Lippert Components, Inc. and its subsidiaries (collectively, “Lippert Components” or “LCI”), supplies, domestically and internationally, a broad array of engineered components for the leading original equipment manufacturers (“OEMs”) in the recreation and transportation product markets, consisting of recreational vehicles (“RVs”) and adjacent industries including buses; trailers used to haul boats, livestock, equipment, and other cargo; trucks; pontoon boats; trains; manufactured homes; and modular housing. The Company also supplies engineered components to the related aftermarkets of these industries, primarily by selling to retail dealers, wholesale distributors, and service centers. At December 31, 2016,2019, the Company operated 48over 90 manufacturing and distribution facilities located throughout the United StatesNorth America and in Canada and Italy.Europe.


Most industries where the Company sells products or where its products are used historically have been seasonal and are generally at the highest levels when the weather is moderate. Accordingly, the Company’s sales and profits have generally been the highest in the second quarter and lowest in the fourth quarter. However, because of fluctuations in dealer inventories, the impact of international, national and regional economic conditions and consumer confidence on retail sales of RVsrecreation and othertransportation products for which the Company sells its components, the timing of dealer orders, and the impact of severe weather conditions on the timing of industry-wide shipments from time to time, current and future seasonal industry trends may be different than in prior years. Additionally, sales of certain engineered components to the aftermarket channels of these industries tend to be counter-seasonal.


The Company is not aware of any significant events, except as disclosed in the Notes to Consolidated Financial Statements, which occurred subsequent to the balance sheet date but prior to the filing of this report that would have a material impact on the Consolidated Financial Statements. All significant intercompany balances and transactions have been eliminated. Certain prior year balances have been reclassified to conform to the current year presentation.


Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, net sales and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates, including, but not limited to, those related to product returns, sales and purchase rebates, accounts receivable, inventories, goodwill and other intangible assets, net assets of acquired businesses, income taxes, warranty and product recall obligations, self-insurance obligations, operating lease right-of-use assets and obligations, asset retirement obligations, long-lived assets, post-retirement benefits, stock-based compensation, segment allocations, contingent consideration, environmental liabilities, contingencies, and litigation. The Company bases its estimates on historical experience, other available information, and various other assumptions believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities not readily apparent from other resources. Actual results and events could differ significantly from management estimates.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents


The Company considers all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents.


Accounts Receivable


Accounts receivable are stated at historical carrying value, net of write-offs and allowances. The Company establishes allowances based upon historical experience and any specific customer collection issues identified by the Company. Uncollectible accounts receivable are written off when a settlement is reached or when the Company has determined the balance will not be collected.


46

Inventories


Inventories are stated at the lower of cost (using the first-in, first-out (FIFO) method) or market.net realizable value. Cost includes material, labor, and overhead; market is replacement cost or realizable value after allowance for costs of distribution.overhead.


Fixed Assets


Fixed assets which are owned are stated at cost less accumulated depreciation, and are depreciated on a straight-line basis over the estimated useful lives of the properties and equipment. Leasehold improvements and leased equipment are amortized over the shorter of the lives of the leases or the underlying assets. Maintenance and repair costs that do not improve service potential or extend economic life are expensed as incurred.


Warranty


The Company provides warranty terms based upon the type of product sold. The Company estimates the warranty accrual based upon various factors, including (i) historical warranty costs, (ii) current trends, (iii) product mix, and (iv) sales. The accounting
LCI INDUSTRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

for warranty accruals requires the Company to make assumptions and judgments, and to the extent actual results differ from original estimates, adjustments to recorded accruals may be required. See Note 6 - Accrued Expenses and Other Current Liabilities for further detail.


Income Taxes


Deferred tax assets and liabilities are determined based on the temporary differences between the financial reporting and tax basis of assets and liabilities, applying enacted statutory tax rates in effect for the year in which the differences are expected to reverse. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all the deferred tax assets will not be realized.


The Tax Cuts and Jobs Act (the “TCJA”), enacted in 2017, created a new requirement that certain income earned by foreign subsidiaries, known as global intangible low-tax income (“GILTI”), must be included in the gross income of their U.S. shareholder. We have elected to account for GILTI tax in the year the tax is incurred.

The Company accounts for uncertainty in tax positions by recognizing in its financial statements the impact of a tax position only if that position is more likely than not of being sustained on audit, based on the technical merits of the position. Further, the Company assesses the tax benefits of the tax positions in its financial statements based on experience with similar tax positions, information obtained during the examination process and the advice of experts. The Company recognizes previously unrecognized tax benefits upon the earlier of the expiration of the period to assess tax in the applicable taxing jurisdiction or when the matter is constructively settled and upon changes in statutes or regulations and new case law or rulings.

The Company classifies interest and penalties related to income taxes as a component of income tax expense in its Consolidated Financial Statements.Statements of Income.


Goodwill


Goodwill represents the excess of the total consideration given in an acquisition of a business over the fair value of the net tangible and identifiable intangible assets acquired. Goodwill is not amortized, but instead is tested at the reporting unit level for impairment annually in November, or more frequently if certain circumstances indicate a possible impairment may exist. In 20162019 and 2015,2018, the Company assessed qualitative factors of its reporting units to determine whether it was more likely than not the fair value of the reporting unit was less than its carrying amount, including goodwill. The qualitative impairment test consists of an assessment of qualitative factors, including general economic and industry conditions, market share and input costs.


Other Intangible Assets
Intangible assets with estimable useful lives are amortized primarily on an accelerated basis, over their respective estimated useful lives to their estimated residual values, and reviewed for impairment. The amortization of other intangibleIntangible assets is doneare amortized using aeither an accelerated or straight-line method, straight-line or accelerated, whichwhichever best reflects the pattern in which the estimated future economic benefits of the asset will be consumed. The useful lives of intangible assets are determined after considering the expected cash flows and other specific facts and circumstances related to each intangible asset. Intangible assets with indefinite lives are not amortized, but instead are tested for impairment annually in November, or more frequently if certain circumstances indicate a possible impairment may exist.


47

Impairment of Long-Lived Assets


Long-lived assets, other than goodwill, are tested for impairment when changes in circumstances indicate their carrying value may not be recoverable. A determination of impairment, if any, is made based on the undiscounted value of estimated future cash flows, salvage value or expected net sales proceeds, depending on the circumstances. Impairment is measured as the excess of the carrying value over the estimated fair value of such assets.

Asset Retirement Obligations

Asset retirement obligations are legal obligations associated with the retirement of long-lived assets. The Company records asset retirement obligations on certain of its owned and leased facilities and leased machinery and equipment. These liabilities are initially recorded at fair value and are adjusted for changes resulting from revisions to the timing or the amount of the original estimate.


Environmental Liabilities


Accruals for environmental matters are recorded when it is probable a liability has been incurred and the amount of the liability can be reasonably estimated, based upon current law and existing technologies. These amounts, which are not discounted and are exclusive of claims against potentially responsible third parties, are adjusted periodically as assessment and remediation efforts progress or additional technical or legal information becomes available. Environmental exposures are difficult to assess for numerous reasons, including the identification of new sites, developments at sites resulting from investigatory studies and remedial
LCI INDUSTRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

activities, advances in technology, changes in environmental laws and regulations and their application, the scarcity of reliable data pertaining to identified sites, the difficulty in assessing the involvement and financial capability of other potentially responsible parties and the Company’s ability to obtain contributions from other parties, and the lengthy time periods over which site remediation occurs. It is possible some of these matters (the outcomes of which are subject to various uncertainties) may be resolved unfavorably against the Company, and could materially affect operating results when resolved in future periods.


Foreign Currency Translation


The “functional currency”financial statements of the Company’s international subsidiaries in Italy isgenerally are measured using the respective local currency as the functional currency. The translation from the applicable foreign currency to U.S. Dollars is performed for balance sheet accounts using exchange rates in effect at the balance sheet date and for revenue and expense accounts using the weighted average exchange rate for the period. The resulting translation adjustments are recorded in accumulated other comprehensive income (loss) as a component of Accumulated Other Comprehensive Income (Loss).stockholders’ equity. The Company reflects net foreign exchange transaction gains and losses resulting from the conversion of the transaction currency to functional currency as a component of foreign currency exchange gains or losses in selling, general and administrative expenses in the Consolidated Statements of Income.


Financial Instruments


The carrying values of cash and cash equivalents, accounts receivable, derivative instruments, and accounts payable approximatedapproximate their fair value due to the short-term nature of these instruments.


Stock-Based Compensation


All stock-based compensation awards are expensed over their vesting period, based on fair value. For awards having a service-only vesting condition, the Company recognizes stock-based compensation expense on a straight-line basis over the requisite service periods. For awards with a performance vesting condition, which are subject to certain pre-established performance targets, the Company recognizes stock-based compensation expense on a graded-vesting basis to the extent it is probable the performance targets will be met. The fair value for stock options is determined using the Black-Scholes option-pricing model, while the fair values of deferred stock units, restricted stock units, restricted stock, and stock awards are based on the market price of the Company’s Common Stock,common stock, all on the date the stock-based awards are granted.


Revenue Recognition


The Company recognizes revenue when performance obligations under the terms of contracts with customers are satisfied, which occurs with the transfer of control of the Company’s products. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring its products are shippedto its customers. Sales, value added and the customer takes ownership and assumes risk of loss, collectability is reasonably assured, and the sales price is fixed or determinable. Salesother taxes collected from customers and remitted to governmental authorities, which are not significant, are accounted for on a net basis and thereforeconcurrent with revenue-producing activities are excluded from netrevenue.
For the majority of product sales, the Company transfers control and recognizes revenue when it ships the product from its facility to its customer. The amount of consideration the Company receives and the revenue recognized varies with sales discounts, volume rebate programs and indexed material pricing. When the Company offers customers retrospective
48

volume rebates, it estimates the expected rebates based on an analysis of historical experience. The Company adjusts its estimate of revenue related to volume rebates at the earlier of when the most likely amount of consideration expected to be received changes or when the consideration becomes fixed. When the Company offers customers prompt pay sales discounts or agrees to variable pricing based on material indices, it estimates the expected discounts or pricing adjustments based on an analysis of historical experience. The Company adjusts its estimate of revenue related to sales discounts and indexed material pricing to the expected value of the consideration to which the Company will be entitled. The Company includes the variable consideration in the Consolidated Statementstransaction price to the extent that it is probable that a significant reversal of Income.cumulative revenue will not occur when the volume, discount or indexed material price uncertainties are resolved.

See Note 14 - Segment Reporting for the Company’s disclosures of disaggregated revenue.
Shipping and Handling Costs

The Company recordsrecognizes shipping and handling costs as fulfillment costs when control over products has transferred to the customer, and records the expense within selling, general and administrative expenses. Such costs aggregated $51.8$77.3 million, $45.8$83.2 million, and $40.9$68.6 million in the years ended December 31, 2016, 20152019, 2018, and 2014,2017, respectively.


Legal Costs


The Company expenses all legal costs associated with litigation as incurred. Legal expenses are included in selling, general and administrative expenses in the Consolidated Statements of Income.


Fair Value Measurements


Fair value is determined using a hierarchy that has three levels based on the reliability of the inputs used to determine fair value. Level 1 refers to fair values determined based on quoted prices in active markets for identical assets. Level 2 refers to fair values estimated using significant other observable inputs, and Level 3 includes fair values estimated using significant unobservable inputs.


UseRecent Accounting Pronouncements

Recently issued accounting pronouncements not yet adopted

In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-04, Simplifying the Test for Goodwill Impairment, which amends Accounting Standards Codification (“ASC”) 350, Intangibles - Goodwill and Other. This ASU simplifies how an entity is required to test goodwill for impairment by eliminating step 2 from the goodwill impairment test. Step 2 measures goodwill impairment loss by comparing the implied fair value of Estimatesa reporting unit’s goodwill with the carrying amount of that goodwill. This ASU is effective for interim and annual reporting periods, beginning after December 15, 2019, and early adoption is permitted. The Company will adopt this ASU in the first quarter of 2020 and does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.


In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which changes the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. This ASU is effective for interim and annual reporting periods, beginning after December 15, 2019, and early adoption is permitted. The Company will adopt this ASU in the first quarter of 2020 and does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.

Recently adopted accounting pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases, and all related amendments, which established ASC Topic 842 (Topic 842), which requires, in most instances, a lessee to recognize on its balance sheet a liability to make lease payments (the lease liability) and also a right-of-use asset representing its right to use the underlying asset for the lease term. Leases are classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. The Company adopted Topic 842 on January 1, 2019, using the cumulative-effect adjustment transition method, which applies the new standard at the effective date without adjusting the comparative periods presented. The Company elected the package of practical expedients permitted under the transition guidance, which allowed the carryforward of historical lease classification, the assessment of whether a contract is or contains a lease, and initial direct costs for any leases that existed prior to adoption of the new standard. The Company also elected to keep leases with an initial term of 12 months or
49

less off its Consolidated Balance Sheet and recognize the associated lease payments in its Consolidated Statements of Income on a straight-line basis over the lease term.

The preparationadoption of financial statements in conformity with accounting principles generally acceptedTopic 842 resulted in the United Statesrecognition of America requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, net sales and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates,
LCI INDUSTRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

including, but not limited to, those related to product returns, sales and purchase rebates, accounts receivable, inventories, goodwill and other intangible assets, netright-of-use assets of acquired businesses, income taxes, warranty$66.4 million and product recalloperating lease obligations self-insurance obligations, lease terminations, asset retirement obligations, long-lived assets, post-retirement benefits, stock-based compensation, segment allocations, contingent consideration, environmental liabilities, contingenciesof $69.0 million at January 1, 2019. The adoption did not result in a cumulative effect adjustment to beginning retained earnings and litigation. The Company bases its estimates on historical experience, other available information and various other assumptions believedis not expected to be reasonablematerially impact the Company’s Consolidated Statements of Income or Cash Flows. See Note 10 of the Notes to Consolidated Financial Statements for expanded disclosures required under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities not readily apparent from other resources. Actual results and events could differ significantly from management estimates.Topic 842.


2.3. ACQUISITIONS, GOODWILL AND OTHER INTANGIBLE ASSETS


Acquisitions in 2017Subsequent Event


SessaKlein S.p.A.Polyplastic


In February 2017,January 2020, the Company acquired 100 percent of the outstanding sharesequity interests of Sessa Klein S.p.A. (“SessaKlein”Polyplastic Group B.V. (with its subsidiaries “Polyplastic”), a manufacturer of highly engineered sidepremier window systems for both high speed and commuter trains, located near Varese, Italy.supplier to the caravaning industry, headquartered in Rotterdam, Netherlands. The purchase price was $8.5$97.6 million, paid at closing,net of cash acquired, plus contingent consideration up to $7.7 million, based on future sales by this operation. The results of the acquired business will be included primarily in the Company’s OEM Segment. The Company is unable to make allin the disclosures required by ASC 805-10-50-2 at this time asprocess of determining the initial accountingfair value of the assets acquired and pro forma analysisliabilities assumed for this business combination is incomplete.the opening balance sheet.


Acquisitions in 20162019


Camping ConnectionCURT


In November 2016,December 2019, the Company acquired 100 percent of the service centersequity interests of CURT Acquisition Holdings, Inc. (with its subsidiaries “CURT”), a leading manufacturer and related businessdistributor of Camping Connection, Inc., an RV repairbranded towing products and service provider locatedtruck accessories for the aftermarket, headquartered in Myrtle Beach, South Carolina and Kissimmee, Florida.Eau Claire, Wisconsin. The purchase price was $2.0$337.6 million, paid at closing.

Atwood Seatingnet of cash acquired, and Chassis Components

In November 2016, the Company acquired the business, manufacturing facility and certain assets of the seating and chassis components business of Atwood Mobile Products, LLC (“Atwood”), a subsidiary of Dometic Group, located in Elkhart, Indiana. The purchase price was $12.5 million paid at closing.is subject to potential post-closing adjustments related to net working capital. The results of the acquired business have been included primarily in the Company’s OEM Segment and in the Consolidated Statements of Income since the acquisition date.date, primarily in the Company’s Aftermarket Segment. The Company is validating account balances and finalizing the valuation for the acquisition. The acquisition of this business was preliminarily recorded on the acquisition date as follows (in thousands):
Cash consideration, net of cash acquired$337,640 
Assets Acquired
Accounts receivable$28,611 
Inventories88,765 
Fixed assets24,036 
Customer relationship112,000 
Tradename and other identifiable intangible assets37,705 
Operating lease right-of-use assets27,925 
Other tangible assets4,060 
Liabilities Assumed
Accounts payable(18,577)
Current portion of operating lease obligations(5,360)
Accrued expenses and other current liabilities(10,002)
Operating lease obligations(22,565)
Deferred taxes(31,877)
Total fair value of net assets acquired$234,721 
Goodwill (not tax deductible)$102,919 

50
Cash consideration$12,463
  
Customer relationships$2,116
Net other assets10,347
Total fair value of net assets acquired$12,463


The fair values of the customer relationshipsrelationship and tradename intangible asset isassets are being amortized over its preliminarytheir estimated useful lifelives of 15 years.

Project 2000 S.r.l.

In May 2016, the Company acquired 100 percent17 years and 20 years, respectively. The fair values of the equity interest of Project 2000 S.r.l. (“Project 2000”),these assets were determined using a manufacturer of innovative, space-saving bed lifts and retractable steps, located near Florence, Italy. The purchase price was $18.8 million paid at closing, plus contingent consideration based on future sales by this operation. The results of the acquired business have been included primarilydiscounted cash flow model, which is a level 3 input in the Company’s OEM Segment and in the Consolidated Statements of Income since the acquisition date. The Company is validating account balances and finalizing the valuation for the acquisition.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

The acquisition of this business was preliminarily recorded on the acquisition date as follows (in thousands):
Cash consideration net of cash acquired$16,137
Contingent consideration1,322
Total fair value of consideration given$17,459
  
Customer relationships$9,694
Other identifiable intangible assets5,193
Net other assets128
Total fair value of net assets acquired$15,015
  
Goodwill (not tax deductible)$2,444

The customer relationships intangible asset is being amortized over its preliminary estimated useful life of 15 years.fair value hierarchy. The consideration given was greater than the fair value of the net assets acquired, resulting in goodwill, because the Company anticipates the attainment of synergies and an increase in the markets for the acquired products.


Flair InteriorsThe results of CURT are included in the Company’s Consolidated Statements of Income since the December 19, 2019 acquisition date and were not material to the consolidated results.


The following unaudited pro forma information represents the Company’s results of operations as if the 2019 acquisition of CURT had occurred at the beginning of 2018. The disclosure of pro forma net sales and earnings does not purport to indicate the results that would actually have been obtained had the acquisition been completed on the assumed date for the periods presented, or which may be realized in the future. The unaudited pro forma information combines the reported results of the Company and CURT but does not reflect any operating efficiencies, cost savings, financing costs, step-up of assets, or other accounting related adjustments resulting from the acquisition.
(unaudited)
Year Ended December 31,
(In thousands, except per share amounts)20192018
Net sales$2,639,761  $2,735,378  
Net income$144,878  $147,878  
Basic net income per common share$5.80  $5.87  
Diluted net income per common share$5.77  $5.81  

The pro forma earnings for the year ended December 31, 2019 were adjusted to exclude $20.2 million of costs incurred directly attributable to the acquisition. Nonrecurring expenses for goodwill amortization of $5.2 million and $5.0 million were excluded from pro forma earnings for the years ended December 31, 2019 and 2018, respectively. The pro forma earnings do not reflect adjustments for any changes in CURT's historical capital structure, which included interest charges of $14.8 million and $14.0 million for the years ended December 31, 2019 and 2018, respectively.

The Company incurred costs during the year ended December, 31 2019 related specifically to this acquisition of $1.0 million, which are included in selling, general, and administrative expenses in the Consolidated Statements of Income.

PWR-ARM

In February 2016,November 2019, the Company acquired the businessPWR-ARM brand and certainelectric powered Bimini business assets of Flair Interiors,Schwintek, Inc. (“Flair”PWR-ARM”), a manufacturer of RV furniture located in Goshen, Indiana.premier electric sunshade solution for pontoon and smaller power boats. The purchase price was $8.1$45.0 million, which includes holdback payments of $5.0 million to be paid at closing.over the next two years. The results of the acquired business have been included primarily in the Company’s OEM Segment and in the Consolidated Statements of Income since the acquisition date.date, primarily in the Company’s OEM Segment. As the acquisition of PWR-ARM is not considered to have a material impact on the Company’s financial statements, pro forma results of operations and other disclosures are not presented. The Company is validating account balances and finalizing the valuation for the acquisition. The acquisition of this business was preliminarily recorded on the acquisition date as follows (in thousands):
Cash consideration$40,000 
Holdback payment5,000 
Total value of consideration given$45,000 
Customer relationship and other identifiable intangible assets$7,030 
Net tangible assets520 
Total fair value of net assets acquired$7,550 
Goodwill (tax deductible)$37,450 

51
Cash consideration$8,100
  
Customer relationships$3,700
Net other assets2,378
Total fair value of net assets acquired$6,078
  
Goodwill (tax deductible)$2,022


The customer relationshipsrelationship intangible asset is being amortized over its estimated useful life of 5 years. The consideration given was greater than the fair value of the net assets acquired, resulting in goodwill, because the Company anticipates an increase in the markets for the acquired products.

Lewmar Marine Ltd.

In August 2019, the Company acquired 100 percent of the equity interests of Lewmar Marine Ltd. and related entities (collectively, “Lewmar”), a supplier of leisure marine equipment, headquartered in Havant, United Kingdom. The purchase price was $43.2 million, net of cash acquired. The results of the acquired business have been included in the Consolidated Statements of Income since the acquisition date, primarily in the Company’s OEM Segment. The Company is validating account balances and finalizing the valuation for the acquisition. As the acquisition of Lewmar is not considered to have a material impact on the Company’s financial statements, pro forma results of operations and other disclosures are not presented. The acquisition of this business was preliminarily recorded on the acquisition date as follows (in thousands):
Cash consideration, net of cash acquired$43,224 
Customer relationship and other identifiable intangible assets$19,579 
Net tangible assets3,287 
Total fair value of net assets acquired$22,866 
Goodwill (not tax deductible)$20,358 

The customer relationship intangible asset is being amortized over its estimated useful life of 15 years. The consideration given was greater than the fair value of the net assets acquired, resulting in goodwill, because the Company anticipates the attainment of synergies and an increase in the markets for the acquired products.


Highwater MarineOther Acquisitions in 2019

During fiscal 2019, the Company completed 4 other acquisitions totaling $28.3 million of purchase consideration, net of cash acquired, and subject to potential post-closing adjustments related to net working capital. The preliminary purchase price allocations resulted in $11.6 million of goodwill, of which $5.8 million is not deductible for tax purposes, and $9.2 million of acquired identifiable intangible assets.

The accounting for these acquisitions is incomplete at December 31, 2019. The estimated fair values of assets acquired and liabilities assumed are based on preliminary allocations and will be finalized during the respective measurement periods which will not exceed 12 months from the respective acquisition dates. As these acquisitions are not considered to have a material impact on the Company’s financial statements, pro forma results of operations and other disclosures are not presented.

Acquisitions in 2018

Smoker Craft Furniture


In January 2016,November 2018, the Company acquired the business and certain assets of the pontoon furniture manufacturing operation of Highwater Marine, LLC (“Highwater”)Smoker Craft Inc., a leading manufacturer of pontoon, aluminum fishing, and other recreational boatsfiberglass boat manufacturer located in Elkhart,New Paris, Indiana. The purchase price was $10.0$28.1 million paid at closing. The results of the acquired business have been included primarily in the Company’s OEM Segment and in the Consolidated Statements of Income since the acquisition date. The acquisition of this business was recorded on the acquisition date as follows (in thousands):
Cash consideration$10,000
  
Customer relationships$8,100
Net tangible assets1,307
Total fair value of net assets acquired$9,407
  
Goodwill (tax deductible)$593

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

The customer relationships intangible asset is being amortized over its estimated useful life of 15 years. The consideration given was greater than the fair value of the net assets acquired, resulting in goodwill, because the Company anticipates leveraging its existing experience and manufacturing capacity with respect to these product lines.

Acquisitions in 2015

Signature Seating

In August 2015, the Company acquired the business and certain assets of Roehm Marine, LLC, also known as Signature Seating (“Signature”), a manufacturer of furniture solutions for fresh water boat manufacturers, primarily pontoon boats. The purchase price was $16.0 million paid at closing, plus contingent consideration based on future sales of this operation. The results of the acquired business have been included in the Company’s OEM Segment and in the Consolidated Statements of Income since the acquisition date. The acquisition of this business was recorded on the acquisition date as follows (in thousands):
Cash consideration$16,000
Contingent consideration3,556
Total fair value of consideration given$19,556
  
Customer relationships$7,500
Net other assets4,023
Total fair value of net assets acquired$11,523
  
Goodwill (tax deductible)$8,033

The customer relationships intangible asset is being amortized over its estimated useful life of 15 years. The consideration given was greater than the fair value of the net assets acquired, resulting in goodwill, because the Company anticipates leveraging its existing experience and manufacturing capacity with respect to these product lines, and also believes the diversified customer base will further its expansion into adjacent industries.

Spectal Industries

In April 2015, the Company acquired the business and certain assets of Industries Spectal, Inc. (“Spectal”), a Quebec, Canada-based manufacturer of windows and doors primarily for school buses, as well as commercial buses, emergency vehicles, trucks, agricultural equipment and RVs. The purchase price was $22.3 million paid at closing, plus contingent consideration based on future sales of this operation. The results of the acquired business have been included primarily in the Company’s OEM Segment and in the Consolidated Statements of Income since the acquisition date. The acquisition of this business was recorded on the acquisition date as follows (in thousands):
Cash consideration$22,335
Contingent consideration1,211
Total fair value of consideration given$23,546
  
Customer relationships$10,100
Net other assets4,381
Total fair value of net assets acquired$14,481
  
Goodwill (tax deductible)$9,065

The customer relationships intangible asset is being amortized over its estimated useful life of 15 years. The consideration given was greater than the fair value of the net assets acquired, resulting in goodwill, because the Company anticipates leveraging its existing experience and manufacturing capacity with respect to these product lines, and also believes the diversified customer base will further its expansion into adjacent industries.

LCI INDUSTRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

EA Technologies

In January 2015, the Company acquired the business and certain assets of EA Technologies, LLC (“EA Technologies”), a manufacturer of custom steel and aluminum parts and provider of electro-deposition (‘e-coat’) and powder coating services for RV, bus, medium-duty truck, automotive, recreational marine, specialty and utility trailer, and military applications. The purchase price was $9.2 million, of which $6.6 million was paid in the fourth quarter of 2014, with the balance paid at closing. The results of the acquired business have been included in the Consolidated Statements of Income since the acquisition date, primarily in the Company’s OEM SegmentSegment.

ST.LA. S.r.l.

In June 2018, the Company acquired 100 percent of the equity interests of ST.LA. S.r.l., a manufacturer of bed lifts and other RV components for the European caravan market, headquartered in Pontedera, Italy. The purchase price was $14.8 million, net of cash acquired, paid at closing. The results of the acquired business have been included in the Consolidated Statements of Income since the acquisition date. The acquisition of this business was recorded ondate, primarily in the acquisition date as follows (in thousands):Company’s OEM Segment.

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Cash consideration$9,248
  
Identifiable intangible assets$480
Net tangible assets8,868
Total fair value of net assets acquired$9,348
  
Gain on bargain purchase$100
Hehr


Acquisitions in 2014

Duncan Systems

In August 2014,February 2018, the Company acquired substantially all of the business and certain assets of Duncan Systems,Hehr International Inc., (“Duncan Systems”Hehr”), an aftermarket distributora manufacturer of replacement motorhome windshields, awnings,windows and tempered and laminated glass for the RV, heavy truck andtransit, specialty vehicle, glass and windows, primarily to fulfill insurance claims.other adjacent industries, headquartered in Los Angeles, California. The purchase price was $18.0$51.5 million paid at closing. The results of the acquired business have been included in the Consolidated Statements of Income since the acquisition date, primarily in the Company’s OEM Segment.

Taylor Made

In January 2018, the Company acquired 100 percent of the equity interests of Taylor Made Group, LLC, (“Taylor Made”), a marine supplier to boat builders and the aftermarket, as well as a key supplier to a host of other industrial end markets, headquartered in Gloversville, New York. The purchase price was $90.4 million, net of cash acquired, paid at closing. The results of the acquired business have been included in the Consolidated Statements of Income since the acquisition date, primarily in the Company’s OEM Segment.

Acquisitions in 2017

Metallarte S.r.l.

In June 2017, the Company acquired 100 percent of the equity interests of Metallarte S.r.l., (“Metallarte”), a manufacturer of entry and compartment doors for the European caravan market located near Siena, Italy, and its subsidiary, RV Doors, S.r.l., a manufacturer of driver-side doors located near Venice, Italy. The purchase price was $14.1 million paid at closing, plus contingent consideration based on future sales ofby this operation. The results of the acquired business have been included in the Company’s Aftermarket Segment and in the Consolidated Statements of Income since the acquisition date. The acquisition of this business was recorded ondate, primarily in the acquisition date as follows (in thousands):Company’s OEM Segment.

Cash consideration$18,000
Contingent consideration1,914
Total fair value of consideration given$19,914
  
Customer relationships$10,500
Net other assets5,000
Total fair value of net assets acquired$15,500
  
Goodwill (tax deductible)$4,414
Lexington

The customer relationships intangible asset is being amortized over its estimated useful life of 14 years. The consideration given was greater than the fair value of the assets acquired, resulting in goodwill, because the Company anticipates the attainment of synergies and an increase in market share for the distributed products.

Power Gear and Kwikee Brands


In June 2014,May 2017, the Company acquired the business and certain assets of Lexington LLC, (“Lexington”), a manufacturer of high quality seating solutions for the marine, RV, business of Actuant Corporation, which manufactures leveling systems, slide-out mechanismstransportation, medical and steps, primarily for motorhome RVs, under the Power Gear and Kwikee brands.office furniture industries located in Elkhart, Indiana. The purchase price was $35.5$40.1 million paid at closing. The results of the acquired business have been included primarily in the Company’s OEM Segment and in the Consolidated Statements of Income since the acquisition date.

LCI INDUSTRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

The acquisition of this business was recorded on the acquisition date, as follows (in thousands):
Cash consideration$35,500
  
Customer relationships$12,300
Patents5,300
Other identifiable intangible assets2,130
Net tangible assets2,227
Total fair value of net assets acquired$21,957
  
Goodwill (tax deductible)$13,543

The customer relationships intangible asset is being amortized over its estimated useful life of 14 years and the patents are being amortized over their estimated useful life of eight years. The consideration given was greater than the fair value of the assets acquired, resulting in goodwill, because the Company anticipates the attainment of synergies and an increase in the markets for the acquired products.

Star Design

In March 2014, the Company acquired the business and certain assets of Star Design, LLC (“Star Design”).The purchase price was $12.2 million paid at closing. The results of the acquired business have been included primarily in the Company’s OEM Segment and in the Consolidated Statements of Income since the acquisition date. The acquisition of this business was recorded on the acquisition date as follows (in thousands):Segment.

Cash consideration$12,232
  
Customer relationships$4,400
Net other assets2,718
Total fair value of net assets acquired$7,118
  
Goodwill (tax deductible)$5,114
SessaKlein S.p.A.

The customer relationships intangible asset is being amortized over its estimated useful life of 14 years. The consideration given was greater than the fair value of the net assets acquired, resulting in goodwill, because the Company anticipates leveraging its existing experience and manufacturing capacity with respect to these product lines, and also believes the diversified customer base will further its expansion into adjacent industries.

Innovative Design Solutions


In February 2014,2017, the Company acquired Innovative Design Solutions, Inc.100 percent of the outstanding shares of SessaKlein S.p.A., (“IDS”SessaKlein”), a designer, developer and manufacturer of electronic systems encompassing a wide variety of RV applications. IDS also manufactures electronichighly engineered side window systems for automotive, medicalboth high speed and industrial applications.commuter trains, located near Varese, Italy. The purchase price was $35.9$6.5 million of which $34.2 million was paid at closing, with the balance to be paid out annually over the subsequent three years,net of cash acquired, plus contingent consideration based on future sales ofby this operation. The results of the acquired business have been included primarily in the Company’s OEM Segment and in the Consolidated Statements of Income since the acquisition date.

LCI INDUSTRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

The acquisition of this business was recorded on the acquisition date, as follows (in thousands):
Cash consideration$34,175
Present value of future payments1,739
Contingent consideration710
Total fair value of consideration given$36,624
  
Patents$6,000
Customer relationships4,000
Other identifiable intangible assets3,180
Net tangible assets1,894
Total fair value of net assets acquired$15,074
  
Goodwill (tax deductible)$21,550

The patents are being amortized over their estimated useful life of 10 years and the customer relationships intangible asset is being amortized over its estimated useful life of 12 years. The consideration given was greater than the fair value of the assets acquired, resulting in goodwill, because the Company anticipates an increaseprimarily in the markets for the acquired products, market share growth in both existing and new markets, as well as attainment of synergies.Company’s OEM Segment.


Goodwill


GoodwillChanges in the carrying amount of goodwill by reportable segment waswere as follows:
(In thousands)OEM SegmentAftermarket SegmentTotal
Net balance – December 31, 2017$109,641  $14,542  $124,183  
Acquisitions – 201850,698  5,369  56,067  
Other(82) —  (82) 
Net balance – December 31, 2018160,257  19,911  180,168  
Acquisitions – 201957,245  115,178  172,423  
Other(1,882) 405  (1,477) 
Net balance – December 31, 2019$215,620  $135,494  $351,114  

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(In thousands)OEM Segment Aftermarket Segment Total
Net balance – December 31, 2014$52,815
 $13,706
 $66,521
Acquisitions – 201517,007
 91
 17,098
Net balance – December 31, 201569,822
 13,797
 83,619
Acquisitions – 20165,059
 738
 5,797
Other(218) —
 (218)
Net balance – December 31, 2016$74,663
 $14,535
 $89,198


The Company performed its annual goodwill impairment procedures for all of its reporting units as of November 30, 2016, 20152019, 2018, and 2014,2017, and concluded no goodwill impairment existed at that time. The Company plans to update its reviewassessment as of November 30, 2017,2020, or sooner if events occur or circumstances change that could more likely than not reduce the fair value of a reporting unit below its carrying value. In conjunction with the Company’s change in reportable segments during the second quarter of 2016 (see Note 14), goodwill was reassigned to reporting units using a relative fair value allocation. In addition, the Company completed an assessment of any potential goodwill impairment for all reporting units immediately prior to the reallocation and determined that no impairment existed. The goodwill balance includesas of each of December 31, 2019, 2018, and 2017 included $50.5 million of accumulated impairment, which occurred prior to December 31, 2014.2017.


Any change in the goodwill amounts resulting from foreign currency translations and purchase accounting adjustments are presented as “Other” in the above table.


Other Intangible Assets


Other intangible assets, by segment, consisted of the following at December 31:31 were as follows:
(In thousands)20192018
OEM Segment$164,047  $159,803  
Aftermarket Segment177,379  16,539  
Other intangible assets$341,426  $176,342  
(In thousands)2016 2015
OEM Segment$97,689
 $84,752
Aftermarket Segment15,254
 16,183
Other intangible assets$112,943
 $100,935
LCI INDUSTRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)



Other intangible assets consisted of the following at December 31, 2016:2019:
(In thousands)Gross
Cost		Accumulated
Amortization		Net
Balance		Estimated Useful
Life in Years
Customer relationships$319,934  $69,008  $250,926  6to17
Patents76,206  44,611  31,595  3to19
Trade names (finite life)50,917  7,086  43,831  3to20
Trade names (indefinite life)7,600  —  7,600  Indefinite
Non-compete agreements7,598  4,947  2,651  3to6
Other309  173  136  2to12
Purchased research and development4,687  —  4,687  Indefinite
Other intangible assets$467,251  $125,825  $341,426  
(In thousands)Gross
Cost		 Accumulated
Amortization		 Net
Balance		 Estimated Useful
Life in Years
Customer relationships$110,784
 $32,414
 $78,370
 6to16
Patents56,468
 34,066
 22,402
 3to19
Tradenames10,041
 5,667
 4,374
 3to15
Non-compete agreements5,852
 2,975
 2,877
 3to6
Other309
 76
 233
 2to12
Purchased research and development4,687
 —
 4,687
 Indefinite
Other intangible assets$188,141
 $75,198
 $112,943
    


The Company performed its annual impairment test for indefinite lived intangible assets as of November 30, 2019, 2018, and 2017, and concluded no impairment existed at that time.

Other intangible assets consisted of the following at December 31, 2015:2018:
(In thousands)Gross
Cost		Accumulated
Amortization		Net
Balance		Estimated Useful
Life in Years
Customer relationships$191,919  $54,889  $137,030  6to16
Patents58,787  40,079  18,708  3to19
Trade names (finite life)10,885  5,507  5,378  3to15
Trade names (indefinite life)7,600  —  7,600  Indefinite
Non-compete agreements6,919  4,148  2,771  3to6
Other309  141  168  2to12
Purchased research and development4,687  —  4,687  Indefinite
Other intangible assets$281,106  $104,764  $176,342  
(In thousands)Gross
Cost		 Accumulated
Amortization		 Net
Balance		 Estimated Useful
Life in Years
Customer relationships$94,560
 $30,514
 $64,046
 6to16
Patents54,293
 28,255
 26,038
 3to19
Tradenames8,935
 4,751
 4,184
 3to15
Non-compete agreements4,493
 2,800
 1,693
 3to6
Other594
 307
 287
 2to12
Purchased research and development4,687
 —
 4,687
 Indefinite
Other intangible assets$167,562
 $66,627
 $100,935
    


Amortization expense related to other intangible assets was as follows for the years ended December 31:
54

(In thousands)2016 2015 2014(In thousands)201920182017
Cost of sales$5,967
 $6,017
 $5,092
Cost of sales$5,200  $5,350  $5,631  
Selling, general and administrative11,791
 10,038
 7,612
Selling, general and administrative expenseSelling, general and administrative expense18,558  15,912  13,942  
Amortization expense$17,758
 $16,055
 $12,704
Amortization expense$23,758  $21,262  $19,573  


Estimated amortization expense for other intangible assets for the next five years is as follows:
(In thousands)20202021202220232024
Cost of sales$4,469  $4,393  $4,180  $3,321  $2,566  
Selling, general and administrative expense28,887  28,372  28,227  27,484  27,038  
Amortization expense$33,356  $32,765  $32,407  $30,805  $29,604  
(In thousands)20172018201920202021
Cost of sales$5,809
$4,973
$4,330
$3,283
$2,743
Selling, general and administrative10,989
10,405
9,362
8,060
7,466
Amortization expense$16,798
$15,378
$13,692
$11,343
$10,209



LCI INDUSTRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

3.    RECEIVABLES

The following table provides a reconciliation of the activity related to the Company’s allowance for doubtful accounts receivable, for the years ended December 31:
(In thousands)2016 2015 2014
Balance at beginning of period$844
 $917
 $705
Provision for doubtful accounts(83) (5) 178
Additions related to acquired businesses29
 33
 58
Recoveries—
 8
 4
Accounts written off(135) (109) (28)
Balance at end of period$655
 $844
 $917

In addition to the allowance for doubtful accounts receivable, the Company had an allowance for prompt payment discounts in the amount of $0.5 million and $0.4 million at December 31, 2016 and 2015, respectively.

4. INVENTORIES


Inventories consisted of the following at December 31:
(In thousands)20192018
Raw materials$256,850  $284,467  
Work in process23,653  12,291  
Finished goods113,104  43,857  
Inventories, net$393,607  $340,615  
(In thousands)2016 2015  
Raw materials$155,044
 $144,397
  
Work in process7,509
 4,932
  
Finished goods26,190
 21,505
  
Inventories, net$188,743
 $170,834
  


5.    NOTES RECEIVABLE

In April 2014, the Company entered into a six-year aluminum extrusion supply agreement, and concurrently sold certain aluminum extrusion assets. The Company recorded a pre-tax loss of $2.0 million in the second quarter of 2014 on the sale of the aluminum extrusion-related assets. In connection with the sale, the Company received $0.3 million at closing and a $7.2 million note receivable collectible over the next four years, recorded at its present value of $6.4 million on the date of closing. During 2016 - 2014, the Company received installments of $5.8 million under the note. At December 31, 2016, the present value of the remaining amount due under the note receivable was $1.4 million included in prepaid expenses and other current assets.

In July 2015, the Company agreed to terminate the supply agreement, and as consideration the Company received a $2.0 million note receivable collectible in 2019 and 2020. The Company recorded this note receivable at its present value of $1.6 million and a corresponding gain of $1.6 million in the 2015 third quarter. At December 31, 2016, the present value of the remaining amount due under the note receivable was $1.7 million included in other assets.

LCI INDUSTRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

6. FIXED ASSETS


Fixed assets consisted of the following at December 31:
 Estimated
Useful Life
(In thousands)20192018in Years
Land$23,868  $22,962  
Buildings and improvements185,744  159,805  10 to 40
Leasehold improvements23,012  16,132  3 to 12
Machinery and equipment311,554  251,995  3 to 15
Furniture and fixtures85,901  51,893  3 to 8
Construction in progress48,288  56,447  
Fixed assets, at cost678,367  559,234  
Less accumulated depreciation and amortization312,058  236,358  
Fixed assets, net$366,309  $322,876  
    Estimated Useful
(In thousands)2016 2015Life in Years
Land$13,802
 $11,064
  
Buildings and improvements106,831
 89,616
10 to 40
Leasehold improvements11,918
 11,147
3 to 10
Machinery and equipment167,691
 153,784
3 to 15
Furniture and fixtures27,053
 20,653
3 to 8
Construction in progress10,067
 5,512
  
Fixed assets, at cost337,362
 291,776
  
Less accumulated depreciation and amortization164,614
 141,176
  
Fixed assets, net$172,748
 $150,600
  


Depreciation and amortization of fixed assets was as follows for the years ended December 31:
(In thousands)201920182017
Cost of sales$39,442  $35,656  $27,042  
Selling, general and administrative expenses12,158  10,608  7,798  
Total$51,600  $46,264  $34,840  

55

(In thousands)2016 2015 2014
Cost of sales$22,993
 $21,289
 $16,364
Selling, general and administrative expenses5,140
 4,137
 3,440
Total$28,133
 $25,426
 $19,804

7.6. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES


Accrued expenses and other current liabilities consisted of the following at December 31:
(In thousands)20192018
Employee compensation and benefits$45,612  $33,835  
Current portion of accrued warranty29,898  32,180  
Customer rebates14,129  6,193  
Other42,781  26,424  
Accrued expenses and other current liabilities$132,420  $98,632  
(In thousands)2016 2015  
Employee compensation and benefits$47,459
 $25,147
  
Current portion of accrued warranty20,393
 17,020
  
Customer rebates9,329
 7,993
  
Other21,554
 19,002
  
Accrued expenses and other current liabilities$98,735
 $69,162
  


Estimated costs related to product warranties are accrued at the time products are sold. In estimating its future warranty obligations, the Company considers various factors, including the Company’s (i) historical warranty costs, (ii) current trends, (iii) product mix, and (iv) sales.


The following table provides a reconciliation of the activity related to the Company’s accrued warranty, including both the current and long-term portions, for the years ended December 31:
(In thousands)201920182017
Balance at beginning of period$46,530  $38,502  $32,393  
Provision for warranty expense30,520  31,819  25,399  
Warranty liability from acquired businesses287  760  150  
Warranty costs paid(30,170) (24,551) (19,440) 
Balance at end of period47,167  46,530  38,502  
Less long-term portion17,269  14,350  15,447  
Current portion of accrued warranty at end of period$29,898  $32,180  $23,055  

(In thousands)2016 2015 2014
Balance at beginning of period$26,204
 $21,641
 $17,325
Provision for warranty expense20,985
 17,267
 12,860
Warranty liability from acquired businesses125
 240
 688
Warranty costs paid(14,921) (12,944) (9,232)
Balance at end of period32,393
 26,204
 21,641
Less long-term portion12,000
 9,184
 7,125
Current portion of accrued warranty$20,393
 $17,020
 $14,516

LCI INDUSTRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

8.7. RETIREMENT AND OTHER BENEFIT PLANS


Defined Contribution Plan


The Company maintains a discretionary defined contribution 401(k) profit sharing plan covering all eligible employees. The Company contributed $3.1$7.7 million, $2.5$6.8 million, and $1.8$4.2 million to this plan during the years ended December 31, 2016, 20152019, 2018, and 2014,2017, respectively.


Deferred Compensation Plan


The Company has an Executive Non-Qualified Deferred Compensation Plan (the “Plan”). Pursuant to the Plan, certain management employees are eligible to defer all or a portion of their regular salary and incentive compensation. Participants deferred $2.3$0.9 million, $1.2$6.9 million, and $1.6$4.9 million during the years ended December 31, 2016, 20152019, 2018, and 2014,2017, respectively. The amounts deferred under this Plan are credited with earnings or losses based upon changes in values of the notional investments elected by the Plan participants. Each Plan participant is fully vested in their deferred compensation and earnings credited to his or her account as all contributions to the Plan are made by the participant. The Company is responsible for certain costs of Plan administration, which are not significant, and will not make any contributions to the Plan. Pursuant to the Plan, payments to the Plan participants are made from the general unrestricted assets of the Company, and the Company’s obligations pursuant to the Plan are unfunded and unsecured. Participants withdrew $1.5$1.7 million, $0.8$0.2 million, and $0.4$0.2 million from the Plan during the years ended December 31, 2016, 20152019, 2018, and 2014,2017, respectively. At December 31, 20162019 and 2015,2018, deferred compensation of $13.4$30.3 million and $11.7$25.9 million, respectively, was recorded in other long-term liabilities, and deferred compensation of $0.2 million and $0.2$0.4 million, respectively, was recorded in accrued expenses and other current liabilities. The Company invests approximately 6099 percent of the amounts deferred by the Plan participants in life insurance contracts, matching the investments elected by the Plan participants. Deferred compensation assets and liabilities are recorded at contract value. At December 31, 20162019 and 2015,2018, life insurance contract assets of $8.2$30.1 million and $7.8$22.2 million, respectively, were recorded in other assets.


9.
56

8. LONG-TERM INDEBTEDNESS


AtLong-term debt consisted of the following at December 31, 2016 and 2015,31:
(In thousands)20192018
Term Loan$300,000  $—  
Revolving Credit Loan266,214  240,060  
Shelf-Loan Facility50,000  50,000  
Other16,349  4,425  
Unamortized deferred financing fees(1,774) (361) 
630,789  294,124  
Less current portion(17,883) (596) 
Long-term indebtedness$612,906  $293,528  

Amended Credit Agreement

On December 14, 2018, the Company had no outstanding borrowings onrefinanced its line of credit.

On February 24, 2014, the Company entered into a $75.0 million line of credit (the “Credit Agreement”) with JPMorgan Chase Bank, N.A. and Wells Fargo Bank, N.A. On March 3, 2015, in accordance with the terms of the Credit Agreement, the Company increased its line of credit by $25.0 million to $100.0 million. Interest on borrowings under the line of credit was designated from time to time by the Company as either (i) the Prime Rate, minus a rate ranging from 0.75 to 1.0 percent (minus 1.0 percent at December 31, 2015), but not less than 1.5 percent, or (ii) LIBOR, plus additional interest ranging from 1.75 to 2.0 percent (plus 1.75 percent at December 31, 2015) depending on the Company’s performance and financial condition.

On April 27, 2016, the Company announced the refinancing of its line of credit through an agreement with JPMorgan Chase, Bank, N.A., Wells Fargo Bank, N.A., Bank of America, N.A., and 1st Source Bank.other bank lenders (as amended, the “Amended Credit Agreement”). The Amended Credit Agreement amended and restated an existing credit agreement amends and restates the existing line of credit, which was scheduled to expire on January 1, 2019,dated April 27, 2016 and now expires on April 27, 2021 (the “AmendedDecember 14, 2023. The Amended Credit Agreement”). In connection with this amendment and restatement,Agreement increased the line ofrevolving credit was increasedfacility from $100.0$325.0 million to $200.0$600.0 million, and contains a feature allowingpermits the Company to drawborrow up to $50.0$250.0 million in approved foreign currencies, including Australian dollars, Canadian dollars, poundpounds sterling, and euros.euros ($45.0 million, or €40.0 million drawn at December 31, 2019).

On December 19, 2019, the Company entered into an Incremental Joinder and Amendment No. 1 (“Amendment No. 1”) of the Amended Credit Agreement with several banks, which provided an incremental term loan in the amount of $300.0 million, which the Company borrowed to fund a portion of the purchase price for the acquisition of CURT. The maximum borrowingsterm loan is required to be repaid in an amount equal to 1.25% of original principal amount of the term loan for the first eight quarterly periods commencing March 31, 2020, and then 1.875% of the original principal amount of the term loan for each quarter thereafter, until the maturity date of December 14, 2023. In addition, Amendment No. 1 modified the credit agreement to allow the Company to request an increase to the facility of up to an additional $300.0 million as an increase to the revolving credit facility or one, or more, incremental term loan facilities upon approval of the lenders and the Company receiving certain other consents. As a result of the new incremental term loan, the total borrowing capacity under the line of credit can be furtherAmended Credit Agreement was increased by $125.0from $600.0 million subject to certain conditions. $900.0 million.

Interest on borrowings under the new line ofrevolving credit isfacility and incremental term loan are designated from time to time by the Company as either (i) the Alternate Base Rate (defined in the Amended Credit Agreement as the greatest of (a) the Prime Rate of JPMorgan Chase Bank, N.A., (b) the federal funds effective rate plus 0.5 percent, and (c) the Adjusted LIBO Rate (as defined in the Amended Credit Agreement) for a one month interest period plus 1.0 percent), plus additional interest ranging from 0.0 percent to 0.625 percent (0.0(0.375 percent at December 31, 2016)2019) depending on the Company’s performance and financial condition,total net leverage ratio, or (ii) the Adjusted LIBO Rate for a period equal to one, two, three, six, or twelve months (with the consent of each lender) as selected by the Company, plus additional interest ranging from 1.00.875 percent to 1.625 percent (1.0(1.375 percent at December 31, 2016)2019) depending on the Company’s performance and financial condition.total net leverage ratio. At December 31, 20162019 and 2015,2018, the Company had $2.5 million and $2.7$2.2 million, respectively, in outstanding,issued, but undrawn, standby letters of credit under the line of credit.revolving credit facility. Availability under the Company’s line ofrevolving credit facility was $197.5$331.8 million at December 31, 2016.2019.


Shelf-Loan Facility

On February 24, 2014, the Company also entered into a $150.0 million “shelf-loan”shelf-loan facility (as amended, the “Shelf-Loan Facility”) with PGIM, Inc. (formerly Prudential Investment Management, Inc.) and its affiliates (“Prudential”). The facility provides for Prudential to consider purchasing, at the Company’s request, in one or a series of transactions, Senior Promissory Notes of the Company in the aggregate principal amount of up to
LCI INDUSTRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

$150.0 million, to mature no more than 12 years after the date of original issue of each Senior Promissory Note. On March 20, 2015, the Company issued $50.0 million of Senior Promissory Notes (“Series A Notes”) to Prudential for a term of five years, at a fixed interest rate of 3.35 percent per annum, payable quarterly in arrears. On March 29, 2019, the Company issued $50.0 million of Series B Senior Notes (the “Series B Notes”) to certain affiliates of Prudential for a term of three years, at a fixed interest rate of 3.8 percent per annum, payable quarterly in arrears, of which the entire amount was outstanding at December 31, 2016. At December 31, 2016, the fair value2019. The net proceeds of the Company’s long-term debt approximatesSeries B Notes were used to repay the carrying value, as estimated using quoted market prices and discounted future cash flows based on similar borrowing arrangements.

Series A Notes. On April 27, 2016,November 11, 2019, the Company alsofurther amended and restated its “shelf-loan”the Shelf-Loan Facility to provide for a new $200.0 million shelf facility withpursuant to which the Series B Notes are currently outstanding. The Shelf-Loan Facility expires on November 11, 2022.

57

The Shelf-Loan Facility provides for Prudential to conform certain covenants and other termsconsider purchasing, at the Company’s request, in one or a series of transactions, additional Senior Promissory Notes of the Company in the aggregate principal amount of up to $150.0 million (excluding the Amended Credit Agreement.Company’s Series B Notes already outstanding). Prudential has no obligation to purchase the Senior Promissory Notes. Interest payable on the Senior Promissory Notes will be at rates determined by Prudential within five business days after the Company issues a request to Prudential. Availability

General

At December 31, 2019, the fair value of the Company’s long-term debt under the Company’s “shelf-loan” facility, subject toAmended Credit Agreement and the approval of Prudential, was $100.0 million at December 31, 2016.Shelf-Loan Facility approximates the carrying value, as estimated using quoted market prices and discounted future cash flows based on similar borrowing arrangements.


Borrowings under both the line of creditAmended Credit Agreement and the “shelf-loan” facilityShelf-Loan Facility are secured on a pari-passu basis by first priority liens on the capital stock or other equity interests of the Company’s direct and indirect subsidiaries (including up to 65 percent of the equity interest of certain “controlled foreign corporations.”corporations”).


Pursuant to the Amended Credit Agreement and “shelf-loan” facility,Shelf-Loan Facility, the Company is requiredshall not permit its net leverage ratio to exceed certain limits, shall maintain a minimum interestdebt service coverage ratio and fixed charge coverages, and tomust meet certain other financial requirements. At December 31, 20162019 and 2015,2018, the Company was in compliance with all such requirements, and expects to remain in compliance for the next twelve months.


Availability under both theThe Amended Credit Agreement and the “shelf-loan” facility is subject toShelf-Loan Facility include a maximum net leverage ratio covenant which limits the amount of consolidated outstanding indebtedness to 2.5 timesthat the Company may incur on a trailing twelve-month EBITDA, as defined. This limitation did not impact the Company’s borrowing availabilityability to incur additional indebtedness under its revolving credit facility at December 31, 2016.2019. The remaining availability under these facilitiesthe revolving credit facility was $297.5$481.8 million at December 31, 2016. The undrawn “shelf-loan” facility expired February 24, 2017, and the Company and Prudential are currently discussing renewal terms.2019. The Company believes the availability under the revolving credit facility under the Amended Credit Agreement, isalong with its cash flows from operations, are adequate to finance the Company’s anticipated cash requirements for the next twelve months.


10.9. INCOME TAXES


The components of earnings before income taxes consisted of the following for the years ended December 31:
(In thousands)201920182017
United States$189,834  $191,095  $213,967  
Foreign1,580  1,257  (1,123) 
Total earnings before income taxes$191,414  $192,352  $212,844  
(In thousands)2016 2015 2014
United States$196,827
 $113,280
 $95,057
Foreign2,345
 1,089
 —
Total earnings before income taxes$199,172
 $114,369
 $95,057


The provision for income taxes in the Consolidated Statements of Income was as follows for the years ended December 31:
(In thousands)201920182017
Current:
Federal$33,655  $22,297  $62,274  
State and local6,764  6,416  10,720  
Foreign1,070  1,214  158  
Total current provision41,489  29,927  73,152  
Deferred:
Federal5,923  12,478  7,614  
State and local(969) 1,639  (806) 
Foreign(1,538) (243) —  
Total deferred provision3,416  13,874  6,808  
Provision for income taxes$44,905  $43,801  $79,960  

58

(In thousands)2016 2015 2014
Current:     
Federal$61,073
 $31,132
 $32,142
State and local10,560
 7,670
 6,142
Foreign466
 160
 —
Total current provision72,099
 38,962
 38,284
Deferred:     
Federal(2,506) 466
 (4,545)
State and local(110) 596
 (948)
Foreign18
 —
 —
Total deferred provision(2,598) 1,062
 (5,493)
Provision for income taxes$69,501
 $40,024
 $32,791
On December 22, 2017, the TCJA was signed into law making significant changes to the Internal Revenue Code (“IRC”). The TCJA changes included a reduction of the corporate income tax rate from 35 percent to 21 percent effective for tax years beginning after December 31, 2017, a provision that allows for full expensing of certain qualified property, repeal of the manufacturing deduction, and further limitations on the deductibility of certain executive compensation. The TCJA contains other provisions that have not materially affected the Company, including a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries, limitations on the deductibility of interest expense, and the creation of U.S. tax base erosion provisions.


LCI INDUSTRIESFollowing the enactment of the TCJA, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 118 (“SAB 118”) to provide guidance on the accounting and reporting impacts of the TCJA. For the year ended December 31, 2018, the Company finalized its tax accounting for the TCJA and pursuant to SAB 118 recorded a one-time non-cash charge of $0.6 million related to adjustments to deferred tax amounts provisionally recorded in the prior year. During the year ended December 31, 2017, the Company recorded a provisional one-time non-cash charge of $13.2 million related to the enactment of the TCJA, which resulted from the re-measurement of certain deferred tax assets using the lower U.S. corporate income tax rate.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The Company has historically reinvested all unremitted earnings of our foreign subsidiaries and affiliates, and therefore has not recognized any U.S. deferred tax liability on those earnings. However, the TCJA change in the U.S. taxation of foreign income has led the Company to reassess its position as it relates to permanent reinvestment and it has now determined that it will only assert permanent reinvestment in its Canadian subsidiaries. The Company examined the potential liabilities related to investments in foreign subsidiaries and concluded that there is no material deferred tax liabilities that should be recorded.


The provision for income taxes differs from the amount computed by applying the federal statutory rate of 21 percent for 2019 and 2018 and 35 percent for 2017 to income before income taxes for the following reasons for the years ended December 31:
(In thousands)201920182017
Income tax at federal statutory rate$40,197  $40,394  $74,495  
State income tax, net of federal income tax impact4,578  6,261  6,011  
Domestic production deduction—  —  (5,511) 
Share-based payment compensation excess tax benefit(1,579) (2,914) (7,683) 
Changes in tax law (TCJA)—  612  13,210  
Other1,709  (552) (562) 
Provision for income taxes$44,905  $43,801  $79,960  
(In thousands)2016 2015 2014
Income tax at federal statutory rate$69,710
 $40,029
 $33,270
State income tax, net of federal income tax impact6,480
 4,386
 3,376
Foreign tax rate differential(614) (82) —
Manufacturing credit pursuant to Jobs Creation Act(5,067) (2,336) (2,258)
Federal tax credits(1,736) (919) (681)
Other728
 (1,054) (916)
Provision for income taxes$69,501
 $40,024
 $32,791


At December 31, 2016,2019, the Company had domestic federal income taxes receivable of $12.7$7.1 million, domestic state income taxes receivable of $4.6 million, and foreign taxes payable of $0.5 million recorded. At December 31, 2018, the Company had domestic federal income taxes receivable of $10.2 million, domestic state income taxes receivable of $0.4 million, were included in prepaid expenses and other current assets. At December 31, 2015, federal and state income taxes receivable of $8.1 million were included in prepaid expenses and other current assets, and state incomeforeign taxes payable of $0.4$0.6 million were included in accrued expensesrecorded.

59

Deferred Income Tax Assets and other current liabilities.Liabilities and Valuation Allowances


The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities were as follows at December 31:
(In thousands)20192018
Deferred tax assets:
Goodwill and other intangible assets$—  $3,854  
Stock-based compensation2,290  2,956  
Deferred compensation5,976  6,710  
Warranty11,246  10,931  
Inventory8,001  6,375  
Other2,585  3,454  
Lease obligation asset25,055  822  
Net operating loss and interest carryforwards7,352  1,467  
Total deferred tax assets before valuation allowance62,505  36,569  
Less: Valuation allowance(1,662) (1,261) 
Total deferred tax assets net of valuation allowance60,843  35,308  
Deferred tax liabilities:
Lease obligation liability(24,368) —  
Fixed assets(27,898) (24,360) 
Intangible assets(44,317) (8,501) 
Total deferred tax liabilities(96,583) (32,861) 
Net deferred tax (liabilities) assets$(35,740) $2,447  
(In thousands)2016 2015  
Deferred tax assets:     
Goodwill and other intangible assets$10,952
 $11,879
  
Stock-based compensation7,550
 7,428
  
Deferred compensation5,184
 5,310
  
Warranty11,679
 8,809
  
Inventory6,572
 5,974
  
Other5,000
 4,922
  
Total deferred tax assets46,937
 44,322
  
Deferred tax liabilities:     
Fixed assets(14,948) (14,931)  
Net deferred tax assets$31,989
 $29,391
  


At December 31, 2019 and 2018, the Company had net foreign deferred tax liabilities of $9.7 million and $8.5 million, respectively, related to goodwill and other intangible assets included in other long-term liabilities on the Consolidated Balance Sheets.

As of December 31, 2019, the Company had deferred tax assets recorded related to foreign net operating losses and tax credit carryforwards of $2.6 million, net. This includes $1.7 million related to UK entities and $0.9 million related to Italian entities. The net operating losses and tax credit carryforwards have indefinite lives.

The valuation allowance for deferred tax assets as of December 31, 2019 and 2018 was $1.7 million and $1.3 million, respectively. The valuation allowance at 2019 and 2018 was related to net operating losses and tax credit carryforwards related to the UK entities. The net change in the total valuation allowance for the year ended December 31, 2019 was an increase of $0.4 million. The increase in the valuation allowance relates to the current year losses in the UK. Based upon historical results and estimated future results, it is the judgment of management that these tax carryforward attributes related to the UK entities are not likely to be realized.

As of December 31, 2019, the Company had a domestic deferred tax asset recorded related to net operating losses acquired during the year of $0.3 million which will begin to expire as of December 31, 2029. Additionally, the Company had a domestic deferred tax asset recorded related to interest expense limitation of $4.4 million net, which has an indefinite life carry forward. No valuation allowance has been established against these net operating losses and interest carryforwards as they are more likely than not to be realized prior to expiration. Certain tax attributes are subject to annual limitations as defined under Internal Revenue Code Section 382 as a result of the stock acquisitions in 2019.

The Company has concluded it is more likely than not that it will realize the benefit of all other existing deferred tax assets, at December 31, 2016 will be realized innet of the ordinary course of operations based on projected future taxable income and scheduling of deferred tax liabilities.valuation allowances mentioned above.


Excess tax benefits on stock-based compensation of $8.0 million, $9.0 million and $3.9 million were credited directly to stockholders’ equity during the years ended December 31, 2016, 2015 and 2014, respectively, relating to tax benefits which exceeded the compensation cost for stock-based compensation recognized in the Consolidated Financial Statements.
60


At December 31, 2016, the remaining pool of excess tax benefits from prior exercises of stock-based compensation in stockholders’ equity was $31.5 million.

Unrecognized Tax Benefits


The following table reconciles the total amounts of unrecognized tax benefits, at December 31:
(In thousands)201920182017
Balance at beginning of period$4,325  $4,145  $3,747  
Changes in tax positions of prior years480  114  (174) 
Additions based on tax positions related to the current year4,288  802  1,255  
Payments—  —  (211) 
Closure of tax years(879) (736) (472) 
Balance at end of period$8,214  $4,325  $4,145  
(In thousands)2016 2015 2014
Balance at beginning of period$2,854
 $1,526
 $1,369
Changes in tax positions of prior years214
 912
 84
Additions based on tax positions related to the current year1,252
 866
 603
Payments—
 (85) —
Closure of tax years(573) (365) (530)
Balance at end of period$3,747
 $2,854
 $1,526
LCI INDUSTRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)



In addition, the total amount of accrued interest and penalties related to taxes, recognized as a liability, was $0.2$0.4 million, $0.2 million, and $0.2 million at December 31, 2016, 20152019, 2018, and 2014,2017, respectively.


The total amount of unrecognized tax benefits, net of federal income tax benefits, of $2.9$7.9 million, $2.7$3.9 million, and $1.2$3.7 million at December 31, 2016, 20152019, 2018, and 2014,2017, respectively, would, if recognized, increase the Company’s earnings, and lower the Company’s annual effective tax rate in the year of recognition.


The Company is subject to taxation in the United States and various states and foreign jurisdictions. TheIn the normal course of business, the Company periodically undergoesis subject to examinations by the Internal Revenue Service (“IRS”), as well as various state and foreign taxing authorities. The IRS and other taxing authorities may challenge certain deductions and positions reported by the Company on its income tax returns.in these jurisdictions. For U.S. federal income tax purposes, the tax year 2014 is currently under audit, while tax years 2013 and 2015 remain subject to examination. For Indiana state income tax purposes, the tax years 2013 through 20152018, 2017, and 2016 remain subject to examination. Approximately 80 percent of the Company’s operations are located in Indiana. In other major jurisdictions, open years are generally 2013 or later.


The Company has assessed its risks associated with all tax return positions, and believes its tax reserve estimates reflect its best estimate of the deductions and positions it will be able to sustain, or it may be willing to concede as part of a settlement. At this time, the Company cannot estimate the range of reasonably possibledoes not anticipate any change in its tax reserve estimatesreserves in 2017. While these tax matters could materially affectthe next twelve months. The Company will continue to monitor the progress and conclusion of all audits and will adjust its estimated liability as necessary.

10. LEASES

The Company leases certain manufacturing and distribution facilities, administrative office space, semi-tractors, trailers, forklifts, and other equipment through operating resultsleases with unrelated third parties. The operating leases have remaining terms of up to 12 years and some leases include options to purchase, terminate, or extend for one or more years. The options are included in the lease term when resolved in future periods, it is management’s opinion that after final disposition, any monetary liabilityreasonably certain the option will be exercised. Leases with an initial term of 12 months or financial impact toless are recognized in lease expense on a straight-line basis over the Company beyond that provided for inlease term and not recorded on the Consolidated Balance Sheet asSheet.

The Company uses its incremental borrowing rate based on information available at lease inception in determining the present value of December 31, 2016, would not be material tothe lease payments. The Company applies a portfolio approach for determining the incremental borrowing rate based on applicable lease terms and the current economic environment.

Certain of the Company’s financial positionlease arrangements contain lease components (such as minimum rent payments) and non-lease components (such as common-area or annual resultsother maintenance costs and taxes). The Company generally accounts for each component separately based on the estimated standalone price of operations.

11.    COMMITMENTS AND CONTINGENCIES

Leases

each component. Some of the Company’s lease arrangements include rental payments that are adjusted periodically for an index rate. These leases are initially measured using the projected payments in effect at the inception of the lease. Certain of the Company’s leased semi-tractors, trailers, and forklifts include variable costs for usage or mileage. Such variable costs are expensed as incurred and included in the variable lease cost item noted in the table below. The Company’s lease commitments are primarilyagreements do not contain any significant residual value guarantees or restrictive covenants. The components of lease cost for real estate, machinerythe year ended December 31, 2019 were as follows:
(in thousands)
Operating lease cost$21,899 
Short-term lease cost2,611
Variable lease cost1,781
Total lease cost$26,291 

61

Rent expense for operating leases was $24.2 million and equipment,$15.2 million for the years ended December 31, 2018 and vehicles. The significant real estate leases provide for renewal options and require the Company to pay for property taxes and all other costs associated with the leased property.2017, respectively.


Future minimum lease payments under operating leases as of December 31, 2019 were as follows:
(in thousands)
Year Ending December 31,
2020$26,764  
202123,042
202217,031
202311,951
202410,477
Thereafter33,077
Total future minimum lease payments (a)
122,342
Less: Interest(20,801)
Present value of operating lease liabilities$101,541  

(a) Refer to the Company’s 2018 Annual Report on Form 10-K for disclosure of future minimum lease payments at December 31, 2016 are as follows (in thousands):2018 under ASC Topic 840, the accounting standard applicable to leases prior to the adoption of Topic 842.

2017$9,388
   
20187,978
   
20196,068
   
20204,936
   
20214,116
   
Thereafter8,017
   
Total minimum lease payments$40,503
   

Rent expense forAt December 31, 2019, the Company’s operating leases had a weighted-average remaining lease term of 6.6 years and a weighted-average discount rate of 5.5 percent.

Cash Flows

The initial right-of-use assets of $66.4 million were recognized as non-cash asset additions upon adoption of Topic 842. Additional right-of use assets of $50.5 million were recognized as non-cash asset additions that resulted from new operating lease obligations during the twelve months ended December 31, 2019, which includes $34.3 million of right-of-use assets from acquisitions. Cash paid for amounts included in the present value of operating lease obligations and included in cash flows from operations was $11.5 million, $9.8 million and $8.6$21.8 million for the yearstwelve months ended December 31, 2016, 20152019.

Finance Leases

The Company has various leases classified as finance leases, which are included in fixed assets, net and 2014, respectively.long-term indebtedness on the Consolidated Balance Sheets. These leases were not material to the Consolidated Financial Statements as of December 31, 2019.


Lessor

The Company has various lease arrangements to lease office space and other real estate under which the Company is the lessor. These leases are classified as operating leases and income associated with these leases is not material.

11. COMMITMENTS AND CONTINGENCIES

Contingent Consideration


In connection with several business acquisitions, if certain sales targets for the acquired products are achieved, the Company would pay additional cash consideration. The Company has recorded a liability for the fair value of this contingent consideration at December 31, 20162019 and 2015,2018, based on the present value of the expected future cash flows using a market participant’s weighted average cost of capital of 13.711.4 percent and 13.912.1 percent, respectively.


As required, the liability for this contingent consideration is measured at fair value quarterly, considering actual sales of the acquired products, updated sales projections, and the updated market participant weighted average cost of capital.
62

Depending upon the weighted average costs of capital and future sales of the products which are subject to contingent consideration, the Company could record adjustments in future periods.

LCI INDUSTRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


The following table provides a reconciliation of the Company’s contingent consideration liability for the years ended December 31:
(In thousands)201920182017
Balance at beginning of period$7,302  $12,545  $9,241  
Acquisitions—  43  7,288  
Payments(10) (4,803) (7,682) 
Accretion (a)
792  951  1,652  
Fair value adjustments (a) (b)
(3,691) (944) 1257  
Net foreign currency translation adjustment3  (490) 789  
Balance at end of the period (c)
4,396  7,302  12,545  
Less current portion in accrued expenses and other current liabilities(2,351) (17) (4,658) 
Total long-term portion in other long-term liabilities$2,045  $7,285  $7,887  
(In thousands)2016 2015 2014
Balance at beginning of period$10,840
 $8,129
 $7,414
Acquisitions1,322
 4,766
 3,370
Payments(4,944) (3,974) (3,739)
Accretion (a)
1,274
 1,196
 1,075
Fair value adjustments (a)
749
 723
 9
Balance at end of the period (b)
9,241
 10,840
 8,129
Less current portion in accrued expenses and other current liabilities(5,829) (3,877) (3,622)
Total long-term portion in other long-term liabilities$3,412
 $6,963
 $4,507


g.Recorded in selling, general and administrative expenses in the Consolidated Statements of Income.
(a)Recorded in selling, general and administrative expense in the Consolidated Statements of Income.
(b)Amounts represent the fair value of estimated remaining payments. The total estimated remaining undiscounted payments as of December 31, 2016 are $11.6 million. The liability for contingent consideration expires at various dates through September 2029. Certain of the contingent consideration arrangements are subject to a maximum payment amount, while the remaining arrangements have no maximum contingent consideration.

h.Includes adjustments to assumptions on weighted average cost of capital and relevant sales projections.
i.Amounts represent the fair value of estimated remaining payments. The total estimated remaining undiscounted payments as of December 31, 2019 were $5.6 million. The liability for contingent consideration expires at various dates through September 2029. Certain of the contingent consideration arrangements are subject to a maximum payment amount, while the remaining arrangements have no maximum contingent consideration.

Furrion Distribution and Supply Agreement


In July 2015, the Company entered into a six-yearsix-year exclusive distribution and supply agreement with Furrion Limited (“Furrion”), a Hong Kong based firm that designs, engineers, and supplies premium electronics. This agreement providesprovided the Company with the rights to distribute Furrion’s complete line of products to OEMs and aftermarket customers in the RV, specialty vehicle, utility trailer, horse trailer, marine, transit bus, manufactured housing, and school bus industries throughout the United States and Canada. Furrion currently supplies a premium line of televisions, sound systems, navigation systems, wireless backup cameras, solar prep units, power solutions and kitchen appliances, primarily to the RV industry.


In connection with this agreement, the Company entered into the following minimum purchase obligations (“MPOs”), which the Company anticipates will be revised from time to time:
July 2016 - June 2017$ 90 million
July 2017 - June 2018$127 million
July 2018 - JuneAugust 2019,$172 million

Furrion and the Company agreed to review these MPOs after the first year on an annual basis and adjust the MPOs as necessary based upon current economic and industry conditions, the development and customer acceptance of new Furrion products, competition and other factors which impact demand for Furrion products. Despite good market acceptance of Furrion products during the first year of the distribution agreement, the MPO was not achieved for the year ended June 30, 2016, primarily due to the timing of development and availability of anticipated new products from Furrion. As a result, the parties are currently in discussions to revise the MPOs, and the Company and Furrion are working togetheragreed to increase product availabilityterminate the agreement effective December 31, 2019, and new product introductions.

Subjecttransition all sale and distribution of Furrion products then handled by the Company to agreed upon revisionsFurrion. Effective January 1, 2020, Furrion is responsible for distributing its products directly to the MPOs, Furrion has the right to either terminate the distribution agreement with six months’ notice or remove exclusivity fromcustomer and assumed all responsibilities previously carried out by the Company if the Company misses an MPO in any given year by more than ten percent, after taking into account excess purchases from the previous year. If exclusivity is withdrawn, the Company at its election may terminate the distribution agreement with six months’ notice.relating to Furrion products. Upon termination of the agreement, Furrion has agreed to purchase from the Company anyall non-obsolete stocksstock and certain obsolete and slow-moving stock of Furrion products at the cost paid by the Company. At December 31, 2019, the Company had receivables of $40.0 million recorded for purchases of inventory stock by Furrion.


Product Recalls


From time to time, the Company cooperates with and assists its customers on their product recalls and inquiries, and occasionally receives inquiries directly from the National Highway Traffic Safety Administration (“NHTSA”) regarding reported incidents involving the Company’s products. As a result, the Company has incurred expenses associated with product recalls from time to time, and may incur expenditures for future investigations or product recalls.
LCI INDUSTRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)



Environmental


The Company’s operations are subject to certain Federal, state and local regulatory requirements relating to the use, storage, discharge and disposal of hazardous materials used during the manufacturing processes. Although the Company believes its operations have been consistent with prevailing industry standards, and are in substantial compliance with applicable environmental laws and regulations, one or more of the Company’s current or former operating sites, or adjacent sites owned by third-parties, have been affected, and may in the future be affected, by releases of hazardous materials. As a
63

result, the Company may incur expenditures for future investigation and remediation of these sites, including in conjunction with voluntary remediation programs or third partythird-party claims.


Litigation


In the normal course of business, the Company is subject to proceedings, lawsuits, regulatory agency inquiries and other claims. All such matters are subject to uncertainties and outcomes that are not predictable with assurance. While these matters could materially affect operating results when resolved in future periods, it is management’s opinionmanagement believes that, after final disposition, including anticipated insurance recoveries in certain cases, any monetary liability or financial impact to the Company beyond that provided in the Consolidated Balance Sheet as of December 31, 2016,2019, would not be material to the Company’s financial position or annual results of operations.


Severance

In 2015, the Company initiated a focused program to reduce indirect labor costs. In connection with this cost reduction program and certain changes at the executive level, the Company incurred severance charges of $3.7 million.

12. STOCKHOLDERS’ EQUITY


Dividends

On April 10, 2015, a special dividend of $2.00 per share of the Company’s Common Stock, representing an aggregate of $48.2 million, was paid to stockholders of record as of March 27, 2015. On January 6, 2014, a special dividend of $2.00 per share of the Company’s Common Stock, representing an aggregate of $46.7 million, was paid to stockholders of record as of December 20, 2013. In connection with these special dividends, holders of deferred stock units, restricted stock and stock awards were credited with deferred stock units, restricted stock or stock equal to $2.00 per special dividend for each deferred stock unit, share of restricted stock or stock award, representing $1.8 million in total for each of the 2015 and 2014 special dividends. In connection with each of these special cash dividends, the exercise price of all outstanding stock options was reduced by $2.00 per share. These reductions in exercise price were made pursuant to the terms of the outstanding awards, resulting in no incremental stock-based compensation expense.


In 2016, the Company initiated the payment of regular quarterly dividends. The table below summarizes the regular quarterly dividends declared and paid during the yearyears ended December 31, 2016:2019, 2018, and 2017:
(In thousands, except per share data)Per ShareRecord DatePayment DateTotal Paid
First Quarter 2017$0.50  03/06/1703/17/17$12,442  
Second Quarter 20170.50  05/19/1706/02/1712,445  
Third Quarter 20170.50  08/18/1709/01/1712,459  
Fourth Quarter 20170.55  11/17/1712/01/1713,711  
Total 2017$2.05  $51,057  
First Quarter 2018$0.55  03/16/1803/29/18$13,858  
Second Quarter 20180.60  06/04/1806/15/1815,127  
Third Quarter 20180.60  08/31/1809/14/1815,129  
Fourth Quarter 20180.60  11/26/1812/07/1815,156  
Total 2018$2.35  $59,270  
First Quarter 2019$0.60  03/08/1903/22/19$14,999  
Second Quarter 20190.65  06/07/1906/21/1916,267  
Third Quarter 20190.65  09/06/1909/20/1916,267  
Fourth Quarter 20190.65  12/06/1912/20/1916,280  
Total 2019$2.55  $63,813  
(In thousands, except per share data)Per Share Record Date Payment Date Total Paid
First Quarter 2016$0.30
 04/01/16 04/15/16 $7,344
Second Quarter 20160.30
 06/06/16 06/17/16 7,363
Third Quarter 20160.30
 08/19/16 09/02/16 7,371
Fourth Quarter 20160.50
 11/28/16 12/09/16 12,359
Total 2016$1.40
     $34,437


Stock-Based Awards


PursuantPrior to stockholder approval of the LCI Industries 2018 Omnibus Incentive Plan (the “2018 Plan) in May 2018, the Company granted to its directors, employees, and other eligible persons common stock-based awards, such as stock options, deferred and restricted stock units, restricted stock, and stock awards pursuant to the LCI Industries Equity Award and Incentive Plan, as Amended and Restated (the “Equity“2011 Plan”), which was approved by stockholders in May 2011. On May 24, 2018, the Company’s stockholders approved the 2018 Plan, which provides that the number of shares of common stock that may be the subject of awards and issued under the 2018 Plan is 1,500,000, plus shares subject to any awards outstanding as of May 24, 2018 under the 2011 Plan that subsequently expire, are forfeited or canceled, are settled for cash, are not issued in shares, or are tendered or withheld to pay the exercise price or satisfy any tax withholding obligations related to the award. Following the stockholders’ approval of the 2018 Plan, no further awards may be made under the 2011 Plan. Executive officers and other employees of the Company may grantand its subsidiaries and affiliates, and independent directors, consultants, and others who provide substantial services to the Company and its directors, employees,subsidiaries and otheraffiliates, are eligible persons Common Stock-basedto be granted awards such as stock options, restricted stock and deferred stock units. All such awards granted under the Equity2018 Plan. Under the 2018 Plan, must be approved by the Compensation Committee of LCII’s Board of Directors (the “Committee”). The Committee determines the period for which all suchis authorized to grant stock options, stock appreciation rights, restricted stock awards, may be exercisable, but in no event may such an award be exercisable more than 10 years from the date of grant. The number of shares available under the Equity Plan,stock unit awards, other stock-based awards, and the exercise price of all such awards grantedcash incentive awards.

LCI INDUSTRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)64


under the Equity Plan, are subject to adjustments by the Committee to reflect stock splits, dividends, recapitalization, mergers, or other major corporate actions.

At the Annual Meeting of Stockholders held on May 22, 2014, stockholders approved an amendment to the Equity Plan to increase the number of shares of common stock available for issuance pursuant to awards by 1,678,632 shares.

The number of shares available for grantingfuture awards under the 2018 Plan and 2011 Plan, as applicable, was 1,049,752, 1,305,4401,361,748, 1,570,274, and 1,389,506737,689 at December 31, 2016, 20152019, 2018, and 2014,2017, respectively.
Stock-based compensation resulted in charges to operations as follows for the years ended December 31:
(In thousands)201920182017
Deferred and restricted stock units$14,342  $12,427  $10,696  
Restricted stock—  590  1,191  
Stock awards1,735  1,048  8,149  
Stock-based compensation expense$16,077  $14,065  $20,036  
(In thousands)2016 2015 2014
Stock options$444
 $974
 $1,412
Deferred stock units7,830
 7,023
 4,343
Restricted stock1,770
 1,031
 910
Stock awards5,376
 5,015
 4,152
Stock-based compensation expense$15,420
 $14,043
 $10,817


Stock-based compensation expense is recorded in the Consolidated Statements of Income in the same line as cash compensation to those employees is recorded, primarily in selling, general and administrative expenses. In addition, for the years ended December 31, 2016, 2015 and 2014, the Company issued deferred stock units to certain executive officers in lieu of cash for a portion of prior year incentive compensation, in accordance with their compensation arrangements, of $0.3 million, $2.0 million and $2.0 million, respectively. In February 2017, the Company issued deferred stock units valued at $6.9 million, to certain officers in lieu of cash for a portion of their 2016 incentive compensation in accordance with their compensation arrangements.

Stock Options

The Equity Plan provides for the grant of stock options that qualify as incentive stock options under Section 422 of the Internal Revenue Code, and non-qualified stock options. The exercise price for stock options granted under the Equity Plan must be at least equal to 100 percent of the fair market value of the shares subject to such stock option on the date of grant. The exercise price may be paid in cash or in shares of the Company’s Common Stock which have been held for a minimum of six months. Historically, upon exercise of stock options, new shares have been issued instead of using treasury shares.

Outstanding stock options expire six years from the date of grant, and either vest ratably over the service period of five years for employees or, for certain executive officers, based on achievement of specified performance conditions. As a result of the Company’s executive succession and corporate relocation, the vesting of certain stock options was accelerated pursuant to contractual obligations with certain employees whose employment terminated as a result of the relocation to Indiana. Transactions in stock options under the Equity Plan are summarized as follows:
 Number of Option Shares
Weighted Average
Exercise Price
Outstanding at December 31, 2013723,661
$15.46
Exercised(258,530)$12.89
Forfeited(11,800)$16.93
Reduction for special cash dividend—
$(2.00)
Outstanding at December 31, 2014
453,331
$16.89
Exercised(214,601)$14.48
Forfeited(26,700)$14.30
Reduction for special cash dividend—
$(2.00)
Outstanding at December 31, 2015212,030
$15.38
Exercised(183,600)$15.10
Forfeited(1,550)$17.17
Outstanding at December 31, 2016 (a)
26,880
$17.17
Exercisable at December 31, 2016 (a)
26,880
$17.17
LCI INDUSTRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


(a)The aggregate intrinsic value for option shares outstanding and option shares exercisable is $2.4 million. The weighted average remaining term for option shares outstanding and option shares exercisable is 0.9 years.

Additional information for the exercise of stock options is as follows for the yearsyear ended December 31:31, 2017.
(In thousands)2016 2015 2014
Intrinsic value of stock options exercised$13,204
 $9,424
 $7,860
Cash receipts from stock options exercised$2,772
 $3,280
 $3,333
Income tax benefits from stock option exercises$4,435
 $2,885
 $3,660
Grant date fair value of stock options vested$506
 $1,055
 $1,561


Deferred and Restricted Stock Units


The Equity2018 Plan provides for the grant or issuance of stock units, including those that have deferral periods, such as deferred stock units (“DSUs”), and those with time-based vesting provisions, such as restricted stock units (“RSUs”), to directors, employees and other eligible persons. Recipients of DSUs and RSUs are entitled to receive shares at the end of a specified vesting or deferral period. Holders of DSUs and RSUs receive dividend equivalents based on dividends granted to holders of the Common Stock,common stock, which dividend equivalents are payable in additional DSUs and RSUs, and are subject to the same vesting criteria as the original grant.


DSUs vest (i) ratably over the service period, (ii) at a specified future date, or (iii) for certain officers, based on achievement of specified performance conditions. RSUs vest (i) ratably over the service period or (ii) at a specified future date. As a result of the Company’s executive succession and corporate relocation, the vesting of certain deferred stock units was accelerated pursuant to contractual obligations with certain employees whose employment terminated. In addition, DSUs are issued in lieu of certain cash compensation. Transactions in DSUs and RSUs under the Equity2011 Plan or the 2018 Plan, as applicable, are summarized as follows:
Number of SharesWeighted Average Price
Outstanding at December 31, 2016506,447  $50.00  
Issued68,340  108.61  
Granted95,079  109.50  
Dividend equivalents9,799  104.12  
Forfeited(3,094) 72.96  
Vested(227,516) 40.39  
Outstanding at December 31, 2017449,055  $72.55  
Issued5,354  106.10  
Granted101,650  103.20  
Dividend equivalents8,036  89.66  
Forfeited(9,557) 76.71  
Vested(290,132) 74.83  
Outstanding at December 31, 2018264,406  $83.84  
Issued6,073  89.82  
Granted252,068  81.07  
Dividend equivalents10,243  89.65  
Forfeited(9,079) 89.67  
Vested(177,563) 69.65  
Outstanding at December 31, 2019346,148  $87.54  

65
 Number of SharesWeighted Average Price
Outstanding at December 31, 2013692,961
$30.26
Issued56,212
$46.08
Granted187,490
$46.94
Dividend equivalents27,532
$50.45
Forfeited(38,855)$29.83
Exercised(187,052)$29.90
Outstanding at December 31, 2014
738,288
$36.96
Issued54,982
$47.51
Granted90,184
$60.22
Dividend equivalents20,922
$59.94
Forfeited(23,604)$44.78
Exercised(353,259)$32.62
Outstanding at December 31, 2015527,513
$44.94
Issued10,742
$72.01
Granted173,097
$54.67
Dividend equivalents9,075
$87.01
Forfeited(10,893)$48.98
Exercised(203,087)$43.55
Outstanding at December 31, 2016506,447
$50.00


As of December 31, 2016,2019, there was $14.4$18.3 million of total unrecognized compensation costscost related to DSUs and RSUs, which is expected to be recognized over a weighted average remaining period of 1.51.4 years.


Restricted Stock Awards and Performance Stock Units


The Equity2011 Plan provided for stock awards and the 2018 Plan provides for performance stock units (“PSUs”) that vest at a specific future date based on achievement of specified performance conditions. Transactions under the grant of restricted stock to directors, employees and other eligible persons. The restriction period is established by2011 Plan or the Committee, but may not be less than one year. Holders of restricted stock have all the rights of a2018 Plan, as applicable, are summarized as follows:
LCI INDUSTRIES
Number of SharesStock Price
Outstanding at December 31, 2016232,622  $55.60  
Granted103,382  90.36  
Dividend equivalents5,249  104.93  
Vested(69,434) 51.20  
Outstanding at December 31, 2017271,819  $70.29  
Issued5,641  106.10  
Granted111,246  106.10  
Dividend equivalents6,280  90.47  
Forfeited(71,618) 86.65  
Vested(136,000) 64.32  
Outstanding at December 31, 2018187,368  $91.39  
Granted48,995  78.11
Dividend equivalents3,658  67.03
Forfeited(8,459) 106.10
Vested(102,434) 77.93
Outstanding at December 31, 2019129,128  $96.21  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

stockholder of the Company, including the right to vote and the right to receive dividends granted to holders of the Common Stock, payable in additional shares of restricted stock, and subject to the same vesting criteria as the original grant. Shares of restricted stock are not transferable during the restriction period. Restricted stock grants, which were all made to directors, were as follows (in thousands except share and per share amounts):
 2016 2015 2014
Granted17,439
 20,558
 19,439
Weighted average stock price$74.55
 $59.60
 $46.82
Fair value of stock granted$1,300
 $1,220
 $910


As of December 31, 2016,2019, there was $0.5$2.9 million of total unrecognized compensation costscost related to restrictedoutstanding stock awards and PSUs, which is expected to be recognized over a weighted average remaining period of 0.40.9 years.
Stock Awards

In accordance with the employment agreements for various officers of the Company, such officers are entitled to receive an annual long-term award consisting of the right to earn shares of common stock. These shares are earned during the subsequent three year period based on growth in the Company’s earnings per diluted share. Transactions in stock awards under the Equity Plan are summarized as follows:
 Number of SharesStock Price
Outstanding at December 31, 2013193,602
$30.84
Granted103,500
$51.20
Dividend equivalents7,675
$50.45
Exercised(31,959)$26.88
Outstanding at December 31, 2014
272,818
$39.03
Granted96,010
$60.29
Dividend equivalents8,992
$59.94
Forfeited(16,534)$60.29
Exercised(98,830)$29.70
Outstanding at December 31, 2015262,456
$49.36
Granted86,918
$54.47
Dividend equivalents3,811
$88.04
Forfeited(10,832)$53.95
Exercised(109,731)$39.94
Outstanding at December 31, 2016232,622
$55.60

As of December 31, 2016, there was $7.6 million of total unrecognized compensation costs related to outstanding stock awards, which is expected to be recognized over a weighted average remaining period of 1.4 years.


Weighted Average Common Shares Outstanding


The following reconciliation details the denominator used in the computation of basic and diluted earnings per share for the years ended December 31:
(In thousands)201920182017
Weighted average shares outstanding for basic earnings per share24,998  25,178  25,020  
Common stock equivalents pertaining to stock-based awards95  285  355  
Weighted average shares outstanding for diluted earnings per share25,093  25,463  25,375  
(In thousands)2016 2015 2014
Weighted average shares outstanding for basic earnings per share24,631
 24,295
 23,911
Common stock equivalents pertaining to stock-based awards302
 355
 423
Weighted average shares outstanding for diluted earnings per share24,933
 24,650
 24,334


The weighted average diluted shares outstanding for the years ended December 31, 2016, 20152019, 2018, and 2014,2017, exclude the effect of 184,277, 255,547122,775, 94,747, and 293,860104,073 shares of common stock, respectively, subject to stock-based awards. Such shares were
LCI INDUSTRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

excluded from total diluted shares because they were anti-dilutive or the specified performance conditions that those shares were subject to were not yet achieved.


Stock Repurchase Program

On October 31, 2018, the Company’s Board of Directors authorized a new stock repurchase program granting the Company authority to repurchase up to $150.0 million of the Company’s common stock over a three-year period. The timing of stock repurchases and the number of shares repurchased will depend upon the market conditions and other factors. Share repurchases, if any, will be made in the open market or in privately negotiated transactions in accordance with applicable securities laws. The stock repurchase program may be modified, suspended or terminated at any time by the Board of Directors.
66

In 2018, the Company purchased 402,570 shares at a weighted average price of $71.28 per share, totaling $28.7 million. There were no share repurchases for the year ended December 31, 2019.

13. FAIR VALUE MEASUREMENTS


Recurring


The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis at
December 31:
20192018
(In thousands)TotalLevel 1Level 2Level 3TotalLevel 1Level 2Level 3
Liabilities
Contingent consideration$4,396  $—  $—  $4,396  $7,302  $—  $—  $7,302  
Derivative liabilities679  —  679  —  1,108  —  1,108  —  
 2016 2015
(In thousands)TotalLevel 1Level 2Level 3 TotalLevel 1Level 2Level 3
Assets         
Unrealized gain on derivative
   instruments
$2,296
$—
$2,296
$—
 $—
$—
$—
$—
Liabilities         
Contingent consideration$9,241
$—
$—
$9,241
 $10,836
$—
$—
$10,836


The Company did not have any assets measured at fair value on a recurring basis at December 31, 2019 or 2018.

Derivative Instruments

The Company’s objectives in using commodity derivatives are to add stability to expense and to manage its exposure to certain commodity price movements. To accomplish this objective, the Company uses commodity swaps as part of its commodity risk management strategy. Commodity swaps designated as cash flow hedges involve fixing the price on a fixed volume of a commodity on specified dates. The commodity swaps are typically cash settled for their fair value at or close to their settlement dates.

At December 31, 2019, the Company had 6 commodity swap derivative instruments for a total of 11.2 million pounds of steel used to hedge its commodity price risk on a portion of the exposure to movements associated with steel costs. These derivatives expire at various dates through April 2020, at an average steel price of $0.37 per pound. These derivatives are designated and qualify as cash flow hedges of commodity price risk; therefore, the gain or loss on the derivative is recorded in accumulated other comprehensive income (loss) and subsequently reclassified in the period during which the hedged transactions affects earnings within the same income statement line item as the earnings effect of the hedged transaction. These derivative instruments were valued at fair value using a market approach based on the quoted market prices of similar instruments at the end of the reporting period. At December 31, 2019, the $0.7 million corresponding liability was recorded in accrued expenses and other current liabilities as reflected in the Consolidated Balance Sheets.

At December 31, 2018, the Company had 5 commodity swap derivative instruments for a total of 34.4 million pounds of steel used to hedge its commodity price risk on a portion of the exposure to movements associated with steel costs. These derivatives expire at various dates through February 2020, at an average steel price of $0.39 per pound. These derivatives are designated and qualify as cash flow hedges of commodity price risk; therefore, the gain or loss on the derivative is recorded in accumulated other comprehensive income (loss) and subsequently reclassified in the period during which the hedged transactions affects earnings within the same income statement line item as the earnings effect of the hedged transaction. These derivative instruments were valued at fair value using a market approach based on the quoted market prices of similar instruments at the end of the reporting period. At December 31, 2018, the $1.1 million corresponding liability was recorded in accrued expenses and other current liabilities ($0.9 million) and other long-term liabilities ($0.2 million) as reflected in the Consolidated Balance Sheets.

Contingent Consideration Related to Acquisitions


Liabilities for contingent consideration related to acquisitions were estimated at fair valuedvalue using management’s projections for long-term sales forecasts, including assumptions regarding market share gains and future industry-specific economic and market conditions, and a market participant’s weighted average cost of capital. Over the next six years, the Company’s long-term sales growth forecasts for products subject to contingent consideration arrangements average approximately 14 percent per year. For further information on the inputs used in determining the fair value, and a roll-forward of the contingent consideration liability, see Note 11 of the Notes to Consolidated Financial Statements.


67

Changes in either of the inputs in isolation would result in a change in the fair value measurement. A change in the assumptions used for sales forecasts would result in a directionally similar change in the fair value liability, while a change in the weighted average cost of capital would result in a directionally opposite change in the fair value liability. If there is an increase in the fair value liability, the Company would record a charge to selling, general and administrative expenses, and if there is a decrease in the fair value liability, the Company would record a benefit in selling, general and administrative expenses.


Derivative Instruments

At December 31, 2016, the Company had derivative instruments for 40.8 million pounds of steel, in order to manage a portion of the exposure to movements associated with steel costs. These derivative instruments expire through December 2018, at an average steel price of $0.25 per pound. While these derivative instruments are considered to be economic hedges of the underlying movement in the price of steel, they are not designated or accounted for as a hedge. These derivative instruments were valued at fair value using a market approach based on the quoted market prices of similar instruments at the end of each reporting period, and the resulting net gain was recorded in cost of sales in the Consolidated Statements of Income. At December 31, 2016 the $2.3 million corresponding asset was recorded in other current assets as reflected in the Consolidated Balance Sheets.

Non-recurring

The following table presents the carrying value on the measurement date of any assets and liabilities which were measured at fair value and recorded at the lower of cost or fair value, on a non-recurring basis, using significant unobservable inputs (Level 3), and the corresponding non-recurring losses recognized during the years ended December 31:
 2016 2015 2014
(In thousands)Carrying
Value		 Non-Recurring
Losses		 Carrying
Value		 Non-Recurring
Losses		 Carrying
Value		 Non-Recurring
Losses
Assets           
Vacant owned facilities$2,496
 $—
 $2,537
 $—
 $3,863
 $—
Net assets of acquired businesses44,250
 —
 28,727
 —
 66,169
 —
Total assets$46,746
 $—
 $31,264
 $—
 $70,032
 $—
LCI INDUSTRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


Vacant Owned Facilities

During 2016, the Company reviewed the recoverability of the carrying value of one vacant owned facility. At December 31, 2016, the Company had one vacant owned facility, with an estimated fair value of over $3.0 million and a carrying value of $2.5 million, classified in fixed assets in the Consolidated Balance Sheets.

During 2015, the Company reviewed the recoverability of the carrying value of three vacant owned facilities, of which one of these facilities was sold and one was reopened. At December 31, 2015, the Company had one vacant owned facility with an estimated fair value of over $3.0 million and a carrying value of $2.5 million, classified in fixed assets in the Consolidated Balance Sheets.

During 2014, the Company reviewed the recoverability of the carrying value of four vacant owned facilities. At December 31, 2014, the Company had three vacant owned facilities, with an combined estimated fair value of $4.2 million and a combined carrying value of $3.9 million, classified in fixed assets in the Consolidated Balance Sheets.

The determination of fair value was based on the best information available, including internal cash flow estimates, market prices for similar assets, broker quotes and independent appraisals, as appropriate.

Net Assets of Acquired Businesses

The Company valued the assets and liabilities associated with the acquisitions of businesses on the respective acquisition dates. Depending upon the type of asset or liability acquired, the Company used different valuation techniques in determining the fair value. Those techniques included comparable market prices, long-term sales, profitability and cash flow forecasts, assumptions regarding future industry-specific economic and market conditions, a market participant’s weighted average cost of capital, as well as other techniques as circumstances required. For further information on acquired assets and liabilities, see Note 2 of the Notes to Consolidated Financial Statements.

14. SEGMENT REPORTING


The Company previously had twohas 2 reportable segments, the recreational vehicle products segment (the “RV Segment”) and the manufactured housing products segment (the “MH Segment”). The Company has recently increased its focus on the significant opportunities in the aftermarket for its products, primarily sales to retail dealers, wholesale distributors and service centers. Additionally, over the past several years, sales of components for manufactured homes have become a smaller part of the Company’s business, largely due to the growth the Company has experienced with respect to its components sold to customers for traditional recreational vehicles as well as the expanded use of its components in other non-RV applications, which we refer to as adjacent industries. Unit growth for MH Segment products has also been lower over the last decade, primarily due to the real estate, credit and economic environment, including the availability of site built homes at stable prices and high interest rate spreads between conventional mortgages for site-built homes and loans for manufactured homes. In response to these changes in the Company’s business, subsequent to March 31, 2016, the Company modified its internal reporting structure, reflecting a change in how its chief operating decision maker (“CODM”) assesses the performance of the Company’s operating results and makes decisions about resource allocations. The Company’s new reportable segments are the OEM Segment and the Aftermarket Segment. Intersegment sales are insignificant.


The OEM Segment, which accounted for 9288 percent, 9391 percent, and 9592 percent of consolidated net sales for each of the years ended December 31, 2016, 20152019, 2018, and 2014,2017, respectively, manufactures orand distributes a broad array of engineered components for the leading OEMs in the recreation and industrial product markets, consisting of RVs and adjacent industries, including buses; trailers used to haul boats, livestock, equipment, and other cargo; trucks; pontoon boats; trains; manufactured homes; and modular housing. Approximately 61 percent, 64 percent, and 71 percent of the Company’s OEM Segment net sales in 20162019, 2018, and 2017, respectively, were of components for travel trailer and fifth-wheel RVs.


The Aftermarket Segment, which accounted for 812 percent, 79 percent, and 58 percent of consolidated net sales for each of the years ended December 31, 2016, 20152019, 2018, and 2014,2017, respectively, supplies engineered components to the related aftermarket channels of the RV and adjacent industries, primarily to retail dealers, wholesale distributors, and service centers. The Aftermarket Segment also includes the sale of replacement glass and awnings to fulfill insurance claims.claims, biminis, covers, buoys, and fenders to the marine industry, and towing products and truck accessories.


Decisions concerning the allocation of the Company’s resources are made by the Company’s CODM,Chief Operating Decision Maker (“CODM”), with oversight by the Board of Directors. The CODM evaluates the performance of each segment based upon segment operating profit or loss,
LCI INDUSTRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

generally defined as income or loss before interest and income taxes. Decisions concerning the allocation of resources are also based on each segment’s utilization of assets. Management of debt is a corporate function. The accounting policies of the OEM and Aftermarket Segments are the same as those described in Note 12 of the Notes to Consolidated Financial Statements.

The change in reported segments had no effectfollowing tables presents the Company’s revenues disaggregated by segment and geography based on the billing address of the Company’s net income, total assets or liabilities, or stockholders’ equity.customers for the years ended December 31:

2019
(In thousands)U.S. (a)Int’l (b)Total
OEM Segment:
RV OEMs:
Travel trailers and fifth-wheels$1,264,404  $12,314  $1,276,718  
Motorhomes110,405  45,218  155,623  
Adjacent Industries OEMs587,521  72,039  659,560  
Total OEM Segment net sales1,962,330  129,571  2,091,901  
Aftermarket Segment:
Total Aftermarket Segment net sales263,382  16,199  279,581  
Total net sales$2,225,712  $145,770  $2,371,482  

68

2018
(In thousands)U.S. (a)Int’l (b)Total
OEM Segment:
RV OEMs:
Travel trailers and fifth-wheels$1,431,574  $9,156  $1,440,730  
Motorhomes143,488  43,809  187,297
Adjacent Industries OEMs574,100  40,489  614,589
Total OEM Segment net sales2,149,162  93,454  2,242,616  
Aftermarket Segment:
Total Aftermarket Segment net sales222,588  10,603  233,191  
Total net sales$2,371,750  $104,057  $2,475,807  

2017
(In thousands)U.S. (a)Int’l (b)Total
OEM Segment:
RV OEMs:
Travel trailers and fifth-wheels$1,403,079  $2,904  $1,405,983  
Motorhomes138,895  20,522  159,417
Adjacent Industries OEMs398,919  12,304  411,223
Total OEM Segment net sales1,940,893  35,730  1,976,623  
Aftermarket Segment:
Total Aftermarket Segment net sales160,637  10,510  171,147  
Total net sales$2,101,530  $46,240  $2,147,770  

(a) Net sales to customers in the United States of America
(b) Net sales to customers domiciled in countries outside of the United States of America

Corporate expenses are allocated between the segments based upon net sales. Accretion related to contingent consideration and other non-segment items are included in the segment to which they relate. Information relating to segments follows for the years ended December 31:
SegmentsCorporate
(In thousands)OEMAftermarketSubtotaland OtherTotal
2019
Net sales to external customers (a)
$2,091,901  $279,581  $2,371,482  $—  $2,371,482  
Operating profit (b)
165,290  34,920  200,210  —  200,210  
Total assets (c)
1,167,899  595,688  1,763,587  99,008  1,862,595  
Expenditures for long-lived assets (d)
166,331  302,857  469,188  —  469,188  
Depreciation and amortization70,136  5,222  75,358  —  75,358  
69

SegmentsCorporate SegmentsCorporate
(In thousands)OEMAftermarketTotaland OtherTotal(In thousands)OEMAftermarketSubtotaland OtherTotal
2016 
20182018
Net sales to external customers (a)
$1,548,091
$130,807
$1,678,898
$—
$1,678,898
Net sales to external customers (a)
$2,242,616  $233,191  $2,475,807  $—  $2,475,807  
Operating profit (b)
180,850
20,000
200,850
—
200,850
Operating profit (b)
167,459  31,329  198,788  —  198,788  
Total assets (c)
569,385
65,211
634,596
152,308
786,904
Total assets (c)
1,034,254  129,776  1,164,030  79,863  1,243,893  
Expenditures for long - lived assets (d)
80,588
6,014
86,602
—
86,602
Expenditures for long-lived assets (d)
Expenditures for long-lived assets (d)
247,895  20,544  268,439  —  268,439  
Depreciation and amortization$42,593
$3,298
$45,891
$276
$46,167
Depreciation and amortization63,447  4,079  67,526  —  67,526  
 
2015 
20172017
Net sales to external customers (a)
$1,300,060
$103,006
$1,403,066
$—
$1,403,066
Net sales to external customers (a)
$1,976,623  $171,147  $2,147,770  $—  $2,147,770  
Operating profit (loss) (b)
105,224
14,746
119,970
(3,716)116,254
Operating profit (b)
Operating profit (b)
190,276  24,005  214,281  —  214,281  
Total assets (c)
500,734
56,683
557,417
65,439
622,856
Total assets (c)
785,926  76,309  862,235  83,623  945,858  
Expenditures for long - lived assets (d)
65,492
2,095
67,587
—
67,587
Expenditures for long-lived assets (d)
Expenditures for long-lived assets (d)
148,570  4,875  153,445  —  153,445  
Depreciation and amortization$38,583
$2,898
$41,481
$143
$41,624
Depreciation and amortization50,751  3,662  54,413  314  54,727  
 
2014 
Net sales to external customers (a)
$1,127,026
$63,756
$1,190,782
$—
$1,190,782
Operating profit (loss) (b)
88,744
8,697
97,441
(1,954)95,487
Total assets (c)
441,127
54,489
495,616
48,225
543,841
Expenditures for long - lived assets (d)
119,715
27,655
147,370
—
147,370
Depreciation and amortization$30,954
$1,554
$32,508
$88
$32,596

(a)Thor Industries, Inc. (“Thor”), a customer of both segments, accounted for 37 percent, 28 percent and 33 percent of the Company’s consolidated net sales for the years ended December 31, 2016, 2015 and 2014, respectively. Berkshire Hathaway Inc. (through its subsidiaries Forest River, Inc. and Clayton Homes, Inc.), a customer of both segments, accounted for 26 percent, 26 percent and 28 percent of the Company’s consolidated net sales for the years ended December 31, 2016, 2015 and 2014, respectively. Jayco, Inc., a customer of both segments, accounted for 10 percent of the Company’s consolidated net sales for the year ended December 31, 2015, this customer was subsequently acquired by Thor and is included in the Thor’s 2016 percentage above. No other customer accounted for more than 10 percent of consolidated net sales in the years ended December 31, 2016, 2015 and 2014. International sales, primarily in Europe and Australia, and export sales represented approximately 2 percent, 1 percent and 1 percent of consolidated net sales in 2016, 2015 and 2014, respectively.
(b)Certain general and administrative expenses are allocated between the segments based upon net sales or operating profit, depending upon the nature of the expense.
(c)Segment assets include accounts receivable, inventories, fixed assets, goodwill and other intangible assets. Corporate and other assets include cash and cash equivalents, prepaid expenses and other current assets, deferred taxes, and other assets.
(d)Expenditures for long-lived assets include capital expenditures, as well as fixed assets, goodwill and other intangible assets purchased as part of the acquisition of businesses. The Company purchased $42.0 million, $38.6 million and $105.0 million of long-lived assets, as part of the acquisitions of businesses in the years ended December 31, 2016, 2015 and 2014, respectively.

(a)  Thor Industries, Inc. (“Thor”), a customer of both segments, accounted for 27 percent, 31 percent, and 38 percent of the Company’s consolidated net sales for the years ended December 31, 2019, 2018, and 2017, respectively. Berkshire Hathaway Inc. (through its subsidiaries Forest River, Inc. and Clayton Homes, Inc.), a customer of both segments, accounted for 21 percent, 23 percent, and 25 percent of the Company’s consolidated net sales for the years ended December 31, 2019, 2018, and 2017, respectively. No other customer accounted for more than 10 percent of consolidated net sales in the years ended December 31, 2019, 2018, and 2017.
LCI INDUSTRIES(b) Certain general and administrative expenses are allocated between the segments based upon net sales or operating profit, depending upon the nature of the expense.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(c) Segment assets include accounts receivable, inventories, fixed assets, goodwill and other intangible assets. Corporate and other assets include cash and cash equivalents, prepaid expenses and other current assets, deferred taxes, and other assets.
(Continued)
(d) Expenditures for long-lived assets include capital expenditures, as well as fixed assets, goodwill and other intangible assets purchased as part of the acquisition of businesses. The Company purchased $395.6 million, $150.9 million, and $65.0 million of long-lived assets, as part of the acquisitions of businesses in the years ended December 31, 2019, 2018, and 2017, respectively.


Net sales by OEM Segment product were as follows for the years ended December 31:
(In thousands)201920182017
OEM Segment:
Chassis, chassis parts, and slide-out mechanisms$796,434  $908,065  $914,397  
Windows and doors585,464  615,644  424,625  
Furniture and mattresses342,691  380,514  342,680  
Axles and suspension solutions129,471  122,897  123,513  
Other237,841  215,496  171,408  
Total OEM Segment net sales2,091,901  2,242,616  1,976,623  
Total Aftermarket Segment net sales279,581  233,191  171,147  
Total net sales$2,371,482  $2,475,807  $2,147,770  

70

(In thousands)2016 2015 2014
OEM Segment:     
Chassis, chassis parts and slide-out mechanisms$743,160
 $664,542
 $593,756
Windows and doors335,717
 301,171
 258,915
Furniture and mattresses245,596
 161,840
 132,356
Axles and suspension solutions115,538
 108,464
 88,909
Other108,080
 64,043
 53,090
Total OEM Segment net sales1,548,091
 1,300,060
 1,127,026
Total Aftermarket Segment net sales130,807
 103,006
 63,756
Total net sales$1,678,898
 $1,403,066
 $1,190,782

The composition of net sales was as follows for the years ended December 31:
(In thousands)2016 2015 2014
Net sales:     
OEM Segment:     
RV OEMs:     
Travel trailers and fifth-wheels$1,099,882
 $938,787
 $841,497
Motorhomes116,191
 86,513
 70,332
Adjacent industries OEMs332,018
 274,760
 215,197
Total OEM Segment net sales1,548,091
 1,300,060
 1,127,026
Aftermarket Segment:     
Total Aftermarket Segment net sales130,807
 103,006
 63,756
Total net sales$1,678,898
 $1,403,066
 $1,190,782

15.    NEW ACCOUNTING PRONOUNCEMENTS

In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-15, Classification of Certain Cash Receipts and Cash Payments, which amends ASC 230, Statement of Cash Flows. This ASU provides guidance on the statement of cash flows presentation of certain transactions where diversity in practice exists. This ASU is effective for annual and interim periods beginning after December 15, 2017, and should be applied retrospectively with early adoption permitted at the beginning of an interim or annual reporting period. The Company is evaluating the effect of adopting this new accounting guidance, but does not expect adoption will have a material impact on the Company’s results of operations, cash flows or financial position.

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which amended ASC 718, Compensation - Stock Compensation. This ASU simplifies several aspects of the accounting for share-based payment transactions, including income tax consequences, the classification of awards as either equity or liabilities, and the classification on the statement of cash flows. This pronouncement is effective for reporting periods beginning after December 15, 2016. The guidance will be applied either prospectively, retrospectively or using a modified retrospective transition method, depending on the area covered in this update. Upon adoption, any future excess tax benefits or deficiencies will be recorded to the provision for income taxes in the consolidated statement of income, instead of additional paid-in capital in the consolidated balance sheet. For the years ended December 31, 2016, 2015 and 2014, $8.0 million, $9.0 million and $3.9 million, respectively, of excess tax benefits were recorded to additional paid-in capital that would have been recorded as a reduction to the provision for income taxes if this new guidance had been adopted as of the respective dates. Additionally, excess tax benefits will be classified as operating activities in the consolidated statement of cash flow instead of in financing activities as required under the current guidance. The Company has not selected a transition method, and except as described above, does not expect the provisions of ASU 2016-09 to have an impact on the Company’s consolidated financial position or results of operations.

LCI INDUSTRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

In February 2016, the FASB issued ASU 2016-02, Leases. This ASU requires, in most instances, a lessee to recognize on its balance sheet a liability to make lease payments (the lease liability) and also a right-of-use asset representing its right to use the underlying asset for the lease term. The amendments are effective for fiscal years beginning after December 15, 2018, including interim periods within those periods, using a modified retrospective approach with early adoption permitted. The Company is evaluating the effect of adopting this new accounting guidance.

In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes. This ASU requires entities with a classified balance sheet to present all deferred tax assets and liabilities as non-current. During the first quarter of 2016, the Company elected to retrospectively adopt ASU 2015-17, thus reclassifying current deferred tax assets to non-current on the accompanying Consolidated Balance Sheet. As a result, the Company reclassified $22,616 from current assets to long-term assets as of December 31, 2015. The adoption of this guidance has no impact on the Company’s results of operations and cash flows.

In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory. This ASU applies to inventory measured using the first-in, first-out (“FIFO”) or average cost methods. Under the updated guidance, an entity should measure inventory that is within scope at the lower of cost and net realizable value, which is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. This ASU is effective for annual and interim periods beginning after December 15, 2016, and should be applied prospectively with early adoption permitted at the beginning of an interim or annual reporting period. Adoption of this ASU will not have a material impact on the Company’s results of operations, cash flows or financial position.

In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs. This ASU requires debt issuance costs be presented on the balance sheet as a reduction from the carrying amount of the related debt liability. In August 2015, the FASB issued an ASU that allows the presentation of debt issuance costs related to line-of-credit arrangements to continue to be an asset on the balance sheet under the simplified guidance, regardless of whether there are any outstanding borrowings on the related arrangements. The amendments in these ASUs are to be applied retrospectively and are effective for interim and annual reporting periods beginning after December 15, 2015. The Company adopted these ASUs retrospectively effective January 1, 2016, and has reclassified all debt issuance costs, with the exception of those related to the revolving credit facility, as a reduction from the carrying amount of the related debt liability for both current and prior periods. The adoption of this guidance had no impact on the Company’s results of operations and cash flows.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. This ASU outlines a single, comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance issued by the FASB, including industry specific guidance. ASU 2014-09 provides accounting guidance for all revenue arising from contracts with customers and affects all entities that enter into contracts with customers to provide goods and services. The guidance also provides a model for the measurement and recognition of gains and losses on the sale of certain non-financial assets, such as property and equipment, including real estate. ASU 2014-09 is effective for annual reporting periods, including interim reporting periods within those periods, beginning after December 15, 2017. The new standard must be adopted using either a full retrospective approach for all periods presented in the period of adoption or a modified retrospective approach. ASU 2014-09 also requires entities to disclose both quantitative and qualitative information to enable users of the financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.

The Company does not anticipate the adoption of this standard will have a material impact on its reported current net sales; however, given its acquisition strategy, there may be additional revenue streams acquired prior to the adoption date. The Company’s technical analysis is on-going with respect to variable consideration, whether certain contracts’ revenues will be recognized over time or at a point in time, and whether costs to obtain a contract will be capitalized. Further, the Company is continuing to assess what incremental disaggregated revenue disclosures will be required in its consolidated financial statements. The Company continues to evaluate transition methods, and expect to finalize its determination once all other significant matters are concluded.
LCI INDUSTRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

16. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)


Interim unaudited financial information follows:
(In thousands, except per share amounts)First QuarterSecond QuarterThird QuarterFourth QuarterYear
Year ended December 31, 2019
Net sales$592,172  $629,068  $586,221  $564,021  $2,371,482  
Gross profit132,594  148,653  135,473  122,482  539,202  
Income before income taxes45,248  63,558  47,253  35,355  191,414  
Net income34,366  47,527  35,809  28,807  146,509  
Net income per common share:
Basic$1.38  $1.90  $1.43  $1.15  $5.86  
Diluted$1.38  $1.89  $1.42  $1.14  $5.84  
Stock market price:
High$86.13  $97.77  $95.52  $109.79  $109.79  
Low$64.70  $75.59  $92.93  $87.15  $64.70  
Close (at end of quarter)$76.82  $90.00  $91.85  $107.13  $107.13  
Year ended December 31, 2018
Net sales$650,492  $684,455  $604,244  $536,616  $2,475,807  
Gross profit140,733  150,456  125,901  103,254  520,344  
Income before income taxes58,719  62,428  43,633  27,572  192,352  
Net income47,336  47,224  33,812  20,179  148,551  
Net income per common share:
Basic$1.88  $1.87  $1.34  $0.80  $5.90  
Diluted$1.86  $1.86  $1.33  $0.80  $5.83  
Stock market price:
High$132.30  $104.90  $102.23  $80.89  $132.30  
Low$99.46  $80.95  $98.40  $59.68  $59.68  
Close (at end of quarter)$104.15  $90.15  $69.35  $66.80  $66.80  
(In thousands, except per share amounts) First Quarter Second Quarter Third Quarter Fourth Quarter Year
Year ended December 31, 2016          
Net sales $422,798
 $440,831
 $412,370
 $402,899
 $1,678,898
Gross profit $108,441
 $116,904
 $105,550
 $98,008
 $428,903
Income before income taxes $55,252
 $58,975
 $44,742
 $40,203
 $199,172
Net income $35,959
 $37,569
 $29,844
 $26,299
 $129,671
           
Net income per common share:          
Basic $1.46
 $1.52
 $1.21
 $1.06
 $5.26
Diluted $1.45
 $1.51
 $1.19
 $1.05
 $5.20
           
Stock market price:          
High $64.46
 $85.09
 $102.46
 $112.95
 $112.95
Low $52.85
 $60.75
 $84.61
 $84.20
 $52.85
Close (at end of quarter) $64.46
 $84.84
 $98.02
 $107.75
 $107.75
           
Year ended December 31, 2015          
Net sales $361,457
 $362,085
 $345,296
 $334,228
 $1,403,066
Gross profit $76,403
 $82,060
 $74,125
 $73,414
 $306,002
Income before income taxes $31,649
 $33,019
 $26,576
 $23,125
 $114,369
Net income $20,073
 $20,869
 $17,263
 $16,140
 $74,345
           
Net income per common share:          
Basic $0.83
 $0.86
 $0.71
 $0.66
 $3.06
Diluted $0.82
 $0.85
 $0.70
 $0.65
 $3.02
           
Stock market price:          
High $64.61
 $62.60
 $59.42
 $61.90
 $64.61
Low $47.63
 $55.26
 $52.42
 $53.55
 $47.63
Close (at end of quarter) $61.54
 $58.02
 $54.61
 $60.89
 $60.89


The sum of per share amounts for the four quarters may not equal the total per share amounts for the year as a result of changes in the weighted average common shares outstanding or rounding.




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Item 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.


None.


Item 9A. CONTROLS AND PROCEDURES.


The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports under the Securities Exchange Act reportsof 1934, as amended (the “Exchange Act”) is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure, in accordance with the definition of “disclosure controls and procedures” in Rule 13a-15 under the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, cannot provide absolute assurance of achieving the desired control objectives. Management included in its evaluation the cost-benefit relationship of possible controls and procedures. The Company continually evaluates its disclosure controls and procedures to determine if changes are appropriate based upon changes in the Company’s operations or the business environment in which it operates.


As of the end of the period covered by this Form 10-K, the Company performed an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and the Company’s Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective.effective as of December 31, 2019.


(a) Management’s Annual Report on Internal Control over Financial Reporting.


We are responsible for the preparation and integrity of the Consolidated Financial Statements appearing in thethis Annual Report on Form 10-K. We are also responsible for establishing and maintaining adequate internal control over financial reporting.reporting for the Company. We maintain a system of internal control that is designed to provide reasonable assurance as to the fair and reliable preparation and presentation of the Consolidated Financial Statements, as well as to safeguard assets from unauthorized use or disposition. The Company continually evaluates its system of internal control over financial reporting to determine if changes are appropriate based upon changes in the Company’s operations or the business environment in which it operates.


Our control environment is the foundation for our system of internal control over financial reporting and is embodied in our Guidelines for Business Conduct. It sets the tone of our organization and includes factors such as integrity and ethical values. Our internal control over financial reporting is supported by formal policies and procedures which are reviewed, modified and improved as changes occur in business conditions and operations.


We conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control —- Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation. Although there are inherent limitations in the effectiveness of any system of internal control over financial reporting, based on our evaluation, we have concluded that our internal control over financial reporting was effective as of December 31, 2016.2019.


During 2019, the Company completed the CURT Acquisition Holdings, Inc. (CURT), Lewmar Marine Ltd. (Lewmar), Rodan Enterprises, LLC (SureShade), Ciesse Holdings S.r.l (Ciesse), Lavet S.r.l. (Lavet), and Femto Engineering S.r.l. (Femto) acquisitions, which contributed $65.4 million of net sales for the year ended December 31, 2019. Total assets from these acquisitions as of December 31, 2019 were $568 million. As the CURT, Lewmar, SureShade, Ciesse, Lavet, and Femto acquisitions occurred in the year ended December 31, 2019, the scope of the Company’s evaluation of the effectiveness of internal control over financial reporting does not include CURT, Lewmar, SureShade, Ciesse, Lavet, and Femto. This exclusion is in accordance with the SEC’s general guidance that an assessment of a recently acquired business may be omitted from the Company’s scope in the year of acquisition.

KPMG LLP, an independent registered public accounting firm, has audited the Consolidated Financial Statements included in this Annual Report on Form 10-K and, as part of their audit, has issued their attestation report on the effectiveness of our internal control over financial reporting, included elsewhere in this Form 10-K.

72

/s/ Jason D. Lippert/s/ Brian M. Hall
Chief Executive OfficerChief Financial Officer

(b) Report of the Independent Registered Public Accounting Firm.


The report is included in Item 8. “Financial Statements and Supplementary Data.”




(c) Changes in Internal Control over Financial Reporting.


During the year ended December 31, 2019, the Company implemented controls to support the adoption of ASU 2016-02, Leases (Topic 842). There were no other changes in the Company’s internal controlscontrol over financial reporting during the quarter ended December 31, 2016,2019, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
The Company has selectedbegan implementation of a new enterprise resource planning (“ERP”) system. Implementation of the new ERP software begansystem in late 2013. To date, 2134 locations have been put on this ERP software.system. The roll-out plan is continually evaluated in the context of priorities for the business and may change as needs of the business dictate. The Company anticipates enhancements to controls due to both the installation of the new ERP softwaresystem and business process changes resulting therefrom.


Item 9B. OTHER INFORMATION.


None.


PART III


Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.


Information with respect to the Company’s Directors, Executive Officersdirectors, executive officers and Corporate Governancecorporate governance is incorporated by reference from the information contained under the proposal entitled “Election of Directors” and under the caption “Corporate Governance and Related Matters – Board Committees” in the Company’s Proxy Statement for the Annual Meeting of Stockholders to be held on May 25, 201721, 2020 (the “2017“2020 Proxy Statement”) and from the information contained under “Executive Officers of the Registrant”“Information About our Executive Officers” in Part I, Item 1, “Business,” in this Report.


Information regarding Section 16 reporting compliance is incorporated by reference from the information contained under the caption “Voting Securities – Compliance withDelinquent Section 16(a) of the Exchange Act”Reports” in the Company’s 20172020 Proxy Statement.


The Company has adopted Governance Principles, Guidelines for Business Conduct, a Whistleblower Policy, and a Code of Ethics for Senior Financial Officers (“Code of Ethics”), each of which, as well as the CharterCharters and Key Practices, as applicable, of the Company’s Audit Committee, Risk Committee, Compensation Committee, and Corporate Governance and Nominating Committee, and Strategy and Acquisition Committee, are available on the Company’s website at www.lci1.com/investors. A copy of any of these documents will be furnished, without charge, upon written request to Secretary, LCI Industries, 3501 County Road 6 East, Elkhart, Indiana 46514.


If the Company makes any substantive amendment to the Code of Ethics or the Guidelines for Business Conduct, or grants a waiver to a Directordirector or Executive Officerexecutive officer from a provision of the Code of Ethics or the Guidelines for Business Conduct, the Company will disclose the nature of such amendment or waiver on its website or in a Current Report on Form 8-K. There have been no waivers to Directorsdirectors or Executive Officersexecutive officers of any provisions of the Code of Ethics or the Guidelines for Business Conduct.


Item 11. EXECUTIVE COMPENSATION.


The information required by this item is incorporated by reference from the information contained under the captioncaptions “Executive Compensation”Compensation,” “Director Compensation,” “CEO Pay Ratio,” and “Director Compensation”“Transactions with Related Persons - Compensation Committee Interlocks and Insider Participation” in the Company’s 20172020 Proxy Statement.


Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.


73

The information required by this item is incorporated by reference from the information contained under the captioncaptions “Voting Securities – Principal Holders of Voting Securities” and “Voting Securities – Security Ownership of Certain Beneficial Owners and Management” in the Company’s 20172020 Proxy Statement and the Equity Compensation Plan Information contained in Part I, Item 5 in this Report.Statement.


Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.


The information required by this item with respect to transactions with related persons and director independence is incorporated by reference from the information contained under the captions “Transactions with Related Persons” and “Corporate Governance and Related Matters – Board of Directors and Director Independence” in the Company’s 20172020 Proxy Statement.




Item 14. PRINCIPAL ACCOUNTINGACCOUNTANT FEES AND SERVICES.


The information required by this item is incorporated by reference from the information contained under the proposal entitled “Appointment“Ratification of Appointment of Auditors – Fees for Independent Auditors” in the Company’s 20172020 Proxy Statement.


PART IV


ITEM 15. EXHIBITS, AND FINANCIAL STATEMENT SCHEDULES.


(a)Documents Filed:
(1)Financial Statements.
(2)Exhibits. See Item 15 (b) - “List of Exhibits” incorporated herein by reference.
(b)Exhibits - List of Exhibits.

EXHIBIT INDEX
Exhibit Number
Description
3.1*Stock Purchase Agreement, dated as of November 21, 2019, by and amoung Lippert Components, Inc., Curt Acquisition Holdings, LLC and Curt Acquisition Holdings, Inc. (incorporated by reference to Exhibit 2.1 included in the Registrant's Form 8-K filed November 22, 2019).
LCI Industries Restated Certificate of Incorporation, as amended effective December 30, 2016.2016 (incorporated by reference to Exhibit 3.1 included in the Registrant's Form 10-K for the year ended December 31, 2016).
Amended and Restated By-lawsBylaws of LCI Industries, as amended May 25, 2017 (incorporated by reference to Exhibit 3.2 included in the Registrant’s Form 8-K filed on December 19, 2016)May 31, 2017).
10.221Description of Registrant's Securities Registered under Section 12 of the Securities Exchange Act of 1934, as amended.
Form of Indemnification Agreement between Registrant and its officers and independent directors (incorporated by reference to Exhibit 10.1 included in the Registrant's Form 8-K filed on May 26, 2015).
10.231†Executive Non-Qualified Deferred Compensation Plan, as amended (incorporated by reference to Exhibit 10.231 included in the Registrant's Form 10-K for the year ended December 31, 2015).
10.259†LCI Industries Equity Award and Incentive Plan, As Amended and Restated (incorporated by reference to Appendix A included in the Registrant’s Definitive Proxy Statement on Schedule 14A filed on April 11, 2014).
10.268†Change in Control Agreement between Registrant and Jason D. Lippert, dated April 9, 2012 (incorporated by reference to Exhibit 10.02 included in the Registrant’s Form 8-K filed on April 10, 2012).
10.269†Change in Control Agreement between Registrant and Scott T. Mereness, dated April 9, 2012 (incorporated by reference to Exhibit 10.03 included in the Registrant’s Form 8-K filed on April 10, 2012).
10.273†Amendment to Change in Control Agreement between Registrant and Jason D. Lippert, dated May 10, 2013 (incorporated by reference to Exhibit 10(ii)(A)-2 included in the Registrant’s Form 8-K filed on May 10, 2013).
10.274†Amendment to Change in Control Agreement between Registrant and Scott T. Mereness, dated May 10, 2013 (incorporated by reference to Exhibit 10(ii)(A)-3 included in the Registrant’s Form 8-K filed on May 10, 2013).
10.278†Change in Control Agreement between Registrant and Robert A. Kuhns, dated April 4, 2013, as amended May 20, 2013 (incorporated by reference to Exhibit 10.278 included in the Registrant’s Form 10-K for the year ended December 31, 2013).


10.286Third Amended and Restated Note Purchase and Private Shelf Agreement dated as of February 24, 2014, by and among Prudential Investment Management, Inc. and Affiliates, and Lippert Components, Inc., guaranteed by Drew Industries Incorporated (incorporated by reference to Exhibit 10.8 included in the Registrant’s Form 8-K filed February 26, 2014).
10.287Form of Shelf Note of Lippert Components, Inc. pursuant to the Third Amended and Restated Note Purchase and Private Shelf Agreement (incorporated by reference to Exhibit 10.9 included in the Registrant’s Form 8-K filed February 26, 2014).
10.294†Form of Executive Employment Agreement (incorporated by reference to Exhibit 10.1 included in the Registrant's Form 8-K filed March 4, 2015).
10.296†Form of Performance Stock Award (incorporated by reference to Exhibit 10.3 included in the Registrant's Form 8-K filed March 4, 2015).
10.297†Form of Deferred Stock Award (incorporated by reference to Exhibit 10.4 included in the Registrant's Form 8-K filed March 4, 2015).
74

10.299
Exhibit Number
Form of 3.35% Series A Senior Notes due March 20, 2020 of Lippert Components, Inc. pursuant to the Third Amended and Restated Note Purchase and Private Shelf Agreement (incorporated by reference to Exhibit 10.2 included in the Registrant's Form 8-K filed March 23, 2015).Description
10.300†Transition, Separation and General Release Agreement, dated August 14, 2015, between Drew Industries Incorporated and Joseph S. Giordano III (incorporated by reference to Exhibit 10.1 included in the Registrant's Form 8-K filed August 20, 2015).
10.301†Transition, Separation and General Release Agreement, dated January 1, 2016, between Drew Industries Incorporated and Todd Driver (incorporated by reference to Exhibit 10.1 included in the Registrant's Form 8-K filed January 7, 2016).
10.302†2016 Annual Incentive Plan (incorporated by reference to Exhibit 10.1 included in the Registrant's Form 8-K filed February 12, 2016).
10.303Third Amended and Restated Credit Agreement dated as of April 27, 2016 among Drew Industries Incorporated, Lippert Components, Inc., Lippert Components Canada, Inc., JPMorgan Chase Bank, N.A., individually and as Administrative Agent, Wells Fargo Bank N.A., individually and as Documentation Agent, Bank of America, N.A., and 1st Source Bank (together with JPMorgan Chase Bank, N.A., Wells Fargo Bank, N.A. and Bank of America, N.A., the “Lenders”) (incorporated by reference to Exhibit 10.1 included in the Registrant's Form 8-K filed May 3, 2016).
10.304
Form of Revolving Credit Note dated as of April 27, 2016 by Lippert Components, Inc., and Lippert Components Canada, Inc., payable to the order of the Lenders pursuant to that certain Third Amended and Restated Credit Agreement (incorporated by reference to 10.2 included in the Registrant's Form 8-K filed May 3, 2016).

10.305Fourth Amended and Restated Pledge and Security Agreement dated as of April 27, 2016, made by Drew Industries Incorporated, Lippert Components, Inc. and certain subsidiaries thereof, in favor of JPMorgan Chase Bank, N.A. as Collateral Agent (incorporated by reference to Exhibit 10.3 included in the Registrant's Form 8-K filed May 3, 2016).
Fourth Amended and Restated Company Guarantee Agreement dated as of April 27, 2016, made by Drew Industries Incorporated, with and in favor of JPMorgan Chase Bank, N.A. as Administrative Agent (incorporated by reference to Exhibit 10.4 included in the Registrant's Form 8-K filed May 3, 2016).

Fourth Amended and Restated Subsidiary Guarantee Agreement dated as of April 27, 2016, made by certain subsidiaries of Drew Industries Incorporated and Lippert Components, Inc., with and in favor of JPMorgan Chase Bank, N.A. as Administrative Agent (incorporated by reference to Exhibit 10.5 included in the Registrant's Form 8-K filed May 3, 2016).


10.308Fourth Amended and Restated Subordination Agreement dated as of April 27, 2016, made by Drew Industries Incorporated and certain subsidiaries of Drew Industries Incorporated, with and in favor of JPMorgan Chase Bank, N.A. as Administrative Agent (incorporated by reference to Exhibit 10.6 included in the Registrant's Form 8-K filed May 3, 2016).
10.309Fourth Amended and Restated Note Purchase and Private Shelf Agreement dated as of April 27, 2016, by and among PGIM, Inc. and Affiliates, and Lippert Components, Inc., guaranteed by Drew Industries Incorporated (incorporated by reference to Exhibit 10.7 included in the Registrant's Form 8-K filed May 3, 2016).
10.310
Form of Shelf Note of Lippert Components, Inc. pursuant to the Fourth Amended and Restated Note Purchase and Private Shelf Agreement (incorporated by reference to Exhibit 10.8 included in the Registrant's Form 8-K filed May 3, 2016).

10.311Second Amended and Restated Parent Guarantee Agreement dated as of April 27, 2016, made by Drew Industries Incorporated in favor of PGIM, Inc. and the Noteholders thereto from time to time (incorporated by reference to Exhibit 10.9 included in the Registrant's Form 8-K filed May 3, 2016).
Second Amended and Restated Subsidiary Guarantee Agreement dated as of April 27, 2016, made by certain subsidiaries (other than Lippert Components, Inc.) of Drew Industries Incorporated, in favor of PGIM, Inc. and the Noteholders thereto from time to time (incorporated by reference to Exhibit 10.10 included in the Registrant's Form 8-K filed May 3, 2016).
Second Amended and Restated Pledge and Security Agreement dated as of April 27, 2016, made by Drew Industries Incorporated, Lippert Components, Inc., Lippert Components Manufacturing, Inc. and the other Subsidiary Guarantors, in favor of JPMorgan Chase Bank, N.A., as Collateral Agent for the benefit of the Noteholders (incorporated by reference to Exhibit 10.11 included in the Registrant's Form 8-K filed May 3, 2016).
Second Amended and Restated Subordination Agreement dated as of April 27, 2016, made by Lippert Components, Inc., Drew Industries Incorporated and certain subsidiaries of Drew Industries Incorporated, with and in favor of PGIM, Inc. and the Noteholders thereto from time to time (incorporated by reference to Exhibit 10.12 included in the Registrant's Form 8-K filed May 3, 2016).
Second Amended and Restated Collateral Agency Agreement dated as of April 27, 2016, by and among Lippert Components, Inc. and PGIM, Inc. and the Noteholders thereto from time to time, and JPMorgan Chase Bank, N.A. as collateral agent for the Noteholders (incorporated by reference to Exhibit 10.13 included in the Registrant's Form 8-K filed May 3, 2016).
Third Amended and Restated Intercreditor Agreement dated as of April 27, 2016 by and among PGIM, Inc. and Affiliates, JPMorgan Chase Bank, N.A. (as Administrative Agent, as Credit Agreement Collateral Agent and Notes Collateral Agent) (incorporated by reference to Exhibit 10.14 included in the Registrant's Form 8-K filed May 3, 2016).
10.317†Description of the transition, separationGrantor Trust Agreement, effective January 15, 2017, by and severance compensation arrangement between RegistrantLCI Industries and David M. SmithWells Fargo Bank, National Association (incorporated by reference to Item 5.02Exhibit 10.318 included in the Registrant's Form 10-K for the year ended December 31, 2016).
Second Amended and Restated Executive Non-Qualified Deferred Compensation Plan (incorporated by reference to Exhibit 10.2 included in the Registrant's Form 8-K filed September 26, 2016)on March 22, 2017).
10.318†*Grantor TrustLCI Industries Performance Stock Unit Award Agreement effective January 15, 2017,Pursuant to LCI Industries Equity Award and Incentive Plan, As Amended and Restated (ROIC) (incorporated by reference to Exhibit 10.2 included in the Registrant’s Form 8-K filed March 5, 2018).
LCI Industries Performance Stock Unit Award Agreement Pursuant to LCI Industries Equity Award and Incentive Plan, As Amended and Restated (EPS) (incorporated by reference to Exhibit 10.3 included in the Registrant’s Form 8-K filed March 5, 2018).
75

Exhibit Number
Description
LCI Industries Restricted Stock Unit Award Agreement Pursuant to LCI Industries Equity Award and Incentive Plan, As Amended and Restated (Executive Officers) (incorporated by reference to Exhibit 10.4 included in the Registrant’s Form 8-K filed March 5, 2018).
LCI Industries Restricted Stock Unit Award Agreement Pursuant to LCI Industries Equity Award and Incentive Plan, As Amended and Restated (Directors) (incorporated by reference to Exhibit 10.5 included in the Registrant’s Form 8-K filed March 5, 2018).
LCI Industries 2018 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 included in the Registrant’s Form 8-K filed May 29, 2018).
Form of Restricted Stock Unit Award Agreement (Executives) under the LCI Industries 2018 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.2 included in the Registrant’s Form 8-K filed May 29, 2018).
Form of Performance Stock Unit Award Agreement (EPS) under the LCI Industries 2018 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.3 included in the Registrant’s Form 8-K filed May 29, 2018).
Form of Performance Stock Unit Award Agreement (ROIC) under the LCI Industries 2018 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.4 included in the Registrant’s Form 8-K filed May 29, 2018).
Form of Restricted Stock Unit Award Agreement (Non-Employee Directors) under the LCI Industries 2018 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.5 included in the Registrant’s Form 8-K filed May 29, 2018).
Form of Deferred Stock Unit Master Agreement (Non-Employee Directors) under the LCI Industries 2018 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.6 included in the Registrant’s Form 8-K filed May 29, 2018).
Form of Agreement for Common Stock in Lieu of Cash Compensation for Non-Employee Directors (incorporated by reference to Exhibit 10.7 included in the Registrant’s Form 8-K filed May 29, 2018).
Separation and General Release Agreement, dated as of November 16, 2018, by and between RegistrantLippert Components, Inc. and Scott T. Mereness (incorporated by reference to Exhibit 10.1 included in the Registrant’s Form 8-K filed November 19, 2018).
Fourth Amended and Restated Credit Agreement dated December 14, 2018 among LCI Industries, Lippert Components, Inc., LCI Industries B.V., LCI Industries C.V., JPMorgan Chase Bank, N.A., individually and as Administrative Agent, Wells Fargo Bank, National Association.N.A., individually and as Syndication Agent, Bank of America, N.A., individually and as Documentation Agent, and a syndicate of other lenders (incorporated by reference to Exhibit 10.1 included in the Registrant’s Form 8-K filed December 19, 2018).
14.1*CodeForm of Ethics for Senior Financial Officers.2019 Performance Stock Unit Award Agreement under the LCI Industries 2018 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 included in the Registrant’s Form 8-K filed March 12, 2019).
14.2*Guidelines for Business Conduct.Form of Restricted Stock Unit Award Agreement (Executives) under the LCI Industries 2018 Omnibus Incentive Plan (Revised February 2019) (incorporated by reference to Exhibit 10.2 included in the Registrant’s Form 8-K filed March 12, 2019).
21*Form of Extension Agreement with certain officers (incorporated by reference to Exhibit 10.3 included in the Registrant’s Form 8-K filed March 12, 2019).
Form of Series B Note of Lippert Components, Inc. issued pursuant to the Fourth Amended and Restated Note Purchase and Private Shelf Agreement (incorporated by reference to Exhibit 10.1 included in the Registrant’s Form 8-K filed April 2, 2019).
LCI Industries 2019 Annual Incentive Program (incorporated by reference to Exhibit 10.1 included in the Registrant’s Form 10-Q/A filed June 21, 2019).
Form of Restricted Stock Unit Award Agreement (Non-Employee Directors) under the LCI Industries 2018 Omnibus Incentive Plan (Revised February 2019) (incorporated by reference to Exhibit 10.2 included in the Registrant’s Form 10-Q/A filed June 21, 2019).
76

Exhibit Number
Description
Form of Deferred Stock Unit Master Agreement (Non-Employee Directors) under the LCI Industries 2018 Omnibus Incentive Plan (Revised February 2019) (incorporated by reference to Exhibit 10.3 included in the Registrant’s Form 10-Q/A filed June 21, 2019).
Fifth Amended and Restated Note Purchase and Private Shelf Agreement dated as of November 11, 2019, by and among PGIM, Inc. and certain of its affiliates, Lippert Components, Inc., guaranteed by LCI Industries (incorporated by reference to Exhibit 10.1 included in the Registrant’s Form 8-K filed November 14, 2019).
Incremental Joinder and Amendment No. 1, dated as of December 19, 2019, among LCI Industries, Lippert Components, Inc., LCI Industries B.V., LCI Industries C.V., LCI Industries Pte. Ltd., the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 included in the Registrant’s Form 8-K filed December 19, 2019).
Fourth Amended and Restated Credit Agreement dated December 14, 2018 among LCI Industries, Lippert Components, Inc., LCI Industries B.V., LCI Industries C.V., JPMorgan Chase Bank, N.A., individually and as Administrative Agent, Wells Fargo Bank, N.A., individually and as Syndication Agent, Bank of America, N.A., individually and as Documentation Agent, and a syndicate of other lenders, as amended by Incremental Joinder and Amendment No. 1, dated as of December 19, 2019.
Subsidiaries of the Registrant.
23*Consent of Independent Registered Public Accounting Firm.
24*Powers of Attorney (included on the signature page of this Report).
31.1*Certification of Chief Executive Officer required by Rule 13a-14(a).


31.2*Certification of Chief Financial Officer required by Rule 13a-14(a).
32.1*Certification of Chief Executive Officer required by Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code.
32.2*Certification of Chief Financial Officer required by Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code.
101101*The following financial information from the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2019, formatted in Inline XBRL: (i) Consolidated Statements of Income; (ii) Consolidated Statements of Comprehensive Income; (iii) Consolidated Balance Sheets; (iv) Consolidated Statements of Cash Flows; (v) Consolidated Statements of Stockholders’ Equity; and (vi) Notes to Consolidated Financial Statements.
104*Cover Page Interactive Data Files.File (formatted as Inline XBRL and contained in Exhibit 101).



*Filed herewith
†Denotes a management contract or compensation plan or arrangement




Item 16. FORM 10-K SUMMARY.


None.



77

SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, Registrantthe registrant has duly caused this Reportreport to be signed on its behalf by the undersigned, thereunto duly authorized.


Date:February 28, 201727, 2020LCI INDUSTRIES
By:/s/ Jason D. Lippert    
Jason D. Lippert
Chief Executive Officer


Pursuant to the requirements of the Securities and Exchange Act of 1934, as amended, this Reportreport has been signed below by the following persons on behalf of the Registrantregistrant and in the capacities and on the dates indicated.


Each person whose signature appears below hereby authorizes Jason D. Lippert and Brian M. Hall, or either of them, to file one or more amendments to the Annual Report on Form 10-K which amendments may make such changes in such Report as either of them deems appropriate, and each such person hereby appoints Jason D. Lippert and Brian M. Hall, or either of them, as attorneys-in-fact to execute in the name and on behalf of each such person individually, and in each capacity stated below, such amendments to such Report.


DateSignatureTitle
February 28, 201727, 2020
By: /s/ Jason D. Lippert
(Jason D. Lippert)
Chief Executive Officer and Director (principal executive officer)
February 28, 201727, 2020
By: /s/ Brian M. Hall
      (Brian M. Hall)
Chief Financial Officer
(principal financial officer)
February 27, 2020
By: /s/ Kip A. Emenhiser
      (Kip A. Emenhiser)
Corporate Controller and VP of Finance
(principal accounting officer)
February 28, 201727, 2020
By: /s/ James F. Gero
      (James F. Gero)
Chairman of the Board of Directors
February 28, 201727, 2020
By: /s/ Leigh J. Abrams
      (Leigh J. Abrams)
Director
February 28, 2017
By: /s/ Frank J. Crespo
      (Frank J. Crespo)
Director
February 28, 201727, 2020
By: /s/ Brendan J. Deely
      (Brendan J. Deely)
Director
February 28, 201727, 2020
By: /s/ Ronald Fenech
      (Ronald Fenech)
Director
February 27, 2020
By: /s/ Tracy D. Graham
      (Tracy D. Graham)
Director
February 28, 201727, 2020
By: /s/ Frederick B. Hegi, Jr.Virginia L. Henkels
(Frederick B. Hegi, Jr.)Virginia L. Henkels)
Director
February 28, 201727, 2020
By: /s/ John B. Lowe, Jr.
      (John B. Lowe, Jr.)
Director
February 28, 2017
By: /s/ Kieran M. O’Sullivan
      (Kieran M. O’Sullivan)
Director
February 28, 201727, 2020
By: /s/ David A. Reed
      (David A. Reed)
Director
February 27, 2020
By: /s/ John A. Sirpilla
      (John A. Sirpilla)
Director


78