SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-13646

(Former name, former address and former fiscal year, if changed since last report) N/A

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.01 par value	LCII	New York Stock Exchange

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 Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§ 232.405 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 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 ☐

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 number of shares outstanding of the registrant’s common stock, as of the latest practicable date ~~(October 31, 2017)~~(July 30, 2021) was ~~24,940,373~~25,271,844 shares of common stock.

PART I – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Nine Months Ended
September 30, Three Months Ended
September 30,
2017 2016 2017 2016
(In thousands, except per share amounts)

Net sales $ 1,600,633
$ 1,275,999
$ 554,814
$ 412,370
Cost of sales 1,224,312
945,104
433,594
306,820
Gross profit 376,321
330,895
121,220
105,550
Selling, general and administrative expenses 206,225
170,641
73,293
60,412
Operating profit 170,096
160,254
47,927
45,138
Interest expense, net 1,162
1,285
311
396
Income before income taxes 168,934
158,969
47,616
44,742
Provision for income taxes 53,514
55,597
15,478
14,898
Net income $ 115,420
$ 103,372

$ 32,138
$ 29,844

Net income per common share:
Basic $ 4.62
$ 4.20
$ 1.28
$ 1.21
Diluted $ 4.56
$ 4.15
$ 1.26
$ 1.19

Weighted average common shares outstanding:
Basic 24,993
24,587
25,060
24,724
Diluted 25,332
24,882
25,459
25,060

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

~~CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME~~

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

LCI INDUSTRIES

CONDENSED CONSOLIDATED ~~BALANCE SHEETS~~STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
(In thousands)

Net income	$	67,889	$	13,186	$	142,009	$	41,400
Other comprehensive income (loss):
Net foreign currency translation adjustment	1,507		1,239		(2,082)		(3,501)
Actuarial gain on pension plans	933		6,299		933		6,299
Unrealized gain on fair value of derivative instruments	0		442		0		1,642
Total comprehensive income	$	70,329	$	21,166	$	140,860	$	45,840

September 30, December 31,
2017 2016 2016
(In thousands, except per share amount)

ASSETS
Current assets
Cash and cash equivalents $ 19,762
$ 95,060
$ 86,170
Accounts receivable, net 139,144
89,626
57,374
Inventories, net 229,763
161,312
188,743
Prepaid expenses and other current assets 45,384
28,572
35,107
Total current assets 434,053
374,570
367,394
Fixed assets, net 210,304
153,167
172,748
Goodwill 123,001
93,925
89,198
Other intangible assets, net 134,761
109,553
112,943
Deferred taxes 32,380
29,208
31,989
Other assets 21,277
14,095
12,632
Total assets $ 955,776
$ 774,518
$ 786,904

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable, trade $ 88,148
$ 55,681
$ 50,616
Accrued expenses and other current liabilities 109,849
97,733
98,735
Total current liabilities 197,997
153,414
149,351
Long-term indebtedness 49,918
49,940
49,949
Other long-term liabilities 60,805
39,796
37,335
Total liabilities 308,720
243,150
236,635

Stockholders’ equity
Common stock, par value $.01 per share 276
273
274
Paid-in capital 201,814
179,434
185,981
Retained earnings 472,154
381,723
395,279
Accumulated other comprehensive income (loss) 2,279
(595 ) (1,798 )
Stockholders’ equity before treasury stock 676,523
560,835
579,736
Treasury stock, at cost (29,467 ) (29,467 ) (29,467 )
Total stockholders’ equity 647,056
531,368
550,269
Total liabilities and stockholders’ equity $ 955,776
$ 774,518
$ 786,904

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

LCI INDUSTRIES

CONDENSED CONSOLIDATED ~~STATEMENTS OF CASH FLOWS~~BALANCE SHEETS

(Unaudited)


	June 30,		December 31,
	2021			2020
(In thousands, except per share amount)

ASSETS
Current assets
Cash and cash equivalents	$	97,961		$	51,821

Accounts receivable, net of allowances of $6,471 and $5,642 at June 30, 2021 and December 31, 2020, respectively	418,014			268,625
Inventories, net	620,183			493,899

Prepaid expenses and other current assets	79,817			55,456
Total current assets	1,215,975			869,801
Fixed assets, net	408,693			387,218
Goodwill	496,422			454,728
Other intangible assets, net	437,398			420,885
Operating lease right-of-use assets	161,250			104,179

Other assets	56,440			61,220
Total assets	$	2,776,178		$	2,298,031

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current maturities of long-term indebtedness	$	65,880		$	17,831
Accounts payable, trade	257,162			184,931

Current portion of operating lease obligations	27,160			25,432
Accrued expenses and other current liabilities	200,388			188,200
Total current liabilities	550,590			416,394
Long-term indebtedness	941,824			720,418
Operating lease obligations	141,364			82,707
Deferred taxes	34,348			53,833
Other long-term liabilities	121,876			116,353
Total liabilities	1,790,002			1,389,705
Stockholders’ equity
Common stock, par value $.01 per share	284			282
Paid-in capital	206,786			227,407
Retained earnings	831,328			731,710
Accumulated other comprehensive income	5,940			7,089
Stockholders’ equity before treasury stock	1,044,338			966,488
Treasury stock, at cost	(58,162)			(58,162)
Total stockholders’ equity	986,176			908,326
Total liabilities and stockholders’ equity	$	2,776,178		$	2,298,031

Nine Months Ended
September 30,
2017 2016
(In thousands)
Cash flows from operating activities:
Net income $ 115,420
$ 103,372
Adjustments to reconcile net income to cash flows provided by operating activities:
Depreciation and amortization 39,856
33,720
Stock-based compensation expense 15,042
11,421
Deferred taxes —
183
Other non-cash items 3,655
1,728
Changes in assets and liabilities, net of acquisitions of businesses:
Accounts receivable, net (69,720 ) (46,028 )
Inventories, net (33,780 ) 13,451
Prepaid expenses and other assets (18,662 ) (7,659 )
Accounts payable, trade 29,856
23,827
Accrued expenses and other liabilities 27,192
30,093
Net cash flows provided by operating activities 108,859
164,108
Cash flows from investing activities:
Capital expenditures (60,342 ) (21,927 )
Acquisitions of businesses, net of cash acquired (67,876 ) (34,237 )
Proceeds from sales of fixed assets 348
533
Other investing activities (105 ) (316 )
Net cash flows used for investing activities (127,975 ) (55,947 )
Cash flows from financing activities:
Exercise of stock-based awards, net of shares tendered for payment of taxes (7,313 ) 409
Proceeds from line of credit borrowings 9,715
81,458
Repayments under line of credit borrowings (9,715 ) (81,458 )
Payment of dividends (37,346 ) (22,078 )
Payment of contingent consideration related to acquisitions (2,574 ) (2,719 )
Other financing activities (59 ) (1,018 )
Net cash flows used for financing activities (47,292 ) (25,406 )

Net (decrease) increase in cash and cash equivalents (66,408 ) 82,755

Cash and cash equivalents at beginning of period 86,170
12,305
Cash and cash equivalents at end of period $ 19,762
$ 95,060

Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 1,291
$ 1,525
Cash paid during the period for income taxes, net of refunds $ 48,181
$ 51,524
Purchase of property and equipment in accrued expenses $ 1,205
$ 279

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

LCI INDUSTRIES

CONDENSED CONSOLIDATED ~~STATEMENT~~STATEMENTS OF ~~STOCKHOLDERS’ EQUITY~~CASH FLOWS

(Unaudited)


	Six Months Ended June 30,
	2021		2020
(In thousands)
Cash flows from operating activities:
Net income	$	142,009	$	41,400
Adjustments to reconcile net income to cash flows provided by operating activities:
Depreciation and amortization	51,270		48,799
Stock-based compensation expense	13,859		7,404

Other non-cash items	4,305		546
Changes in assets and liabilities, net of acquisitions of businesses:
Accounts receivable, net	(142,489)		(62,611)
Inventories, net	(115,314)		63,404
Prepaid expenses and other assets	(16,401)		(27,679)
Accounts payable, trade	71,144		20,917
Accrued expenses and other liabilities	15,476		9,921
Net cash flows provided by operating activities	23,859		102,101
Cash flows from investing activities:
Capital expenditures	(42,005)		(14,549)
Acquisitions of businesses, net of cash acquired	(103,858)		(94,713)


Other investing activities	(566)		4,096
Net cash flows used in investing activities	(146,429)		(105,166)
Cash flows from financing activities:
Vesting of stock-based awards, net of shares tendered for payment of taxes	(7,925)		(4,616)
Proceeds from revolving credit facility	554,693		276,542
Repayments under revolving credit facility	(719,747)		(197,330)
Repayments under term loan and other borrowings	(8,652)		(9,554)
Proceeds from issuance of convertible notes	460,000		0
Purchases of convertible note hedge contracts	(100,142)		0
Proceeds from issuance of warrants concurrent with note hedge contracts	48,484		0
Payment of debt issuance costs	(11,844)		0
Payment of dividends	(41,678)		(32,670)
Payment of contingent consideration and holdbacks related to acquisitions	(4,387)		0
Other financing activities	0		(279)
Net cash flows provided by financing activities	168,802		32,093
Effect of exchange rate changes on cash and cash equivalents	(92)		(2,115)
Net increase in cash and cash equivalents	46,140		26,913
Cash and cash equivalents at beginning of period	51,821		35,359
Cash and cash equivalents cash at end of period	$	97,961	$	62,272
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	6,496	$	9,593
Cash paid during the period for income taxes, net of refunds	$	55,449	$	(611)
Purchase of property and equipment in accrued expenses	$	3,952	$	2,624

Common
Stock
Paid-in
Capital
Retained
Earnings
Accumulated Other Comprehensive (Loss) Income
Treasury
Stock
Total
Stockholders’
Equity
(In thousands, except shares and per share amounts)
Balance - December 31, 2016 $ 274
$ 185,981
$ 395,279
$ (1,798 ) $ (29,467 ) $ 550,269
Net income —
—
115,420
—
—
115,420
Issuance of 190,753 shares of common stock pursuant to stock-based awards, net of shares tendered for payment of taxes 2
(7,315 ) —
—
—
(7,313 )
Stock-based compensation expense —
15,042
—
—
—
15,042
Issuance of 63,677 deferred stock units relating to prior year compensation —
6,907
—
—
—
6,907
Other comprehensive income —
—
—
4,077
—
4,077
Cash dividends ($1.50 per share) —
—
(37,346 ) —
—
(37,346 )
Dividend equivalents on stock-based awards —
1,199
(1,199 ) —
—
—
Balance - September 30, 2017 $ 276
$ 201,814
$ 472,154
$ 2,279
$ (29,467 ) $ 647,056

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

LCI INDUSTRIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)


(In thousands, except shares and per share amounts)	Common Stock		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total Stockholders’ Equity
Balance - December 31, 2019	$	281	$	212,485	$	644,945	$	1,123	$	(58,162)	$	800,672
Net income	—		—		28,214		—		—		28,214
Issuance of 87,833 shares of common stock pursuant to stock-based awards, net of shares tendered for payment of taxes	1		(4,518)		—		—		—		(4,517)
Stock-based compensation expense	—		3,295		—		—		—		3,295
Other comprehensive loss	—		—		—		(3,540)		—		(3,540)
Cash dividends ($0.65 per share)	—		—		(16,321)		—		—		(16,321)
Dividend equivalents on stock-based awards	—		297		(297)		—		—		0
Balance - March 31, 2020	282		211,559		656,541		(2,417)		(58,162)		807,803
Net income	—		—		13,186		—		—		13,186
Issuance of 16,251 shares of common stock pursuant to stock-based awards, net of shares tendered for payment of taxes	—		(99)		—		—		—		(99)
Stock-based compensation expense	—		4,109		—		—		—		4,109
Other comprehensive income	—		—		—		7,980		—		7,980
Cash dividends ($0.65 per share)	—		—		(16,349)		—		—		(16,349)
Dividend equivalents on stock-based awards	—		295		(295)		—		—		0
Balance - June 30, 2020	282		215,864		653,083		5,563		(58,162)		816,630

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

LCI INDUSTRIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)


(In thousands, except shares and per share amounts)	Common Stock		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total Stockholders’ Equity
Balance - December 31, 2020	$	282	$	227,407	$	731,710	$	7,089	$	(58,162)	$	908,326
Net income	—		—		74,120		—		—		74,120
Issuance of 97,086 shares of common stock pursuant to stock-based awards, net of shares tendered for payment of taxes	1		(7,768)		—		—		—		(7,767)
Stock-based compensation expense	—		7,436		—		—		—		7,436
Other comprehensive loss	—		—		—		(3,589)		—		(3,589)
Cash dividends ($0.75 per share)	—		—		(18,939)		—		—		(18,939)
Dividend equivalents on stock-based awards	—		325		(325)		—		—		0
Balance - March 31, 2021	283		227,400		786,566		3,500		(58,162)		959,587
Net income	—		—		67,889		—		—		67,889
Issuance of 16,324 shares of common stock pursuant to stock-based awards, net of shares tendered for payment of taxes	1		(159)		—		—		—		(158)
Stock-based compensation expense	—		6,423		—		—		—		6,423
Purchase of convertible note hedge contracts, net of tax	—		(75,750)		—		—		—		(75,750)
Issuance of warrants	—		48,484		—		—		—		48,484
Other comprehensive income	—		—		—		2,440		—		2,440
Cash dividends ($0.90 per share)	—		—		(22,739)		—		—		(22,739)
Dividend equivalents on stock-based awards	—		388		(388)		—		—		0
Balance - June 30, 2021	284		206,786		831,328		5,940		(58,162)		986,176

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

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BASIS OF PRESENTATION

The Condensed Consolidated Financial Statements include the accounts of LCI Industries and its wholly-owned subsidiaries ~~(“LCII”~~("LCII" and collectively with its subsidiaries, the ~~“Company”~~"Company," "we," "us," or "our"). LCII has no unconsolidated subsidiaries. LCII, through its wholly-owned subsidiary, Lippert Components, Inc. and its subsidiaries (collectively, ~~“Lippert Components”~~"Lippert Components," "LCI," or ~~“LCI”~~"Lippert"), 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 primarily 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. At ~~September~~June 30, ~~2017,~~2021, the Company operated 52over 100 manufacturing and distribution facilities located throughout ~~the United States~~North 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 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.~~years, particularly as a result of the coronavirus ("COVID-19") pandemic and related impacts. Additionally, sales of certain engineered components to the aftermarket channels of these industries tend to be ~~counter-seasonal.~~counter-seasonal, but may be different in 2021 and future years as a result of the COVID-19 pandemic and related impacts.

The Company is not aware of any significant events, except as disclosed in the Notes to Condensed 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 Condensed Consolidated Financial Statements.

In the opinion of management, the information furnished in this Form 10-Q reflects all adjustments necessary for a fair statement of the financial position and results of operations for the interim periods presented. The Condensed Consolidated Financial Statements ~~presented herein~~ have been prepared ~~by the Company~~ in accordance with the ~~accounting policies described in its December 31, 2016 Annual Report on~~instructions to Form ~~10-K~~10-Q, and should be read in conjunction with the Notes to Consolidated Financial Statements which appear in that report. All significant intercompany balances and transactions have been eliminated. Certain prior year balances have been reclassifiedtherefore do not include some information necessary to conform to ~~current year presentation.~~annual reporting requirements. Results for interim periods should not be considered indicative of results for the full year.

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 ~~terminations,~~right-of-use assets and obligations, asset retirement obligations, long-lived assets, pension and 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.

InCOVID-19 Update

The COVID-19 pandemic has caused significant uncertainty and disruption in the ~~opinion~~global economy and financial markets. The COVID-19 pandemic had an adverse effect on the Company's financial results during the first half of ~~management,~~2020 due to

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

government-mandated plant shutdowns. The Company took a variety of actions during 2020 to help mitigate the ~~information furnished~~adverse impacts, including temporary cost savings measures and delays and reductions in ~~this Form 10-Q reflects all adjustments necessary for a fair statement~~capital expenditures. Activity in most of the end markets the Company serves sequentially improved as 2020 progressed, and this trend has continued into the first half of 2021, especially in the RV and marine OEM markets and the Company's Aftermarket Segment. Management continues to closely monitor the impact of COVID-19 on all aspects of the business. The extent to which COVID-19 may impact the Company's liquidity, financial ~~position~~condition, and results of operations ~~for~~in the ~~interim periods presented.~~ future remains uncertain.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Condensed Consolidated Financial Statements presented herein have been prepared by the Company in accordance with the ~~instructions~~accounting policies described in its December 31, 2020 Annual Report on Form 10-K and should be read in conjunction with the Notes to ~~Form 10-Q,~~Consolidated Financial Statements which appear in that report. All significant intercompany balances and transactions have been eliminated.

The Company's accounting policies related to the convertible note hedge and warrant transactions, including the related earnings per share considerations, are disclosed in Note 3 and Note 12 of the Notes to Condensed Consolidated Financial Statements.

Recently adopted accounting pronouncement

In August 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity ("ASU 2020-06"). This ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. ASU 2020-06 also amends the diluted earnings per share calculation for convertible instruments by requiring the use of the if-converted method. The Company has chosen to early adopt ASU 2020-06 in 2021. This ASU will have no retrospective changes but impacts how the convertible debt the Company issued in May 2021 is both recognized and disclosed.

3. EARNINGS PER SHARE

The following reconciliation details the denominator used in the computation of basic and diluted earnings per share for the periods indicated:


	Three Months Ended June 30,		Six Months Ended June 30,
(In thousands)	2021	2020	2021	2020
Weighted average shares outstanding for basic earnings per share	25,275	25,150	25,230	25,108
Common stock equivalents pertaining to stock-based awards	110	69	121	69
Weighted average shares outstanding for diluted earnings per share	25,385	25,219	25,351	25,177

Equity instruments excluded from diluted net earnings per share calculation as the effect would have been antidilutive	139	110	143	109

For the Company's 1.125 percent convertible senior notes due 2026 (the "Convertible Notes") issued in May 2021, the dilutive effect is calculated using the if-converted method in accordance with ASU 2020-06. The Company is required, pursuant to the indenture governing the Convertible Notes, dated May 13, 2021, by and between the Company and U.S. Bank National Association, as trustee (the "Indenture"), to settle the principal amount of the Convertible Notes in cash and may elect to settle the remaining conversion obligation (i.e., the stock price in excess of the conversion price) in cash, shares of the Company's common stock, or a combination thereof. Under the if-converted method, we include the number of shares required to satisfy the conversion obligation, assuming all the Convertible Notes are converted. The average closing price of the Company's common stock for the three and six months ended June 30, 2021 is used as the basis for determining the dilutive effect on earnings per share. The average price of the Company's common stock for each of the three and six months ended June 30, 2021 was less than the conversion price of $165.65, and, therefore, ~~do not include some information necessary~~all associated shares were antidilutive.

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

In conjunction with the issuance of the Convertible Notes, the Company, in privately negotiated transactions with certain commercial banks ("the Counterparties") sold warrants to ~~conform~~purchase 2.8 million shares of the Company's common stock (the "Warrants"). The Warrants have a strike price of $259.84 per share, subject to ~~annual reporting requirements.~~customary anti-dilution adjustments. For calculating the dilutive effect of the Warrants, the Company uses the treasury stock method. With this method, the Company assumes exercise of the Warrants at the beginning of the period, or at time of issuance if later, and issuance of common shares upon exercise. Proceeds from the exercise of the Warrants are assumed to be used to repurchase shares of the Company's common stock at the average market price during the period. The incremental shares, representing the number of shares assumed to be received upon the exercise of the Warrants less the number of shares repurchased, are included in diluted shares. For periods where the Warrants strike price of $259.84 per share is greater than the average share price of the Company's common stock for the period, the Warrants would be antidilutive. For each of the three and six months ended June 30, 2021, the average share price was below the Warrant strike price, and therefore 2.8 million shares were considered antidilutive.

In connection with the issuance of the Convertible Notes, the Company entered into privately negotiated call option contracts on the Company's common stock (the "Convertible Note Hedge Transactions") with the Counterparties. The Company paid an aggregate amount of $100.1 million to the Counterparties pursuant to the Convertible Note Hedge Transactions. The Convertible Note Hedge Transactions cover, subject to anti-dilution adjustments substantially similar to those in the Convertible Notes, approximately 2.8 million shares of the Company's common stock, the same number of shares initially underlying the Convertible Notes, at a strike price of approximately $165.65, subject to customary anti-dilution adjustments. The Convertible Note Hedge Transactions will expire upon the maturity of the Convertible Notes, subject to earlier exercise or termination. Exercise of the Convertible Note Hedge Transactions would reduce the number of shares of the Company's common stock outstanding, and therefore would be antidilutive.

4. ACQUISITIONS, GOODWILL AND OTHER INTANGIBLE ASSETS

Subsequent Event

Furrion

In August 2021, the Company entered into a definitive agreement to acquire Furrion Holdings Limited (“Furrion”), a leading distributor of a large range of appliances and other products to OEMs and aftermarket customers in the recreational vehicle, specialty vehicle, utility trailer, horse trailer, marine, transit bus, and school bus industries. The transaction is expected to close in the third quarter of 2021, subject to customary closing conditions, including regulatory approval.

Acquisitions Completed During the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2021

~~Metallarte S.r.l.~~Schaudt

In ~~June 2017,~~April 2021, the Company acquired 100 percent of the equity interests of ~~Metallarte S.r.l. (“Metallarte”~~Schaudt GmbH Elektrotechnik & Apparatebau ("Schaudt"), a ~~manufacturer~~leading supplier of ~~entry~~electronic controls and ~~compartment doors~~energy management systems for the European caravan ~~market~~industry located ~~near Siena, Italy, and its subsidiary, RV Doors, S.r.l., a manufacturer of driver-side doors located near Venice, Italy.~~in Markdorf, Germany. The purchase price was ~~$14.1 million paid at closing, plus contingent consideration based on future sales by this operation.~~approximately $29.4 million. The purchase price is subject to customary adjustments for cash, working capital, and indebtedness. The results of the acquired business have been included ~~primarily in the Company’s OEM Segment and~~ in the Condensed Consolidated Statements of Income since the acquisition ~~date.~~date, primarily in the Company's OEM Segment. The Company is ~~validating account balances~~in the process of determining the fair value of the assets acquired and ~~finalizing the valuation~~liabilities assumed for the ~~acquisition.~~

opening balance sheet, including net working capital, fixed assets, and the fair value of intangible assets. As this acquisition is not considered to

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(Continued)~~

(Unaudited)

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 onas of the acquisition date as follows (in thousands):

Cash consideration, net of cash acquired $ 13,501
Contingent consideration 2,366
Total fair value of consideration given $ 15,867

Customer relationships $ 7,000
Other identifiable intangible assets 2,150
Net tangible assets 167
Total fair value of net assets acquired $ 9,317

Goodwill (not tax deductible) $ 6,550


Cash consideration, net of cash acquired	$	29,383

Customer relationships	$	10,000
Other identifiable intangible assets	2,500
Net tangible assets	564
Total fair value of net assets acquired	$	13,064

Goodwill (not tax deductible)	$	16,319

The customer relationships intangible asset is being amortized over its estimated useful life of 158 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.

~~Lexington~~Ranch Hand

In ~~May 2017,~~April 2021, the Company acquired 100 percent of the ~~business and certain assets~~equity interests of ~~Lexington~~Kaspar Ranch Hand Equipment, LLC ~~(“Lexington”~~("Ranch Hand"), a manufacturer of ~~high quality seating solutions~~custom bumpers, grill guards, and steps for the ~~marine, RV, transportation, medical and office furniture industries located~~automotive aftermarket headquartered in ~~Elkhart, Indiana.~~Shiner, Texas. The purchase price was ~~$40.1~~approximately $56.7 million, ~~paid at closing.~~plus contingent consideration up to $3.0 million. The purchase price is subject to customary adjustments for cash, working capital, and indebtedness. The results of the acquired business have been included ~~primarily in the Company’s OEM Segment and~~ in the Condensed Consolidated Statements of Income since the acquisition ~~date.~~date, primarily in the Company's Aftermarket Segment. The Company is ~~validating account balances~~in the process of determining the fair value of the assets acquired and ~~finalizing the valuation~~liabilities assumed for the ~~acquisition.~~opening balance sheet, including net working capital, fixed assets, and the fair value of intangible assets. As this acquisition 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 $ 40,062

Customer relationships $ 16,900
Other identifiable intangible assets 1,820
Net tangible assets 4,928
Total fair value of net assets acquired $ 23,648

Goodwill (tax deductible) $ 16,414


Cash consideration, net of cash acquired	$	56,709
Contingent consideration	3,000
Total fair value of consideration given	$	59,709

Customer relationships	$	24,200
Other identifiable intangible assets	9,100
Net tangible assets	16,872
Total fair value of net assets acquired	$	50,172

Goodwill (tax deductible)	$	9,537

~~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 the attainment of synergies and an increase in the markets for the acquired products.

~~Sessa Klein S.p.A.~~

In February 2017, the Company acquired 100 percent of the outstanding shares of Sessa Klein S.p.A. (“Sessa Klein”), a manufacturer of highly engineered side window systems for both high speed and commuter trains, located near Varese, Italy. The purchase price was $8.5 million paid at closing, plus contingent consideration based on future sales by this operation. The results of the acquired business have been included primarily in the Company’s OEM Segment and in the Condensed Consolidated Statements of Income since the acquisition date. The Company is validating account balances and finalizing the valuation for the acquisition.

~~LCI INDUSTRIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(Continued)~~

~~(Unaudited)~~

~~The acquisition of this business was preliminarily recorded on the acquisition date as follows~~ ~~(in thousands)~~:

Cash consideration, net of cash acquired $ 6,502
Contingent consideration 4,922
Total fair value of consideration given $ 11,424

Customer relationships $ 3,189
Other identifiable intangible assets 1,329
Net tangible assets 585
Total fair value of net assets acquired $ 5,103

Goodwill (not tax deductible) $ 6,321

~~Acquisitions During the Nine Months Ended September 30, 2016~~

~~Project 2000 S.r.l.~~

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. 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, net of cash acquired $ 16,618
Contingent consideration 1,322
Total fair value of consideration given $ 17,940

Customer relationships $ 9,696
Other identifiable intangible assets 6,141
Net other liabilities (3,482 )
Total fair value of net assets acquired $ 12,355

Goodwill (not tax deductible) $ 5,585

The customer relationships intangible asset is being amortized over its estimated useful life of 1513 years. The fair value of this asset was determined using a discounted cash flow model, which is a Level 3 input in the 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 Interiors~~Other Acquisitions in 2021

During the first six months of 2021, the Company completed 2 other acquisitions totaling $17.8 million of cash purchase consideration, plus holdback payments of $2.1 million to be paid over the next two years and contingent consideration of up to $2.0 million. The acquisitions are subject to potential post-closing adjustments related to net working capital. The

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

preliminary purchase price allocations resulted in $8.8 million of goodwill (tax deductible) and $7.5 million of acquired identifiable intangible assets.

The accounting for these acquisitions is incomplete at June 30, 2021. 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 with Measurement Period Adjustments During the Six Months Ended June 30, 2021

Veada

In ~~February 2016,~~December 2020, the Company acquired 100 percent of the ~~business and certain assets~~outstanding capital stock of ~~Flair Interiors,~~Veada Industries, Inc. ~~(“Flair”~~("Veada"), a manufacturer and distributor of ~~RV furniture located~~boat seating and marine accessories based in ~~Goshen,~~New Paris, Indiana. The purchase price was ~~$8.1~~$69.0 million, net of cash acquired, which included initial holdback payments of $12.2 million to be paid over the next two years. Holdback payments of $3.9 million were paid; these holdback payment requirements were reduced by $0.5 million during the six months ended June 30, 2021 due to net working capital true-ups. The remaining holdback payments are recorded in the Condensed Consolidated Balance Sheet in accrued expenses and other current liabilities ($6.0 million) and other long-term liabilities ($1.8 million) at ~~closing.~~June 30, 2021. The results of the acquired business have been included ~~primarily in the Company’s OEM Segment and~~ in the Condensed Consolidated Statements of Income since the acquisition ~~date.~~date, primarily in the Company's OEM Segment.

~~LCI INDUSTRIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(Continued)~~

~~(Unaudited)~~

~~The acquisition of this business was recorded on~~During the ~~acquisition date as follows~~ ~~(in thousands)~~:

Cash consideration $ 8,100

Customer relationships $ 3,700
Net other assets 2,378
Total fair value of net assets acquired $ 6,078

Goodwill (tax deductible) $ 2,022

~~The customer relationships intangible asset is being amortized over its estimated useful life of 15 years. The consideration given was greater than~~six months ended June 30, 2021, the Company adjusted the preliminary purchase price allocation reported at December 31, 2020 to account for updates to net working capital balances and assumptions and estimates related to the fair value of fixed assets and intangible assets. These measurement period adjustments would not have resulted in a material impact on the ~~net assets acquired, resulting in goodwill, because~~prior period results if the ~~Company anticipates~~adjustments had been recognized as of the ~~attainment of synergies and an increase in the markets~~acquisition date. The purchase price allocation is subject to adjustment for the ~~acquired products.~~fair value of intangible assets as additional information is obtained within the measurement period (not to exceed 12 months from the acquisition date).

~~Highwater Marine Furniture~~Challenger

In ~~January 2016,~~November 2020, the Company acquired substantially all of the business ~~and certain~~ assets of ~~the pontoon furniture manufacturing operation of Highwater Marine,~~Challenger Door, LLC ~~(“Highwater”~~("Challenger"), a leading manufacturer and distributor of ~~pontoon~~branded doors for the RV industry and ~~other recreational boats located~~products for specialty and cargo trailers, based in ~~Elkhart,~~Nappanee, Indiana. The purchase price was ~~$10.0~~$35.0 million, which included holdback payments of up to $4.5 million to be paid over the next two years. These holdback payment requirements were reduced by $1.7 million during the six months ended June 30, 2021 due to net working capital true-ups. The remaining holdback payments are recorded in the Condensed Consolidated Balance Sheet in accrued expenses and other current liabilities ($1.8 million) and other long-term liabilities ($1.0 million) at ~~closing.~~June 30, 2021. The results of the acquired business have been included ~~primarily in the Company’s OEM Segment and~~ in the Condensed Consolidated Statements of Income since the acquisition ~~date. The acquisition of this business was recorded on~~date, primarily in the ~~acquisition date as follows~~ ~~(in thousands)~~:Company’s OEM Segment.

Cash consideration $ 10,000

Customer relationships $ 8,100
Net tangible assets 1,307
Total fair value of net assets acquired $ 9,407

Goodwill (tax deductible) $ 593

~~The customer relationships intangible asset is being amortized over its estimated useful life of 15 years. The consideration given was greater than~~During the six months ended June 30, 2021, the Company adjusted the preliminary purchase price allocation reported at December 31, 2020 to account for updates to net working capital balances and assumptions and estimates related to the fair value of fixed assets and intangible assets. These measurement period adjustments would not have resulted in a material impact on the ~~net~~prior period results if the adjustments had been recognized as of the acquisition date. The purchase price allocation is subject to adjustment for the fair value of intangible assets ~~acquired, resulting in goodwill, because~~as additional information is obtained within the ~~Company anticipates leveraging its existing experience and manufacturing capacity with respect~~measurement period (not to ~~these product lines.~~exceed 12 months from the acquisition date).

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Goodwill

Goodwill by reportable segment was as follows:

(In thousands) OEM Segment Aftermarket Segment Total
Net balance – December 31, 2016 $ 74,663
$ 14,535
$ 89,198
Acquisitions – 2017 29,277
—
29,277
Other 4,519
7
4,526
Net balance – September 30, 2017 $ 108,459
$ 14,542
$ 123,001


(In thousands)	OEM Segment		Aftermarket Segment		Total
Net balance – December 31, 2020	$	305,953	$	148,775	$	454,728
Acquisitions – 2021	24,448		10,190		34,638
Measurement period adjustments	9,456		(23)		9,433
Foreign currency translation	(2,528)		151		(2,377)
Net balance – June 30, 2021	$	337,329	$	159,093	$	496,422

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.

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

~~LCI INDUSTRIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(Continued)~~

~~(Unaudited)~~

Other Intangible Assets

Other intangible assets consisted of the following at ~~September~~June 30, ~~2017:~~2021:


(In thousands)	Gross Cost		Accumulated Amortization		Net Balance		Estimated Useful Life in Years
Customer relationships	$	424,433	$	110,076	$	314,357	6	to	17
Patents	96,920		49,698		47,222		3	to	20
Trade names (finite life)	74,889		14,240		60,649		3	to	20
Trade names (indefinite life)	7,600		—		7,600		Indefinite
Non-compete agreements	7,479		4,702		2,777		3	to	6
Other	309		203		106		2	to	12
Purchased research and development	4,687		—		4,687		Indefinite
Other intangible assets	$	616,317	$	178,919	$	437,398

(In thousands) Gross
Cost Accumulated
Amortization Net
Balance Estimated Useful
Life in Years
Customer relationships $ 138,941
$ 39,792
$ 99,149
6 to 16
Patents 57,416
37,277
20,139
3 to 19
Trade names 10,416
4,708
5,708
3 to 15
Non-compete agreements 8,479
3,609
4,870
3 to 6
Other 309
101
208
2 to 12
Purchased research and development 4,687
—
4,687
Indefinite
Other intangible assets $ 220,248
$ 85,487
$ 134,761

~~Other intangible assets consisted of the following at September 30, 2016:~~

(In thousands) Gross
Cost Accumulated
Amortization Net
Balance Estimated Useful
Life in Years
Customer relationships $ 106,316
$ 30,226
$ 76,090
6 to 16
Patents 55,172
32,290
22,882
3 to 19
Trade names 9,876
5,332
4,544
3 to 15
Non-compete agreements 4,569
3,460
1,109
3 to 6
Other 309
68
241
2 to 12
Purchased research and development 4,687
—
4,687
Indefinite
Other intangible assets $ 180,929
$ 71,376
$ 109,553

Other intangible assets consisted of the following at December 31, ~~2016:~~2020:


(In thousands)	Gross Cost		Accumulated Amortization		Net Balance		Estimated Useful Life in Years
Customer relationships	$	398,613	$	95,443	$	303,170	6	to	17
Patents	92,128		47,090		45,038		3	to	20
Trade names (finite life)	69,686		11,272		58,414		3	to	20
Trade names (indefinite life)	7,600		—		7,600		Indefinite
Non-compete agreements	6,478		4,617		1,861		3	to	6
Other	309		194		115		2	to	12
Purchased research and development	4,687		—		4,687		Indefinite
Other intangible assets	$	579,501	$	158,616	$	420,885

(In thousands) Gross
Cost Accumulated
Amortization Net
Balance Estimated Useful
Life in Years
Customer relationships $ 110,784
$ 32,414
$ 78,370
6 to 16
Patents 56,468
34,066
22,402
3 to 19
Trade names 10,041
5,667
4,374
3 to 15
Non-compete agreements 5,852
2,975
2,877
3 to 6
Other 309
76
233
2 to 12
Purchased research and development 4,687
—
4,687
Indefinite
Other intangible assets $ 188,141
$ 75,198
$ 112,943

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(Continued)~~

(Unaudited)

3.5. INVENTORIES

Inventories ~~valued~~are stated at the lower of cost (first-in, first-out (FIFO) method) or ~~market,~~net realizable value. Cost includes material, labor, and overhead. Inventories consisted of the following at:


	June 30,		December 31,
(In thousands)	2021			2020
Raw materials	$	450,035		$	356,921
Work in process	35,948			24,189
Finished goods	134,200			112,789
Inventories, net	$	620,183		$	493,899

September 30, December 31,
(In thousands) 2017 2016 2016
Raw materials $ 191,680
$ 127,708
$ 155,044
Work in process 10,562
11,227
7,509
Finished goods 27,521
22,377
26,190
Inventories, net $ 229,763
$ 161,312
$ 188,743

Fixed assets consisted of the following at:


	June 30,		December 31,
(In thousands)	2021			2020
Fixed assets, at cost	$	801,003		$	750,138
Less accumulated depreciation and amortization	392,310			362,920
Fixed assets, net	$	408,693		$	387,218

September 30,
December 31,
(In thousands) 2017 2016 2016
Fixed assets, at cost $ 396,789
$ 313,057
$ 337,362
Less accumulated depreciation and amortization 186,485
159,890
164,614
Fixed assets, net $ 210,304
$ 153,167
$ 172,748

5.7. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of the following at:


	June 30,		December 31,
(In thousands)	2021			2020
Employee compensation and benefits	$	81,906		$	62,555

Current portion of accrued warranty	25,370			32,451
Customer rebates	12,531			23,670
Other	80,581			69,524
Accrued expenses and other current liabilities	$	200,388		$	188,200

September 30, December 31,
(In thousands) 2017 2016 2016
Employee compensation and benefits $ 42,646
$ 45,299
$ 47,459
Current portion of accrued warranty 23,558
19,607
20,393
Taxes payable 5,613
—
41
Customer rebates 11,120
10,998
9,329
Other 26,912
21,829
21,513
Accrued expenses and other current liabilities $ 109,849
$ 97,733
$ 98,735

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 ~~nine~~six months ended ~~September~~June 30:


(In thousands)	2021		2020
Balance at beginning of period	$	47,091	$	47,167
Provision for warranty expense	12,304		8,358
Warranty liability from acquired businesses	125		0
Warranty costs paid	(15,360)		(10,916)
Balance at end of period	44,160		44,609
Less long-term portion	18,790		16,281
Current portion of accrued warranty at end of period	$	25,370	$	28,328

(In thousands) 2017 2016
Balance at beginning of period $ 32,393
$ 26,204

Provision for warranty expense 18,570
15,494

Warranty liability from acquired businesses 150
125

Warranty costs paid (13,963 ) (10,833 )
Balance at end of period 37,150
30,990

Less long-term portion 13,592
11,383

Current portion of accrued warranty $ 23,558
$ 19,607

Warranty costs paid for the six months ended June 30, 2021 include $2.6 million of payments related to a specific warranty issue known at the time of acquisition of CURT Acquisition Holdings, Inc. (with its subsidiaries, "CURT") in

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(Continued)~~

(Unaudited)

December 2019. These payments will be reimbursed to the Company by the sellers of CURT under the terms of the stock purchase agreement.

The acquisition of Polyplastic in January 2020 included the assumption of two partially-funded defined benefit pension plans (the "Dutch pension plans") based in the Netherlands. The Dutch pension plans, which are qualified defined benefit pension plans, provide benefits based on years of service and average pay. The benefits earned by the employees are immediately vested. The Company funds the future obligations of the Dutch pension plans by purchasing an insurance contract from a large multi-national insurance company. Each year, the Company makes premium payments to the insurance company (1) to provide for the benefit obligation of the current year of service based on each employee's age, gender, and current salary, and (2) for indexations for both active and post-active participants. The Company determines the fair value of the plan assets with the assistance of an actuary using unobservable inputs (Level 3), which is determined as the present value of the accrued benefits guaranteed by the insurer. The components of net periodic pension cost for the Dutch pension plans were as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2021		2020		2021		2020
Net service cost	$	(1,107)	$	(1,355)	$	(2,216)	$	(1,625)
Interest cost	(166)		(405)		(332)		(486)
Expected return on plan assets	109		252		217		302
Administrative charges	(72)		(108)		(143)		(130)
Net periodic pension cost	$	(1,236)	$	(1,616)	$	(2,474)	$	(1,939)

9. LONG-TERM INDEBTEDNESS

~~At September 30, 2017 and 2016, and~~Long-term indebtedness consisted of the following at:


	June 30,		December 31,
(In thousands)	2021			2020

Convertible Notes	$	460,000		$	0
Term Loan	277,500			285,000
Revolving Credit Loan	224,482			394,888
Shelf-Loan Facility	50,000			50,000
Other	8,191			9,652
Unamortized deferred financing fees	(12,469)			(1,291)
	1,007,704			738,249
Less current portion	(65,880)			(17,831)
Long-term indebtedness	$	941,824		$	720,418

Amended Credit Agreement

On December ~~31, 2016,~~14, 2018, the Company ~~had no outstanding borrowings on~~and certain of its ~~line of credit.~~

~~On April 27, 2016, the Company~~subsidiaries refinanced 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~~other bank lenders (as amended, ~~and restated~~ the ~~existing line of credit, which now expires on April 27, 2021 (the~~ “Amended Credit Agreement”). ~~In connection with this amendment~~The Amended Credit Agreement amended and ~~restatement,~~restated an existing credit agreement dated April 27, 2016 and now expires on December 14, 2023. The Amended Credit Agreement increased the ~~line of~~revolving credit ~~was increased~~facility from ~~$100.0~~$325.0 million to ~~$200.0~~$600.0 million, and ~~contains a feature allowing~~permits the Company to ~~draw~~borrow up to ~~$50.0~~$250.0 million in approved foreign currencies, including Australian dollars, Canadian dollars, ~~pound~~pounds sterling, and ~~euros.~~euros ($164.5 million, or €138.0 million drawn at June 30, 2021).

On December 19, 2019, the Company and certain of its subsidiaries 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 borrowings~~term loan is required to be repaid in an amount equal to 1.25% of original principal amount of

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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~~Amended Credit Agreement was increased from $600.0 million to $900.0 million.

On May 7, 2021, the Company and certain of ~~credit can be~~its subsidiaries entered into an Amendment No. 2 of the Amended Credit Agreement with several banks, which modified provisions to, among other things, permit the issuance of the Convertible Notes and permit the entry into the related Convertible Note Hedge Transactions and Warrant transactions ("Warrant Transactions"). See Note 12 of the Notes to Condensed Consolidated Financial Statements for further ~~increased by $125.0 million, subject to certain conditions.~~ details of the Convertible Note Hedge Transactions and Warrant Transactions.

Interest on borrowings under the ~~line of~~revolving 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 ~~September~~June 30, ~~2017)~~2021) 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 ~~1.0~~0.875 percent to 1.625 percent ~~(1.0~~(1.375 percent at ~~September~~June 30, ~~2017)~~2021) depending on the Company’s ~~performance and financial condition.~~total net leverage ratio. At ~~September~~June 30, ~~2017 and 2016,~~2021, the Company had ~~$2.4~~$2.8 million ~~and $2.5 million, respectively,~~ in issued, but undrawn, standby letters of credit under the ~~line of credit.~~revolving credit facility. Availability under the Company’s ~~line of~~revolving credit facility was ~~$197.6~~$372.6 million at ~~September~~June 30, ~~2017.~~2021.

On February 24, 2014, the Company and certain of its subsidiaries entered into a $150.0 million ~~“shelf-loan”~~shelf-loan facility (as amended and restated, the “Shelf-Loan Facility”) with PGIM, Inc. (formerly Prudential Investment Management, Inc.) and its affiliates (“Prudential”). 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 3.80 percent per annum, payable quarterly in arrears, of which the entire amount was outstanding at ~~September~~June 30, ~~2017. At September 30, 2017, the fair value~~2021. The net proceeds of the ~~Company’s long-term debt approximates~~Series B Notes were used to repay the ~~carrying value, as estimated using quoted market prices~~Series A Notes. On November 11, 2019, the Company and ~~discounted future cash flows based on similar borrowing arrangements.~~

certain of its subsidiaries amended and restated the Shelf-Loan Facility to provide for a new $200.0 million shelf facility pursuant to which the Series B Notes are currently outstanding and to conform certain covenants to the Amended Credit Agreement. On March ~~30, 2017,~~31, 2020, the Company ~~amended~~and certain of its ~~“shelf-loan” facility~~subsidiaries entered into a Consent and Amendment to ~~extend~~ the ~~term through March 30, 2020. In connection with this amendment,~~Shelf-Loan Facility to join certain Company subsidiaries that were acquired in the ~~facility~~CURT acquisition as guarantors and permit other internal restructuring matters related to certain of the Company's subsidiaries. On September 21, 2020, the Company and certain of its subsidiaries entered into a Second Amendment to the Shelf-Loan Facility to conform additional covenants to the Amended Credit Agreement. On May 7, 2021, the Company and certain of its subsidiaries entered into a Third Amendment to the Shelf-Loan Facility to permit the issuance of the Convertible Notes and permit the entry into the related Convertible Note Hedge Transactions and Warrant Transactions. The Shelf-Loan Facility expires on November 11, 2022.

The Shelf-Loan Facility provides for Prudential to consider 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 Company’s Series AB 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~~

On May 13, 2021, the Company issued $460.0 million in aggregate principal amount of 1.125 percent convertible senior notes due 2026 in a private placement to certain qualified institutional buyers, resulting in net proceeds to the Company of approximately $448.2 million after deducting the initial purchasers' discounts and offering expenses payable by the Company. The Convertible Notes bear interest at a coupon rate of 1.125 percent per annum, payable semiannually in arrears on May 15 and November 15 of each year, beginning on November 15, 2021. The Convertible Notes will mature on May 15,

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

2026, unless earlier converted, redeemed, or repurchased, in accordance with their terms. No sinking fund is provided for the Convertible Notes. There are no registration rights associated with the Convertible Notes or the common stock issuable upon conversion of the Convertible Notes.

The initial conversion rate of the Convertible Notes is 6.0369 shares of the Company's common stock per $1,000 principal amount of the Convertible Notes, which is equal to an initial conversion price of approximately $165.65 per share of the Company's common stock. The conversion rate of the Convertible Notes is subject to adjustment upon the occurrence of certain specified events, but will not be adjusted for accrued and unpaid interest on any Convertible Note being converted, except in limited circumstances. In addition, upon the occurrence of a make-whole fundamental change (as defined in the Indenture) or upon a notice of redemption, the Company will, in certain circumstances, increase the conversion rate for a holder that elects to convert its Convertible Notes in connection with such make-whole fundamental change or notice of redemption, as the case may be.

Prior to the close of business on the business day immediately preceding January 15, 2026, the Convertible Notes are convertible at the option of the holders only under the ~~Company’s “shelf-loan” facility~~following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2021 (and only during such calendar quarter), if the last reported sale price (as defined in the Indenture) per share of the Company's common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 percent of the conversion price for the Convertible Notes on each applicable trading day; (2) during the five business day period after any ten consecutive trading day period (the "measurement period") in which the trading price (as defined in the Indenture) per $1,000 principal amount of the Convertible Notes for each trading day of the measurement period was ~~$150.0~~less than 98 percent of the product of the last reported sale price of the Company's common stock and the conversion rate on each such trading day; (3) if the Company calls such Convertible Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date, but only with respect to the Convertible Notes called (or deemed called) for redemption; or (4) upon the occurrence of certain specified corporate events described in the Indenture. On or after January 15, 2026, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their Convertible Notes at any time, regardless of the foregoing circumstances. Upon conversion, the Company will pay cash up to the aggregate principal amount of the notes to be converted and pay or deliver, as the case may be, cash, shares of the Company's common stock, or a combination of cash and shares of the Company's common stock, at the Company's election, in respect of the remainder, if any, of the Company's conversion obligation in excess of the aggregate principal amount of the notes being converted.

The Company may not redeem the Convertible Notes prior to May 20, 2024. On or after May 20, 2024, the Company may redeem for cash all or any portion of the Convertible Notes, at the Company's option, if the last reported sale price of the Company's common stock has been at least 130 percent of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100 percent of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. Upon the occurrence of a fundamental change (as defined in the Indenture), subject to certain conditions, holders of the Convertible Notes may require the Company to repurchase for cash all or any portion of their Convertible Notes in principal amounts of $1,000 or an integral multiple thereof at a repurchase price equal to 100 percent of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest on such notes to, but not including, the fundamental change repurchase date (as defined in the Indenture).

The Convertible Notes are senior unsecured obligations and rank senior in right of payment to all of the Company's indebtedness that is expressly subordinated in right of payment to the Convertible Notes, equal in right of payment with all the Company's liabilities that are not so subordinated, effectively junior to any of the Company's secured indebtedness to the extent of the value of the assets securing such indebtedness, and structurally junior to all indebtedness and other liabilities (including trade payables) of our subsidiaries. The Indenture contains customary terms and covenants, including that upon certain events of default occurring and continuing, either the named trustee or the holders of at least 25 percent of the aggregate principal amount of the outstanding Convertible Notes may declare 100 percent of the principal of, and accrued and unpaid interest, if any, on all the outstanding Convertible Notes to be due and payable.

The Convertible Notes are not registered securities nor listed on any securities exchange but may be actively traded by qualified institutional buyers. The fair value of the Convertible Notes of $470.4 million at ~~September~~June 30, ~~2017. However,~~2021 was estimated using Level 1 inputs, as it is based on quoted prices for these instruments in active markets.

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

At June 30, 2021, the fair value of the Company’s long-term debt under the Amended Credit Agreement limits the aggregate indebtedness outstanding to Prudential from time to time to $150.0 million; therefore, currently the Company can only access an additional $100.0 million under the shelf-loan facility. The Company is currently discussing a proposed amendment to the Amended Credit Agreement with JPMorgan Chase and the ~~other lenders to address this limitation.~~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 credit~~Amended Credit Agreement and the ~~“shelf-loan” facility~~Shelf-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~~interests of certain ~~“controlled~~"controlled foreign ~~corporations.”~~corporations").

Pursuant to the Amended Credit Agreement and ~~“shelf-loan” facility,~~Shelf-Loan Facility, the Company ~~is required~~shall not permit its net leverage ratio to exceed certain limits, shall maintain a minimum ~~interest~~debt service coverage ratio, and ~~fixed charge coverages, and to~~must meet certain other financial requirements. At ~~September~~June 30, ~~2017 and 2016,~~2021, the Company was in compliance with all such ~~requirements, and expects to remain in compliance for the next twelve months.~~requirements.

~~Availability under both the~~The Amended Credit Agreement and the ~~“shelf-loan” facility is subject to~~Shelf-Loan Facility include a maximum net leverage ratio covenant which limits the amount of consolidated outstanding indebtedness ~~to 2.5 times~~that the Company may incur on a trailing twelve-month EBITDA, as ~~defined.~~defined in the Amended Credit Agreement and the Shelf-Loan Facility. This limitation did not impact the Company’s ~~borrowing availability~~ability to incur additional indebtedness under its revolving credit facility at ~~September~~June 30, ~~2017.~~2021. The combined remaining availability under ~~these facilities~~the revolving credit facility and the potential additional notes issuable under the Shelf-Loan Facility was ~~$297.6~~$522.6 million at ~~September~~June 30, ~~2017.~~2021. The Company believes the availability of $372.6 million under the revolving credit facility under the Amended Credit Agreement, ~~and “shelf-loan” facility is~~along with its cash flows from operations, are adequate to finance the Company’s anticipated cash requirements for the next twelve months.

~~LCI INDUSTRIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(Continued)~~The Company leases certain manufacturing and warehouse facilities, administrative office space, semi-tractors, trailers, forklifts, and other equipment through operating leases with unrelated third parties. The increase in lease costs for the three and six months ended June 30, 2021 compared to the three and six months ended June 30, 2020 was primarily driven by capacity expansions and leases assumed in recent acquisitions. The components of lease cost were as follows:

~~(Unaudited)~~


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2021		2020		2021		2020
Operating lease cost	$	11,317	$	8,154	$	20,415	$	15,976
Short-term lease cost	986		391		1,875		1,269
Variable lease cost	742		526		1,431		1,147
Total lease cost	$	13,045	$	9,071	$	23,721	$	18,392

7.11. COMMITMENTS AND CONTINGENCIES

Contingent Consideration

In connection with several business acquisitions, if certain ~~sales~~performance targets for the acquired products are achieved, the Company ~~will be required to~~would pay additional cash consideration. The Company has recorded a liability for the fair value of this contingent consideration at ~~September~~June 30, ~~2017 and 2016,~~2021, based on the present value of the expected future cash flows using a market participant’s weighted average cost of capital of ~~13.6 percent and 12.4 percent, respectively.~~13.3 percent.

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. 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.

The following table provides a reconciliation of the Company’s contingent consideration liability for the ~~nine~~six months ended ~~September 30:~~June 30, 2021:

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands) 2017 2016
Balance at beginning of period $ 9,241
$ 10,840
Acquisitions 7,288
1,322
Payments (2,574 ) (2,719 )
Accretion ^(a)
1,227
976
Fair value adjustments^(a)
1,204
1,046
Net foreign currency translation adjustment 659
—
Balance at end of the period^(b)
17,045
11,465
Less current portion in accrued expenses and other current liabilities (6,649 ) (4,984 )
Total long-term portion in other long-term liabilities $ 10,396
$ 6,481

^{Fair value adjustments (a) (b)}

Balance at ~~various dates through September 2029. Certain~~end of the ~~contingent consideration arrangements are subject to a maximum payment amount, while the remaining arrangements have no maximum contingent consideration.~~period (b)

(a) Recorded in selling, general and administrative expenses in the Condensed Consolidated Statements of Income.

(b) Amount represents the fair value of estimated remaining payments. The total estimated remaining undiscounted payments as of June 30, 2021 were $10.6 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~~Receivable

At June 30, 2021 and ~~Supply Agreement~~

~~In July 2015,~~December 31, 2020, the Company ~~entered into~~had a ~~six-year exclusive~~receivable from Furrion of $36.7 million and $42.3 million, respectively, recorded for purchases of inventory stock following the termination of the distribution and supply agreement with Furrion. The termination agreement originally required Furrion ~~Limited (“Furrion”), a Hong Kong based firm that designs, engineers~~to make periodic payments throughout 2020 and ~~supplies premium electronics. This agreement provides~~the first six months of 2021; however, due to the impacts of the COVID-19 pandemic, the payment schedule was adjusted to provide for periodic payments through July 2022. Accordingly, the Company ~~with~~has recorded 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 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, fireplaces and kitchen appliances, primarily to the RV industry.

In connection with this agreement, the Company entered into minimum purchase obligations (“MPOs”), which Furrion and the Company agreed to review after the first year on an annual basis and adjust 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.

Subject to agreed upon revisions to the MPOs, Furrion has the right to either terminate the distribution agreement with six months’ notice or remove exclusivity from 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 Companyreceivable at its ~~election may terminate~~present value at June 30, 2021 based on the distribution agreement with six months’ notice. Upon termination of the agreement, Furrion has agreed to purchase from the Company any non-obsolete stocks of Furrion products at the cost paid by the Company.current payment plan.

~~LCI INDUSTRIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(Continued)~~

~~(Unaudited)~~

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.

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,~~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-party claims.

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 opinion~~management 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 Condensed Consolidated Balance Sheet as of ~~September~~June 30, ~~2017,~~2021, would not be material to the Company’s financial position or ~~annual~~ results of operations.

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

12. STOCKHOLDERS’ EQUITY

The following table summarizes information about shares of the ~~Company’s~~Company's common stock at:


	June 30,	December 31,
(In thousands)	2021		2020
Common stock authorized	75,000		75,000
Common stock issued	28,356		28,243
Treasury stock	3,087		3,087
Common stock outstanding	25,269		25,156

September 30, December 31,
(In thousands) 2017 2016 2016
Common stock authorized 75,000
75,000
75,000
Common stock issued 27,625
27,308
27,434
Treasury stock 2,684
2,684
2,684

~~The following reconciliation details the denominator used in the computation of basic and diluted earnings per share:~~

Nine Months Ended
September 30, Three Months Ended
September 30,
(In thousands) 2017 2016 2017 2016
Weighted average shares outstanding for basic earnings per share 24,993
24,587
25,060
24,724
Common stock equivalents pertaining to stock-based awards 339
295
399
336
Weighted average shares outstanding for diluted earnings per share 25,332
24,882
25,459
25,060

The weighted average diluted shares outstanding for the nine months ended September 30, 2017 and 2016, exclude the effect of 117,223 and 219,302 shares of common stock, respectively, subject to stock-based awards. The weighted average diluted shares outstanding for the three months ended September 30, 2017 and 2016, exclude the effect of 64,353 and 171,514 shares of common stock, respectively, subject to stock-based awards. Such shares were excluded from total diluted shares because they were anti-dilutive or the specified performance conditions those shares were subject to were not yet achieved.

~~LCI INDUSTRIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(Continued)~~

~~(Unaudited)~~

~~In 2016, the Company initiated the payment of regular quarterly dividends.~~ The table below summarizes the regular quarterly dividends declared and paid during the periods ended ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016:~~2020:


(In thousands, except per share data)	Per Share		Record Date	Payment Date	Total Paid
First Quarter 2020	$	0.65	03/06/20	03/20/20	$	16,321
Second Quarter 2020	0.65		06/05/20	06/19/20	16,349
Third Quarter 2020	0.75		09/04/20	09/18/20	18,865
Fourth Quarter 2020	0.75		12/04/20	12/18/20	18,866
Total 2020	$	2.80			$	70,401

First Quarter 2021	$	0.75	03/12/21	03/26/21	$	18,939
Second Quarter 2021	0.90		06/04/21	06/18/21	22,739

Total 2021	$	1.65			$	41,678

(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 2016 0.30
06/06/16 06/17/16 7,363
Third Quarter 2016 0.30
08/19/16 09/02/16 7,371
Fourth Quarter 2016 0.50
11/28/16 12/09/16 12,359
Total 2016 $ 1.40
$ 34,437

First Quarter 2017 $ 0.50
03/06/17 03/17/17 $ 12,442
Second Quarter 2017 0.50
05/19/17 06/02/17 12,445
Third Quarter 2017 0.50
08/18/17 09/01/17 12,459
Nine Months Ended September 30, 2017 $ 1.50
$ 37,346

Deferred and Restricted Stock Units

~~In February 2017,~~

The LCI Industries 2018 Omnibus Incentive Plan (the "2018 Plan”) provides for the ~~Company issued 63,677~~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 ~~average~~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, 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.

Transactions in DSUs and RSUs under the LCI Industries Equity Award and Incentive Plan, as Amended and Restated (the "2011 Plan") or the 2018 Plan, as applicable, are summarized as follows:


	Number of Shares	Weighted Average Price
Outstanding at December 31, 2020	335,087	$	90.04
Issued	2,578	131.87
Granted	104,116	142.99
Dividend equivalents	3,658	128.47
Forfeited	(2,386)	112.82
Vested	(157,302)	86.99
Outstanding at June 30, 2021	285,751	$	109.63

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The 2018 Plan provides for performance stock units ("PSUs") that vest at a specific future date based on achievement of specified performance conditions. Transactions in PSUs under the 2018 Plan are summarized as follows:


	Number of Shares	Weighted Average Price
Outstanding at December 31, 2020	119,727	$	89.92

Granted	40,102	143.54
Dividend equivalents	1,885	128.44
Forfeited	(1,053)	96.55
Vested	(12,593)	95.03
Outstanding at June 30, 2021	148,068	$	104.01

The Company paid an aggregate amount of $100.1 million to the Counterparties pursuant to the Convertible Note Hedge Transactions. The Convertible Note Hedge Transactions cover, subject to anti-dilution adjustments substantially similar to those in the Convertible Notes, approximately 2.8 million shares of the Company's common stock, the same number of shares initially underlying the Convertible Notes, at a strike price of ~~$108.47,~~approximately $165.65, subject to customary anti-dilution adjustments. The Convertible Note Hedge Transactions will expire upon the maturity of the Convertible Notes, subject to earlier exercise or ~~$6.9 million,~~termination. The Convertible Note Hedge Transactions are expected generally to ~~executive officers in lieu~~reduce the potential dilutive effect to the Company's common stock of the conversion of the Convertible Notes and/or offset any cash ~~for a portion of their 2016 incentive compensation. In February 2016,~~payments the Company ~~issued 4,784 deferred~~is required to make in excess of the principal amount of the Convertible Notes which are converted, as the case may be, in the event the price per share of the Company's common stock, ~~units at~~as measured under the ~~average~~terms of the Convertible Note Hedge Transactions, is greater than the strike price of ~~$55.22, or $0.3~~the Convertible Note Hedge Transactions. The Convertible Note Hedge Transactions meet the criteria in ASC 815-40 to be classified within Stockholders' Equity, and therefore the Convertible Note Hedge Transactions are not revalued after their issuance.

The Convertible Notes and the Convertible Note Hedge Transactions will be integrated for tax purposes. The accounting impact of this tax treatment makes the Convertible Note Hedge Transactions deductible as original issue discount for tax purposes over the term of the Convertible Notes, and results in a $24.4 million deferred tax asset recognized through equity.

In addition, concurrently with entering into the Convertible Note Hedge Transactions, the Company entered into separate, privately-negotiated Warrant Transactions with the Counterparties, whereby the Company sold Warrants to ~~executive officers~~purchase 2.8 million shares of the Company's common stock at an initial strike price of $259.84 per share, subject to customary anti-dilution adjustments, which is approximately 100 percent above the last reported sale price of the Company's common stock on May 10, 2021. The Company received aggregate proceeds of $48.5 million from the Warrant Transactions with the Counterparties, with such proceeds partially offsetting the costs of entering into the Convertible Note Hedge Transactions. The Warrants expire in ~~lieu~~August 2026. If the market value per share of ~~cash for~~the Company's common stock, as measured under the Warrant Transactions, exceeds the strike price of the Warrants, the Warrants will have a ~~portion of their 2015 incentive compensation.~~dilutive effect on the Company's earnings per share, unless the Company elects, subject to certain conditions, to settle the Warrants in cash. The Warrants meet the criteria in ASC 815-40 to be classified within Stockholders' Equity, and therefore the Warrants are not revalued after issuance.

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table presents the ~~Company’s~~Company's assets and liabilities measured at fair value on a recurring basis at:


	June 30, 2021								December 31, 2020
(In thousands)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets
Pension plan assets (Note 8)	$	53,558	$	0	$	0	$	53,558	$	61,936	$	0	$	0	$	61,936
Liabilities
Contingent consideration	$	9,549	$	0	$	0	$	9,549	$	4,609	$	0	$	0	$	4,609

September 30, 2017 December 31, 2016
(In thousands) Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3
Assets
Unrealized gain on derivative
instruments $ 1,180
$ —
$ 1,180
$ —
$ 2,296
$ —
$ 2,296
$ —
Liabilities
Contingent consideration $ 17,045
$ —
$ —
$ 17,045
$ 9,241
$ —
$ —
$ 9,241

Contingent Consideration Related to Acquisitions

Liabilities for contingent consideration related to acquisitions were estimated at fair ~~valued~~value using ~~management’s~~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~~participant's weighted average cost of capital. Over the next six years, the ~~Company’s~~Company's long-term sales growth forecasts for products subject to contingent consideration arrangements average approximately 1413 percent per year. For further information on the inputs used in determining the fair value, and a ~~roll-forward~~roll forward of the contingent consideration liability, see Note 711 of the Notes to Condensed Consolidated Financial Statements.

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 September 30, 2017, the Company had derivative instruments for 19.2 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

~~LCI INDUSTRIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(Continued)~~

~~(Unaudited)~~

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 or (gains) recognized during the nine months ended September 30:

2017 2016
(In thousands) Carrying
Value Non-Recurring
Losses/(Gains) Carrying
Value Non-Recurring
Losses/(Gains)
Vacant owned facilities $ 2,464
$ —
$ 2,506
$ —
Net assets of acquired businesses 38,068
—
27,840
—
Total assets $ 40,532
$ —
$ 30,346
$ —

~~Vacant Owned Facilities~~

During the first nine months of 2017, the Company reviewed the recoverability of the carrying value of one vacant owned facility. At September 30, 2017, 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 Condensed Consolidated Balance Sheets.

During the first nine months of 2016, the Company reviewed the recoverability of the carrying value of one vacant owned facility. At September 30, 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 Condensed 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 acquired or liability assumed, 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 assumed liabilities, see Note 2 of the Notes to Condensed Consolidated Financial Statements.

~~10.~~14. SEGMENT REPORTING

The Company has ~~two~~2 reportable segments, the OEM Segment and the Aftermarket Segment. Intersegment sales are insignificant.

The OEM Segment, which accounted for 9280 percent and 76 percent of consolidated net sales for ~~each of~~ the ~~nine month periods~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016,~~2020, respectively, manufactures or distributes a broad array of engineered components for the leading OEMs in the recreation and transportation product markets, consisting primarily 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~~Company's OEM Segment net sales for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 were of components for travel trailer and fifth-wheel RVs.

The Aftermarket Segment, which accounted for 820 percent and 24 percent of consolidated net sales for ~~each of~~ the ~~nine month periods~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016,~~2020, respectively, supplies engineered components to the related aftermarket channels of the RVrecreation and ~~adjacent industries,~~

~~LCI INDUSTRIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(Continued)~~

~~(Unaudited)~~

Decisions concerning the allocation of the ~~Company’s~~Company's resources are made by the ~~Company’s~~Company's chief operating decision maker ~~(“CODM”~~("CODM"), with oversight by the Board of Directors. The CODM evaluates the performance of each segment based upon segment operating profit or loss, generally defined as income or loss before interest and income taxes. Decisions concerning the allocation of resources are also based on each ~~segment’s~~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 ofin the ~~Company’s~~Company's Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2020.

Information relating to segments follows for the:
Nine Months Ended
September 30, Three Months Ended
September 30,
(In thousands) 2017 2016 2017 2016
Net sales:
OEM Segment:
RV OEMs:
Travel trailers and fifth-wheels $ 1,045,465
$ 836,634
$ 357,940
$ 263,579
Motorhomes 114,887
85,762
41,595
29,373
Adjacent industries OEMs 310,373
253,088
106,386
82,963
Total OEM Segment net sales 1,470,725
1,175,484
505,921
375,915
Aftermarket Segment:
Total Aftermarket Segment net sales 129,908
100,515
48,893
36,455
Total net sales $ 1,600,633
$ 1,275,999
$ 554,814
$ 412,370
Operating profit:
OEM Segment $ 151,867
$ 144,102
$ 41,025
$ 39,049
Aftermarket Segment 18,229
16,152
6,902
6,089
Total operating profit $ 170,096
$ 160,254
$ 47,927
$ 45,138

~~11. NEW ACCOUNTING PRONOUNCEMENTS~~

~~In August 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-12,~~ ~~Targeted Improvements to Accounting for Hedging Activities,~~ ~~which amends ASC 815,~~ ~~Derivatives and Hedging.~~ This ASU better aligns an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. This ASU is effective for interim and annual reporting periods beginning after December 15, 2018, and early adoption is permitted. The Company is evaluating the effect of adopting this new accounting guidance.

~~In May 2017, the FASB issued ASU 2017-09,~~ ~~Compensation - Stock Compensation: Scope of Modification Accounting.~~ This ASU provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The updated guidance is effective for interim and annual periods beginning after December 15, 2017, and early adoption is permitted. The Company does not believe the updated requirements will materially impact the Company’s consolidated financial statements.

~~In January 2017, the FASB issued ASU 2017-04,~~ ~~Simplifying the Test for Goodwill Impairment,~~ ~~which amends 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 a 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 with early adoption permitted. The Company does not expect the adoption of this ASU to have a material impact on the Company’s consolidated financial statements.

~~In January 2017, the FASB issued ASU 2017-01,~~ ~~Clarifying the Definition of a Business,~~ ~~which amends ASC 805,~~ ~~Business Combinations. This ASU clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating~~

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(Continued)~~

(Unaudited)

~~whether transactions should be accounted for as acquisition (or disposals) of assets or businesses. This ASU is effective for interim~~The following tables present the Company's revenues disaggregated by segment and ~~annual reporting periods beginning after December 15, 2017. The adoption of this ASU 2017-01 is not expected to have a material impact~~geography based on the ~~Company’s consolidated financial statements.~~

~~In August 2016, the FASB issued 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 consolidated financial statements.

~~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~~billing address of the ~~accounting for share-based payment transactions, including income tax consequences,~~Company's customers:


	Three Months Ended June 30, 2021						Three Months Ended June 30, 2020
(In thousands)	U.S. (a)		Int’l (b)		Total		U.S. (a)		Int’l (b)		Total
OEM Segment:
RV OEMs:
Travel trailers and fifth-wheels	$	508,810	$	18,804	$	527,614	$	204,977	$	7,541	$	212,518
Motorhomes	39,776		27,477		67,253		13,505		11,208		24,713
Adjacent Industries OEMs	232,495		37,292		269,787		108,554		22,027		130,581
Total OEM Segment net sales	781,081		83,573		864,654		327,036		40,776		367,812
Aftermarket Segment:
Total Aftermarket Segment net sales	209,997		19,069		229,066		154,671		3,282		157,953
Total net sales	$	991,078	$	102,642	$	1,093,720	$	481,707	$	44,058	$	525,765

	Six Months Ended June 30, 2021						Six Months Ended June 30, 2020
(In thousands)	U.S. (a)		Int’l (b)		Total		U.S. (a)		Int’l (b)		Total
OEM Segment:
RV OEMs:
Travel trailers and fifth-wheels	$	995,352	$	35,278	$	1,030,630	$	508,659	$	10,967	$	519,626
Motorhomes	79,193		50,653		129,846		40,419		22,381		62,800
Adjacent Industries OEMs	444,177		76,251		520,428		255,155		62,588		317,743
Total OEM Segment net sales	1,518,722		162,182		1,680,904		804,233		95,936		900,169
Aftermarket Segment:
Total Aftermarket Segment net sales	381,407		31,667		413,074		276,289		8,977		285,266
Total net sales	$	1,900,129	$	193,849	$	2,093,978	$	1,080,522	$	104,913	$	1,185,435

(a) Net sales to customers in the ~~classification~~United States of ~~awards as either equity or liabilities, and the classification on the statement of cash flows. Under the new standard, all excess tax benefits and tax deficiencies are recorded as a component~~America

(b) Net sales to customers in countries domiciled outside of the ~~provision for income taxes in the reporting period in which they occur. Additionally, ASU 2016-09 requires that the Company present excess tax benefits on the consolidated statement~~United States of cash flows as an operating activity. The adoption of the ASU resulted in the recognition of excess tax benefits in the provision for income taxes within the Condensed Consolidated Financial Statements of $5.2 million for the nine months ended September 30, 2017. Additionally, the Condensed Consolidated Statement of Cash Flows now present excess tax benefits as an operating activity, adjusted prospectively. Finally, the Company elected to continue to estimate forfeitures based on historical data and recognizes forfeiture compensation expense over the vesting period of the award. The Company adopted ASU 2016-09 in the first quarter of 2017 and elected to apply this adoption prospectively. Prior periods have not been adjusted.America

~~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 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~~following table presents 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 disaggregated revenue disclosures, in addition to current disclosures in Note 10 - Segment Reporting, will be required in its consolidated financial statements. The Company plans to adopt ASU 2014-09 using the modified retrospective approach on January 1, 2018.Company's operating profit by segment:


	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2021		2020		2021		2020
Operating profit:
OEM Segment	$	63,334	$	1,763	$	142,621	$	44,952
Aftermarket Segment	30,648		19,019		52,792		20,096
Total operating profit	$	93,982	$	20,782	$	195,413	$	65,048

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table presents the Company's revenue disaggregated by product:


	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2021		2020		2021		2020
OEM Segment:
Chassis, chassis parts, and slide-out mechanisms	$	309,237	$	131,540	$	596,298	$	333,803
Windows and doors	256,722		109,696		506,642		265,727
Furniture and mattresses	168,804		57,662		324,048		144,842
Axles and suspension solutions	60,850		25,606		115,972		60,742
Other	69,041		43,308		137,944		95,055
Total OEM Segment net sales	864,654		367,812		1,680,904		900,169
Total Aftermarket Segment net sales	229,066		157,953		413,074		285,266
Total net sales	$	1,093,720	$	525,765	$	2,093,978	$	1,185,435

LCI INDUSTRIES

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This ~~Management’s~~Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the ~~Company’s~~Company's Condensed Consolidated Financial Statements and Notes thereto included in Item 1 of Part 1 of this ~~Report,~~report, as well as the ~~Company’s~~Company's Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2020.

LCI Industries ~~(“LCII”,~~("LCII" and collectively with its subsidiaries, the ~~“Company”~~"Company," "we," "us," or "our"), through its wholly-owned subsidiary, Lippert Components, Inc. and its subsidiaries (collectively, ~~“Lippert Components”~~"Lippert Components," "LCI," or ~~“LCI”~~"Lippert"), 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 primarily 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~~We also ~~supplies~~supply engineered components to the related aftermarkets of these industries, primarily by selling to retail dealers, wholesale distributors, and service centers.

~~The Company has~~We have two reportable segments, the OEM Segment and the Aftermarket Segment. Intersegment sales are insignificant. At ~~September~~June 30, ~~2017, the Company~~2021, we operated 52over 100 manufacturing and distribution facilities located throughout the United States and in Canada, Germany, Ireland, Italy, the Netherlands, and ~~Italy.~~the United Kingdom. See Note 1014 of the Notes to ~~the~~ Condensed Consolidated Financial ~~Statements.~~Statements for further information regarding our segments.

~~The Company’s~~Our OEM Segment manufactures or distributes a broad array of engineered components for the leading OEMs of ~~RVs~~leisure and ~~adjacent~~mobile transportation industries. Approximately 7162 percent of ~~the Company’s~~our OEM Segment net sales for the twelve months ended ~~September~~June 30, ~~2017~~2021 were of components for travel trailer and fifth-wheel RVs, including:



● Steel chassis and related components		● ~~Furniture~~Entry, luggage, patio, and ~~mattresses~~ramp 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 components~~Awnings and awning accessories
● Vinyl, aluminum, and frameless windows		● ~~Appliances~~Electronic 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 engineered components to the related aftermarket channels of the RVrecreation and ~~adjacent industries,~~transportation product markets, primarily to retail dealers, wholesale distributors, and service centers. The Aftermarket Segment also includes biminis, covers, buoys, fenders to the marine industry, towing products, truck accessories, and the sale of replacement glass and awnings to fulfill insurance claims.

Most industries where ~~the Company sells~~we sell products or where ~~its~~our products are used historically have been seasonal and are generally at the highest levels when the weather is moderate. Accordingly, ~~the Company’s~~our 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~~we sell our 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.~~years, particularly as a result of the COVID-19 pandemic and related impacts. Additionally, many of the optional upgrades and non-critical replacement parts for RVs are purchased outside the normal product selling season, thereby causing these Aftermarket Segment sales to be counter-seasonal, but this may be different in 2021 and future years as a result of ~~components~~the COVID-19 pandemic and related impacts.

COVID-19 UPDATE

The COVID-19 pandemic has caused significant uncertainty and disruption in the global economy and financial markets. The COVID-19 pandemic had an adverse effect on our financial results during the first half of 2020 due to government-mandated plant shutdowns. We took a variety of actions during 2020 to help mitigate the adverse impacts, including temporary cost savings measures and delays and reductions in capital expenditures.

Activity in most of the end markets we serve sequentially improved as 2020 progressed, and this trend has continued into the first half of 2021, especially in the RV and marine OEM markets and our Aftermarket Segment. With RV retail demand

LCI INDUSTRIES

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)

at record levels through the first six months of 2021, the industry has faced challenges with supply chain constraints, rising material costs, and a tightened labor market, especially in northern Indiana. To address these challenges, we have strategically managed working capital, including intentionally building up levels of certain inventory items to avoid future shortages. We continue to focus on our culture and leadership development programs to focus on team member retention and regularly hold hiring events, with COVID-19 safety measures, to fill open positions. As we build inventory levels and invest in additional production capacity, we also closely monitor our liquidity, and may need to seek additional financing, though such additional financing may not be available on terms favorable to us, or at all. See "Liquidity and Capital Resources" below for further discussion.

The health and safety of our team members have remained our top priority. We continue to maintain the rigorous health and safety protocols we established in 2020. We leased a location to provide drive-thru rapid COVID-19 tests for our team members in northern Indiana. We have encouraged team members to seek vaccination when eligible and partnered with a local hospital to host private vaccination days for our eligible northern Indiana team members and their families.

We continue to closely monitor the impact of COVID-19 on all aspects of our business.

FURRION UPDATE

At June 30, 2021, we had a receivable from Furrion Limited ("Furrion") of $36.7 million recorded for purchases of inventory stock following the termination of the distribution and supply agreement with Furrion. The termination agreement originally required Furrion to make periodic payments throughout 2020 and the first six months of 2021; however, due to the ~~aftermarket channels~~impacts of ~~these industries tend~~the COVID-19 pandemic the payment schedule was adjusted to ~~be counter-seasonal.~~provide for periodic payments through July 2022. Accordingly, we have recorded the receivable at its present value at June 30, 2021 based on the current payment plan.

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”~~"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

~~LCI INDUSTRIES~~

~~ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF~~

~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Continued)~~

industry-wide wholesale shipments. ~~Based on~~Due to the ~~strength~~COVID-19 pandemic, the 2020 Open House was canceled; however, the 2021 Open House is currently planned to take place in September. The seasonality of ~~retail sales~~the RV industry has been, and will likely continue to be, impacted by the COVID-19 pandemic, and the ~~current outlook from several RV OEMs and their dealer networks, most industry analysts continue~~timing of a return to ~~report that RV dealer inventory~~historical seasonality is ~~in line with anticipated retail demand.~~not possible to predict at this time.

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 the first ~~nine~~six months of ~~2017, the Company’s~~2021, our primary RV market, increased 1871 percent to ~~321,300~~265,000 units, compared to the first six months of 2020, primarily due to increased retail demand and dealers rebuilding inventory levels. Retail demand for travel trailer and fifth-wheel RVs increased 42 percent in the first six months of 2021 compared to the same period ~~of 2016, as a result of:~~

~~An estimated 30,100 unit increase~~ in ~~retail demand in the first nine months of 2017, or 10 percent, as compared to the same period of 2016. In addition, retail~~2020. Retail demand is typically revised upward ~~over the~~in subsequent ~~quarter by approximately five to ten percent,~~months, primarily due to delayed RV registrations.

Partially offset by RV dealers seasonally decreasing inventory levels by an estimated 3,200 units for the period ended September 30, 2017, lower than the decrease in inventory levels of 22,000 units in the same period of 2016.

While ~~the Company measures its~~we measure our 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:

Estimated
Wholesale Retail Unit Impact on
Units Change Units Change Dealer Inventories
Quarter ended September 30, 2017⁽¹⁾
103,900
26% 113,700
5% (9,800)
Quarter ended June 30, 2017 115,900
17% 138,000
12% (22,100)
Quarter ended March 31, 2017 101,500
12% 72,800
16% 28,700
Quarter ended December 31, 2016 90,300
20% 58,300
17% 32,000
Twelve months ended September 30, 2017⁽¹⁾
411,600
18% 382,800
11% 28,800

Quarter ended September 30, 2016 82,400
20% 108,700
9% (26,300)
Quarter ended June 30, 2016 99,200
12% 122,800
9% (23,600)
Quarter ended March 31, 2016 90,800
11% 62,900
15% 27,900
Quarter ended December 31, 2015 75,000
4% 49,900
16% 25,100
Twelve months ended September 30, 2016 347,400
12% 344,300
12% 3,100


⁽¹⁾	~~Retail sales data for September 2017 has not been published; therefore retail and dealer inventory data includes a Company estimate for retail units sold in September.~~

According to the RVIA, industry-wide wholesale shipments of motorhome RVs in the first nine months of 2017 increased 14 percent to 47,300 units compared to the same period of 2016. The Company estimates retail demand for motorhome RVs increased 13 percent in the first nine months of 2017, following an 11 percent increase in retail demand in 2016.

The RVIA has projected an 11 percent increase in industry-wide wholesale shipments of travel trailer and fifth-wheel RVs for 2017 and a two percent increase for 2018. Several RV OEMs, however, are introducing new product lines, additional features and adding production capacity. 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 93 of the last 95 months on a year-over-year basis. Industry resources report strong attendance and high consumer interest at RV shows around the United States and Canada thus far in 2017.

Although future retail demand is inherently uncertain, RV industry fundamentals in the first nine months of 2017, including generally low unemployment, low fuel prices and available credit for dealers and RV consumers, were strong, as evidenced by the 10 percent increase in industry-wide retail sales of travel trailer and fifth-wheel RVs in the first nine months of 2017. 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 the remainder of 2017. The Company also remains confident in its ability

LCI INDUSTRIES

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)


					Estimated
	Wholesale		Retail		Unit Impact on
	Units	Change	Units	Change	Dealer Inventories
Quarter ended June 30, 2021	133,800	100%	179,400	36%	(45,600)
Quarter ended March 31, 2021	131,200	49%	113,800	52%	17,400
Quarter ended December 31, 2020	115,200	38%	89,000	40%	26,200
Quarter ended September 30, 2020	110,100	37%	158,100	34%	(48,000)
Twelve months ended June 30, 2021	490,300	54%	540,300	39%	(50,000)

Quarter ended June 30, 2020	66,800	(34)%	131,700	(5)%	(64,900)
Quarter ended March 31, 2020	88,000	4%	74,800	(3)%	13,200
Quarter ended December 31, 2019	83,300	(8)%	63,600	(6)%	19,700
Quarter ended September 30, 2019	80,600	(13)%	118,000	(6)%	(37,400)
Twelve months ended June 30, 2020	318,700	(14)%	388,100	(5)%	(69,400)

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 themAccording to the ~~RV industry. The~~ RVIA, ~~has an advertising campaign promoting~~industry-wide wholesale shipments of motorhome RVs in 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,~~first six months of 2021 increased 71 percent to 29,100 units compared to the ~~RV OEMs have developed more entry level units, specifically targeting younger families,~~first six months of 2020, primarily due to OEM plant shutdowns in ~~both towables and motorhomes. The popularity of traveling~~response to COVID-19 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~~the 2020 period. Retail demand for ~~RVs. RVIA studies indicate RV vacations cost significantly less than other forms~~motorhome RVs increased 20 percent year-over-year in the first six months of ~~vacation travel, even when factoring~~2021, compared to a 22 percent year-over-year decrease in ~~fuel prices and~~retail demand in the ~~cost~~same period of ~~RV ownership. More details can be found at www.RVIA.org.~~2020.

Adjacent Industries

~~The Company’s~~Our 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”~~"Adjacent Industries"). In many cases, OEM customers of the Adjacent Industries are affiliated with RV OEMs through related subsidiaries. ~~The Company believes~~We believe there are significant opportunities in these Adjacent ~~Industries and, as a result, five of the last eight 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 192,000 and 183,500 enclosed trailers were sold in 2016 and 2015, respectively.~~

~~Pontoon boats. Statistical Surveys also reported approximately 49,600 and 45,400 pontoon boats were sold in 2016 and 2015, respectively.~~

~~School buses. According to Wards Communications and R.L. Polk & Co., there were approximately 32,800 and 29,600 school buses sold in 2016 and 2015, respectively.~~

~~Manufactured housing. According to the Institute for Building Technology and Safety, there were approximately 81,100 and 70,500 manufactured home wholesale shipments in 2016 and 2015, respectively.~~

Aftermarket Segment

Many of ~~the Company’s~~our OEM Segment products are also sold through various aftermarket channels, including dealerships, ~~warehouse~~wholesale distributors, and service centers, as well as direct to retail ~~customers. The Company has~~customers via the Internet. This includes discretionary accessories and replacement service parts. We have teams dedicated to product technical and installation training ~~and~~as well as marketing support for ~~its~~our Aftermarket Segment customers. ~~The Company~~We also ~~supports two~~support multiple 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 biminis, covers, buoys, fenders to the marine industry, towing products, truck accessories, and the sale of replacement glass and awnings to fulfill insurance claims. 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 is nearly nine million units. Additionally,~~counter-seasonal, but this may be different in 2021 and future years as a result of ~~a vibrant secondary market, one-third~~the COVID-19 pandemic and related impacts.

According to Go RVing, estimated RV ownership in the United States as of ~~current owners purchased their RV new while the remaining two-thirds purchased a previously owned RV.~~2020 had increased to over 11 million households. This vibrant ~~secondary~~ market is a key driver for ~~the~~ aftermarket sales, as ~~the Company anticipates~~we anticipate 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

Consolidated Highlights

•Consolidated net sales in the second quarter of 2021 were $1.1 billion, 108 percent higher than consolidated net sales for the same period of 2020 of $525.8 million. The increase was primarily driven by record RV retail demand and strong Aftermarket Segment sales growth. Net sales from acquisitions completed in 2020 and the first six months of 2021, primarily Veada Industries, Inc. and Challenger Door, LLC, contributed approximately $53.7

LCI INDUSTRIES

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)

~~RESULTS OF OPERATIONS~~

~~Consolidated Highlights~~

~~Consolidated net~~million in the second quarter of 2021. Additionally, the pandemic had a negative impact on sales in the ~~third~~second quarter of 2017 increased to $555 million, 35 percent higher than consolidated net sales for the third quarter of 2016 of $412 million. Acquisitions completed by the Company over the twelve months ended September 30, 2017, added $24 million in net sales in the third quarter of 2017. The 26 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 the third quarter of 2017. Further, the Company organically increased sales to adjacent industries and the aftermarket.2020.

•Net income for the ~~third~~second quarter of ~~2017 increased to $32.1~~2021 was $67.9 million, or ~~$1.26 per diluted share, up from net income of $29.8 million, or $1.19~~$2.67 per diluted share, compared to net income of $13.2 million, or $0.52 per diluted share, for the ~~third~~same period of 2020.

•Consolidated operating profit during the second quarter of ~~2016.~~

~~Consolidated operating profits during the third quarter of 2017 increased six percent,~~2021 was $94.0 million compared to ~~$47.9 million from $45.1~~$20.8 million in the ~~third quarter~~same period of ~~2016.~~2020. Operating profit margin ~~decreased to nine~~was 8.6 percent in the ~~third~~second quarter of ~~2017 from 11 percent~~2021 compared to ~~the third quarter of 2016.~~

~~The improvement~~4.0 percent in the ~~Company’s operating results were partially offset by continued increases in input costs,~~same period of 2020, primarily steel, aluminum and direct labor. Aluminum costs have increased in excess of 20 percent over the prior year. Labor continues to remain a challenge with Elkhart County unemployment rates at less than three percent, and, as a result of fixed costs being spread over a larger sales base in the ~~Company has initiated price increases that will be fully implemented by~~2021 period and COVID-19-related shutdowns which negatively impacted the ~~first quarter of 2018.~~2020 period.

Lean manufacturing teams continue working to reduce cost and implement processes to better utilize available floorspace. The Company also has reduced direct labor attrition which improves efficiency and on-time deliveries, while reducing other costs associated with workforce turnover. The Company has implemented a number of cost saving initiatives during the third quarter of 2017.

•The cost of aluminum ~~steel~~ and ~~foam~~steel used in certain of ~~the Company’s~~our manufactured components ~~declined during the first half of 2016; however, certain commodities experienced cost increases~~increased in the second ~~half~~quarter of ~~2016 and~~2021 compared to the ~~first nine months~~same period of ~~2017 from market low points.~~2020. Raw material costs ~~continue~~are subject to ~~fluctuate~~continued fluctuation and are ~~expected~~being offset, in part, by contractual selling prices that are indexed to ~~remain volatile.~~select commodities.

~~Thus far in 2017, the Company completed three acquisitions:~~

◦

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 by this operation.


◦	In 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, transportation, medical and office furniture industries located in Elkhart, Indiana. The purchase price was $40.1 million paid at closing.


◦	In February 2017, the Company acquired 100 percent of the outstanding shares of Sessa Klein S.p.A. (“Sessa Klein”), a manufacturer of highly engineered side window systems for both high speed and commuter trains, located near Varese, Italy. The purchase price was $8.5 million paid at closing, plus contingent consideration based on future sales by this operation.

Integration activities for these and previously 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.

•The effective tax rate of 25.0 percent for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021 was ~~substantially~~ lower than the comparable prior year period of 26.3 percent, primarily due to the ~~recognition~~reduced rate impact of ~~excess~~permanent tax ~~benefits attributable to~~differences with the ~~adoption by~~growth in income before income taxes and an increase in the ~~Company of Accounting Standards Update 2016-09, which simplified several aspects of the accounting for share-based payment transactions, including income tax consequences. The~~ excess tax benefit ~~equated~~related to ~~$5.9 million recognized in~~ the ~~first nine months~~vesting of ~~2017.~~equity-based compensation awards, as discussed below under "Income Taxes."

~~Return on equity for the twelve months ended September 30, 2017, which is calculated by taking net income over equity, was 24.2 percent.~~

•In March and June ~~and September 2017, the Company~~2021, we paid a quarterly dividend of ~~$0.50~~$0.75 per share and $0.90 per share, aggregating to ~~$12.4 million, $12.4~~$18.9 million and ~~$12.5~~$22.7 million, respectively.

~~LCI INDUSTRIES~~

~~ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF~~

~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Continued)~~

OEM Segment - ~~Third~~Second Quarter

Net sales of the OEM Segment in the ~~third~~second quarter of ~~2017~~2021 increased ~~35 percent, or $130~~$496.8 million, compared to the same period of ~~2016.~~2020. Net sales of components to ~~OEMs were to~~ the following OEMs markets for the three months ended ~~September 30:~~June 30 were:


(In thousands)	2021		2020		Change
RV OEMs:
Travel trailers and fifth-wheels	$	527,614	$	212,518	148	%
Motorhomes	67,253		24,713		172	%
Adjacent Industries OEMs	269,787		130,581		107	%
Total OEM Segment net sales	$	864,654	$	367,812	135	%

(In thousands) 2017 2016 Change
RV OEMs:
Travel trailers and fifth-wheels $ 357,940
$ 263,579
36 %
Motorhomes 41,595
29,373
42 %
Adjacent industries OEMs 106,386
82,963
28 %
Total OEM Segment net sales $ 505,921
$ 375,915
35 %

According to the RVIA, industry-wide wholesale unit shipments for the three months ended ~~September~~June 30 were:


	2021	2020	Change
Travel trailer and fifth-wheel RVs	133,800	66,800	100	%
Motorhomes	14,800	6,900	114	%

2017 2016 Change
Travel trailer and fifth-wheel RVs 103,900
82,400
26 %
Motorhomes 14,500
12,800
13 %

Our calculations of content in the OEM Segment discussion that follows were adjusted to remove Furrion sales from all prior periods to enhance comparability between periods following the termination of the agreement at the end of 2019.

The Company’s net sales growth in components for travel trailer and fifth-wheel RVs during the third quarter of 2017 exceeded the increase in industry-wide wholesale shipments of travel trailer and fifth-wheel RVs during the same period, primarily due to market share gains.

The Company’s net sales growth in components for motorhomes during the third quarter of 2017 exceeded the increase in industry-wide wholesale shipments of motorhomes during the same period, primarily due to acquisitions completed in 2017. 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~~our average product content per RV produced is an indicator of ~~the Company’s~~our overall market share of components for new RVs. ~~The Company’s~~Our average product content per type of RV, calculated based upon ~~the Company’s~~our net sales of components to domestic RV OEMs for the different types of RVs produced for the twelve months ended ~~September~~June 30, divided by the industry-wide wholesale shipments of the different ~~types~~product mix of RVs for the same period, was:


Content per:	2021		2020		Change
Travel trailer and fifth-wheel RV	$	3,621	$	3,371	7	%
Motorhome	$	2,644	$	2,308	15	%

Content per: 2017 2016 Change
Travel trailer and fifth-wheel RV $ 3,172
$ 3,025
5 %
Motorhome $ 2,152
$ 1,957
10 %

~~The Company’s~~Our 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~~our products, as well as changes in the types of RVs produced industry-wide.

~~The Company’s~~Our increase in net ~~OEM~~ sales to ~~Adjacent Industries increased~~RV OEMs of travel trailers, fifth-wheel, and motorhome components during the ~~third~~second quarter of ~~2017~~2021 was primarily ~~due to acquisitions completed~~driven by a recovery in ~~2017 and 2016 and market share gains. The Company continues to believe there are significant opportunities in Adjacent Industries.~~

~~Operating profit of the OEM Segment was $41.0 million~~RV retail demand beginning later in the ~~third~~second quarter of ~~2017, an improvement of $2.0 million compared to the same period of 2016. The operating profit margin of the OEM Segment in the third quarter of 2017 was positively impacted by:~~

~~Better fixed cost absorption by spreading fixed costs over a sales base that increased by $130 million.~~

~~Increased sales to Adjacent Industries OEMs.~~

~~Pricing changes of targeted products.~~

~~Investments over the past several years to increase capacity~~2020 and ~~improve operating efficiencies. Further, the Company has implemented efficiency improvements, including lean manufacturing initiatives, increased use of automation~~

LCI INDUSTRIES

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)

continuing into the second quarter of 2021. The net sales increase further benefited from content gains and ~~employee retention initiatives. The Company has also reduced direct labor attrition which improves efficiency and reduces other costs associated with workforce turnover.~~

~~Offset by:~~

~~Higher material costs for certain raw materials. Steel, aluminum and foam costs increased~~price increases during the second quarter of 2021. Additionally, the pandemic had a negative impact on sales in the ~~third~~second quarter of ~~2017. Material costs are subject to global supply and demand forces and are expected to remain volatile.~~2020.

Higher labor costs. 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. Additionally, competition for skilled workers has continued to tighten the labor market which has increased the cost of labor.

Fixed costs, which were approximately $3 million to $4 million higher than in the third quarter of 2016. Over the past couple of years, the Company made significant investments in manufacturing capacity, both facilities and personnel, to prepare for the expectedOur increase in net sales to OEMs in ~~2017~~Adjacent Industries during the second quarter of 2021 was driven by acquisitions and ~~beyond.~~a recovery in retail demand for the marine industry and other adjacent markets beginning later in the second quarter of 2020 and continuing into the second quarter of 2021.

Operating profit of the OEM Segment was $63.3 million in the second quarter of 2021, an increase of $61.6 million compared to the same period of 2020. The operating profit margin of the OEM Segment in the second quarter of 2021 increased to 7.3 percent compared to 0.5 percent for the same period of 2020 and was positively impacted by:

•Leveraging of fixed costs over a larger sales base, partially related to COVID-19 shutdowns in 2020, which increased operating profit by $53.7 million related to fixed selling, general, and administrative costs and $27.9 million related to fixed overhead costs.

•Pricing changes to targeted products, resulting in an increase in operating profit of $19.6 million compared to the same period of 2020. In addition, selling prices contractually tied to ~~investments~~indexes of select commodities increased, resulting in ~~fixed~~an increase in operating profit of $19.1 million compared to the same period of 2020.

Partially offset by:

•Increases in material commodity pricing, which negatively impacted operating profit by $45.0 million, primarily related to increased steel and aluminum costs.

•Increases in direct labor costs due to ~~expand manufacturing capacity, the Company has made improvements in marketing, human resources, engineering, customer service~~production volumes and ~~other critical departments. The Company also added the teams from acquired businesses, as well as amortization costs of~~a tight labor market, which reduced operating profit by $12.6 million.

Amortization expense on intangible assets ~~related~~for the OEM Segment was $7.8 million in the second quarter of 2021, compared to ~~those businesses.~~$6.3 million in the same period in 2020. Depreciation expense on fixed assets for the OEM Segment was $12.1 million in the second quarter of 2021, compared to $11.5 million in the same period of 2020.

OEM Segment – Year to Date

Net sales of the OEM Segment in the first ~~nine~~six months of ~~2017~~2021 increased 2587 percent, or ~~$295~~$780.7 million, compared to the first ~~nine~~six months of ~~2016.~~2020. Net sales of components to OEMs were to the following markets for the ~~nine~~six months ended ~~September~~June 30:


(In thousands)	2021		2020		Change
RV OEMs:
Travel trailers and fifth-wheels	$	1,030,630	$	519,626	98	%
Motorhomes	129,846		62,800		107	%
Adjacent Industries OEMs	520,428		317,743		64	%
Total OEM Segment net sales	$	1,680,904	$	900,169	87	%

(In thousands) 2017 2016 Change
RV OEMs:
Travel trailers and fifth-wheels $ 1,045,465
$ 836,634
25 %
Motorhomes 114,887
85,762
34 %
Adjacent industries OEMs 310,373
253,088
23 %
Total OEM Segment net sales $ 1,470,725
$ 1,175,484
25 %

According to the RVIA, industry-wide wholesale unit shipments for the ~~nine~~six months ended ~~September~~June 30, were:


	2021	2020	Change
Travel trailer and fifth-wheel RVs	265,000	154,700	71	%
Motorhomes	29,100	17,000	71	%

2017 2016 Change
Travel trailer and fifth-wheel RVs 321,300
272,400
18 %
Motorhomes 47,300
41,600
14 %

~~The Company’s~~Our increase in net sales ~~growth in~~to RV OEMs of travel trailers, fifth-wheel, and motorhome components ~~for travel trailer and fifth-wheel RVs~~ during the first ~~nine~~six months of ~~2017 exceeded~~2021 was primarily driven by a recovery in RV retail demand beginning later in the ~~increase in industry-wide wholesale shipments~~first six months of ~~travel trailer~~2020 and ~~fifth-wheel RVs during~~continuing into the ~~same period primarily due to market share gains and acquisitions completed in 2017 and 2016.~~

first six months of 2021. The ~~Company’s~~ net sales ~~growth in components for motorhomes~~increase further benefited from content gains during the first ~~nine~~six months of ~~2017 exceeded~~2021. Additionally, the pandemic had a negative impact on sales in the second quarter of 2020.

Our increase in industry-wide wholesale shipments of motorhomes during the same period, primarily due to acquisitions completed in 2017 and 2016 and market share gains. 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 Company’s~~ net sales to OEMs in Adjacent Industries ~~increased~~ during the first ~~nine~~six months of ~~2017, primarily due to~~2021 was driven by acquisitions ~~completed~~and a recovery in retail demand for the marine industry and other adjacent markets beginning later in the ~~fourth quarter~~first six months of ~~2016~~2020 and continuing into the first ~~nine~~six months of ~~2017, and market share gains. Acquisitions added $33 million in net sales during the first nine months of 2017. The Company continues~~2021. We continue to believe there are significant opportunities in Adjacent Industries.

Operating profit of the OEM Segment was $151.9 million in the first nine months of 2017, an improvement of $7.8 million compared to the first nine months of 2016. The operating profit margin of the OEM Segment in the first nine months of 2017 was impacted by:

LCI INDUSTRIES

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)

Operating profit of the OEM Segment was $142.6 million in the first six months of 2021, an increase of $97.7 million compared to the same period of 2020. The operating profit margin of the OEM Segment in the first six months of 2021 increased to 8.5 percent compared to 5.0 percent for the same period of 2020 and was positively impacted by:

~~Better fixed cost absorption by spreading~~•Leveraging of fixed costs over a larger sales base, ~~that~~partially related to COVID-19 shutdowns in 2020, which increased operating profit by ~~$295 million.~~$66.1 million related to fixed selling, general, and administrative costs and $34.3 million related to fixed overhead costs.

~~Increased sales to Adjacent Industries OEMs.~~

•Pricing changes to targeted products, resulting in an increase in operating profit of ~~targeted products.~~

~~Investments over~~$25.1 million compared to the ~~past several years~~same period of 2020. In addition, selling prices contractually tied to indexes of select commodities increased; resulting in an increase ~~capacity and improve~~in operating ~~efficiencies. Further,~~profit of $17.4 million compared to the ~~Company has implemented efficiency improvements, including lean manufacturing initiatives, increased use~~same period 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 claims. The Company actively works to manage and reduce these costs, however, these costs remain subject to fluctuation.~~2020.

Partially offset by:

~~Fixed costs,~~•Increases in material commodity pricing, which ~~were approximately $8~~negatively impacted operating profit by $62.9 million, to $9 million higher than in the first nine months of 2016. 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 2017 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 assetsprimarily related to ~~those businesses.~~increased steel and aluminum costs.

~~Higher material~~•Increases in direct labor costs ~~for certain raw materials. Steel, aluminum~~due to production volumes and ~~foam costs increased in the first nine months of 2017. Material costs are subject to global supply and demand forces and are expected to remain volatile.~~

Higher labor costs. 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. Additionally, competition for skilled workers has continued to tighten thea tight labor market, which ~~has increased the cost of labor.~~

reduced operating profit by $18.3 million.

Aftermarket Segment - ~~Third~~Second Quarter

Net sales of the Aftermarket Segment in the ~~third~~second quarter of ~~2017~~2021 increased 3445 percent, or ~~$12~~$71.1 million, compared to the same period of ~~2016.~~2020. Net sales of components in the Aftermarket Segment were as follows for the three months ended ~~September~~June 30:


(In thousands)	2021		2020		Change
Total Aftermarket Segment net sales	$	229,066	$	157,953	45	%

(In thousands) 2017 2016 Change
Total Aftermarket Segment net sales $ 48,893
$ 36,455
34 %

~~The Company’s~~Our net sales to the Aftermarket Segment increased during the ~~third~~second quarter of ~~2017~~2021, primarily due to the Company’s focus on building out well qualified, customer-focused teams 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 opportunitiesconsumer demand in the ~~RV aftermarket as the components sold to OEMs are subject to normal wear~~outdoor recreational and ~~tear over time.~~transportation market and our distributor customers rebuilding their inventory levels.

Operating profit of the Aftermarket Segment was ~~$6.9~~$30.6 million in the ~~third~~second quarter of ~~2017,~~2021, an increase of ~~$0.8~~$11.6 million compared to the same period of ~~2016; however,~~2020. The operating profit margin ~~has decreased~~of the Aftermarket Segment was 13.4 percent in 2021, compared to 12.0 percent in 2020, and was positively impacted by:

•Leveraging of fixed costs over a larger sales base, partially related to COVID-19 shutdowns in 2020, which increased operating profit by $6.9 million related to fixed selling, general, and administrative costs and $4.7 million related to fixed overhead costs.

•Pricing changes to targeted products, resulting in an increase in operating profit of $7.7 million compared to the same period of 2020.

Partially offset by:

•Increases in transportation costs, primarily for third party freight, which reduced operating profit by $7.7 million.

•Increases in material commodity pricing, which negatively impacted operating profit by $5.2 million, primarily related to increased steel and aluminum costs.

•The recognition of higher cost of sales due to the ~~increase~~inventory fair value step-up for Ranch Hand determined as part of the purchase accounting of $0.6 million.

•Additional amortization related to long-lived assets from the Ranch Hand acquisition, which reduced operating profit by $0.5 million.

Amortization expense on intangible assets for the Aftermarket Segment was $3.5 million in ~~net sales~~the second quarter of 2021, compared to ~~wholesale distributors with lower margins traditionally experienced~~$2.9 million in ~~aftermarket channels. As indicated, this business is still~~the same period of 2020. Depreciation expense on fixed assets for the Aftermarket Segment was $3.3 million in ~~an early growth stage and~~ the ~~Company has added staff~~second quarter of 2021, compared to ~~support anticipated growth and anticipates further cost increases~~$3.4 million in ~~this area as it builds up~~ the ~~capabilities~~same period of ~~this business.~~2020.

LCI INDUSTRIES

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)

Aftermarket Segment – Year to Date

Net sales of the Aftermarket Segment in the first ~~nine~~six months of ~~2017~~2021 increased 2945 percent, or ~~$29~~$127.8 million, compared to the same period of ~~2016.~~2020. Net sales of components in the Aftermarket Segment were as follows for the ~~nine~~six months ended ~~September~~June 30:


(In thousands)	2021		2020		Change
Total Aftermarket Segment net sales	$	413,074	$	285,266	45	%

(In thousands) 2017 2016 Change
Total Aftermarket Segment net sales $ 129,908
$ 100,515
29 %

~~The Company’s~~Our net sales to the Aftermarket Segment increased during the first ~~nine~~six months of ~~2017~~2021 primarily due to organic growth of $117.7 million and sales from acquisitions of $10.1 million.

Operating profit of the Aftermarket Segment was $52.8 million in the first six months of 2021, an increase of $32.7 million compared to the same period of 2020, primarily due to sales from organic growth, and the impact of COVID-19 in 2020. The operating profit margin of the Aftermarket Segment was 12.8 percent in 2021, compared to 7.0 percent in 2020, and was positively impacted by:

•Leveraging of fixed costs over a larger sales base, partially related to COVID-19 shutdowns in 2020, which increased operating profit by $16.4 million related to fixed selling, general, and administrative costs and $9.6 million related to fixed overhead costs.

•Pricing changes to targeted products, resulting in an increase in operating profit of $11.6 million compared to the same period of 2020.

•The recognition of higher cost of sales during the first six months of 2020 due to the inventory fair value step-up for CURT of $6.9 million.

Partially offset by:

•Increases in transportation costs, primarily for third party freight, which reduced operating profit by $10.2 million.

•Increases in material commodity pricing, which negatively impacted operating profit by $8.9 million, primarily related to increased steel and aluminum costs.

Income Taxes

The effective tax rates for the six months ended June 30, 2021 and 2020 were 25.0 percent and 26.3 percent, respectively. The effective tax rate for the six months ended June 30, 2021 differed from the Federal statutory rate primarily due to state taxes, foreign taxes, and non-deductible expenses, partially offset by the recognition of excess tax benefits as a component of the provision for income taxes, and Federal and Indiana research and development credits. The decrease in the effective tax rate for the six months ended June 30, 2021 as compared to the same period in 2020 was primarily due to the ~~Company’s focus on building out well qualified, customer-focused teams~~decreased rate impact of permanent tax differences with the growth in income before income taxes and ~~infrastructure~~an increase in the excess tax benefit related to ~~service this market. With an estimated nine~~the vesting of equity-based compensation awards and investments in life insurance contracts.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

As of June 30, 2021, we had $98.0 million in cash and cash equivalents, and $372.6 million of availability under our revolving credit facility under the Amended Credit Agreement (as defined in Note 9 of the Notes to Condensed Consolidated Financial Statements). Additionally, we have the ability to request up to $150.0 million in additional Senior Promissory Notes be purchased by Prudential under our Shelf-Loan Facility (each as defined in Note 9 of the Notes to Condensed Consolidated Financial Statements), subject to Prudential's approval. See Note 9 of the Notes to Condensed Consolidated Financial Statements for a description of our credit facilities.

We maintain a level of liquidity sufficient to allow us to meet our cash needs in the short term. Over the long term, we manage our cash and capital structure to maximize shareholder return, maintain our financial condition, and maintain flexibility for our future strategic investments. We continuously assess our capital requirements, working capital needs, debt and leverage levels, debt and lease maturity schedules, capital expenditure requirements, dividends, future investments or acquisitions, and potential share repurchases. As discussed above under "COVID-19 Update," with RV retail demand at record levels through the first six months of 2021, the industry has faced challenges with supply chain constraints, rising material costs, and a tightened

LCI INDUSTRIES

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)

labor market, especially in northern Indiana. To address these challenges, we have strategically managed working capital, including intentionally building up levels of certain inventory items to avoid future shortages, and have expanded our production capacity. As we build inventory levels and invest in additional production capacity, we also closely monitor our liquidity. In the event additional need for cash arise, or if we refinance our existing debt, we may raise additional funds from a combination of sources, including the potential issuance of debt or equity securities. Additional financing might not be available on terms favorable to us, or at all.

~~million households in North America owning an RV and~~We believe the ~~Company’s increasing content per unit,~~availability under the ~~Company continues~~revolving credit facility under the Amended Credit Agreement, along with our cash flows from operations, are adequate 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 $18.2 million in the first nine months of 2017, an increase of $2.1 million compared to the same period of 2016; however, operating margin has decreased primarily due to the increase in net sales to wholesale distributors with lower margins traditionally experienced in aftermarket channels. As indicated, this business is still in an early growth stage and the Company has added staff to supportfinance our anticipated ~~growth and anticipates further cost increases in this area as it builds up the capabilities of this business.~~

~~Income Taxes~~

~~The effective tax rates~~cash requirements for the nine months ended September 30, 2017 and 2016 were 31.7% and 35.0%, respectively. The effective tax rate for the nine months ended September 30, 2017 differed from the Federal statutory rate primarily due to the recognition of excess tax benefits as a component of the provision for income taxes attributable to the adoption of ASU 2016-09, the tax benefit relating to U.S. manufacturer’s deduction and Federal and Indiana research and development (“R&D”) credits offset by state taxes, foreign taxes and non-deductible expenses. The decrease in effective tax rate for the nine months ended September 30, 2017 as compared to the same period in 2016 was due primarily to the recognition of excess tax benefits attributable to the adoption of ASU 2016-09 in the first quarter of 2017.

Generally, calendar years 2014 - 2016 remain open for federal and state income tax purposes. The Company is currently being audited by the Internal Revenue Service for the tax year ended December 31, 2014.

~~The net amount of tax liability for unrecognized tax benefits may change within~~ the next twelve months due to changes in audit status, expiration of statutes of limitations, settlements of tax assessments and other events which could impact our determination of unrecognized tax benefits. Although the ultimate timing for resolution of the disputed tax issues is uncertain, we may resolve certain tax matters within the next twelve months and pay amounts for other unresolved tax matters in order to limit the potential impact of interest charges. The resolution of these audits are not expected to be material to our consolidated financial statements.months.

~~LIQUIDITY AND CAPITAL RESOURCES~~

The Condensed Consolidated Statements of Cash Flows reflect the following for the ~~nine~~six months ended ~~September~~June 30:


(In thousands)	2021		2020
Net cash flows provided by operating activities	$	23,859	$	102,101
Net cash flows used in investing activities	(146,429)		(105,166)
Net cash flows provided by financing activities	168,802		32,093
Effect of exchange rate changes on cash and cash equivalents	(92)		(2,115)
Net increase in cash and cash equivalents	$	46,140	$	26,913

(In thousands) 2017 2016
Net cash flows provided by operating activities $ 108,859
$ 164,108
Net cash flows used for investing activities (127,975 ) (55,947 )
Net cash flows used for financing activities (47,292 ) (25,406 )
Net (decrease) increase in cash and cash equivalents $ (66,408 ) $ 82,755

Cash Flows from Operations

Net cash flows ~~from~~provided by operating activities ~~in first nine months of 2017~~ were ~~$55.2~~$23.9 million ~~lower than the same period of 2016, primarily due to:~~

~~A $69.7 million seasonal increase in accounts receivable~~ in the first ~~nine~~six months of ~~2017~~2021, compared to $102.1 million in the first six months of 2020. The decrease in net cash flows provided by operating activities was primarily due to changes in net assets and liabilities, net of acquisitions of businesses, which generated $191.5 million less cash than in the first six months of 2020. During the first six months of 2021, in an effort to address challenges with supply chain constraints, rising material costs, and a ~~$46.0~~tightened labor market, we strategically managed working capital, including intentionally building up levels of certain inventory items and expanded production capacity. As a result, increases in inventory and receivables related to increased wholesale RV demand were the primary uses of cash generated from net assets. The decrease was partially offset by a $113.3 million increase in net income, adjusted for depreciation and amortization, stock-based compensation expense, deferred taxes, and other non-cash items.

Over the ~~same period~~long term, based on our historical collection and payment patterns, as well as inventory turnover, and also giving consideration to emerging trends and changes to the sales mix, we expect working capital to increase or decrease equivalent to approximately 10 to 15 percent of ~~2016, primarily due to increased~~the increase or decrease, respectively, in net ~~sales partially offset by~~sales. However, there are many factors that can impact this relationship, especially in the timing of payments by the Company’s customers. Overall, accounts receivable balances remain current with an increase in days sales outstanding to 22 at September 30, 2017, compared to 19 at September 30, 2016. The increase in days sales outstanding is due to growth in sales to adjacentshort term.

Depreciation and ~~international customers which pay with longer terms.~~

~~A $33.8~~amortization was $51.3 million ~~increase in inventory~~ in the first ~~nine~~six months of ~~2017~~2021, and is expected to be approximately $100 to $110 million for the full year 2021. Non-cash stock-based compensation expense in the first six months of 2021 was $13.9 million. Non-cash stock-based compensation expense is expected to be approximately $20 to $30 million for the full year 2021.

Cash Flows from Investing Activities

Cash flows used in investing activities of $146.4 million in the first six months of 2021 were primarily comprised of $103.9 million for the acquisitions of businesses, net of cash acquired and $42.0 million for capital expenditures. Cash flows used in investing activities of $105.2 million in the first six months of 2020 were primarily comprised of $94.7 million for the acquisitions of businesses, net of cash acquired, and $14.5 million for capital expenditures.

Our capital expenditures are primarily for replacement and growth. Over the long term, based on our historical capital expenditures, the replacement portion has averaged approximately one to two percent of net sales, while the growth portion has averaged approximately two to three percent of net sales. However, there are many factors that can impact actual spending compared to ~~a $13.5~~these historical averages. We estimate full year 2021 capital expenditures of $130 to $150 million, ~~decrease~~including capacity expansions to meet elevated demand, which we expect to fund with cash flows from operations or periodic borrowings under the revolving credit facility as needed.

Capital expenditures and acquisitions in the ~~same period~~first six months of ~~2016. Inventory turnover for~~2021 were funded by cash from operations, borrowings under our credit agreement, and net proceeds from the ~~twelve months ended September 30, 2017 increased to 7.8 turns compared to 7.3 turns for the same period~~issuance of ~~2016. The Company is working to improve inventory turnover;~~

our 1.125 percent convertible senior notes due 2026 (the

LCI INDUSTRIES

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)

~~however, inventory turns may trend lower due to growth in product categories such as imported furniture and Furrion electronics.~~

A $27.2 million increase in accrued expenses and other liabilities in the first nine months of 2017 compared to a $30.1 million increase in the same period of 2016, primarily due to timing of these payments.

~~Partially offset by:~~

~~A $12.0 million increase in net income in first nine months of 2017 compared to the same period of 2016.~~

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

Depreciation and amortization was $39.9 million in the first nine months of 2017, and is expected to be approximately $55 million to $60 million for fiscal year 2017. Non-cash stock-based compensation in the first nine months of 2017 was $15.0 million. Non-cash stock-based compensation is expected to be approximately $19 million to $21 million in 2017.

~~Cash Flows from Investing Activities~~

~~Cash flows used for investing activities of $128.0 million in the first nine months of 2017 were primarily comprised of $60.3 million for capital~~"Convertible Notes"). Capital expenditures and $67.9 million for the acquisition of businesses. Cash flows used for investing activities of $55.9 million in the first nine months of 2016 were primarily comprised of $21.9 million for capital expenditures and $34.2 million for the acquisition of businesses. Information detailing out the acquisitions in the ~~first nine months~~remainder of ~~2017 and 2016 are included in Note 2 of the Notes to the Condensed Consolidated Financial Statements.~~

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 2 percent of net sales, while the growth portion has averaged approximately 8 to 11 percent of the annual increase in net sales. However, there are many factors that can impact the actual spending compared to these historical averages. During 2017, the Company has focused capital investment in growth, automation and lean manufacturing initiatives.

~~The first nine months of 2017 capital expenditures and acquisitions were primarily funded by cash from operations. Capital expenditures in 2017~~fiscal year 2021 are expected to be funded primarily from cash generated from operations, as well as periodic borrowings under ~~the Company’s line of credit.~~our revolving credit facility.

Cash Flows from Financing Activities

Cash flows ~~used for~~provided by financing activities in the first ~~nine~~six months of ~~2017~~2021 were primarily comprised of proceeds from the issuance of the Convertible Notes and warrants to purchase 2.8 million shares of the Company's common stock (the "Warrants"), net of debt issuance costs, and from the privately negotiated call option contracts on the Company's common stock (the "Convertible Note Hedge Transactions") of $396.5 million, partially offset by $165.1 million in net payments under our revolving credit facility, payments of quarterly dividends of ~~$0.50 per share~~$41.7 million, repayments of $8.7 million under the ~~Company’s common stock, representing an aggregate~~term loan and other borrowings, and cash outflows of ~~$12.4~~$7.9 million ~~$12.4 million and $12.5 million, respectively, paid~~related to ~~stockholders~~vesting of ~~record as of March 6, 2017, May 19, 2017 and August 18, 2017, respectively. In addition, the Company had $7.3 million~~stock-based awards, net of shares tendered for payment of taxes. ~~Further, the Company paid $2.6~~

On May 13, 2021, we issued $460.0 million in ~~contingent consideration related~~aggregate principal amount of the Convertible Notes in a private placement to ~~acquisitions.~~certain qualified institutional buyers, resulting in net proceeds to us of approximately $448.2 million after deducting initial purchasers' discounts and offering expenses payable by us on the Convertible Notes. In connection with the issuance of the Convertible Notes, we entered into the Convertible Note Hedge Transactions and Warrant Transactions. We used approximately $51.6 million of the net proceeds of the offering of the Convertible Notes to pay the $100.1 million cost of the Convertible Note Hedge Transactions (after such cost was partially offset by the $48.5 million of proceeds from the Warrant Transactions). The remainder of the net proceeds from the Convertible Notes were used to repay outstanding borrowings under our revolving credit facility, and for general corporate purposes. See Note 9 and Note 12 to the Notes to Condensed Consolidated Financial Statements for further description of these transactions.

Cash flows ~~used for~~provided by financing activities in the first ~~nine~~six months of ~~2016~~2020 were primarily comprised of ~~payments~~$79.2 million of dividends of $0.30 per share of the Company’s common stock, representing an aggregate of $7.3 million, $7.4 million and $7.4 million, respectively, paid to stockholders of record as of April 1, 2016, June 6, 2016 and August 19, 2016, respectively. In addition, the Company received $3.6 million in cash and the related tax benefits from the exercise of stock-based compensation, which wasnet borrowings under our revolving credit facility, partially offset by ~~$3.2~~payments of quarterly dividends of $32.7 million, repayments of $9.6 million under our term loan and other borrowings, and cash outflows of $4.6 million related to the vesting of stock-based awards, net of shares tendered for payment of taxes. ~~Further, the Company paid $2.7 million in contingent consideration related to acquisitions.~~

In connection with certain business acquisitions, if established sales targets for the acquired business are achieved, ~~the Company~~we will pay additional cash consideration. ~~The Company has~~We have recorded a ~~$17.0~~$9.5 million liability for the aggregate fair value of these expected contingent consideration liabilities at ~~September~~June 30, ~~2017, including $6.6 million recorded as a current liability.~~2021. For further information, see Note 711 of the Notes to ~~the~~ Condensed Consolidated Financial Statements.

~~On April 27, 2016,~~The Amended Credit Agreement and Shelf-Loan Facility include both financial and non-financial covenants. The covenants dictate that we shall not permit our net leverage ratio to exceed certain limits, shall maintain a minimum debt service coverage ratio, and must meet certain other financial requirements. At June 30, 2021, we were in compliance with all such requirements, and we expect to remain in compliance for the ~~Company refinanced its line~~next twelve months.

We have paid regular quarterly dividends since 2016. Future dividend policy with respect to our common stock will be determined by our Board of ~~credit through an agreement~~Directors in light of our prevailing financial needs, earnings, and other relevant factors, including any limitations in our debt agreements, such as maintenance of certain financial ratios. In October 2018, our Board of Directors authorized a stock repurchase program. No shares were repurchased in the first six months of 2021. See Note 12 of the Notes to Condensed Consolidated Financial Statements for additional information related to our dividend program.

CORPORATE GOVERNANCE

We are in compliance with ~~JPMorgan Chase Bank, N.A., Wells Fargo Bank, N.A., Bank~~the corporate governance requirements of ~~America, N.A.,~~the Securities and ~~1st Source Bank.~~Exchange Commission (“SEC”) and the New York Stock Exchange. Our governance documents and committee charters and key practices have been posted to the “Investors” section of our website (www.lci1.com) and are updated periodically. The ~~agreement amended~~website also contains, or provides direct links to, all SEC filings, press releases and ~~restated the existing line of credit,~~investor presentations. We have also established a Whistleblower Policy, which ~~now expires~~includes a toll-free hotline (877-373-9123) to report complaints about our accounting, internal controls, auditing matters or other concerns. The Whistleblower Policy and procedure for complaints can be found on ~~April 27, 2021 (the “Amended Credit Agreement”~~our website (www.lci1.com). ~~In connection with this amendment and~~

LCI INDUSTRIES

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)

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 September 30, 2017, the Company had $2.4 million in issued, but undrawn, standby letters of credit under the line of credit. Availability under the Company’s line of credit was $197.6 million at September 30, 2017.

On March 30, 2017, the Company amended its “shelf-loan” facility with Prudential Investment Management, Inc. and its affiliates (“Prudential”) to extend the term through March 30, 2020. In connection with this amendment, 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 (excluding the Company’s Series A 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 under the Company’s “shelf-loan” facility was $150.0 million at September 30, 2017. However, the Amended Credit Agreement limits the aggregate indebtedness outstanding to Prudential from time to time to $150.0 million; therefore, currently the Company can only access an additional $100 million under the shelf-loan facility.

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 September 30, 2017, 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 September 30, 2017. The remaining availability under these facilities, not including the potential increase of $125 million under the Amended Credit Agreement, was $297.6 million at September 30, 2017. The Company believes the availability under the Amended Credit Agreement and “shelf-loan” facility is adequate to finance the Company’s anticipated cash requirements for the next twelve months.

~~Additional information on the Company’s Amended Credit Agreement and “shelf-loan” facility is included in Note 6 of the Notes to the Condensed Consolidated Financial Statements.~~

~~CORPORATE GOVERNANCE~~

The Company is in compliance with the corporate governance requirements of the Securities and Exchange Commission (“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/investors~~) 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/investors~~).

CONTINGENCIES

Information required by this item is included in Note 711 of the Notes to ~~the~~ Condensed Consolidated Financial Statements and ~~under Item 1 of Part I of this Quarterly Report on Form 10-Q.~~is incorporated herein by reference.

INFLATION

The prices of key raw materials, consisting primarily of steel ~~aluminum,~~ and ~~foam,~~aluminum, and components used by ~~the Company~~us 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. We did not experience any significant increases in our labor costs in the first six months of 2021 related to inflation.

NEW ACCOUNTING PRONOUNCEMENTS

Information required by this item is included in Note 112 of the Notes to ~~the~~ Condensed Consolidated Financial Statements.

~~LCI INDUSTRIES~~

~~ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF~~

~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Continued)~~

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires ~~the Company~~us 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~~we evaluate our 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 ~~terminations,~~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~~We base our 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's~~management estimates.

FORWARD-LOOKING STATEMENTS

This Form 10-Q contains certain “forward-looking statements” with respect to ~~the Company’s~~our financial condition, results of operations, business strategies, operating efficiencies or synergies, competitive position, growth opportunities, acquisitions, plans and objectives of management, markets for the Company’s ~~Common Stock~~common stock, the impact of legal proceedings, and other matters. Statements in this Form 10-Q 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 (the “Exchange Act”), 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, liquidity, covenant compliance, retail and wholesale demand, integration of acquisitions, R&D investments, and industry trends, whenever they occur in this Form 10-Q 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-Q, the impacts of COVID-19, or other future pandemics, on the global economy and on the Company's customers, suppliers, employees, business and cash flows, 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 ~~the Company sells its~~we sell our products, availability of credit for financing the retail and wholesale purchase of products for which ~~the Company sells its~~we sell our components, inventory levels of retail dealers and manufacturers, availability of transportation for products for which ~~the Company sells its~~we sell our components, the financial condition of ~~the Company’s~~our customers, the financial condition of retail dealers of products for which ~~the Company sells its~~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~~team member benefits, ~~employee~~team member 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

LCI INDUSTRIES

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)

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 ~~the Company sells its~~we sell our components, and other risks and uncertainties discussed more fully under the caption “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2020, and in the Company’s subsequent filings with the ~~Securities and Exchange Commission.~~SEC, including the Company's Quarterly Reports on Form 10-Q. 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.

LCI INDUSTRIES

ITEM 3 – QUANTITATIVE AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK

~~At September 30, 2017, the Company had $49.9 million of fixed~~We are exposed to market risk related to changes in short-term interest rates on our variable rate ~~debt outstanding. Assuming there is a decrease of 100 basis points in~~debt. Depending on the interest rate ~~for borrowings~~option selected as more fully described in Note 9 of the Notes to Condensed Consolidated Financial Statements, interest is charged based on an indexed rate plus an applicable margin. Assuming a ~~similar nature subsequent to September 30, 2017, which the Company becomes unable to capitalize on~~hypothetical increase of 0.25 percent in the ~~short-term as~~indexed interest rate (which approximates a ~~result~~ten percent increase of the ~~structure~~weighted-average interest rate on our borrowings as of ~~its fixed rate financing, future cash flows~~June 30, 2021), our results of operations would not be ~~approximately $0.5 million lower per annum than if the fixed rate financing could be obtained at current market rates.~~materially affected.

~~The Company is~~We are also exposed to changes in the prices of raw materials, specifically steel and aluminum. ~~The Company has,~~We have, 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 9 of the Notes to Condensed Consolidated Financial Statements for a more detailed discussion of~~We had no outstanding derivative ~~instruments.~~instruments on commodities at June 30, 2021 and December 31, 2020.

~~The Company has~~We have 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”~~"Inflation" in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of this ~~Report.~~report.

ITEM 4 – CONTROLS AND PROCEDURES


a)	~~Evaluation of Disclosure Controls and Procedures~~

~~The Company maintains~~a.Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in ~~the Company’s~~our Exchange Act reports 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~~our management, including ~~its~~our principal executive officer and principal 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~~13a-15(e) 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~~We continually ~~evaluates its~~evaluate our disclosure controls and procedures to determine if changes are appropriate based upon changes in ~~the Company’s~~our operations or the business environment in which ~~it operates.~~we operate.

As of the end of the period covered by this Form 10-Q, ~~the Company~~we performed an evaluation, under the supervision and with the participation of ~~the Company’s~~our management, including ~~the Company’s~~our principal executive officer and ~~the Company’s~~our principal financial officer, of the effectiveness of the design and operation of ~~the Company’s~~our disclosure controls and procedures. Based on the foregoing, ~~the Company’s~~our principal executive officer and principal financial officer concluded that ~~the Company’s~~our disclosure controls and procedures were ~~effective.~~effective as of June 30, 2021.


b)	~~Changes in Internal Control over Financial Reporting~~

~~The Company has selected~~b.Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended June 30, 2021, which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We began implementation of a new enterprise resource planning (“ERP”) ~~system. Implementation of the new ERP software began~~system in late 2013. ~~To date, 23 locations have been put on this ERP system.~~ The roll-out plan is continually evaluated in the context of priorities for the business and may change as the needs of the business dictate. ~~The Company anticipates~~We anticipate enhancements to controls due to both the installation of the new ERP system and business process changes resulting therefrom.

There were no changes in the Company’s internal controls over financial reporting during the quarter ended September 30, 2017, which have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

LCI INDUSTRIES

PART II – OTHER INFORMATION

ITEM 1 – LEGAL PROCEEDINGS

In the normal course of business, ~~the Company is~~we are 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 opinion 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 Condensed Consolidated Balance ~~Sheets~~Sheet as of ~~September~~June 30, ~~2017,~~2021, would not be material to ~~the Company’s~~our financial position or ~~annual~~ results of operations.

ITEM 1A – RISK FACTORS

There have been no material changes to the matters discussed in Part I, Item 1A – Risk Factors in our Annual Report on Form 10-K as filed with the ~~Securities and Exchange Commission~~SEC on February ~~28, 2017.~~26, 2021, except that the following risk factors are added:

Conversion of the Convertible Notes may dilute the ownership interest of our stockholders or may otherwise depress the price of our common stock.

The conversion of some or all of the Convertible Notes may dilute the ownership interests of our stockholders. Upon conversion of the Convertible Notes, we have the option to pay or deliver, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock in respect of the remainder, if any, of our conversion obligation in excess of the aggregate principal amount of the notes being converted. If we elect to settle the remainder, if any, of our conversion obligation in excess of the aggregate principal amount of the Convertible Notes being converted in shares of our common stock or a combination of cash and shares of our common stock, any sales in the public market of our common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock. In addition, the existence of the Convertible Notes may encourage short selling by market participants because the conversion of the Convertible Notes could be used to satisfy short positions, or anticipated conversion of the Convertible Notes into shares of our common stock could depress the price of our common stock.

Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our substantial debt.

Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness, including the Convertible Notes, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not continue to generate cash flow from operations in the future sufficient to service our debt and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.

The conditional conversion feature of the Convertible Notes, if triggered, may adversely affect our financial condition and operating results.

In the event the conditional conversion feature of the Convertible Notes is triggered, holders will be entitled to convert their Convertible Notes at any time during specified periods at their option. If one or more holders elect to convert their Convertible Notes, we would be required to settle any converted principal amount of such Convertible Notes through the payment of cash, which could adversely affect our liquidity. In addition, even if holders do not elect to convert their Convertible Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Convertible Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.

Certain provisions in the Indenture governing the Convertible Notes may delay or prevent an otherwise beneficial takeover attempt of us.

Certain provisions in the Indenture may make it more difficult or expensive for a third party to acquire us. For example, the Indenture will require us, subject to certain exceptions, to repurchase the Convertible Notes for cash upon the occurrence of a fundamental change and, in certain circumstances, to increase the conversion rate for a holder that converts its Convertible Notes in connection with a make-whole fundamental change. A takeover of us may trigger the requirement that we repurchase the Convertible Notes and/or increase the conversion rate, which could make it more costly for a potential acquirer to engage in such takeover. Such additional costs may have the effect of delaying or preventing a takeover of us that would otherwise be beneficial to investors.

ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

There has been no activity with respect to our stock repurchase program during the six months ended June 30, 2021. At June 30, 2021, we had $121.3 million remaining in the current share repurchase authorization. Please refer to our Annual Report on Form 10-K as filed with the SEC on February 26, 2021 for further information on the program.

As described elsewhere in this Quarterly Report on Form 10-Q, on May 13, 2021, we issued $460.0 million aggregate principal amount of the Convertible Notes to qualified institutional buyers (the “Initial Purchasers”) in a private placement pursuant to certain exemptions from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to the terms of a Purchase Agreement, dated May 10, 2021, with Wells Fargo Securities, LLC, BofA Securities, Inc. and J.P. Morgan Securities LLC, in their capacity as the representatives of the Initial Purchasers. The aggregate offering price of the Convertible Notes was $460.0 million and the aggregate Initial Purchasers’ discount was $11.5 million.

We offered and sold the Convertible Notes to the Initial Purchasers in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act, for resale by such Initial Purchasers to certain “qualified institutional buyers” pursuant to the exemption from registration provided by Rule 144A under the Securities Act.

In addition, on May 10, 2021, we entered into separate, privately negotiated warrant transactions with the Counterparties (Bank of America, N.A., Bank of Montreal, JPMorgan Chase Bank, National Association and Wells Fargo Bank, National Association), and on May 12, 2021, we entered into additional separate, privately negotiated warrant transactions with the Counterparties. Pursuant to these Warrant Transactions, we issued Warrants to the Counterparties relating to the same number of shares of our common stock initially underlying the Convertible Notes, with a strike price of $259.84 per share. The number of Warrants and the strike price are subject to adjustment under certain circumstances described in the respective confirmations for the Warrant Transactions. The aggregate offering price of the Warrants was $48.5 million.

We offered and sold the Warrants in reliance on the exemption from registration requirements of the Securities Act afforded by Section 4(a)(2) of the Securities Act.

The terms of conversion and exercise of the Convertible Notes and the Warrants are described elsewhere in this Quarterly Report on Form 10-Q and in the underlying documents, which are included as Exhibits 4.1, 4.2 and 10.12 through 10.19 to this Quarterly Report on Form 10-Q and are incorporated herein by reference.

We used approximately $51.6 million of the net proceeds of the offering of the Convertible Notes to pay the cost of the Convertible Note Hedge Transactions (after such cost was partially offset by the proceeds to us from the sale of Warrants).

ITEM 6 – EXHIBITS

a) Exhibits as required by item 601 of Regulation S-K:

~~31.1~~ ~~Certification of Chief Executive Officer required by Rule 13a-14(a). Exhibit 31.1 is filed herewith.~~


1	3.1	LCI Industries Restated Certificate of Incorporation, as amended effective December 30, 2016 (incorporated by reference to Exhibit 3.1 included in the Registrant’s Form 10-K for the year ended December 31, 2016).
2	3.2	Amended and Restated Bylaws 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 May 31, 2017).
3	4.1	Indenture, dated May 13, 2021, by and between LCI Industries and U.S. Bank National Association (incorporated by reference to Exhibit 4.1 included in the Registrant’s Form 8-K filed on May 14, 2021).
4	4.2	Form of 1.125% Convertible Senior Note due 2026 (included in Exhibit 4.1).
5	10.1	Amendment No. 2 to Fourth Amended and Restated Credit Agreement, dated as of May 7, 2021, by and among LCI Industries, Lippert Components, Inc., LCI Industries B.V., LCI Industries Pte. Ltd., each other Subsidiary of the Company listed on the signature pages thereto, 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 on May 10, 2021).
6	10.2	Third Amendment to Fifth Amended and Restated Note Purchase and Private Shelf Agreement, dated as of May 7, 2021, by and among PGIM, Inc. and the noteholders party thereto, Lippert Components, Inc., LCI Industries and the other parties thereto (incorporated by reference to Exhibit 10.2 included in the Registrant’s Form 8-K filed on May 10, 2021).
7	10.3	Purchase Agreement, dated May 10, 2021, by and among LCI Industries, Wells Fargo Securities, LLC, BofA Securities, Inc. and J.P. Morgan Securities LLC (incorporated by reference to Exhibit 10.1 included in the Registrant’s Form 8-K filed on May 14, 2021).
8	10.4*	Base Convertible Note Hedge Confirmation, dated May 10, 2021, between LCI Industries and Bank of America, N.A. (incorporated by reference to Exhibit 10.2 included in the Registrant’s Form 8-K filed on May 14, 2021).
9	10.5*	Base Convertible Note Hedge Confirmation, dated May 10, 2021, between LCI Industries and Bank of Montreal (incorporated by reference to Exhibit 10.3 included in the Registrant’s Form 8-K filed on May 14, 2021).
10	10.6*	Base Convertible Note Hedge Confirmation, dated May 10, 2021, between LCI Industries and JPMorgan Chase Bank, National Association (incorporated by reference to Exhibit 10.4 included in the Registrant’s Form 8-K filed on May 14, 2021).
11	10.7*	Base Convertible Note Hedge Confirmation, dated May 10, 2021, between LCI Industries and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 10.5 included in the Registrant’s Form 8-K filed on May 14, 2021).
12	10.8*	Additional Convertible Note Hedge Confirmation, dated May 12, 2021, between LCI Industries and Bank of America, N.A. (incorporated by reference to Exhibit 10.6 included in the Registrant’s Form 8-K filed on May 14, 2021).
13	10.9*	Additional Convertible Note Hedge Confirmation, dated May 12, 2021, between LCI Industries and Bank of Montreal (incorporated by reference to Exhibit 10.7 included in the Registrant’s Form 8-K filed on May 14, 2021).
14	10.10*	Additional Convertible Note Hedge Confirmation, dated May 12, 2021, between LCI Industries and JPMorgan Chase Bank, National Association (incorporated by reference to Exhibit 10.8 included in the Registrant’s Form 8-K filed on May 14, 2021).
15	10.11*	Additional Convertible Note Hedge Confirmation, dated May 12, 2021, between LCI Industries and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 10.9 included in the Registrant’s Form 8-K filed on May 14, 2021).
16	10.12*	Base Warrant Confirmation, dated May 10, 2021, between LCI Industries and Bank of America, N.A. (incorporated by reference to Exhibit 10.10 included in the Registrant’s Form 8-K filed on May 14, 2021).
17	10.13*	Base Warrant Confirmation, dated May 10, 2021, between LCI Industries and Bank of Montreal (incorporated by reference to Exhibit 10.11 included in the Registrant’s Form 8-K filed on May 14, 2021).
18	10.14*	Base Warrant Confirmation, dated May 10, 2021, between LCI Industries and JPMorgan Chase Bank, National Association (incorporated by reference to Exhibit 10.12 included in the Registrant’s Form 8-K filed on May 14, 2021).
19	10.15*	Base Warrant Confirmation, dated May 10, 2021, between LCI Industries and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 10.13 included in the Registrant’s Form 8-K filed on May 14, 2021).
20	10.16*	Additional Warrant Confirmation, dated May 12, 2021, between LCI Industries and Bank of America, N.A. (incorporated by reference to Exhibit 10.14 included in the Registrant’s Form 8-K filed on May 14, 2021).


21	10.17*	Additional Warrant Confirmation, dated May 12, 2021, between LCI Industries and Bank of Montreal (incorporated by reference to Exhibit 10.15 included in the Registrant’s Form 8-K filed on May 14, 2021).
22	10.18*	Additional Warrant Confirmation, dated May 12, 2021, between LCI Industries and JPMorgan Chase Bank, National Association (incorporated by reference to Exhibit 10.16 included in the Registrant’s Form 8-K filed on May 14, 2021).
23	10.19*	Additional Warrant Confirmation, dated May 12, 2021, between LCI Industries and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 10.17 included in the Registrant’s Form 8-K filed on May 14, 2021).
24	31.1	Certification of Chief Executive Officer required by Rule 13a-14(a). Exhibit 31.1 is filed herewith.
25	31.2	Certification of Chief Financial Officer required by Rule 13a-14(a). Exhibit 31.2 is filed herewith.
26	32.1	Certification of Chief Executive Officer required by Rule 13a-14(b) and Section 1350 Chapter 63 of Title 18 of the United States Code. Exhibit 32.1 is filed herewith.
27	32.2	Certification of Chief Financial Officer required by Rule 13a-14(b) and Section 1350 Chapter 63 of Title 18 of the United States Code. Exhibit 32.2 is filed herewith.
28	101	The following financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, formatted in Inline XBRL: (i) Condensed Consolidated Statements of Income; (ii) Condensed Consolidated Statements of Comprehensive Income; (iii) Condensed Consolidated Balance Sheets; (iv) Condensed Consolidated Statements of Cash Flows; (v) Condensed Consolidated Statements of Stockholders’ Equity; and (vi) Notes to Condensed Consolidated Financial Statements.
29	104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

*Certain portions of this exhibit have been redacted pursuant to Item 601(b)(10)(iv) of Regulation S-K. The Registrant agrees to furnish supplementally an unredacted copy of the exhibit to the Securities and Exchange Commission upon its request.


2)	~~31.2~~ ~~Certification of Chief Financial Officer required by Rule 13a-14(a). Exhibit 31.2 is filed herewith.~~


3)	~~32.1~~ ~~Certification of Chief Executive Officer required by Rule 13a-14(b) and Section 1350 Chapter 63 of Title 18 of the United States Code. Exhibit 32.1 is filed herewith.~~


4)	~~32.2~~ ~~Certification of Chief Financial Officer required by Rule 13a-14(b) and Section 1350 Chapter 63 of Title 18 of the United States Code. Exhibit 32.2 is filed herewith.~~


5)	~~101 Interactive Data Files.~~

LCI INDUSTRIES

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


LCI INDUSTRIES
Registrant


~~LCI INDUSTRIES~~
~~Registrant~~
By

By	/s/ Brian M. Hall
Brian M. Hall
Chief Financial Officer
~~November 7, 2017~~August 4, 2021



Delaware		13-3250533
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification Number)

3501 County Road 6 East		46514
Elkhart, ~~Indiana~~	Indiana	(Zip Code)
(Address of principal executive offices)



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



	Page
PART I –		FINANCIAL INFORMATION

		ITEM 1 – FINANCIAL STATEMENTS

		CONDENSED CONSOLIDATED STATEMENTS OF INCOME	4

		CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	5

		CONDENSED CONSOLIDATED BALANCE SHEETS	6

		CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	7

		CONDENSED CONSOLIDATED ~~STATEMENT~~STATEMENTS OF STOCKHOLDERS’ EQUITY	8

		NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	910

		ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	2227

		ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	3338

		ITEM 4 – CONTROLS AND PROCEDURES	3338

PART II –		OTHER INFORMATION

		ITEM 1 – LEGAL PROCEEDINGS	3439

		ITEM 1A – RISK FACTORS	3439

		ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	40

		ITEM 6 – EXHIBITS	3441

SIGNATURES			3543

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



	Nine Months Ended September 30,				Three Months Ended September 30,
	2017		2016		2017		2016
(In thousands, except per share amounts)

Net sales	$	1,600,633	$	1,275,999	$	554,814	$	412,370
Cost of sales	1,224,312		945,104		433,594		306,820
Gross profit	376,321		330,895		121,220		105,550
Selling, general and administrative expenses	206,225		170,641		73,293		60,412
Operating profit	170,096		160,254		47,927		45,138
Interest expense, net	1,162		1,285		311		396
Income before income taxes	168,934		158,969		47,616		44,742
Provision for income taxes	53,514		55,597		15,478		14,898
Net income	$	115,420	$	103,372	$	32,138	$	29,844

Net income per common share:
Basic	$	4.62	$	4.20	$	1.28	$	1.21
Diluted	$	4.56	$	4.15	$	1.26	$	1.19

Weighted average common shares outstanding:
Basic	24,993		24,587		25,060		24,724
Diluted	25,332		24,882		25,459		25,060



	September 30,						December 31,
	2017			2016			2016
(In thousands, except per share amount)

ASSETS
Current assets
Cash and cash equivalents	$	19,762		$	95,060		$	86,170
Accounts receivable, net	139,144			89,626			57,374
Inventories, net	229,763			161,312			188,743
Prepaid expenses and other current assets	45,384			28,572			35,107
Total current assets	434,053			374,570			367,394
Fixed assets, net	210,304			153,167			172,748
Goodwill	123,001			93,925			89,198
Other intangible assets, net	134,761			109,553			112,943
Deferred taxes	32,380			29,208			31,989
Other assets	21,277			14,095			12,632
Total assets	$	955,776		$	774,518		$	786,904

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable, trade	$	88,148		$	55,681		$	50,616
Accrued expenses and other current liabilities	109,849			97,733			98,735
Total current liabilities	197,997			153,414			149,351
Long-term indebtedness	49,918			49,940			49,949
Other long-term liabilities	60,805			39,796			37,335
Total liabilities	308,720			243,150			236,635

Stockholders’ equity
Common stock, par value $.01 per share	276			273			274
Paid-in capital	201,814			179,434			185,981
Retained earnings	472,154			381,723			395,279
Accumulated other comprehensive income (loss)	2,279			(595		)	(1,798		)
Stockholders’ equity before treasury stock	676,523			560,835			579,736
Treasury stock, at cost	(29,467		)	(29,467		)	(29,467		)
Total stockholders’ equity	647,056			531,368			550,269
Total liabilities and stockholders’ equity	$	955,776		$	774,518		$	786,904



Cash consideration, net of cash acquired	$	13,501
Contingent consideration	2,366
Total fair value of consideration given	$	15,867

Customer relationships	$	7,000
Other identifiable intangible assets	2,150
Net tangible assets	167
Total fair value of net assets acquired	$	9,317

Goodwill (not tax deductible)	$	6,550



Cash consideration	$	40,062

Customer relationships	$	16,900
Other identifiable intangible assets	1,820
Net tangible assets	4,928
Total fair value of net assets acquired	$	23,648

Goodwill (tax deductible)	$	16,414



Cash consideration, net of cash acquired	$	6,502
Contingent consideration	4,922
Total fair value of consideration given	$	11,424

Customer relationships	$	3,189
Other identifiable intangible assets	1,329
Net tangible assets	585
Total fair value of net assets acquired	$	5,103

Goodwill (not tax deductible)	$	6,321



Cash consideration, net of cash acquired	$	16,618
Contingent consideration	1,322
Total fair value of consideration given	$	17,940

Customer relationships	$	9,696
Other identifiable intangible assets	6,141
Net other liabilities	(3,482		)
Total fair value of net assets acquired	$	12,355

Goodwill (not tax deductible)	$	5,585



Cash consideration	$	8,100

Customer relationships	$	3,700
Net other assets	2,378
Total fair value of net assets acquired	$	6,078

Goodwill (tax deductible)	$	2,022


^{Fair value adjustments (a) (b)}	Amounts represent the fair value of estimated remaining payments. The total estimated remaining payments as of September 30, 2017 are $20.2 million undiscounted. The liability for contingent consideration expires(23)
Net foreign currency translation adjustment	(141)
Balance at ~~various dates through September 2029. Certain~~end of the ~~contingent consideration arrangements are subject to a maximum payment amount, while the remaining arrangements have no maximum contingent consideration.~~period (b)	9,549
Less current portion in accrued expenses and other current liabilities	(7,986)
Total long-term portion in other long-term liabilities	$	1,563



	September 30, 2017								December 31, 2016
(In thousands)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets
Unrealized gain on derivative instruments	$	1,180	$	—	$	1,180	$	—	$	2,296	$	—	$	2,296	$	—
Liabilities
Contingent consideration	$	17,045	$	—	$	—	$	17,045	$	9,241	$	—	$	—	$	9,241