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
industry-wide wholesale shipments. Based onDue to the strengthCOVID-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 salesthe 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 continuetiming of a return to report that RV dealer inventoryhistorical seasonality is in line with anticipated retail demand.not possible to predict at this time.
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| | | | | | | | | 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 |
| | | | | | | | | |
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(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)
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| | | | | | | | | 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) |
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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 promotingindustry-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 travelingresponse 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 consumerthe 2020 period. Retail demand for RVs. RVIA studies indicate RV vacations cost significantly less than other formsmotorhome RVs increased 20 percent year-over-year in the first six months of vacation travel, even when factoring2021, compared to a 22 percent year-over-year decrease in fuel prices andretail demand in the costsame period of RV ownership. More details can be found at www.RVIA.org.2020.
Adjacent Industries
The Company’sOur 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 believesWe 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’sour OEM Segment products are also sold through various aftermarket channels, including dealerships, warehousewholesale distributors, and service centers, as well as direct to retail customers. The Company hascustomers via the Internet. This includes discretionary accessories and replacement service parts. We have teams dedicated to product technical and installation training andas well as marketing support for itsour Aftermarket Segment customers. The CompanyWe also supports twosupport 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-thirdthe 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 anticipateswe 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 netmillion in the second quarter of 2021. Additionally, the pandemic had a negative impact on sales in the thirdsecond 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 thirdsecond quarter of 2017 increased to $32.12021 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 thirdsame 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 quartersame period of 2016.2020. Operating profit margin decreased to ninewas 8.6 percent in the thirdsecond quarter of 2017 from 11 percent2021 compared to the third quarter of 2016.
The improvement4.0 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 by2021 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 foamsteel used in certain of the Company’sour manufactured components declined during the first half of 2016; however, certain commodities experienced cost increasesincreased in the second halfquarter of 2016 and2021 compared to the first nine monthssame period of 2017 from market low points.2020. Raw material costs continueare subject to fluctuatecontinued fluctuation and are expectedbeing offset, in part, by contractual selling prices that are indexed to remain volatile.select commodities.
Thus far in 2017, the Company completed three acquisitions:
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◦ | 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. |
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◦ | 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. |
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◦ | 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 ninesix months ended SeptemberJune 30, 2017,2021 was substantially lower than the comparable prior year period of 26.3 percent, primarily due to the recognitionreduced rate impact of excesspermanent tax benefits attributable todifferences with the adoption bygrowth 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 equatedrelated to $5.9 million recognized in the first nine monthsvesting 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 Company2021, 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 - ThirdSecond Quarter
Net sales of the OEM Segment in the thirdsecond quarter of 20172021 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 | % |
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| | | | | | | | | | |
(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 SeptemberJune 30 were:
| | | | | | | | | | | | | | | | | |
| 2021 | | 2020 | | Change |
Travel trailer and fifth-wheel RVs | 133,800 | | | 66,800 | | | 100 | % |
Motorhomes | 14,800 | | | 6,900 | | | 114 | % |
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| | | | | | | | |
| 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’sour average product content per RV produced is an indicator of the Company’sour overall market share of components for new RVs. The Company’sOur average product content per type of RV, calculated based upon the Company’sour net sales of components to domestic RV OEMs for the different types of RVs produced for the twelve months ended SeptemberJune 30, divided by the industry-wide wholesale shipments of the different typesproduct 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’sOur 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’sour products, as well as changes in the types of RVs produced industry-wide.
The Company’sOur increase in net OEM sales to Adjacent Industries increasedRV OEMs of travel trailers, fifth-wheel, and motorhome components during the thirdsecond quarter of 20172021 was primarily due to acquisitions completeddriven 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 millionRV retail demand beginning later in the thirdsecond 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 capacity2020 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 increasedprice increases during the second quarter of 2021. Additionally, the pandemic had a negative impact on sales in the thirdsecond 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 2017Adjacent 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 investmentsindexes of select commodities increased, resulting in fixedan 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 serviceproduction volumes and other critical departments. The Company also added the teams from acquired businesses, as well as amortization costs ofa tight labor market, which reduced operating profit by $12.6 million.
Amortization expense on intangible assets relatedfor 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 ninesix months of 20172021 increased 2587 percent, or $295$780.7 million, compared to the first ninesix months of 2016.2020. Net sales of components to OEMs were to the following markets for the ninesix months ended SeptemberJune 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 ninesix months ended SeptemberJune 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’sOur increase in net sales growth into RV OEMs of travel trailers, fifth-wheel, and motorhome components for travel trailer and fifth-wheel RVs during the first ninesix months of 2017 exceeded2021 was primarily driven by a recovery in RV retail demand beginning later in the increase in industry-wide wholesale shipmentsfirst six months of travel trailer2020 and fifth-wheel RVs duringcontinuing 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 motorhomesincrease further benefited from content gains during the first ninesix months of 2017 exceeded2021. 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 ninesix months of 2017, primarily due to2021 was driven by acquisitions completedand a recovery in retail demand for the marine industry and other adjacent markets beginning later in the fourth quarterfirst six months of 20162020 and continuing into the first ninesix months of 2017, and market share gains. Acquisitions added $33 million in net sales during the first nine months of 2017. The Company continues2021. 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, thatpartially 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 yearssame period of 2020. In addition, selling prices contractually tied to indexes of select commodities increased; resulting in an increase capacity and improvein operating efficiencies. Further,profit of $17.4 million compared to the Company has implemented efficiency improvements, including lean manufacturing initiatives, increased usesame 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 $8negatively 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, aluminumdue 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 - ThirdSecond Quarter
Net sales of the Aftermarket Segment in the thirdsecond quarter of 20172021 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 SeptemberJune 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’sOur net sales to the Aftermarket Segment increased during the thirdsecond quarter of 20172021, 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 wearoutdoor 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 thirdsecond 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 decreasedof 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 increaseinventory 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 salesthe second quarter of 2021, compared to wholesale distributors with lower margins traditionally experienced$2.9 million in aftermarket channels. As indicated, this business is stillthe 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 staffsecond quarter of 2021, compared to support anticipated growth and anticipates further cost increases$3.4 million in this area as it builds up the capabilitiessame 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 ninesix months of 20172021 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 ninesix months ended SeptemberJune 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’sOur net sales to the Aftermarket Segment increased during the first ninesix months of 20172021 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 teamsdecreased rate impact of permanent tax differences with the growth in income before income taxes and infrastructurean increase in the excess tax benefit related to service this market. With an estimated ninethe 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 andWe believe the Company’s increasing content per unit,availability under the Company continuesrevolving 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 ratescash 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 ninesix months ended SeptemberJune 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 fromprovided 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 ninesix months of 20172021, 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 $46.0tightened 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 periodlong 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 increasedthe increase or decrease, respectively, in net sales partially offset bysales. 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 $33.8amortization was $51.3 million increase in inventory in the first ninesix months of 20172021, 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 $13.5these historical averages. We estimate full year 2021 capital expenditures of $130 to $150 million, decreaseincluding 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 periodfirst six months of 2016. Inventory turnover for2021 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 periodissuance 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 monthsremainder 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 2017fiscal 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 forprovided by financing activities in the first ninesix months of 20172021 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 aggregateterm loan and other borrowings, and cash outflows of $12.4$7.9 million $12.4 million and $12.5 million, respectively, paidrelated to stockholdersvesting of record as of March 6, 2017, May 19, 2017 and August 18, 2017, respectively. In addition, the Company had $7.3 millionstock-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 relatedaggregate 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 forprovided by financing activities in the first ninesix months of 20162020 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 $3.2payments 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 Companywe will pay additional cash consideration. The Company hasWe have recorded a $17.0$9.5 million liability for the aggregate fair value of these expected contingent consideration liabilities at SeptemberJune 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 linenext 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 agreementDirectors 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., Bankthe 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 amendedwebsite 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 expiresincludes 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 Companyus 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 Companyus 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 itswe 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 itsWe 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'smanagement estimates.
FORWARD-LOOKING STATEMENTS
This Form 10-Q contains certain “forward-looking statements” with respect to the Company’sour financial condition, results of operations, business strategies, operating efficiencies or synergies, competitive position, growth opportunities, acquisitions, plans and objectives of management, markets for the Company’s Common Stockcommon stock, the impact of legal proceedings, and other matters. Statements in this Form 10-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 itswe sell our products, availability of credit for financing the retail and wholesale purchase of products for which the Company sells itswe sell our components, inventory levels of retail dealers and manufacturers, availability of transportation for products for which the Company sells itswe sell our components, the financial condition of the Company’sour customers, the financial condition of retail dealers of products for which the Company sells itswe 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, employeeteam member benefits, employeeteam 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 itswe 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 fixedWe 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 indebt. Depending on the interest rate for borrowingsoption 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 onhypothetical increase of 0.25 percent in the short-term asindexed interest rate (which approximates a resultten percent increase of the structureweighted-average interest rate on our borrowings as of its fixed rate financing, future cash flowsJune 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 isWe 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 ofWe had no outstanding derivative instruments.instruments on commodities at June 30, 2021 and December 31, 2020.
The Company hasWe 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 maintainsa.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’sour 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’sour management, including itsour 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-1513a-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 CompanyWe continually evaluates itsevaluate our disclosure controls and procedures to determine if changes are appropriate based upon changes in the Company’sour 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 Companywe performed an evaluation, under the supervision and with the participation of the Company’sour management, including the Company’sour principal executive officer and the Company’sour principal financial officer, of the effectiveness of the design and operation of the Company’sour disclosure controls and procedures. Based on the foregoing, the Company’sour principal executive officer and principal financial officer concluded that the Company’sour disclosure controls and procedures were effective.effective as of June 30, 2021.
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b) | Changes in Internal Control over Financial Reporting |
The Company has selectedb.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 begansystem 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 anticipatesWe 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 iswe 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 SheetsSheet as of SeptemberJune 30, 2017,2021, would not be material to the Company’sour 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 CommissionSEC 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:
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1) | 31.1 Certification of Chief Executive Officer required by Rule 13a-14(a). Exhibit 31.1 is filed herewith. | | | | | | | | | 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 | | 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 | | 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 | | Form of 1.125% Convertible Senior Note due 2026 (included in Exhibit 4.1). | 5 | | 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 | | 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 | | 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 | | 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 | | 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 | | 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 | | 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 | | 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 | | 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 | | 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 | | 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 | | 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 | | 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 | | 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 | | 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 | | 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 | | 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 | | 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 | | 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 | | Certification of Chief Executive Officer required by Rule 13a-14(a). Exhibit 31.1 is filed herewith. | 25 | | Certification of Chief Financial Officer required by Rule 13a-14(a). Exhibit 31.2 is filed herewith. | 26 | | 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 | | 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.
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2) | 31.2 Certification of Chief Financial Officer required by Rule 13a-14(a). Exhibit 31.2 is filed herewith. |
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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. |
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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. |
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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.
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LCI INDUSTRIES |
Registrant |
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LCI INDUSTRIES |
Registrant |
By | |
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By | /s/ Brian M. Hall |
Brian M. Hall |
Chief Financial Officer |
November 7, 2017August 4, 2021 |