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)~~2023) was ~~24,940,373~~25,324,579 shares of common stock.

PART I – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED STATEMENTS OF INCOME


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
(In thousands, except per share amounts)

Net sales	$	959,315	$	1,132,079	$	2,947,264	$	4,312,797
Cost of sales	748,367		879,025		2,332,125		3,186,415
Gross profit	210,948		253,054		615,139		1,126,382
Selling, general and administrative expenses	165,358		165,479		494,332		550,317
Operating profit	45,590		87,575		120,807		576,065
Interest expense, net	10,325		6,910		30,968		19,353
Income before income taxes	35,265		80,665		89,839		556,712
Provision for income taxes	9,378		19,273		23,267		144,609
Net income	$	25,887	$	61,392	$	66,572	$	412,103

Net income per common share:
Basic	$	1.02	$	2.41	$	2.63	$	16.23
Diluted	$	1.02	$	2.40	$	2.62	$	16.15

Weighted average common shares outstanding:
Basic	25,340		25,447		25,293		25,398
Diluted	25,504		25,600		25,405		25,520

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 September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
(In thousands)

Net income	$	25,887	$	61,392	$	66,572	$	412,103
Other comprehensive income (loss):
Net foreign currency translation adjustment	(2,995)		(12,197)		(232)		(28,767)
Actuarial gain (loss) on pension plans	—		(125)		100		13,860

Total comprehensive income	$	22,892	$	49,070	$	66,440	$	397,196

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)


	September 30,		December 31,
	2023			2022
(In thousands, except per share amount)

ASSETS
Current assets
Cash and cash equivalents	$	31,242		$	47,499

Accounts receivable, net of allowances of $7,491 and $5,904 at September 30, 2023 and December 31, 2022, respectively	338,847			214,262
Inventories, net	791,884			1,029,705

Prepaid expenses and other current assets	68,666			99,310
Total current assets	1,230,639			1,390,776
Fixed assets, net	472,518			482,185
Goodwill	579,912			567,063
Other intangible assets, net	462,412			503,320
Operating lease right-of-use assets	233,740			247,007

Other long-term assets	54,586			56,561
Total assets	$	3,033,807		$	3,246,912

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term indebtedness	$	566		$	23,086
Accounts payable, trade	198,914			143,529

Current portion of operating lease obligations	34,642			35,447
Accrued expenses and other current liabilities	179,894			219,238
Total current liabilities	414,016			421,300
Long-term indebtedness	908,245			1,095,888
Operating lease obligations	211,289			222,478
Deferred taxes	25,281			30,580
Other long-term liabilities	102,836			95,658
Total liabilities	1,661,667			1,865,904
Stockholders' equity
Common stock, par value $.01 per share	287			285
Paid-in capital	240,972			234,956
Retained earnings	1,206,525			1,221,279
Accumulated other comprehensive income	6,572			6,704
Stockholders' equity before treasury stock	1,454,356			1,463,224
Treasury stock, at cost	(82,216)			(82,216)
Total stockholders' equity	1,372,140			1,381,008
Total liabilities and stockholders' equity	$	3,033,807		$	3,246,912

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)


	Nine Months Ended September 30,
(In thousands)	2023		2022

Cash flows from operating activities:
Net income	$	66,572	$	412,103
Adjustments to reconcile net income to cash flows provided by operating activities:
Depreciation and amortization	98,818		95,966
Stock-based compensation expense	14,027		20,564
Deferred taxes	—		(2,401)
Other non-cash items	4,611		1,174
Changes in assets and liabilities, net of acquisitions of businesses:
Accounts receivable, net	(121,914)		(18,128)
Inventories, net	246,155		26,508
Prepaid expenses and other assets	31,237		31,304
Accounts payable, trade	54,817		(82,054)
Accrued expenses and other liabilities	(5,060)		471
Net cash flows provided by operating activities	389,263		485,507
Cash flows from investing activities:
Capital expenditures	(50,060)		(103,748)
Acquisitions of businesses	(25,851)		(55,709)


Other investing activities	4,284		2,137
Net cash flows used in investing activities	(71,627)		(157,320)
Cash flows from financing activities:
Vesting of stock-based awards, net of shares tendered for payment of taxes	(9,591)		(10,805)
Proceeds from revolving credit facility	248,900		844,900
Repayments under revolving credit facility	(414,554)		(1,001,040)
Repayments under shelf loan, term loan, and other borrowings	(45,767)		(65,852)




Payment of dividends	(79,744)		(76,273)
Payment of contingent consideration and holdbacks related to acquisitions	(31,857)		(57,328)
Other financing activities	(834)		1,468
Net cash flows used in financing activities	(333,447)		(364,930)
Effect of exchange rate changes on cash and cash equivalents	(446)		(2,750)
Net decrease in cash and cash equivalents	(16,257)		(39,493)
Cash and cash equivalents at beginning of period	47,499		62,896
Cash and cash equivalents at end of period	$	31,242	$	23,403
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	29,459	$	16,326
Cash paid during the period for income taxes, net of refunds	$	7,531	$	144,121
Purchase of property and equipment in accrued expenses	$	451	$	2,019

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, 2021	$	284	$	220,459	$	930,795	$	(501)	$	(58,162)	$	1,092,875
Net income	—		—		196,181		—		—		196,181
Issuance of 138,208 shares of common stock pursuant to stock-based awards, net of shares tendered for payment of taxes	1		(10,570)		—		—		—		(10,569)
Stock-based compensation expense	—		6,517		—		—		—		6,517
Other comprehensive loss	—		—		—		(2,882)		—		(2,882)
Cash dividends ($0.90 per share)	—		—		(22,870)		—		—		(22,870)
Dividend equivalents on stock-based awards	—		392		(392)		—		—		—
Balance - March 31, 2022	$	285	$	216,798	$	1,103,714	$	(3,383)	$	(58,162)	$	1,259,252
Net income	—		—		154,530		—		—		154,530
Issuance of 18,245 shares of common stock pursuant to stock-based awards, net of shares tendered for payment of taxes	—		(204)		—		—		—		(204)
Stock-based compensation expense	—		7,184		—		—		—		7,184


Other comprehensive income	—		—		—		297		—		297
Cash dividends ($1.05 per share)	—		—		(26,702)		—		—		(26,702)
Dividend equivalents on stock-based awards	—		453		(453)		—		—		—
Balance - June 30, 2022	$	285	$	224,231	$	1,231,089	$	(3,086)	$	(58,162)	$	1,394,357
Net income	—		—		61,392		—		—		61,392
Issuance of 578 shares of common stock pursuant to stock-based awards, net of shares tendered for payment of taxes	—		(32)		—		—		—		(32)
Stock-based compensation expense	—		6,863		—		—		—		6,863
Other comprehensive loss	—		—		—		(12,322)		—		(12,322)
Cash dividends ($1.05 per share)	—		—		(26,701)		—		—		(26,701)
Dividend equivalents on stock-based awards	—		456		(456)		—		—		—
Balance - September 30, 2022	$	285	$	231,518	$	1,265,324	$	(15,408)	$	(58,162)	$	1,423,557

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, 2022	$	285	$	234,956	$	1,221,279	$	6,704	$	(82,216)	$	1,381,008
Net income	—		—		7,259		—		—		7,259
Issuance of 119,091 shares of common stock pursuant to stock-based awards, net of shares tendered for payment of taxes	1		(8,889)		—		—		—		(8,888)
Stock-based compensation expense	—		4,695		—		—		—		4,695
Other comprehensive income	—		—		—		2,000		—		2,000
Cash dividends ($1.05 per share)	—		—		(26,563)		—		—		(26,563)
Dividend equivalents on stock-based awards	—		532		(532)		—		—		—
Balance - March 31, 2023	$	286	$	231,294	$	1,201,443	$	8,704	$	(82,216)	$	1,359,511
Net income	—		—		33,426		—		—		33,426
Issuance of 26,445 shares of common stock pursuant to stock-based awards, net of shares tendered for payment of taxes	—		(697)		—		—		—		(697)
Stock-based compensation expense	—		4,385		—		—		—		4,385


Other comprehensive income	—		—		—		863		—		863
Cash dividends ($1.05 per share)	—		—		(26,591)		—		—		(26,591)
Dividend equivalents on stock-based awards	—		525		(525)		—		—		—
Balance - June 30, 2023	$	286	$	235,507	$	1,207,753	$	9,567	$	(82,216)	$	1,370,897
Net income	—		—		25,887		—		—		25,887
Issuance of 146 shares of common stock pursuant to stock-based awards, net of shares tendered for payment of taxes	1		(7)		—		—		—		(6)
Stock-based compensation expense	—		4,947		—		—		—		4,947
Other comprehensive loss	—		—		—		(2,995)		—		(2,995)
Cash dividends ($1.05 per share)	—		—		(26,590)		—		—		(26,590)
Dividend equivalents on stock-based awards	—		525		(525)		—		—		—
Balance - September 30, 2023	$	287	$	240,972	$	1,206,525	$	6,572	$	(82,216)	$	1,372,140

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, transportation products, and housing markets, consisting primarily of recreational vehicles ~~(“RVs”~~("RVs") and adjacent industries including boats; 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.~~centers, as well as direct to retail customers via the Internet. At September 30, ~~2017,~~2023, the Company operated 52120 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~~Company's sales and profits have generally been the highest in the second quarter and lowest in the fourth quarter. However, ~~because of~~current and future seasonal industry trends have been, and may in the future be, different than in prior years due to various factors, including fluctuations in dealer inventories and the timing of dealer orders, 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~~as well other factors such as a global health crisis or natural disaster. Additionally, many of the optional upgrades and ~~future seasonal industry trends may be different than in prior years. Additionally,~~non-critical replacement parts for RVs are purchased outside the normal product selling season, thereby causing certain Aftermarket Segment sales ~~of components to the aftermarket channels of these industries tend~~ to be counter-seasonal.

The Company is not aware of any significant events 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 presented herein have been prepared by the Company in accordance with the accounting policies described in its December 31, 2016 Annual Report on Form 10-K and should be read in conjunction with the Notes to Consolidated Financial Statements which appear in that report.Statements. All significant intercompany balances and transactions have been eliminated. Certain prior year balances have been reclassified to conform to the current year presentation.

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 have been prepared in accordance with the instructions to Form 10-Q, and therefore do not include some information necessary to conform to 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.

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Risks and Uncertainties

Negative conditions in the ~~opinion of management,~~general economy in the ~~information furnished~~United States or abroad, including conditions resulting from financial and credit market fluctuations, increased inflation and interest rates, changes in ~~this Form 10-Q reflects all adjustments necessary for a fair statement of~~economic policy, trade uncertainty, including changes in tariffs, sanctions, international treaties, and other trade restrictions, including geopolitical tensions, armed conflicts, natural disasters or global public health crises, have negatively impacted, and could continue to negatively impact, the Company’s business, liquidity, financial ~~position~~condition and results of ~~operations for the interim periods presented.~~ operations.

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, 2022 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.

There are no recent accounting pronouncements that have been issued and not yet adopted that are expected to have a material impact on our Condensed Consolidated Financial Statements.

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 September 30,		Nine Months Ended September 30,
(In thousands)	2023	2022	2023	2022
Weighted average shares outstanding for basic earnings per share	25,340	25,447	25,293	25,398
Common stock equivalents pertaining to stock-based awards	164	153	112	122
Weighted average shares outstanding for diluted earnings per share	25,504	25,600	25,405	25,520

Equity instruments excluded from diluted net earnings per share calculation as the effect would have been antidilutive	167	113	164	112

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. 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, the Company includes the number of shares required to satisfy the conversion obligation, assuming all the Convertible Notes are converted. Because the average closing price of the Company's common stock for each of the three and nine months ended September 30, 2023, which is used as the basis for determining the dilutive effect on earnings per share, was less than the conversion price of $165.65, all associated shares were antidilutive.

In conjunction with the issuance of the Convertible Notes, the Company, in privately negotiated transactions with certain commercial banks (the "Counterparties"), sold warrants to 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 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 shares of common stock 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 each of the three and nine months ended September 30, 2023, the average share price was below the Warrant strike price of $259.84 per share, and therefore ~~do not include some information necessary~~2.8 million shares were considered antidilutive.

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 ~~conform~~the Counterparties pursuant to ~~annual reporting requirements.~~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.

2.4. ACQUISITIONS, GOODWILL AND OTHER INTANGIBLE ASSETS

Acquisitions Completed During the Nine Months Ended September 30, ~~2017~~2023

~~Metallarte S.r.l.~~During the nine months ended September 30, 2023, the Company completed two acquisitions for an aggregate $25.8 million of cash purchase consideration, plus holdback payments of $0.5 million to be paid over two years. The preliminary purchase price allocations resulted in $16.7 million of goodwill (tax deductible). 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 Nine Months Ended September 30, 2023

Way

In ~~June 2017,~~November 2022, the Company acquired ~~100 percent~~substantially all of the ~~equity interests~~business assets of ~~Metallarte S.r.l. (“Metallarte”~~Way Interglobal Network LLC ("Way"), a ~~manufacturer~~distributor of ~~entry~~innovative appliances and ~~compartment doors for~~electronics to OEMs in 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.~~industry. The purchase price was ~~$14.1~~$54.8 million, ~~paid at closing, plus contingent consideration based~~which includes a holdback payment of $2.0 million due on ~~future sales by this operation.~~the first anniversary of the acquisition in November 2023, and remains subject to adjustment as a result of net working capital true-up procedures. 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, primarily in the Company's OEM Segment. As the operations of this acquisition 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.

During the nine months ended September 30, 2023, the Company adjusted the preliminary purchase price allocation reported in the Company's December 31, 2022 Annual Report on Form 10-K to account for updates to net working capital balances. These measurement period adjustments would not have resulted in a material impact on the prior period results if the adjustments had been recognized as of the acquisition date. The ~~Company~~purchase price allocation is ~~validating account balances~~subject to further adjustment for net working capital 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 $ 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

~~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 intangible assets as additional information is obtained within the ~~net assets acquired, resulting in goodwill, because~~measurement period (not to exceed 12 months from the ~~Company anticipates the attainment of synergies and an increase~~acquisition date).

Goodwill

Changes in the ~~markets for the acquired products.~~

~~Lexington~~

~~In May 2017, the Company acquired the business and certain assets~~carrying amount 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. 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. 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

~~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

~~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.

~~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 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.

~~Flair Interiors~~

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

~~LCI INDUSTRIES~~

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

~~(Unaudited)~~

~~The acquisition of this business was recorded on 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

~~Highwater Marine Furniture~~

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

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 the fair value of the net assets acquired, resulting in goodwill, because the Company anticipates leveraging its existing experience and manufacturing capacity with respect to these product lines.

~~Goodwill~~

~~Goodwill~~ by reportable segment ~~was~~were 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, 2022	$	399,736	$	167,327	$	567,063
Acquisitions – 2023	16,748		—		16,748
Measurement period adjustments	(2,905)		(143)		(3,048)
Foreign currency translation	(625)		(226)		(851)
Net balance – September 30, 2023	$	412,954	$	166,958	$	579,912

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 30, ~~2017:~~2023:

(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			(In thousands)	Gross Cost		Accumulated Amortization		Net Balance		Estimated Useful Life in Years
Customer relationships	$	106,316	$	30,226	$	76,090	6	to	16	Customer relationships	$	508,625	$	180,810	$	327,815	6	to	20
Patents	55,172		32,290		22,882		3	to	19	Patents	118,914		67,164		51,750		3	to	20
Trade names	9,876		5,332		4,544		3	to	15
Trade names (finite life)										Trade names (finite life)	98,169		25,503		72,666		3	to	20
Trade names (indefinite life)										Trade names (indefinite life)	7,600		—		7,600		Indefinite
Non-compete agreements	4,569		3,460		1,109		3	to	6	Non-compete agreements	10,334		8,085		2,249		3	to	6
Other	309		68		241		2	to	12	Other	609		277		332		2	to	12
Purchased research and development	4,687		—		4,687		Indefinite

Other intangible assets	$	180,929	$	71,376	$	109,553				Other intangible assets	$	744,251	$	281,839	$	462,412

Other intangible assets consisted of the following at December 31, ~~2016:~~2022:


(In thousands)	Gross Cost		Accumulated Amortization		Net Balance		Estimated Useful Life in Years
Customer relationships	$	520,273	$	163,562	$	356,711	6	to	20
Patents	121,167		62,841		58,326		3	to	20
Trade names (finite life)	97,810		21,380		76,430		3	to	20
Trade names (indefinite life)	7,600		—		7,600		Indefinite
Non-compete agreements	11,584		7,698		3,886		3	to	6
Other	609		242		367		2	to	12

Other intangible assets	$	759,043	$	255,723	$	503,320

~~LCI INDUSTRIES~~

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

~~(Unaudited)~~

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:


	September 30,		December 31,
(In thousands)	2023			2022
Raw materials	$	484,290		$	600,601
Work in process	48,657			44,850
Finished goods	258,937			384,254
Inventories, net	$	791,884		$	1,029,705

At September 30, 2023 and December 31, 2022, the Company had recorded inventory obsolescence reserves of $63.0 million and $55.9 million, respectively.

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

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Fixed assets consisted of the following at:


	September 30,		December 31,
(In thousands)	2023			2022
Fixed assets, at cost	$	986,179		$	945,255
Less accumulated depreciation and amortization	513,661			463,070
Fixed assets, net	$	472,518		$	482,185

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:


	September 30,		December 31,
(In thousands)	2023			2022
Employee compensation and benefits	$	58,810		$	77,804

Current portion of accrued warranty	44,209			35,148
Customer rebates	20,893			12,138
Deferred acquisition payments and contingent consideration*	2,581			34,013
Other	53,401			60,135
Accrued expenses and other current liabilities	$	179,894		$	219,238

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

* Includes current portion of contingent consideration (Note 10) and deferred acquisition payments (Note 4).

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)~~Company's historical warranty costs, ~~(ii) current trends, (iii) product mix,~~warranty claim lag, and ~~(iv)~~ sales. The following table provides a reconciliation of the activity related to the ~~Company’s~~Company's accrued warranty, including both the current and long-term portions, for the nine months ended September 30:


(In thousands)	2023		2022
Balance at beginning of period	$	54,528	$	52,114
Provision for warranty expense	60,691		36,362

Warranty costs paid	(49,110)		(29,373)
Balance at end of period	66,109		59,103
Less long-term portion	(21,900)		(19,520)
Current portion of accrued warranty at end of period	$	44,209	$	39,583

(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

LCI INDUSTRIES

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

(Unaudited)

6.8. LONG-TERM INDEBTEDNESS

~~At September 30, 2017~~Long-term debt consisted of the following:


	September 30,		December 31,
(In thousands)	2023			2022

Convertible Notes	$	460,000		$	460,000
Term Loan	330,000			375,000
Revolving Credit Loan	122,742			289,067

Other	3,258			3,959
Unamortized deferred financing fees	(7,189)			(9,052)
	908,811			1,118,974
Less current portion	(566)			(23,086)
Long-term indebtedness	$	908,245		$	1,095,888

The Company and ~~2016, and~~certain of its subsidiaries are party to a credit agreement dated December ~~31, 2016, the Company had no outstanding borrowings on its line of credit.~~

~~On April 27, 2016, the Company refinanced its line of credit through an agreement~~14, 2018 with JPMorgan Chase, ~~Bank,~~ N.A., ~~Wells Fargo Bank, N.A., Bank~~as a lender and administrative agent, and other bank lenders (as amended, the "Credit Agreement"). The Credit Agreement provides for a $600.0 million revolving credit facility (of which $50.0 million is available for the issuance of ~~America, N.A., and 1st Source Bank. The agreement amended and restated the existing line~~letters of credit ~~which now expires~~(the "LC Facility") and up to $400.0 million is available in approved foreign currencies). The Credit Agreement also provides for term loans (the "Term Loan") to the Company in an aggregate principal amount of $400.0 million. The maturity date of the Credit Agreement is December 7, 2026. The Term Loan is required to be repaid in an amount equal to 1.25 percent of the original principal amount of the Term Loan for the first eight quarterly periods commencing with the quarter ended December 31, 2021, 1.875 percent of the original principal amount of the Term Loan for the next eight quarterly periods, and then 2.50 percent of the original principal amount of the Term Loan of each additional payment until the maturity date. The Company prepaid $30.0 million of principal on ~~April 27, 2021 (the “Amended~~the Term Loan during the three months ended September 30, 2023. This prepayment was applied to pay in full the scheduled principal amortization payments due through September 30, 2024. The Credit ~~Agreement”). In connection with this amendment and restatement, the line of credit was increased from $100.0 million to $200.0 million, and contains a feature allowing~~Agreement also permits the Company to ~~draw~~request an increase to the revolving and/or term loan facility by up to ~~$50.0~~an additional $400.0 million in ~~approved foreign currencies, including Australian dollars, Canadian dollars, pound sterling~~the aggregate upon the approval of the lenders providing any such increase and ~~euros. The maximum borrowings~~the satisfaction of certain other conditions.

Borrowings under the ~~line of credit can be further increased by $125.0 million, subject to certain conditions. Interest on borrowings under the line of credit is~~Credit Agreement in U.S. dollars 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, (b) the federal funds effective~~base rate ~~plus 0.5 percent and (c) the Adjusted LIBO Rate (as defined in the Amended Credit Agreement) for~~loans which bear interest at a ~~one month interest period plus 1.0 percent),~~base rate plus additional interest ranging from 0.0 percent to ~~0.625~~0.875 percent ~~(0.0~~(0.750 percent was applicable at September 30, ~~2017)~~2023) depending on the Company’s ~~performance and financial condition,~~total net leverage ratio or (ii) ~~the Adjusted LIBO~~term benchmark loans which bear interest at term Secured Overnight Financing Rate ("SOFR") plus a credit spread adjustment of 0.1 percent for aan interest period ~~equal to one, two, three, six or twelve months as~~ selected by the Company plus additional interest ranging from ~~1.0~~0.875 percent to ~~1.625~~1.875 percent ~~(1.0~~(1.750 percent was applicable at September 30, ~~2017)~~2023) depending on the Company’s ~~performance and financial condition.~~total net leverage ratio. Foreign currency borrowings have the same additional interest margins applicable to term benchmark loans based on the Company's total net leverage ratio. At September 30, ~~2017 and 2016,~~2023, the Company had ~~$2.4~~$4.6 million ~~and $2.5 million, respectively,~~ in issued, but undrawn, standby letters of credit under the ~~line of credit.~~LC Facility. Availability under the Company’s ~~line of~~revolving credit facility, giving effect to certain limitations related to compliance with the maximum net leverage ratio covenant, was ~~$197.6~~$178.5 million at September 30, ~~2017.~~2023. A commitment fee ranging from 0.150 percent to 0.275 percent (0.250 percent was applicable at September 30, 2023) depending on the Company's total net leverage ratio accrues on the actual daily amount that the revolving commitment exceeds the revolving credit exposure.

~~On February 24, 2014, the~~Shelf-Loan Facility

The Company ~~entered into~~and certain of its subsidiaries had a $150.0 million ~~“shelf-loan”~~shelf-loan facility (the "Shelf-Loan Facility") with PGIM, Inc. (formerly Prudential Investment Management, Inc.) and its affiliates ~~(“Prudential”~~("Prudential"). On March ~~20, 2015,~~29, 2019, the Company issued $50.0 million of Series B Senior ~~Promissory~~ Notes ~~(“Series A Notes”~~(the "Series B Notes") to certain affiliates of Prudential for a term of ~~five~~

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

three years, at a fixed interest rate of ~~3.35~~3.80 percent per annum, payable quarterly in arrears. The Series B Notes were paid in full in March 2022, and the Shelf-Loan Facility expired on November 11, 2022.

On May 13, 2021, the Company issued $460.0 million in aggregate principal amount of 1.125 percent Convertible Notes due 2026 in a private placement to certain qualified institutional buyers, resulting in net proceeds to the Company of approximately $447.8 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, 2026, unless earlier converted, redeemed, or repurchased, in accordance with their terms.

As of September 30, 2023, the conversion rate of the Convertible Notes was 6.1615 shares of the Company's common stock per $1,000 principal amount of the Convertible Notes. The conversion rate of the Convertible Notes is subject to further adjustment upon the occurrence of certain specified events. 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 certain circumstances as set forth 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. Upon conversion, the Company will pay cash up to the aggregate principal amount of the Convertible 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 Convertible 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 ~~entire~~Company provides notice of redemption at a redemption price equal to 100 percent of the principal amount ~~was~~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 Convertible 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 $425.5 million at September 30, ~~2017.~~ 2023 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 September 30, ~~2017,~~2023, the fair value of the ~~Company’s~~Company's long-term debt under the Credit Agreement approximates the carrying value, as estimated using quoted market prices and discounted future cash flows based on similar borrowing arrangements.

On March 30, 2017, the Company amended its “shelf-loan” facility 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 $100.0 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.

Borrowings under both the line of credit and the “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 of certain “controlled foreign corporations.”)

Pursuant to the ~~Amended~~ Credit Agreement, ~~and “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. On May 23, 2023, the Company entered into an amendment to the Credit Agreement that, among other things, provided for adjustments to certain of the financial covenants by increasing the maximum total net leverage ratio and decreasing the minimum debt service coverage ratio, in each case for the two fiscal quarters ending June 30, 2023 and September 30, 2023. At September 30, ~~2017 and 2016,~~2023, the Company was in compliance with all ~~such requirements, and expects to remain in compliance for the next twelve months.~~financial covenants.

~~Availability under both the Amended~~The Credit Agreement ~~and the “shelf-loan” facility is subject to~~includes 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.~~EBITDA. This limitation ~~did not impact~~reduced the ~~Company’s borrowing~~Company's remaining availability under its revolving credit facility at September 30, ~~2017. The remaining availability under these facilities was $297.6 million at September 30, 2017.~~2023. The Company believes the availability of $178.5 million under the ~~Amended~~revolving credit facility under the Credit Agreement, ~~and “shelf-loan” facility is~~along with its cash flows from operations, are adequate to finance the ~~Company’s~~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 components of lease expense were as follows:

~~(Unaudited)~~


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2023		2022		2023		2022
Operating lease expense	$	14,796	$	14,081	$	45,710	$	40,229
Short-term lease expense	1,140		2,019		3,927		5,793
Variable lease expense	1,154		1,175		3,354		2,824
Total lease expense	$	17,090	$	17,275	$	52,991	$	48,846

7.10. COMMITMENTS AND CONTINGENCIES

Holdback Payments and Contingent Consideration

~~In connection with several business acquisitions, if certain sales targets for the acquired products are achieved,~~From time to time, the Company ~~will be required to pay additional cash consideration. The Company has recorded~~finances a ~~liability for the fair value~~portion of ~~this~~its business combinations with deferred acquisition payments ("holdback payments") and/or contingent ~~consideration~~earnout provisions. Holdback payments are accrued at ~~September 30, 2017 and 2016, based on the~~their discounted 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.~~

value. 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. See Note 4 - Acquisitions, Goodwill and Other Intangible Assets for information on certain holdback payments. Contingent consideration balances were not material at September 30, 2023.

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

(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

~~Furrion Distribution and Supply Agreement~~

In July 2015, the Company entered into a six-year exclusive distribution and supply agreement with Furrion Limited (“Furrion”), a Hong Kong based firm that designs, engineers and supplies premium electronics. This agreement provides the Company with the rights to distribute Furrion’s complete line of products to OEMs and aftermarket customers in the RV, specialty vehicle, utility trailer, horse trailer, marine, transit bus 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 Company at its election may terminate 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.

~~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~~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

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 30, ~~2017,~~2023, would not be material to the ~~Company’s~~Company's financial position or ~~annual~~ results of operations.

~~8. STOCKHOLDERS’~~11. STOCKHOLDERS' EQUITY

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


	September 30,	December 31,
(In thousands)	2023		2022
Common stock authorized	75,000		75,000
Common stock issued	28,665		28,519
Treasury stock	3,341		3,341
Common stock outstanding	25,324		25,178

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 30, ~~2017~~2023 and December 31, ~~2016:~~2022:


(In thousands, except per share data)	Per Share		Record Date	Payment Date	Total Paid
First Quarter 2022	$	0.90	03/11/22	03/25/22	$	22,870
Second Quarter 2022	1.05		06/03/22	06/17/22	26,702
Third Quarter 2022	1.05		09/02/22	09/16/22	26,701
Fourth Quarter 2022	1.05		12/02/22	12/16/22	26,453
Total 2022	$	4.05			$	102,726

First Quarter 2023	$	1.05	03/10/23	03/24/23	$	26,563
Second Quarter 2023	1.05		06/02/23	06/16/23	26,591
Third Quarter 2023	1.05		09/01/23	09/15/23	26,590
Total 2023	$	3.15			$	79,744

(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 price~~end of ~~$108.47,~~a specified vesting or ~~$6.9 million,~~deferral period. Holders of DSUs and RSUs receive dividend equivalents based on dividends granted to ~~executive officers~~holders of the common stock, which dividend equivalents are payable in lieu of cash for a portion of their 2016 incentive compensation. In February 2016, the Company issued 4,784 deferred stock units at the average price of $55.22, or $0.3 million, to executive officers in lieu of cash for a portion of their 2015 incentive compensation.

~~9. FAIR VALUE MEASUREMENTS~~

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

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 fair valued using management’s projections for long-term sales forecasts, including assumptions regarding market share gains~~RSUs, and future industry-specific economic and market conditions, and a market participant’s weighted average cost of capital. Over the next six years, the Company’s long-term sales growth forecasts for productsare subject to ~~contingent consideration arrangements average approximately 14 percent per year. For further information~~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 ~~the inputs used in determining the fair value, and a roll-forward~~achievement of ~~the contingent consideration liability, see Note 7 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

specified performance conditions. RSUs vest

LCI INDUSTRIES

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

(Unaudited)

(i) ratably over the service period or (ii) at a specified future date. In addition, DSUs are issued in lieu of certain cash compensation. Transactions in DSUs and RSUs under the 2018 Plan are summarized as follows:

~~underlying movement~~


	Number of Shares	Weighted Average Price
Outstanding at December 31, 2022	277,774	$	120.92
Issued	2,464	117.44
Granted	159,640	114.22
Dividend equivalents	8,275	114.46
Forfeited	(20,853)	121.11
Vested	(129,786)	112.28
Outstanding at September 30, 2023	297,514	$	118.49

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, 2022	162,381	$	120.12

Granted	140,953	108.42
Dividend equivalents	5,517	114.61
Forfeited	(3,245)	96.55
Vested	(100,046)	101.11
Outstanding at September 30, 2023	205,560	$	122.57

On May 19, 2022, the Company's Board of Directors authorized a stock repurchase program granting the Company authority to repurchase up to $200.0 million of the Company's common stock over a three-year period, ending on May 19, 2025. The timing of stock repurchases and the number of shares will depend upon the market conditions and other factors. Share repurchases, if any, will be made in the open market and in privately negotiated transactions in accordance with applicable securities laws. The stock repurchase program may be modified, suspended, or terminated at any time by the Board of Directors. In 2022, the Company purchased 253,490 shares at a weighted average price of ~~steel, they are not designated or accounted for as a hedge. These derivative instruments~~$94.89 per share, totaling $24.1 million. No purchases were valued at fair value using a market approach based on the quoted market prices of similar instruments at the end of each reporting period, and the resulting net loss was recorded in selling, general and administrative expenses in the Condensed Consolidated Statements of Income. At September 30, 2017, the $1.2 million corresponding asset was recorded in other current assets as reflected in the Condensed Consolidated Balance Sheets. A net loss of $1.1 million was recorded in selling, general and administrative expenses in the Condensed Consolidated Statements of Incomemade during the nine months ended September 30, ~~2017.~~2023.

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.~~12. SEGMENT REPORTING

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

The OEM Segment, which accounted for 9276 percent and 83 percent of consolidated net sales for ~~each of~~ the nine ~~month periods~~months ended September 30, ~~2017~~2023 and ~~2016,~~2022, respectively, manufactures orand distributes a broad array of engineered components for the leading OEMs in the recreation, transportation products, and housing markets, consisting primarily of RVs and adjacent industries, including boats; buses; trailers used to haul boats, livestock, equipment, and other cargo; trucks; ~~pontoon boats;~~ trains; manufactured homes; and modular housing. Approximately 7146 percent of the ~~Company’s~~Company's OEM Segment net sales for the nine months ended September 30, ~~2017~~2023 were of components for travel trailer and fifth-wheel RVs.

The Aftermarket Segment, which accounted for 824 percent and 17 percent of consolidated net sales for ~~each of~~ the nine ~~month periods~~months ended September 30, ~~2017~~2023 and ~~2016,~~2022, respectively, supplies engineered components to the related aftermarket channels of the RVrecreation, transportation products, and ~~adjacent industries,~~

~~LCI INDUSTRIES~~

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

~~(Unaudited)~~

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(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.~~2022.

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 following tables present 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~~Company's revenues disaggregated by segment 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 impactgeography based on the ~~Company’s consolidated financial statements.~~billing address of the Company's customers:


	Three Months Ended September 30, 2023						Three Months Ended September 30, 2022
(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	$	352,774	$	10,799	$	363,573	$	480,207	$	13,308	$	493,515
Motorhomes	40,254		25,415		65,669		60,964		21,958		82,922
Adjacent Industries OEMs	254,355		44,870		299,225		295,173		40,810		335,983
Total OEM Segment net sales	647,383		81,084		728,467		836,344		76,076		912,420
Aftermarket Segment:
Total Aftermarket Segment net sales	212,647		18,201		230,848		203,106		16,553		219,659
Total net sales	$	860,030	$	99,285	$	959,315	$	1,039,450	$	92,629	$	1,132,079

	Nine Months Ended September 30, 2023						Nine Months Ended September 30, 2022
(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	$	994,581	$	38,285	$	1,032,866	$	2,218,157	$	43,093	$	2,261,250
Motorhomes	124,946		81,458		206,404		185,118		76,538		261,656
Adjacent Industries OEMs	862,176		144,202		1,006,378		930,536		131,838		1,062,374
Total OEM Segment net sales	1,981,703		263,945		2,245,648		3,333,811		251,469		3,585,280
Aftermarket Segment:
Total Aftermarket Segment net sales	648,034		53,582		701,616		673,519		53,998		727,517
Total net sales	$	2,629,737	$	317,527	$	2,947,264	$	4,007,330	$	305,467	$	4,312,797

~~In January 2017,~~(a) Net sales to customers in the ~~FASB issued ASU 2017-01,~~ ~~Clarifying~~United States of America

(b) Net sales to customers in countries domiciled outside of the ~~Definition~~United States of ~~a Business,~~ ~~which amends ASC 805,~~ ~~Business Combinations. This ASU clarifies~~America

The following table presents the ~~definition of a business with the objective of adding guidance to assist entities with evaluating~~Company's operating profit by segment:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2023		2022		2023		2022
Operating profit:
OEM Segment	$	11,165	$	65,186	$	29,086	$	501,137
Aftermarket Segment	34,425		22,389		91,721		74,928
Total operating profit	$	45,590	$	87,575	$	120,807	$	576,065

LCI INDUSTRIES

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

(Unaudited)

~~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 of the accounting for share-based payment transactions, including income tax consequences, the classification of awards as either equity or liabilities, and the classification on the statement of cash flows. Under the new standard, all excess tax benefits and tax deficiencies are recorded as a component 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 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.

~~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~~Company's 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.by product:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2023		2022		2023		2022
OEM Segment:
Chassis, chassis parts, and slide-out mechanisms	$	202,429	$	295,256	$	603,221	$	1,341,567
Windows and doors	214,135		244,011		652,840		876,354
Furniture and mattresses	104,266		179,710		370,175		651,456
Axles and suspension solutions	82,083		67,343		246,466		257,766
Other	125,554		126,100		372,946		458,137
Total OEM Segment net sales	728,467		912,420		2,245,648		3,585,280
Total Aftermarket Segment net sales	230,848		219,659		701,616		727,517
Total net sales	$	959,315	$	1,132,079	$	2,947,264	$	4,312,797

LCI INDUSTRIES

ITEM 2 – ~~MANAGEMENT’S~~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 1I 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.~~2022.

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, transportation products, and housing markets, consisting primarily of recreational vehicles ~~(“RVs”~~("RVs") and adjacent industries, including boats; 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.~~centers, as well as direct to retail customers via the Internet.

~~The Company has~~We have two reportable segments, the OEM Segment and the Aftermarket Segment. Intersegment sales are insignificant. At September 30, ~~2017, the Company~~2023, we operated 52120 manufacturing and distribution facilities located throughout ~~the United States~~North America and ~~in Canada and Italy.~~Europe. See Note 1012 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 and adjacent ~~industries.~~industries, including boats; buses; trailers used to haul boats, livestock, equipment, and other cargo; trucks; trains; manufactured homes; and modular housing. Approximately 7147 percent of ~~the Company’s~~our OEM Segment net sales for the twelve months ended September 30, ~~2017~~2023 were of components for travel trailer and fifth-wheel RVs, including:



● Steel chassis and related components		~~● Furniture and mattresses~~
~~● Axles and suspension solutions~~	● Electric and manual entry steps
● Axles and suspension solutions		● Awnings and awning accessories
● Slide-out mechanisms and solutions		● ~~Awnings and awning accessories~~Electronic components
● Thermoformed bath, kitchen, and other products		● ~~Electronic components~~Appliances
● Vinyl, aluminum, and frameless windows		● ~~Appliances~~Air conditioners
● Manual, electric, and hydraulic stabilizer and leveling systems		● Televisions and sound systems ~~navigation~~ ~~systems and backup cameras~~
● Entry, luggage, patio, and ramp doors		● Tankless water heaters
● Furniture and mattresses		● Other accessories

The Aftermarket Segment supplies many of these engineered components to the related aftermarket channels of the RVrecreation, transportation products, and ~~adjacent industries,~~housing markets, primarily to retail dealers, wholesale distributors, and service ~~centers.~~centers, as well as direct to retail customers via the Internet. The Aftermarket Segment also includes biminis, covers, buoys, fenders to the marine industry, towing products, truck accessories, appliances, air conditioners, televisions, sound systems, tankless water heaters, 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~~current and future seasonal industry trends have been, and may in the future be, different than in prior years due to various factors, including fluctuations in dealer inventories and the timing of dealer orders, 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~~as well other factors such as a global health crisis or natural disaster. Additionally, many of the optional upgrades and ~~future seasonal industry trends may be different than in prior years. Additionally,~~non-critical replacement parts for RVs are purchased outside the normal product selling season, thereby causing certain Aftermarket Segment sales ~~of components to the aftermarket channels of these industries tend~~ to be counter-seasonal.

Negative conditions in the general economy in the United States or abroad, including conditions resulting from financial and credit market fluctuations, increased inflation and interest rates, changes in economic policy, trade uncertainty, including changes in tariffs, sanctions, international treaties, and other trade restrictions, geopolitical tensions, armed conflicts,

LCI INDUSTRIES

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)

natural disasters, or global public health crises, have negatively impacted, and could continue to negatively impact, the Company’s business, liquidity, financial condition and results of operations.

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 the strength of retail sales and the current outlook from several RV OEMs and their dealer networks, most industry analysts continue to report that RV dealer inventory is in line with anticipated retail demand.

According to the Recreation Vehicle Industry Association ~~(“RVIA”~~("RVIA"), industry-wide wholesale shipments from the United States of travel trailer and fifth-wheel RVs, our primary RV market, decreased 46 percent to 195,700 units in the first nine months of ~~2017, the Company’s primary RV market, increased 18 percent to 321,300 units,~~2023, compared to the ~~same period~~first nine months of ~~2016, as a result of:~~

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

According to the RVIA, industry-wide wholesale shipments of motorhome RVs in the first nine months of ~~2017 increased 14~~2023 decreased 22 percent to ~~47,300~~35,800 units compared to the ~~same period~~first nine months of ~~2016. The Company estimates retail~~2022. Retail demand for motorhome RVs ~~increased 13~~decreased seven percent year-over-year in the first nine months of ~~2017, following~~2023, compared to an 11 percent ~~increase~~year-over-year decrease in retail demand in ~~2016.~~

~~The RVIA has projected an 11 percent increase~~the same period of 2022. We believe the decline 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~~has been partially driven by inflation and ~~available credit for dealers and RV consumers, were strong, as evidenced by the 10 percent increase in industry-wide~~rising interest rates impacting 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 abilityconsumers.

LCI INDUSTRIES

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)

Our current estimate for full-year 2023 industry-wide wholesale shipments from the United States of travel trailer, fifth-wheel, and motorhome RVs is approximately 295,000 to ~~exceed industry growth rates through new product introductions, market share gains, aftermarket sales, acquisitions~~305,000 units. This estimate is based on the current RVIA forecast and ~~ongoing investments~~suggests a decrease of 40 to 38 percent compared to actual wholesale shipments 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 are2022. This 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 beendecline is being driven by ~~the Baby Boomer generation. The size of that generation is beginning to wane,~~current dealer inventory levels, inflation, and younger generations (Generation X and Millennials) are becoming more relevant to future industry growth. Generation X and Millennials are more diverse, requiring new and creative marketing approaches to attract them to the RV industry. The RVIA has an advertising campaign promoting the “RV Lifestyle” targeted at both parents aged 30 - 49 with children at home, as well as couples aged 50 - 64 with no children at home. In addition, the RV OEMs have developed more entry level units, specifically targeting younger families, in both towables and motorhomes. The popularity of traveling in RVs to NASCAR and other sporting events, more family-oriented domestic vacations, and using RVs as second homes, are trends that could continue to motivate consumer demand for RVs. RVIA studies indicate RV vacations cost significantly less than other forms of vacation travel, even when factoring in fuel prices and the cost of RV ownership. More details can be found at www.RVIA.org.rising interest rates impacting retail consumers.

~~The Company’s~~Our portfolio of products used in RVs can also be used in other applications, including boats; 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~~Industries.

We currently expect global economic uncertainty to negatively impact consumer discretionary purchases such as trailers and ~~as a result, five~~boats for the remainder of 2023; however, we currently anticipate that production of manufactured homes, buses, and trains should remain at or near current run rates through the ~~last eight business acquisitions completed by the Company were focused in Adjacent Industries.~~remainder of 2023.

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:

Many of ~~the Company’s~~our OEM Segment products are also sold through various aftermarket channels ~~including dealerships, warehouse~~of the recreation, transportation products, and housing markets, primarily to retail dealers, 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.~~minimal. The Aftermarket Segment also includes biminis, covers, buoys, fenders to the marine industry, towing products, truck accessories, appliances, air conditioners, televisions, sound systems, tankless water heaters, and the sale of replacement glass and awnings to fulfill insurance claims. Many of the optional upgrades and non-critical ~~replacements~~replacement parts for RVs are purchased outside the normal product selling ~~seasons,~~season, thereby causing certain Aftermarket Segment sales to be counter-seasonal.

According to ~~the RVIA, current~~Go RVing, estimated RV ownership ~~is nearly nine~~in the United States as of 2020 had increased to over 11 million ~~units. Additionally, as a result of a vibrant secondary market, one-third of current owners purchased their RV new while the remaining two-thirds purchased a previously owned RV.~~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.

We currently expect to see a slight increase in aftermarket sales over prior year levels in the remainder of 2023 as distribution channel inventories stabilize. We expect these gains will be tempered by the impact of inflation and rising interest rates on consumers' discretionary spending.

Consolidated Highlights

•Consolidated net sales in the third quarter of 2023 were $1.0 billion, 15 percent lower than consolidated net sales for the same period of 2022 of $1.1 billion. The decrease was primarily driven by a nearly 21 percent decrease in North American RV wholesale shipments, decreased selling prices which are indexed to select commodities, and lower North American marine production levels, partially offset by acquisitions. Net sales from acquisitions completed in the twelve months ended September 30, 2023 contributed approximately $16.9 million in the third quarter of 2023.

•Net income for the third quarter of 2023 was $25.9 million, or $1.02 per diluted share, compared to net income of $61.4 million, or $2.40 per diluted share, for the same period of 2022.

•Consolidated operating profit during the third quarter of 2023 was $45.6 million, compared to $87.6 million in the same period of 2022. Operating profit margin was 4.8 percent in the third quarter of 2023 compared to 7.7 percent in the same period of 2022. The decrease was primarily due to decreased selling prices which are indexed to select commodities and the impact of fixed costs on reduced sales, partially offset by decreases in material commodity costs.

LCI INDUSTRIES

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)

~~RESULTS OF OPERATIONS~~

~~Consolidated Highlights~~

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

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.

•We made net repayments of indebtedness of $211.4 million ~~$12.4 million and $12.5 million, respectively.~~year-to-date through September 30, 2023.

~~LCI INDUSTRIES~~

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

~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Continued)~~

OEM Segment - Third Quarter

Net sales of the OEM Segment in the third quarter of ~~2017 increased 35 percent, or $130~~2023 decreased by $184.0 million, compared to the same period of ~~2016.~~2022. Net sales of components to OEMs were to the following markets for the three months ended September 30:


(In thousands)	2023		2022		Change
RV OEMs:
Travel trailers and fifth-wheels	$	363,573	$	493,515	(26)	%
Motorhomes	65,669		82,922		(21)	%
Adjacent Industries OEMs	299,225		335,983		(11)	%
Total OEM Segment net sales	$	728,467	$	912,420	(20)	%

(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 30 were:


	2023	2022	Change
Travel trailer and fifth-wheels	61,500	73,300	(16)	%
Motorhomes	10,300	15,300	(33)	%

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

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 30, divided by the industry-wide wholesale shipments of the different ~~types~~product mix of RVs for the same period, was:


Content per:	2023		2022		Change
Travel trailer and fifth-wheel	$	5,192	$	5,862	(11)	%
Motorhome	$	3,705	$	3,807	(3)	%

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 our products, market share gains, and acquisitions. For the ~~Company’s products,~~twelve months ended September 30, 2023, travel trailer and fifth-wheel RV content declined year-over-year primarily due to pricing decreases indexed to commodity and freight indices, as well as ~~changes~~wholesale shipments outpacing OEM production levels, partially offset by organic market share growth.

Our decrease in ~~the types of RVs produced industry-wide.~~

~~The Company’s~~ net ~~OEM~~ sales to ~~Adjacent Industries increased~~RV OEMs during the third quarter of ~~2017~~2023 was driven by a 21 percent reduction in North American wholesale shipments during the third quarter of 2023, primarily due to ~~acquisitions completed~~current dealer inventory levels, inflation, and rising interest rates impacting retail consumers.



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)



	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	22

		ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	3332

		ITEM 4 – CONTROLS AND PROCEDURES	3332

PART II –		OTHER INFORMATION

		ITEM 1 – LEGAL PROCEEDINGS	3433

		ITEM 1A – RISK FACTORS	3433

		ITEM 5 – OTHER INFORMATION	33

		ITEM 6 – EXHIBITS	3433

SIGNATURES			3534

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



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



	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



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



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


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



	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



					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.~~


◦	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.


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.~~


LCI INDUSTRIES
Registrant


~~LCI INDUSTRIES~~By		/s/ Lillian D. Etzkorn
~~Registrant~~Lillian D. Etzkorn


By	~~/s/ Brian M. Hall~~
~~Brian M. Hall~~
Chief Financial Officer
November 7, ~~2017~~2023