UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended: March 31, ~~2021~~2022


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

For the transition period from _________________ to _________________

Commission File Number: 001-13646

LCI INDUSTRIES

(Exact name of registrant as specified in its charter)


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	(Zip Code)
(Address of principal executive offices)

(574) 535-1125

(Registrant’s telephone number, including area code)

(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 every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

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

Large accelerated filer ☒ Accelerated filer ☐

Non-accelerated filer ☐ Smaller reporting company ☐

Emerging growth company ☐

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

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

The number of shares outstanding of the registrant’s common stock, as of the latest practicable date (April ~~30, 2021)~~29, 2022) was ~~25,254,445~~25,415,157 shares of common stock.

LCI INDUSTRIES

TABLE OF CONTENTS


		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 STATEMENTS OF STOCKHOLDERS’ EQUITY	8

	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	9

	ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	2124

	ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	3033

	ITEM 4 – CONTROLS AND PROCEDURES	3033

PART II –	OTHER INFORMATION

	ITEM 1 – LEGAL PROCEEDINGS	3134

	ITEM 1A – RISK FACTORS	31

	~~ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~	3134

	ITEM 6 – EXHIBITS	3234

SIGNATURES		3335

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

PART I – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

LCI INDUSTRIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


		Three Months Ended March 31,				Three Months Ended March 31,
		2021		2020				2022		2021
(In thousands, except per share amounts)	(In thousands, except per share amounts)						(In thousands, except per share amounts)

Net sales	Net sales	$	1,000,258	$	659,670		Net sales	$	1,644,568	$	1,000,258
Cost of sales	Cost of sales	758,481		501,065			Cost of sales	1,180,325		758,481
Gross profit	Gross profit	241,777		158,605			Gross profit	464,243		241,777
Selling, general and administrative expenses	Selling, general and administrative expenses	140,346		114,339			Selling, general and administrative expenses	194,542		140,346
Operating profit	Operating profit	101,431		44,266			Operating profit	269,701		101,431
Interest expense, net	Interest expense, net	2,705		5,197			Interest expense, net	6,252		2,705
Income before income taxes	Income before income taxes	98,726		39,069			Income before income taxes	263,449		98,726
Provision for income taxes	Provision for income taxes	24,606		10,855			Provision for income taxes	67,268		24,606
Net income	Net income	$	74,120	$	28,214		Net income	$	196,181	$	74,120

Net income per common share:	Net income per common share:						Net income per common share:
Basic	Basic	$	2.94	$	1.13		Basic	$	7.75	$	2.94
Diluted	Diluted	$	2.93	$	1.12		Diluted	$	7.71	$	2.93

Weighted average common shares outstanding:	Weighted average common shares outstanding:						Weighted average common shares outstanding:
Basic	Basic	25,193		25,075			Basic	25,329		25,193
Diluted	Diluted	25,325		25,143			Diluted	25,461		25,325

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

LCI INDUSTRIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


		Three Months Ended March 31,				Three Months Ended March 31,
		2021		2020				2022		2021
(In thousands)	(In thousands)						(In thousands)

Net income	Net income	$	74,120	$	28,214		Net income	$	196,181	$	74,120
Other comprehensive income (loss):
Other comprehensive loss:							Other comprehensive loss:
Net foreign currency translation adjustment	Net foreign currency translation adjustment	(3,589)		(4,740)			Net foreign currency translation adjustment	(2,882)		(3,589)

Unrealized gain on fair value of derivative instruments		0		1,200

Total comprehensive income	Total comprehensive income	$	70,531	$	24,674		Total comprehensive income	$	193,299	$	70,531

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

LCI INDUSTRIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


		March 31,		December 31,	March 31,				December 31,
		2021				2020			2022		2021
(In thousands, except per share amount)	(In thousands, except per share amount)							(In thousands, except per share amount)

ASSETS	ASSETS							ASSETS
Current assets	Current assets							Current assets
Cash and cash equivalents	Cash and cash equivalents	$	63,319			$	51,821	Cash and cash equivalents	$	55,449	$	62,896

Accounts receivable, net of allowances of $6,478 and $5,642 at March 31, 2021 and December 31, 2020, respectively		405,395				268,625
Accounts receivable, net of allowances of $8,662 and $6,446 at March 31, 2022 and December 31, 2021, respectively								Accounts receivable, net of allowances of $8,662 and $6,446 at March 31, 2022 and December 31, 2021, respectively	564,672		319,782
Inventories, net	Inventories, net	535,056				493,899		Inventories, net	1,136,230		1,095,907

Prepaid expenses and other current assets	Prepaid expenses and other current assets	64,410				55,456		Prepaid expenses and other current assets	70,766		88,300
Total current assets	Total current assets	1,068,180				869,801		Total current assets	1,827,117		1,566,885
Fixed assets, net	Fixed assets, net	392,713				387,218		Fixed assets, net	450,095		426,455
Goodwill	Goodwill	454,382				454,728		Goodwill	562,038		543,180
Other intangible assets, net	Other intangible assets, net	407,599				420,885		Other intangible assets, net	539,004		519,957
Operating lease right-of-use assets	Operating lease right-of-use assets	121,789				104,179		Operating lease right-of-use assets	199,756		164,618

Other assets		55,810				61,220
Other long-term assets								Other long-term assets	62,713		66,999
Total assets	Total assets	$	2,500,473			$	2,298,031	Total assets	$	3,640,723	$	3,288,094

LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES AND STOCKHOLDERS' EQUITY								LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities	Current liabilities							Current liabilities
Current maturities of long-term indebtedness	Current maturities of long-term indebtedness	$	67,154			$	17,831	Current maturities of long-term indebtedness	$	21,108	$	71,003
Accounts payable, trade	Accounts payable, trade	232,481				184,931		Accounts payable, trade	340,909		282,183

Current portion of operating lease obligations	Current portion of operating lease obligations	24,794				25,432		Current portion of operating lease obligations	33,500		30,592
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	210,559				188,200		Accrued expenses and other current liabilities	345,486		243,438
Total current liabilities	Total current liabilities	534,988				416,394		Total current liabilities	741,003		627,216
Long-term indebtedness	Long-term indebtedness	726,608				720,418		Long-term indebtedness	1,265,379		1,231,959
Operating lease obligations	Operating lease obligations	101,677				82,707		Operating lease obligations	176,255		143,436
Deferred taxes	Deferred taxes	55,563				53,833		Deferred taxes	41,260		43,184
Other long-term liabilities	Other long-term liabilities	122,050				116,353		Other long-term liabilities	157,574		149,424
Total liabilities	Total liabilities	1,540,886				1,389,705		Total liabilities	2,381,471		2,195,219
Stockholders’ equity
Stockholders' equity								Stockholders' equity
Common stock, par value $.01 per share	Common stock, par value $.01 per share	283				282		Common stock, par value $.01 per share	285		284
Paid-in capital	Paid-in capital	227,400				227,407		Paid-in capital	216,798		220,459
Retained earnings	Retained earnings	786,566				731,710		Retained earnings	1,103,714		930,795
Accumulated other comprehensive income		3,500				7,089
Stockholders’ equity before treasury stock		1,017,749				966,488
Accumulated other comprehensive loss								Accumulated other comprehensive loss	(3,383)		(501)
Stockholders' equity before treasury stock								Stockholders' equity before treasury stock	1,317,414		1,151,037
Treasury stock, at cost	Treasury stock, at cost	(58,162)				(58,162)		Treasury stock, at cost	(58,162)		(58,162)
Total stockholders’ equity		959,587				908,326
Total liabilities and stockholders’ equity		$	2,500,473			$	2,298,031
Total stockholders' equity								Total stockholders' equity	1,259,252		1,092,875
Total liabilities and stockholders' equity								Total liabilities and stockholders' equity	$	3,640,723	$	3,288,094

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

LCI INDUSTRIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Three Months Ended
March 31,
2021 2020
(In thousands)
Cash flows from operating activities:
Net income $ 74,120 $ 28,214
Adjustments to reconcile net income to cash flows provided by operating activities:
Depreciation and amortization 24,516 24,614
Stock-based compensation expense 7,436 3,295
Other non-cash items 1,318 (2,231)
Changes in assets and liabilities, net of acquisitions of businesses:
Accounts receivable, net (139,245) (74,776)
Inventories, net (41,170) 40,883
Prepaid expenses and other assets (3,328) 6,350
Accounts payable, trade 49,644 31,878
Accrued expenses and other liabilities 31,556 (13,468)
Net cash flows provided by operating activities 4,847 44,759
Cash flows from investing activities:
Capital expenditures (20,957) (7,955)
Acquisitions of businesses, net of cash acquired (2,779) (95,766)
Other investing activities (605) 1,972
Net cash flows used in investing activities (24,341) (101,749)
Cash flows from financing activities:
Vesting of stock-based awards, net of shares tendered for payment of taxes (7,767) (4,517)
Proceeds from revolving credit facility 208,863 247,154
Repayments under revolving credit facility (141,489) (102,330)
Repayments under term loan and other borrowings (3,889) (3,750)
Payment of dividends (18,939) (16,321)
Payment of contingent consideration and holdbacks related to acquisitions (2,792) 0
Other financing activities 0 (391)
Net cash flows provided by financing activities 33,987 119,845
Effect of exchange rate changes on cash and cash equivalents (2,995) (215)
Net increase in cash and cash equivalents 11,498 62,640
Cash and cash equivalents at beginning of period 51,821 35,359
Cash and cash equivalents cash at end of period $ 63,319 $ 97,999
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 3,564 $ 5,536
Cash received during the period for income taxes, net of payments $ (86) $ (73)
Purchase of property and equipment in accrued expenses $ 3,787 $ 2,459


	Three Months Ended March 31,
	2022		2021
(In thousands)
Cash flows from operating activities:
Net income	$	196,181	$	74,120
Adjustments to reconcile net income to cash flows provided by operating activities:
Depreciation and amortization	31,812		24,516
Stock-based compensation expense	6,517		7,436

Other non-cash items	1,771		1,318
Changes in assets and liabilities, net of acquisitions of businesses:
Accounts receivable, net	(240,404)		(139,245)
Inventories, net	(31,278)		(41,170)
Prepaid expenses and other assets	20,495		(3,328)
Accounts payable, trade	57,808		49,644
Accrued expenses and other liabilities	92,024		31,556
Net cash flows provided by operating activities	134,926		4,847
Cash flows from investing activities:
Capital expenditures	(42,037)		(20,957)
Acquisitions of businesses	(50,089)		(2,779)


Other investing activities	(219)		(605)
Net cash flows used in investing activities	(92,345)		(24,341)
Cash flows from financing activities:
Vesting of stock-based awards, net of shares tendered for payment of taxes	(10,569)		(7,767)
Proceeds from revolving credit facility	372,400		208,863
Repayments under revolving credit facility	(330,600)		(141,489)
Repayments under shelf loan, term loan, and other borrowings	(55,642)		(3,889)




Payment of dividends	(22,870)		(18,939)
Payment of contingent consideration and holdbacks related to acquisitions	(2,031)		(2,792)
Other financing activities	(4)		—
Net cash flows (used in) provided by financing activities	(49,316)		33,987
Effect of exchange rate changes on cash and cash equivalents	(712)		(2,995)
Net (decrease) increase in cash and cash equivalents	(7,447)		11,498
Cash and cash equivalents at beginning of period	62,896		51,821
Cash and cash equivalents cash at end of period	$	55,449	$	63,319
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	3,943	$	3,564
Cash paid during the period for income taxes, net of refunds	$	192	$	(86)
Purchase of property and equipment in accrued expenses	$	2,400	$	3,787

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)	(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		(In thousands, except shares and per share amounts)	Common Stock		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total Stockholders’ Equity
Balance - December 31, 2019		$	281	$	212,485	$	644,945	$	1,123	$	(58,162)	$	800,672
Balance - December 31, 2020														Balance - December 31, 2020	$	282	$	227,407	$	731,710	$	7,089	$	(58,162)	$	908,326
Net income	Net income	—		—		28,214		—		—		28,214		Net income	—		—		74,120		—		—		74,120
Issuance of 87,833 shares of common stock pursuant to stock-based awards, net of shares tendered for payment of taxes		1		(4,518)		—		—		—		(4,517)
Issuance of 97,086 shares of common stock pursuant to stock-based awards, net of shares tendered for payment of taxes														Issuance of 97,086 shares of common stock pursuant to stock-based awards, net of shares tendered for payment of taxes	1		(7,768)		—		—		—		(7,767)
Stock-based compensation expense	Stock-based compensation expense	—		3,295		—		—		—		3,295		Stock-based compensation expense	—		7,436		—		—		—		7,436
Other comprehensive loss	Other comprehensive loss	—		—		—		(3,540)		—		(3,540)		Other comprehensive loss	—		—		—		(3,589)		—		(3,589)
Cash dividends ($0.65 per share)		—		—		(16,321)		—		—		(16,321)
Cash dividends ($0.75 per share)														Cash dividends ($0.75 per share)	—		—		(18,939)		—		—		(18,939)
Dividend equivalents on stock-based awards	Dividend equivalents on stock-based awards	—		297		(297)		—		—		0		Dividend equivalents on stock-based awards	—		325		(325)		—		—		—
Balance - March 31, 2020		282		211,559		656,541		(2,417)		(58,162)		807,803
Balance - March 31, 2021														Balance - March 31, 2021	$	283	$	227,400	$	786,566	$	3,500	$	(58,162)	$	959,587


Balance - December 31, 2020		$	282	$	227,407	$	731,710	$	7,089	$	(58,162)	$	908,326
Balance - December 31, 2021														Balance - December 31, 2021	$	284	$	220,459	$	930,795	$	(501)	$	(58,162)	$	1,092,875
Net income	Net income	—		—		74,120		—		—		74,120		Net income	—		—		196,181		—		—		196,181
Issuance of 97,086 shares of common stock pursuant to stock-based awards, net of shares tendered for payment of taxes		1		(7,768)		—		—		—		(7,767)
Issuance of 138,208 shares of common stock pursuant to stock-based awards, net of shares tendered for payment of taxes														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	Stock-based compensation expense	—		7,436		—		—		—		7,436		Stock-based compensation expense	—		6,517		—		—		—		6,517
Other comprehensive loss	Other comprehensive loss	—		—		—		(3,589)		—		(3,589)		Other comprehensive loss	—		—		—		(2,882)		—		(2,882)
Cash dividends ($0.75 per share)		—		—		(18,939)		—		—		(18,939)
Cash dividends ($0.90 per share)														Cash dividends ($0.90 per share)	—		—		(22,870)		—		—		(22,870)
Dividend equivalents on stock-based awards	Dividend equivalents on stock-based awards	—		325		(325)		—		—		0		Dividend equivalents on stock-based awards	—		392		(392)		—		—		—
Balance - March 31, 2021		283		227,400		786,566		3,500		(58,162)		959,587
Balance - March 31, 2022														Balance - March 31, 2022	$	285	$	216,798	$	1,103,714	$	(3,383)	$	(58,162)	$	1,259,252

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" and collectively with its subsidiaries, the "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," "LCI," or "Lippert"), supplies, domestically and internationally, a broad array of engineered components for the leading original equipment manufacturers ("OEMs") in the recreation and transportation product markets, consisting primarily of recreational vehicles ("RVs") and adjacent industries including buses; trailers used to haul boats, livestock, equipment, and other cargo; trucks; boats; trains; manufactured homes; and modular housing. The Company also supplies engineered components to the related aftermarkets of these industries, primarily by selling to retail dealers, wholesale distributors, and service centers. At March 31, ~~2021,~~2022, the Company operated over ~~100~~120 manufacturing and distribution facilities located throughout North America and 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 and future seasonal industry trends may be different than in prior years, particularly~~ as ~~a result of~~well as the coronavirus ("COVID-19") pandemic and related impacts. Additionally, ~~sales~~many of ~~certain engineered components to~~ the ~~aftermarket channels of these industries tend~~optional upgrades and non-critical replacement parts for RVs are purchased outside the normal product selling season, thereby causing Aftermarket Segment sales to be counter-seasonal, but this has been, and may in the future be, different ~~in 2021 and future years~~ as a result of the COVID-19 pandemic and related impacts.

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

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 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.

~~COVID-19 Update~~

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

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~government-mandated plant shutdowns.~~ COVID-19 and Russia-Ukraine War Update

The ~~Company took a variety of actions during 2020 to help mitigate~~ongoing COVID-19 pandemic and the ~~adverse impacts, including temporary cost savings measures~~conflict between Russia and ~~delays~~Ukraine (the "Russia-Ukraine War") have caused significant uncertainty and reductions in capital expenditures. Activity in most of the end markets the Company serves sequentially improved as 2020 progressed, and this trend has continued into the first quarter of 2021, especiallydisruption in the RVglobal economy and ~~marine OEM markets and the Company's Aftermarket Segment.~~financial markets. Management continues to closely monitor the impact of COVID-19 and the Russia-Ukraine War on all aspects of the business. The extent to which COVID-19 and/or the Russia-Ukraine War may impact the Company's liquidity, financial condition, and results of operations in the future remains uncertain.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Condensed Consolidated Financial Statements presented herein have been prepared by the Company in accordance with the accounting policies described in its December 31, ~~2020~~2021 Annual Report on Form 10-K and should be read in conjunction with the Notes to Consolidated Financial Statements which appear in that report. ~~All significant intercompany balances and transactions have been eliminated.~~

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 March 31,
(In thousands)	2022	2021
Weighted average shares outstanding for basic earnings per share	25,329	25,193
Common stock equivalents pertaining to stock-based awards	132	132
Weighted average shares outstanding for diluted earnings per share	25,461	25,325

Equity instruments excluded from diluted net earnings per share calculation as the effect would have been antidilutive	111	147

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 the three months ended March 31, 2022, 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 common shares upon exercise. Proceeds from the exercise of the Warrants are assumed to be used to repurchase shares of the Company's common stock at the average market price during the period. The incremental shares, representing the number of shares assumed to be received upon the exercise of the Warrants less the number of shares repurchased, are included in diluted shares. For the three months ended March 31, 2022, the average share price was below the Warrant strike price of $259.84 per share, and therefore 2.8 million shares were considered antidilutive.

In connection with the issuance of the Convertible Notes, the Company entered into privately negotiated call option contracts on the Company's common stock (the "Convertible Note Hedge Transactions") with the Counterparties. The Company paid an aggregate amount of $100.1 million to the Counterparties pursuant to the Convertible Note Hedge Transactions. The Convertible Note Hedge Transactions cover, subject to anti-dilution adjustments substantially similar to those in the

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Convertible Notes, approximately 2.8 million shares of the Company's common stock, the same number of shares initially underlying the Convertible Notes, at a strike price of approximately $165.65, subject to customary anti-dilution adjustments. The Convertible Note Hedge Transactions will expire upon the maturity of the Convertible Notes, subject to earlier exercise or termination. Exercise of the Convertible Note Hedge Transactions would reduce the number of shares of the Company's common stock outstanding, and therefore would be antidilutive.

4. ACQUISITIONS, GOODWILL AND OTHER INTANGIBLE ASSETS

~~Subsequent Event~~

Acquisitions Completed During the Three Months Ended March 31, 2022

~~Schaudt~~Girard

In ~~April 2021,~~March 2022, the Company acquired ~~100 percent~~substantially all of the ~~equity interests~~business assets of ~~Schaudt GmbH Elektrotechnik & Apparatebau ("Schaudt"~~Girard Systems and Girard Products LLC (collectively "Girard"), a ~~leading supplier~~manufacturer and distributor of ~~electronic controls~~proprietary awnings and ~~energy management systems~~tankless water heaters for OEMs and aftermarket customers in the ~~European caravan industry located in Markdorf, Germany.~~recreational vehicle, specialty vehicle, and related industries. The ~~purchase price~~total fair value of consideration was approximately ~~$30.0~~$70.0 million. The Company paid $50.0 million in cash consideration at closing, with $20.0 million due on July 1, 2022. The deferred acquisition fixed payment is recorded on the Condensed Consolidated Balance Sheet in accrued expenses and other current liabilities at March 31, 2022.

The purchase price is subject to customary adjustments for ~~cash,~~ working ~~capital, and indebtedness.~~capital. The results of the acquired business ~~will be~~have been included in the Condensed Consolidated Statements of Income since the acquisition date, in both the Company's OEM ~~Segment.~~ and Aftermarket Segments. 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.

The Company is in the process of determining the fair value of the assets acquired and liabilities assumed for the opening balance sheet, including net working capital, ~~fixed assets,~~deferred taxes, and the fair value of intangible assets.

~~Ranch Hand~~

~~In April 2021,~~ The current estimates for intangible assets are based on the ~~Company acquired 100 percent of the equity interests of Kaspar Ranch Hand Equipment, LLC ("Ranch Hand"), a manufacturer of custom bumpers, grill guards,~~Company's historical acquisitions and ~~steps~~estimated projections for the automotive aftermarket headquartered in Shiner, Texas. The purchase price was approximately $57.4 million, plus contingent consideration up to $3.0 million. The purchase price is subject to customary adjustments for cash, working capital, and indebtedness. The results of the acquired ~~business~~company. These estimates will be ~~included in~~updated to the ~~Company's Aftermarket Segment. The Company~~valuation when it is in the process of determining the fair value of the assets acquired and liabilities assumed for the opening balance sheet, including net working capital, fixed assets, and the fair value of intangible assets.

~~Acquisitions Completed During the Three Months Ended March 31, 2021~~

~~Wolfpack~~

In March 2021, the Company acquired the business and certain assets of Wolfpack Chassis, LLC ("Wolfpack"), a chassis manufacturer in Kendallville, Indiana to add production capacity. The purchase price was $2.8 million paid at closing. The preliminary purchase price allocation resulted in goodwill of $2.0 million. The accounting for this acquisition is incomplete at March 31, 2021. The purchase price allocation is subject to adjustment for net working capital, fixed asset valuation, and the fair value of intangible assets as additional information is obtainedfinalized within the measurement period (not to exceed 12 months from the acquisition date). The acquisition of this business was preliminarily recorded as of the acquisition date as follows (in thousands):


Cash consideration	$	50,000
Fixed deferred consideration	20,000
Total fair value of consideration given	$	70,000


Identifiable intangible assets	$	35,000
Other assets acquired and liabilities assumed, net	14,802
Total fair value of net assets acquired	$	49,802

Goodwill (tax deductible)	$	20,198

The consideration given was greater than the fair value of the net assets acquired, resulting in goodwill.

Acquisitions with Measurement Period Adjustments During the Three Months Ended March 31, 2022

Exertis

In October 2021, the Company acquired certain business assets of Stampede Presentation Products, Inc. d/b/a Exertis ("Exertis"), a global distribution company, in exchange for $39.7 million. The acquisition qualifies as a business combination for accounting purposes and supports the acquisition of Furrion Holdings Limited ("Furrion") by allowing the Company to provide logistics and warehousing to serve Furrion's North American customer base. The results of the acquired business have been included in the Condensed Consolidated Statements of Income since the acquisition date, primarily in the Company's

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

OEM Segment. As the operations of this acquisition isare not considered to have a material impact on the Company's financial statements, pro forma results of operations and other disclosures are not presented.

~~LCI INDUSTRIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~Acquisitions~~The Company had a pre-existing relationship with ~~Measurement Period Adjustments During the Three Months Ended March 31, 2021~~

~~Veada~~

~~In December 2020,~~Exertis where Exertis had a prepaid asset and the Company ~~acquired 100 percent~~had an equal and offsetting deferred revenue liability of $24.8 million, which was effectively settled immediately prior to the business combination. No gain or loss was recognized in the effective settlement of the outstanding capital stock of Veada Industries, Inc. ("Veada"), a manufacturer and distributor of boat seating and marine accessories based in New Paris, Indiana. The purchase price was $69.0 million, net of cash acquired, which included holdback payments of $12.2 million to be paid over the next two years. Holdback payments of $2.3 million were paid during the three months ended March 31, 2021. The remaining holdback payments are recorded in the Condensed Consolidated Balance Sheet in accrued expenses and other current liabilities ($8.2 million) and other long-term liabilities ($1.8 million) at March 31, 2021. The results of the acquired business have been included in the Condensed Consolidated Statements of Income since the acquisition date, primarily in the Company's OEM Segment. As the acquisition of Veada is not considered to have a material impact on the Company's financial statements, pro forma results of operations and other disclosures are not presented.deferred revenue liability.

~~Challenger~~Furrion

In ~~November 2020,~~September 2021, the Company acquired ~~substantially all~~100 percent of the ~~business assets~~share capital of ~~Challenger Door, LLC ("Challenger"),~~Furrion, a leading ~~manufacturer and~~ distributor of ~~branded doors for~~a large range of appliances and other products to OEMs and aftermarket customers in the RV, ~~industry~~specialty vehicle, utility trailer, horse trailer, marine, transit bus, and ~~products for specialty and cargo trailers, based~~school bus industries. The total fair value of consideration, net of cash acquired, was approximately $146.7 million. The Company paid $50.5 million in ~~Nappanee, Indiana. The purchase price was $35.0 million, which included holdback~~cash consideration at closing, net of cash acquired, with fixed payments of ~~$4.5~~$31.3 million ~~to be paid over~~due on each of the ~~next two years.~~first and second anniversaries of the acquisition in September 2022 and September 2023. The ~~holdback~~deferred acquisition fixed payments are recorded at their respective discounted present values in the Condensed Consolidated Balance Sheet in accrued expenses and other current liabilities ~~($3.5 million)~~ and other long-term liabilities ~~($1.0 million)~~ at March 31, ~~2021.~~ 2022.

In 2019, the Company and Furrion agreed to terminate an exclusive distribution and supply agreement and transition all sale and distribution of Furrion products then handled by the Company to Furrion. Effective January 1, 2020, Furrion took responsibility for distributing its products directly to the customer and assumed all responsibilities previously carried out by the Company relating to Furrion products. Upon termination of the agreement, Furrion purchased from the Company all non-obsolete stock and certain obsolete and slow-moving stock of Furrion products at the cost paid by the Company. At the date of the Furrion acquisition in September 2021, the Company had a receivable balance of $35.0 million (the "Receivable from Furrion") and Furrion had a corresponding payable balance. In direct connection with the acquisition negotiations, the receivable and payable were effectively settled in the acquisition and the receivable balance is included within the approximate $146.7 million of consideration transferred. No gain or loss was recognized in the effective settlement of the receivable.

The results of the acquired business have been included in the Condensed Consolidated Statements of Income since the acquisition date, ~~primarily~~ in both the ~~Company’s~~Company's OEM ~~Segment.~~and Aftermarket Segments. As ~~the~~this acquisition ~~of Challenger~~ is not considered to have a material impact on the ~~Company’s~~Company's financial statements, pro forma results of operations and other disclosures are not presented.

During the three months ended March 31, ~~2021,~~2022, the Company adjusted the preliminary purchase price allocation reported at December 31, ~~2020~~2021 to account for updates to net working capital ~~balances~~ and ~~assumptions and estimates related to the fair value of~~ fixed ~~assets.~~asset 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 is in the process of determining the fair value of the assets acquired and liabilities assumed for the opening balance sheet, including net working capital, fixed assets, the evaluation of technical tax matters regarding the transaction, and evaluating the various assumptions and forecasts which drove the purchase price allocation ~~is subject to adjustment for net working capital and~~which could impact the fair value of intangible assets. The current estimates for intangible assets ~~as additional information~~are based on the Company's historical acquisitions and estimated projections for the acquired company. These preliminary estimates will be updated to the valuation when it is ~~obtained~~finalized within the measurement period (not to exceed 12 months from the acquisition date). and may change materially.

Schaudt

In April 2021, the Company acquired 100 percent of the equity interests of Schaudt GmbH Elektrotechnik & Apparatebau ("Schaudt"), a leading supplier of electronic controls and energy management systems for the European caravan industry located in Markdorf, Germany. The purchase price was approximately $29.4 million. The results of the acquired business have been included in the Condensed Consolidated Statements of Income since the acquisition date, primarily in the

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Company's OEM Segment. As 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 three months ended March 31, 2022, the Company adjusted and finalized the preliminary purchase price allocation reported at December 31, 2021 to account for updates to net working capital and fixed asset 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.

Goodwill

~~Goodwill~~Changes in the carrying amount of goodwill by reportable segment ~~was~~were as follows:

(In thousands) OEM Segment Aftermarket Segment Total
Net balance – December 31, 2020 $ 305,953 $ 148,775 $ 454,728
Acquisitions – 2021 2,000 — 2,000
Measurement period adjustments 1,250 45 1,295
Foreign currency translation (3,670) 29 (3,641)
Net balance – March 31, 2021 $ 305,533 $ 148,849 $ 454,382


(In thousands)	OEM Segment		Aftermarket Segment		Total
Net balance – December 31, 2021	$	379,463	$	163,717	$	543,180
Acquisitions – 2022	16,966		3,232		20,198
Measurement period adjustments	538		62		600
Foreign currency translation	(1,737)		(203)		(1,940)
Net balance – March 31, 2022	$	395,230	$	166,808	$	562,038

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.

~~LCI INDUSTRIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Other Intangible Assets

Other intangible assets consisted of the following at March 31, ~~2021:~~2022:


(In thousands)	(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	Customer relationships	$	395,669	$	102,042	$	293,627	6	to	17	Customer relationships	$	501,482	$	136,343	$	365,139	6	to	17
Patents	Patents	91,865		48,421		43,444		3	to	20	Patents	131,232		55,461		75,771		3	to	20
Trade names (finite life)	Trade names (finite life)	68,936		12,489		56,447		3	to	20	Trade names (finite life)	96,980		16,732		80,248		3	to	20
Trade names (indefinite life)	Trade names (indefinite life)	7,600		—		7,600		Indefinite			Trade names (indefinite life)	7,600		—		7,600		Indefinite
Non-compete agreements	Non-compete agreements	6,179		4,497		1,682		3	to	6	Non-compete agreements	11,464		5,997		5,467		3	to	6
Other	Other	310		198		112		2	to	12	Other	309		217		92		2	to	12
Purchased research and development	Purchased research and development	4,687		—		4,687		Indefinite			Purchased research and development	4,687		—		4,687		Indefinite
Other intangible assets	Other intangible assets	$	575,246	$	167,647	$	407,599				Other intangible assets	$	753,754	$	214,750	$	539,004

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Other intangible assets consisted of the following at December 31, ~~2020:~~2021:


(In thousands)	(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	Customer relationships	$	398,613	$	95,443	$	303,170	6	to	17	Customer relationships	$	487,853	$	127,048	$	360,805	6	to	17
Patents	Patents	92,128		47,090		45,038		3	to	20	Patents	116,725		53,479		63,246		3	to	20
Trade names (finite life)	Trade names (finite life)	69,686		11,272		58,414		3	to	20	Trade names (finite life)	93,994		16,497		77,497		3	to	20
Trade names (indefinite life)	Trade names (indefinite life)	7,600		—		7,600		Indefinite			Trade names (indefinite life)	7,600		—		7,600		Indefinite
Non-compete agreements	Non-compete agreements	6,478		4,617		1,861		3	to	6	Non-compete agreements	11,464		5,439		6,025		3	to	6
Other	Other	309		194		115		2	to	12	Other	309		212		97		2	to	12
Purchased research and development	Purchased research and development	4,687		—		4,687		Indefinite			Purchased research and development	4,687		—		4,687		Indefinite
Other intangible assets	Other intangible assets	$	579,501	$	158,616	$	420,885				Other intangible assets	$	722,632	$	202,675	$	519,957

4.5. INVENTORIES

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


		March 31,		December 31,	March 31,				December 31,
(In thousands)	(In thousands)	2021				2020		(In thousands)	2022		2021
Raw materials	Raw materials	$	388,015			$	356,921	Raw materials	$	843,161	$	833,992
Work in process	Work in process	27,727				24,189		Work in process	60,248		48,250
Finished goods	Finished goods	119,314				112,789		Finished goods	232,821		213,665
Inventories, net	Inventories, net	$	535,056			$	493,899	Inventories, net	$	1,136,230	$	1,095,907

6. FIXED ASSETS

Fixed assets consisted of the following at:


	March 31,		December 31,
(In thousands)	2022			2021
Fixed assets, at cost	$	883,257		$	842,462
Less accumulated depreciation and amortization	433,162			416,007
Fixed assets, net	$	450,095		$	426,455

1214

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~5. FIXED ASSETS~~

~~Fixed assets consisted of the following at:~~

March 31, December 31,
(In thousands) 2021 2020
Fixed assets, at cost $ 770,045 $ 750,138
Less accumulated depreciation and amortization 377,332 362,920
Fixed assets, net $ 392,713 $ 387,218

6.7. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

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


		March 31,		December 31,	March 31,				December 31,
(In thousands)	(In thousands)	2021				2020		(In thousands)	2022		2021
Employee compensation and benefits	Employee compensation and benefits	$	65,979			$	62,555	Employee compensation and benefits	$	85,797	$	85,760
Income taxes payable	Income taxes payable	32,214				9,697		Income taxes payable	76,159		10,561
Deferred acquisition payments and contingent consideration*								Deferred acquisition payments and contingent consideration*	57,388		39,307
Current portion of accrued warranty	Current portion of accrued warranty	23,780				32,451		Current portion of accrued warranty	38,255		33,874
Customer rebates		23,126				23,670

Other	Other	65,460				59,827		Other	87,887		73,936
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	$	210,559			$	188,200	Accrued expenses and other current liabilities	$	345,486	$	243,438

* Includes current portion of contingent consideration (Note 11) and deferred consideration and holdback payments related to acquisitions (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 three months ended March 31:


(In thousands)	(In thousands)	2021		2020		(In thousands)	2022		2021
Balance at beginning of period	Balance at beginning of period	$	47,091	$	47,167	Balance at beginning of period	$	52,114	$	47,091
Provision for warranty expense	Provision for warranty expense	6,977		5,879		Provision for warranty expense	15,441		6,977

Warranty costs paid	Warranty costs paid	(8,288)		(6,603)		Warranty costs paid	(8,770)		(8,288)
Balance at end of period	Balance at end of period	45,780		46,443		Balance at end of period	58,785		45,780
Less long-term portion	Less long-term portion	22,000		17,800		Less long-term portion	20,530		22,000
Current portion of accrued warranty at end of period	Current portion of accrued warranty at end of period	$	23,780	$	28,643	Current portion of accrued warranty at end of period	$	38,255	$	23,780

7.8. PENSION PLANS

The ~~acquisition of Polyplastic in January 2020 included the assumption of~~Company maintains two partially-funded defined benefit pension plans (the "Dutch pension plans") based in the Netherlands. The Dutch pension plans, which are qualified defined benefit pension plans, provide benefits based on years of service and average pay. The benefits earned by the employees are immediately vested. The Company funds the future obligations of the Dutch pension plans by purchasing ~~an insurance contract~~non-participating annuities from a large multi-national insurance ~~company.~~company that cover the vested pension benefit obligation of the participants, but do not cover future indexations or cost of living adjustments that are provided in plan benefits. Each year, the Company makes premium payments to the insurance company (1) to provide for the benefit obligation of the current year of service based on each employee's age, gender, and current salary, and (2) for indexations for both active and post-active participants. The Company determines the fair value of the plan assets with the assistance of an actuary using unobservable inputs (Level 3), which is determined as the present value of the accrued benefits guaranteed by the insurer.

~~LCI INDUSTRIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

The components of net periodic pension cost for the Dutch pension plans were as follows:


		Three Months Ended March 31,					Three Months Ended March 31,
(In thousands)	(In thousands)	2021		2020		(In thousands)	2022		2021
Net service cost	Net service cost	$	(1,109)	$	(270)	Net service cost	$	(1,070)	$	(1,109)
Interest cost	Interest cost	(166)		(81)		Interest cost	(276)		(166)
Expected return on plan assets	Expected return on plan assets	108		50		Expected return on plan assets	172		108
Administrative charges	Administrative charges	(71)		(22)		Administrative charges	(73)		(71)
Net periodic pension cost	Net periodic pension cost	$	(1,238)	$	(323)	Net periodic pension cost	$	(1,247)	$	(1,238)

~~8. LONG-TERM INDEBTEDNESS~~

~~Long-term indebtedness consisted of the following at:~~

March 31, December 31,
(In thousands) 2021 2020
Term Loan $ 281,250 $ 285,000
Revolving Credit Loan 454,706 394,888
Shelf-Loan Facility 50,000 50,000
Other 8,958 9,652
Unamortized deferred financing fees (1,152) (1,291)
793,762 738,249
Less current portion (67,154) (17,831)
Long-term indebtedness $ 726,608 $ 720,418

~~Amended Credit Agreement~~

On December 14, 2018, the Company refinanced its credit agreement with JPMorgan Chase, N.A., Wells Fargo Bank, N.A., Bank of America, N.A., and other bank lenders (as amended, the “Amended Credit Agreement”). The Amended Credit Agreement amended and restated an existing credit agreement dated April 27, 2016 and now expires on December 14, 2023. The Amended Credit Agreement increased the revolving credit facility from $325.0 million to $600.0 million, and permits the Company to borrow up to $250.0 million in approved foreign currencies, including Australian dollars, Canadian dollars, pounds sterling, and euros ($164.7 million, or €140.0 million drawn at March 31, 2021).

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

Interest on borrowings under the revolving credit facility and incremental term loan are designated from time to time by the Company as either (i) the Alternate Base Rate (defined in the Amended Credit Agreement as the greatest of (a) the Prime Rate of JPMorgan Chase Bank, N.A., (b) the federal funds effective rate plus 0.5 percent, and (c) the Adjusted LIBO Rate (as defined in the Amended Credit Agreement) for a one month interest period plus 1.0 percent), plus additional interest ranging from 0.0 percent to 0.625 percent (0.375 percent at March 31, 2021) depending on the Company’s total net leverage ratio, or (ii) the Adjusted LIBO Rate for a period equal to one, two, three, six, or twelve months (with the consent of each lender) as

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

9. LONG-TERM INDEBTEDNESS

Long-term debt consisted of the following:


	March 31,		December 31,
(In thousands)	2022			2021

Convertible Notes	$	460,000		$	460,000
Revolving Credit Loan	442,506			403,953
Term Loan	390,000			395,000
Shelf-Loan Facility	—			50,000
Other	5,195			5,997
Unamortized deferred financing fees	(11,214)			(11,988)
	1,286,487			1,302,962
Less current portion	(21,108)			(71,003)
Long-term indebtedness	$	1,265,379		$	1,231,959

Credit Agreement

The Company and certain of its subsidiaries are party to a credit agreement dated December 14, 2018 with JPMorgan Chase, N.A., 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 letters of credit (the "LC Facility") and up to $400.0 million is available in approved foreign currencies (the "Foreign Sublimit")). 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 Credit Agreement also permits the Company to request an increase to the revolving and/or term loan facility by up to an additional $400.0 million in the aggregate upon the approval of the lenders providing any such increase.

Borrowings under the Credit Agreement in U.S. dollars are designated from time to time by the Company as (i) base rate loans which bear interest at a base rate plus additional interest ranging from 0.0 percent to 0.625 percent (0.625 percent was applicable at March 31, 2022) depending on the Company’s total net leverage ratio or (ii) term benchmark loans which bear interest at LIBOR (or a relevant benchmark replacement rate) for an interest period selected by the Company plus additional interest ranging from 0.875 percent to 1.625 percent ~~(1.375~~(1.625 percent was applicable at March 31, ~~2021)~~2022) depending on the Company’s total net leverage ratio. Foreign currency borrowings, other than Pounds Sterling, have the same additional interest margins applicable to term benchmark loans based on the Company's total net leverage ratio. At March 31, ~~2021,~~2022, the Company had ~~$2.9~~$27.7 million in issued, but undrawn, standby letters of credit under the ~~revolving credit facility.~~LC Facility. Availability under the Company’s revolving credit facility was ~~$142.4~~$129.8 million at March 31, ~~2021.~~2022. A commitment fee ranging from 0.150 percent to 0.225 percent (0.225 percent was applicable at March 31, 2022) depending on the Company's total net leverage ratio accrues on the actual daily amount that the revolving commitment exceeds the revolving credit exposure.

Shelf-Loan Facility

~~On February 24, 2014, the~~The Company ~~entered into~~and certain of its subsidiaries have a ~~$150.0 million~~ shelf-loan facility ~~(as amended and restated, the “Shelf-Loan Facility”~~(the "Shelf-Loan Facility") with PGIM, Inc. (formerly Prudential Investment Management, Inc.) and its affiliates ~~(“Prudential”~~("Prudential"). On March 20, 2015, the Company issued $50.0 million of Senior Promissory Notes (“Series A Notes”) to Prudential for a term of five years, at a fixed interest rate of 3.35 percent per annum, payable quarterly in arrears. On March 29, 2019, the Company issued $50.0 million of Series B Senior Notes (the ~~“Series~~"Series B ~~Notes”~~Notes") to certain affiliates of Prudential for a term of three years, at a fixed interest rate of 3.80 percent per annum, payable quarterly in ~~arrears, of which the entire amount was outstanding at March 31, 2021.~~arrears. The ~~net proceeds of the~~ Series B Notes were ~~used to repay~~paid in full in March 2022, and the Series A Notes. On November 11, 2019, the Company amended and restated the Shelf-Loan Facility to provide for a new $200.0 million shelf facility pursuant to which the Series B Notes are currently outstanding and to conform certain covenants to the Amended Credit Agreement. On March 31, 2020, the Company entered into a Consent and Amendment to the Shelf-Loan Facility to join certain Company subsidiaries that were acquired in the CURT acquisition as guarantors and permit other internal restructuring matters related to certain of the Company's subsidiaries. On September 21, 2020, the Company entered into a Second Amendment to the Shelf-Loan Facility to conform additional covenants to the Amended Credit Agreement. The Shelf-Loan Facility expires on November 11, 2022.

The Shelf-Loan Facility provides for Prudential to consider purchasing, at the ~~Company’s~~Company's request, in one or a series of transactions, additional ~~Senior Promissory Notes~~senior promissory notes of the Company in the aggregate principal amount of up to ~~$150.0 million (excluding the Company’s Series B Notes already outstanding).~~$200.0 million. Prudential has no obligation to purchase the ~~Senior Promissory Notes.~~senior promissory notes. Interest payable on the ~~Senior Promissory Notes~~senior promissory notes will be at rates determined by Prudential within five business days after the Company issues a request to Prudential.

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Convertible Notes

On May 13, 2021, the Company issued $460.0 million in aggregate principal amount of 1.125 percent convertible senior notes due 2026 in a private placement to certain qualified institutional buyers, resulting in net proceeds to the Company of approximately $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 March 31, 2022, the conversion rate was 6.0629 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 the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2021 (and only during such calendar quarter), if the last reported sale price (as defined in the Indenture) per share of the Company's common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 percent of the conversion price for the Convertible Notes on each applicable trading day; (2) during the five business day period after any ten consecutive trading day period (the "measurement period") in which the trading price (as defined in the Indenture) per $1,000 principal amount of the Convertible Notes for each trading day of the measurement period was less than 98 percent of the product of the last reported sale price of the Company's common stock and the conversion rate on each such trading day; (3) if the Company calls such Convertible Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date, but only with respect to the Convertible Notes called (or deemed called) for redemption; or (4) upon the occurrence of certain specified corporate events described in the Indenture. On or after January 15, 2026, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their Convertible Notes at any time, regardless of the foregoing circumstances. Upon conversion, the Company will pay cash up to the aggregate principal amount of the notes to be converted and pay or deliver, as the case may be, cash, shares of the Company's common stock, or a combination of cash and shares of the Company's common stock, at the Company's election, in respect of the remainder, if any, of the Company's conversion obligation in excess of the aggregate principal amount of the notes being converted.

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

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 $422.1 million at March 31, 2022 was estimated using Level 1 inputs, as it is based on quoted prices for these instruments in active markets.

General

At March 31, ~~2021,~~2022, the fair value of the ~~Company’s~~Company's long-term debt under the ~~Amended~~ Credit Agreement ~~and the Shelf-Loan Facility~~ approximates the carrying value, as estimated using quoted market prices and discounted future cash flows based on similar borrowing arrangements.

Borrowings under both the ~~Amended~~ Credit Agreement 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 certain of the ~~Company’s~~Company's direct and indirect subsidiaries (including up to 65 percent of the equity interests of certain "controlled foreign corporations").

Pursuant to the ~~Amended~~ Credit Agreement and Shelf-Loan Facility, the Company shall not permit its net leverage ratio to exceed certain limits, shall maintain a minimum debt service coverage ratio, and must meet certain other financial requirements. At March 31, ~~2021,~~2022, the Company was in compliance with all such ~~requirements.~~requirements and expects to remain in such compliance for the next twelve months.

The ~~Amended~~ Credit Agreement and the Shelf-Loan Facility include a maximum net leverage ratio covenant which limits the amount of consolidated outstanding indebtedness that the Company may incur on a trailing twelve-month ~~EBITDA, as defined in the Amended Credit Agreement and the Shelf-Loan Facility.~~EBITDA. This limitation did not impact the ~~Company’s~~Company's ability to incur additional indebtedness under its revolving credit facility at March 31, ~~2021. The combined remaining availability under the revolving credit facility and the potential additional notes issuable under the Shelf-Loan Facility was $292.4 million at March 31, 2021.~~2022. The Company believes the availability of ~~$142.4~~$129.8 million under the revolving credit facility under the ~~Amended~~ Credit Agreement, along with its cash flows from operations, are adequate to finance the ~~Company’s~~Company's anticipated cash requirements for the next twelve months.

9.10. LEASES

The Company leases certain manufacturing and warehouse facilities, administrative office space, semi-tractors, trailers, forklifts, and other equipment through operating leases with unrelated third parties. The increase in lease costs for the

~~LCI INDUSTRIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

three months ended March 31, ~~2021~~2022 compared to the three months ended March 31, ~~2020~~2021 was primarily driven by capacity expansions and leases assumed in ~~recent~~ acquisitions. The components of lease cost were as follows:


		Three Months Ended March 31,				Three Months Ended March 31,
(in thousands)		2021		2020
(In thousands)							(In thousands)	2022		2021
Operating lease cost	Operating lease cost	$	9,098	$	7,822		Operating lease cost	$	12,912	$	9,098
Short-term lease cost	Short-term lease cost	889		878			Short-term lease cost	1,840		889
Variable lease cost	Variable lease cost	689		621			Variable lease cost	713		689
Total lease cost	Total lease cost	$	10,676	$	9,321		Total lease cost	$	15,465	$	10,676

~~10.~~11. COMMITMENTS AND CONTINGENCIES

Contingent Consideration

In connection with several business acquisitions, if certain ~~performance~~sales targets for the acquired products are achieved, the Company would pay additional cash consideration. The Company has recorded a liability for the fair value of this contingent consideration at March 31, ~~2021,~~2022, based on the present value of the expected future cash flows using a market participant’s weighted average cost of capital of ~~13.0~~13.1 percent.

As required, the liability for this contingent consideration is measured at fair value quarterly, considering actual sales of the acquired products, updated sales projections, and the updated market participant weighted average cost of capital. Depending upon the weighted average costs of capital and future sales of the products which are subject to contingent

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

consideration, the Company could record adjustments in future periods. The following table provides a reconciliation of the Company’s contingent consideration liability for the three months ended March 31, ~~2021:~~2022:

(In thousands)

Balance at beginning of period

~~4,609~~6,911

Payments

~~(5)~~(2,000)

Accretion (a)

~~Net foreign currency translation adjustment~~

~~(197)~~

Balance at end of the period (b)

~~4,463~~4,967

Less current portion in accrued expenses and other current liabilities

~~(2,935)~~(3,084)

Total long-term portion in other long-term liabilities

~~1,528~~1,883

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

(b) Amount represents the fair value of estimated remaining payments. The total estimated remaining undiscounted payments as of March 31, ~~2021~~2022 were ~~$5.6~~$6.4 million. The liability for contingent consideration expires at various dates through September 2029. Certain of the contingent consideration arrangements are subject to a maximum payment amount, while the remaining arrangements have no maximum contingent consideration.

~~Furrion Receivable~~

At March 31, 2021 and December 31, 2020, the Company had a receivable from Furrion Limited ("Furrion") of $42.7 million and $42.3 million, respectively, recorded for purchases of inventory stock following the termination of the distribution and supply agreement with Furrion. The termination agreement originally required Furrion to make periodic payments throughout 2020 and the first six months of 2021; however, due to the impacts of the COVID-19 pandemic, the Company is currently in negotiations impacting the timing of the repayment of this receivable. Accordingly, the Company has classified $7.8 million of the receivable as long-term, and recorded the receivable at its present value at March 31, 2021 based on the currently proposed payment plan.

Product Recalls

From time to time, the Company cooperates with and assists its customers on their product recalls and inquiries, and occasionally receives inquiries directly from the National Highway Traffic Safety Administration regarding reported incidents

~~LCI INDUSTRIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

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.

Environmental

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 believes its operations have been consistent with prevailing industry standards and are in substantial compliance with applicable environmental laws and regulations, one or more of the Company’s current or former operating sites, or adjacent sites owned by third-parties, have been affected, and may in the future be affected, by releases of hazardous materials. As a 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.

Litigation

In the normal course of business, the Company is subject to proceedings, lawsuits, regulatory agency inquiries, and other claims. All such matters are subject to uncertainties and outcomes that are not predictable with assurance. While these matters could materially affect operating results when resolved in future periods, 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 March 31, ~~2021,~~2022, would not be material to the ~~Company’s~~Company's financial position or results of operations.

~~11. STOCKHOLDERS’~~12. STOCKHOLDERS' EQUITY

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

March 31, December 31,
(In thousands) 2021 2020
Common stock authorized 75,000 75,000
Common stock issued 28,340 28,243
Treasury stock 3,087 3,087
Common stock outstanding 25,253 25,156

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

Three Months Ended
March 31,
(In thousands) 2021 2020
Weighted average shares outstanding for basic earnings per share 25,193 25,075
Common stock equivalents pertaining to stock-based awards 132 68
Weighted average shares outstanding for diluted earnings per share 25,325 25,143
Equity instruments excluded from diluted net earnings per share calculation as the effect would have been anti-dilutive 147 109


	March 31,	December 31,
(In thousands)	2022		2021
Common stock authorized	75,000		75,000
Common stock issued	28,499		28,360
Treasury stock	3,087		3,087
Common stock outstanding	25,412		25,273

1719

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The table below summarizes the regular quarterly dividends declared and paid during the periods ended March 31, ~~2021~~2022 and December 31, ~~2020:~~2021:

(In thousands, except per share data) Per Share Record Date Payment Date Total Paid
First Quarter 2020 $ 0.65 03/06/20 03/20/20 $ 16,321
Second Quarter 2020 0.65 06/05/20 06/19/20 16,349
Third Quarter 2020 0.75 09/04/20 09/18/20 18,865
Fourth Quarter 2020 0.75 12/04/20 12/18/20 18,866
Total 2020 $ 2.80 $ 70,401
First Quarter 2021 $ 0.75 03/12/21 03/26/21 $ 18,939


(In thousands, except per share data)	Per Share		Record Date	Payment Date	Total Paid
First Quarter 2021	$	0.75	03/12/21	03/26/21	$	18,939
Second Quarter 2021	0.90		06/04/21	06/18/21	22,739
Third Quarter 2021	0.90		09/03/21	09/17/21	22,747
Fourth Quarter 2021	0.90		12/03/21	12/17/21	22,746
Total 2021	$	3.45			$	87,171

First Quarter 2022	$	0.90	03/11/22	03/25/22	$	22,870

Deferred and Restricted Stock Units

The LCI Industries 2018 Omnibus Incentive Plan (the "2018 ~~Plan”~~Plan") provides for the grant or issuance of stock units, including those that have deferral periods, such as deferred stock units ~~(“DSUs”~~("DSUs"), and those with time-based vesting provisions, such as restricted stock units ~~(“RSUs”~~("RSUs"), to directors, employees, and other eligible persons. Recipients of DSUs and RSUs are entitled to receive shares at the end of a specified vesting or deferral period. Holders of DSUs and RSUs receive dividend equivalents based on dividends granted to holders of the common stock, which dividend equivalents are payable in additional DSUs and RSUs, and are subject to the same vesting criteria as the original grant.

DSUs vest (i) ratably over the service period, (ii) at a specified future date, or (iii) for certain officers, based on achievement of specified performance conditions. RSUs vest (i) ratably over the service period or (ii) at a specified future date.

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


		Number of Shares	Weighted Average Price			Number of Shares	Weighted Average Price
Outstanding at December 31, 2020		335,087	$	90.04
Outstanding at December 31, 2021					Outstanding at December 31, 2021	285,711	$	110.41
Issued	Issued	1,340	132.28		Issued	1,405	103.81
Granted	Granted	93,615	143.53		Granted	142,924	122.04
Dividend equivalents	Dividend equivalents	1,639	131.62		Dividend equivalents	2,390	105.22
Forfeited	Forfeited	(973)	96.55		Forfeited	(950)	110.28
Vested	Vested	(139,913)	86.42		Vested	(147,201)	93.20
Outstanding at March 31, 2021		290,795	$	106.32
Outstanding at March 31, 2022					Outstanding at March 31, 2022	284,279	$	121.85

Performance Stock Units

The 2018 Plan provides for performance stock units ~~(“PSUs”~~("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			Number of Shares	Weighted Average Price
Outstanding at December 31, 2020		119,727	$	89.92
Outstanding at December 31, 2021					Outstanding at December 31, 2021	149,961	$	104.01

Granted	Granted	40,102	143.54		Granted	91,988	110.83
Dividend equivalents	Dividend equivalents	833	131.62		Dividend equivalents	1,336	105.22
Forfeited	Forfeited	(1,053)	96.55		Forfeited	(4,840)	78.11
Vested	Vested	(12,593)	95.03		Vested	(80,938)	82.40
Outstanding at March 31, 2021		147,016	$	104.01
Outstanding at March 31, 2022					Outstanding at March 31, 2022	157,507	$	116.63

Convertible Note Hedge Transactions

The Company paid an aggregate amount of $100.1 million to the Counterparties pursuant to the Convertible Note Hedge Transactions. The Convertible Note Hedge Transactions cover, subject to anti-dilution adjustments substantially similar to those in the Convertible Notes, approximately 2.8 million shares of the Company's common stock, the same number of

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~12.~~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. The Convertible Note Hedge Transactions are expected generally to reduce the potential dilutive effect to the Company's common stock of the conversion of the Convertible Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of the Convertible Notes which are converted, as the case may be, in the event the price per share of the Company's common stock, as measured under the terms of the Convertible Note Hedge Transactions, is greater than the strike price of the Convertible Note Hedge Transactions. The Convertible Note Hedge Transactions meet the criteria in Accounting Standards Codification ("ASC") 815-40 to be classified within stockholders' equity, and therefore the Convertible Note Hedge Transactions are not revalued after their issuance.

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

Warrant Transactions

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

13. FAIR VALUE MEASUREMENTS

Recurring

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


		March 31, 2021								December 31, 2020									March 31, 2022								December 31, 2021
(In thousands)	(In thousands)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		(In thousands)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets	Assets																	Assets
Pension plan assets (Note 7)		$	59,189	$	0	$	0	$	59,189	$	61,939	$	0	$	0	$	61,939
Pension plan assets (Note 8)																		Pension plan assets (Note 8)	$	51,215	$	—	$	—	$	51,215	$	52,296	$	—	$	—	$	52,296
Liabilities	Liabilities																	Liabilities
Contingent consideration	Contingent consideration	$	4,463	$	0	$	0	$	4,463	$	4,609	$	0	$	0	$	4,609	Contingent consideration	$	4,967	$	—	$	—	$	4,967	$	6,911	$	—	$	—	$	6,911

Contingent Consideration Related to Acquisitions

Liabilities for contingent consideration related to acquisitions were estimated at fair value using ~~management’s~~management's projections for long-term sales forecasts, including assumptions regarding market share gains and future industry-specific economic and market conditions, and a market ~~participant’s~~participant's weighted average cost of capital. Over the next six years, the ~~Company’s~~Company's long-term sales growth forecasts for products subject to contingent consideration arrangements average approximately 13 percent per year. For further information on the inputs used in determining the fair value, and a roll forward of the contingent consideration liability, see Note 1011 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

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

there is a decrease in the fair value liability, the Company would record a benefit in selling, general and administrative expenses.

~~13.~~14. SEGMENT REPORTING

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

The OEM Segment, which accounted for 8285 percent and 8182 percent of consolidated net sales for the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, respectively, manufactures orand distributes a broad array of engineered components for the leading OEMs in the recreation and transportation product markets, consisting primarily of RVs and adjacent industries, including buses; trailers used to haul boats, livestock, equipment and other cargo; trucks; boats; trains; manufactured homes; and modular housing. Approximately 6268 percent of the ~~Company’s~~Company's OEM Segment net sales for the three months ended March 31, ~~2021~~2022 were of components for travel trailer and fifth-wheel RVs.

The Aftermarket Segment, which accounted for 1815 percent and 1918 percent of consolidated net sales for the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, respectively, supplies engineered components to the related aftermarket channels of the recreation and transportation product 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, and the sale of replacement glass and awnings to fulfill insurance claims.

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 2 of the Notes to Consolidated Financial Statements in the ~~Company’s~~Company's Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

~~LCI INDUSTRIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

The following tables present the ~~Company’s~~Company's revenues disaggregated by segment and geography based on the billing address of the ~~Company’s~~Company's customers:


		Three Months Ended March 31, 2021						Three Months Ended March 31, 2020							Three Months Ended March 31, 2022						Three Months Ended March 31, 2021
(In thousands)	(In thousands)	U.S. (a)		Int’l (b)		Total		U.S. (a)		Int’l (b)		Total		(In thousands)	U.S. (a)		Int’l (b)		Total		U.S. (a)		Int’l (b)		Total
OEM Segment:	OEM Segment:													OEM Segment:
RV OEMs:	RV OEMs:													RV OEMs:
Travel trailers and fifth-wheels	Travel trailers and fifth-wheels	$	486,542	$	16,474	$	503,016	$	303,682	$	3,426	$	307,108	Travel trailers and fifth-wheels	$	937,635	$	15,591	$	953,226	$	486,542	$	16,474	$	503,016
Motorhomes	Motorhomes	39,417		23,176		62,593		26,914		11,173		38,087		Motorhomes	60,146		27,108		87,254		39,417		23,176		62,593
Adjacent Industries OEMs	Adjacent Industries OEMs	211,682		38,959		250,641		146,601		40,561		187,162		Adjacent Industries OEMs	311,648		44,454		356,102		211,682		38,959		250,641
Total OEM Segment net sales	Total OEM Segment net sales	737,641		78,609		816,250		477,197		55,160		532,357		Total OEM Segment net sales	1,309,429		87,153		1,396,582		737,641		78,609		816,250
Aftermarket Segment:	Aftermarket Segment:													Aftermarket Segment:
Total Aftermarket Segment net sales	Total Aftermarket Segment net sales	171,410		12,598		184,008		121,618		5,695		127,313		Total Aftermarket Segment net sales	230,167		17,819		247,986		171,410		12,598		184,008
Total net sales	Total net sales	$	909,051	$	91,207	$	1,000,258	$	598,815	$	60,855	$	659,670	Total net sales	$	1,539,596	$	104,972	$	1,644,568	$	909,051	$	91,207	$	1,000,258

(a) Net sales to customers in the United States of America

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

~~The following table presents the Company’s operating profit by segment:~~

LCI INDUSTRIES

Three Months Ended
March 31,
(In thousands) 2021 2020
Operating profit:
OEM Segment $ 79,287 $ 43,189
Aftermarket Segment 22,144 1,077
Total operating profit $ 101,431 $ 44,266
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table presents the ~~Company’s~~Company's operating profit by segment:


	Three Months Ended March 31,
(In thousands)	2022		2021
Operating profit:
OEM Segment	$	245,374	$	79,287
Aftermarket Segment	24,327		22,144
Total operating profit	$	269,701	$	101,431

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

Three Months Ended
March 31,
(In thousands) 2021 2020
OEM Segment:
Chassis, chassis parts, and slide-out mechanisms $ 287,061 $ 202,263
Windows and doors 249,920 156,031
Furniture and mattresses 155,244 87,180
Axles and suspension solutions 55,122 35,136
Other 68,903 51,747
Total OEM Segment net sales 816,250 532,357
Total Aftermarket Segment net sales 184,008 127,313
Total net sales $ 1,000,258 $ 659,670


	Three Months Ended March 31,
(In thousands)	2022		2021
OEM Segment:
Chassis, chassis parts, and slide-out mechanisms	$	559,720	$	287,061
Windows and doors	330,358		249,920
Furniture and mattresses	242,226		155,244
Axles and suspension solutions	97,045		55,122
Other	167,233		68,903
Total OEM Segment net sales	1,396,582		816,250
Total Aftermarket Segment net sales	247,986		184,008
Total net sales	$	1,644,568	$	1,000,258

2023

LCI INDUSTRIES

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This ~~Management’s~~Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the ~~Company’s~~Company's Condensed Consolidated Financial Statements and Notes thereto included in Item 1 of Part 1 of this report, as well as the ~~Company’s~~Company's Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

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

We have two reportable segments, the OEM Segment and the Aftermarket Segment. Intersegment sales are insignificant. At March 31, ~~2021,~~2022, we operated over ~~100~~120 manufacturing and distribution facilities located throughout ~~the United States~~North America and ~~in Canada, Ireland, Italy, the Netherlands, and the United Kingdom.~~Europe. See Note 1314 of the Notes to Condensed Consolidated Financial Statements for further information regarding our segments.

Our OEM Segment manufactures or distributes a broad array of engineered components for the leading OEMs of ~~leisure~~RVs and ~~mobile transportation industries.~~adjacent industries, including buses; trailers used to haul boats, livestock, equipment and other cargo; trucks; boats; trains; manufactured homes; and modular housing. Approximately 6265 percent of our OEM Segment net sales for the twelve months ended March 31, ~~2021~~2022 were of components for travel trailer and fifth-wheel RVs, including:


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

The Aftermarket Segment supplies many of these engineered components to the related aftermarket channels of the recreation and transportation product 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, sound systems, and the sale of replacement glass and awnings to fulfill insurance claims.

Most industries where we sell products or where our products are used historically have been seasonal and are generally at the highest levels when the weather is moderate. Accordingly, 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 ~~we sell our~~the Company sells its components, ~~the timing of dealer orders, and~~ the impact of severe weather conditions on the timing of industry-wide shipments from time to time, ~~current and future seasonal industry trends may be different than in prior years, particularly~~ as ~~a result of~~well as the ~~COVID-19~~coronavirus ("COVID-19") pandemic and related impacts. Additionally, many of the optional upgrades and non-critical replacement parts for RVs are purchased outside the normal product selling season, thereby causing ~~these~~ Aftermarket Segment sales to be counter-seasonal, but this has been, and may in the future be, different ~~in 2021 and future years~~ as a result of the COVID-19 pandemic and related ~~impacts.~~impact.

COVID-19 AND RUSSIA-UKRAINE WAR UPDATE

The ongoing COVID-19 pandemic has caused significant uncertainty and disruption in the global economy and financial ~~markets. The COVID-19 pandemic had an adverse effect on our financial results during~~markets since early 2020. With RV retail demand at record levels throughout 2021, the ~~first half of 2020~~industry faced challenges with supply chain constraints, rising material and freight costs, and increases in direct labor costs due to government-mandated plant shutdowns. We took a variety of actions during 2020 to help mitigate the adverse impacts, including temporary cost savings measures and delays and reductions in capital expenditures.

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

2124

LCI INDUSTRIES

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)

~~demand at record levels through the first three months of 2021, the industry has faced challenges with supply chain constraints, rising material costs,~~ and a tightened labor market, especially in ~~northern~~Northern Indiana. These trends have continued through the first quarter of 2022, and, with regard to supply chain constraints and freight costs, have also been impacted by the conflict between Russia and Ukraine (the "Russia-Ukraine War"). To address these challenges, we have continued to strategically ~~managed~~manage working capital, including ~~intentionally building up~~carrying elevated levels of certain inventory items to avoid future shortages. ~~We have also expanded capacity outside of Elkhart County, Indiana, with new leased facilities and the acquisition of Wolfpack Chassis in Kendallville, Indiana during the quarter.~~ We continue to focus on our culture and leadership development programs to focus on team member retention and regularly hold hiring events, with COVID-19 safety measures, to fill open positions. As we build inventory levels and invest in additional production capacity, we also closely monitor our liquidity, and may need to seek additional financing, though such additional financing may not be available on terms favorable to us, or at all. See "Liquidity and Capital Resources" below for further discussion.

The health and safety of our team members have remained our top priority. We continue to maintain the rigorous health and safety protocols we established in 2020. We leased a location to provide drive-thru rapid COVID-19 tests for our team members in northern Indiana. We have encouraged team members to seek vaccination when eligible and partnered with a local hospital in April 2021 to host a private vaccination day for our eligible northern Indiana team members and their families.

retention. We continue to closely monitor the impact of COVID-19 and the Russia-Ukraine War on all aspects of our business.

~~FURRION UPDATE~~

~~At March 31, 2021, we had a receivable from Furrion Limited ("Furrion")~~ The extent to which COVID-19 and/or the Russia-Ukraine War may impact our liquidity, financial condition, and results of ~~$42.7 million recorded for purchases of inventory stock following~~operations in the termination of the distribution and supply agreement with Furrion. The termination agreement originally required Furrion to make periodic payments throughout 2020 and the first six months of 2021; however, due to the impacts of the COVID-19 pandemic, we are currently in negotiations impacting the timing of the repayment of this receivable. Accordingly, we have classified $7.8 million of the receivable as long-term, and recorded the receivable at its present value at March 31, 2021 based on the currently proposed payment plan.

Due to the nature of the Furrion distribution and supply arrangement, the operating margin related to sales of Furrion products were dilutive to our consolidated operating margin prior to the end of 2019 when the agreement was terminated.future remains uncertain.

INDUSTRY BACKGROUND

OEM Segment

North American Recreational Vehicle Industry

An RV is a vehicle designed as temporary living quarters for recreational, camping, travel or seasonal use. RVs may be motorized (motorhomes) or towable (travel trailers, fifth-wheel travel trailers, folding camping trailers, and truck campers).

The annual sales cycle for the RV industry generally starts in October after the ~~“Open House”~~"Open House" in Elkhart, Indiana where many of the largest RV OEMs display product to RV retail dealers and ends after the conclusion of the summer selling season in September in the following calendar year. Between October and March, industry-wide wholesale shipments of travel trailer and fifth-wheel RVs have historically exceeded retail sales as dealers build inventories to support anticipated sales. Between April and September, the spring and summer selling seasons, retail sales of travel trailer and fifth-wheel RVs have historically exceeded industry-wide wholesale shipments. Due to the COVID-19 pandemic, the 2021 and 2020 Open ~~House was canceled; however, the 2021 Open House is currently planned to take place in September.~~Houses were canceled. The seasonality of the RV industry has been, and will likely continue to be, impacted by the COVID-19 pandemic, and the timing of a return to historical seasonality is not possible to predict at this time.

According to the Recreation Vehicle Industry Association ("RVIA"), industry-wide wholesale shipments from the United States of travel trailer and fifth-wheel RVs in the first three months of ~~2021,~~2022, our primary RV market, increased 4916 percent to ~~131,200~~152,200 units, compared to the first three months of ~~2020,~~2021, primarily due to ~~increased retail demand and~~ dealers rebuilding inventory ~~levels.~~levels partially offset by a decrease in retail demand. Retail demand for travel trailer and fifth-wheel RVs ~~increased 30~~decreased 18 percent in the first three months of ~~2021~~2022 compared to the same period in ~~2020.~~2021. Retail demand is typically revised upward in subsequent months, primarily due to delayed RV registrations.

~~LCI INDUSTRIES~~

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

~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Continued)~~

While 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 March 31, 2021 131,200 49% 96,900 30% 34,300
Quarter ended December 31, 2020 115,200 38% 88,500 39% 26,700
Quarter ended September 30, 2020 110,100 37% 157,700 34% (47,600)
Quarter ended June 30, 2020 66,800 (34)% 131,500 (5)% (64,700)
Twelve months ended March 31, 2021 423,300 20% 474,600 20% (51,300)
Quarter ended March 31, 2020 88,000 4% 74,800 (3)% 13,200
Quarter ended December 31, 2019 83,300 (8)% 63,600 (6)% 19,700
Quarter ended September 30, 2019 80,600 (13)% 118,000 (6)% (37,400)
Quarter ended June 30, 2019 101,000 (13)% 138,800 (7)% (37,800)
Twelve months ended March 31, 2020 352,900 (8)% 395,200 (6)% (42,300)


					Estimated
	Wholesale		Retail		Unit Impact on
	Units	Change	Units	Change	Dealer Inventories
Quarter ended March 31, 2022	152,200	16%	93,800	(18)%	58,400
Quarter ended December 31, 2021	130,400	13%	76,300	(15)%	54,100
Quarter ended September 30, 2021	136,000	24%	130,800	(18)%	5,200
Quarter ended June 30, 2021	133,800	100%	180,400	36%	(46,600)
Twelve months ended March 31, 2022	552,400	30%	481,300	(3)%	71,100

LCI INDUSTRIES

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)


					Estimated
	Wholesale		Retail		Unit Impact on
	Units	Change	Units	Change	Dealer Inventories
Quarter ended March 31, 2021	131,200	14%	114,500	52%	16,700
Quarter ended December 31, 2020	115,200	5%	89,400	40%	25,800
Quarter ended September 30, 2020	110,100	65%	159,100	35%	(49,000)
Quarter ended June 30, 2020	66,800	(24)%	132,500	(5)%	(65,700)
Twelve months ended March 31, 2021	423,300	20%	495,500	25%	(72,200)

According to the RVIA, industry-wide wholesale shipments of motorhome RVs in the first three months of ~~2021~~2022 increased 4210 percent to ~~14,300~~15,800 units compared to the first three months of ~~2020,~~2021, primarily due to ~~OEM plant shutdowns in response to COVID-19 in the 2020 period.~~dealers rebuilding inventory levels and increased retail demand. Retail demand for motorhome RVs increased ~~one~~two percent year-over-year in the first three months of ~~2021,~~2022, compared to ~~an eight~~a 27 percent year-over-year ~~decrease~~increase in retail demand in the same period of ~~2020.~~2021.

Adjacent Industries

Our portfolio of products used in RVs can also be used in other applications, including buses; trailers used to haul boats, livestock, equipment and other cargo; trucks; 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. We believe there are significant opportunities in these Adjacent ~~Industries and, as a result, seven of our last eleven business acquisitions were focused in Adjacent~~ Industries.

Aftermarket Segment

Many of our OEM Segment products are also sold through various aftermarket channels ~~including dealerships,~~of the recreation and transportation product markets, primarily to retail dealers, wholesale distributors, and service centers, as well as direct to retail customers via the Internet. This includes discretionary accessories and replacement service parts. We have teams dedicated to product, technical, and installation training as well as marketing support for our Aftermarket Segment customers. We also support multiple call centers to provide 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, and the sale of replacement glass and awnings to fulfill insurance claims. Many of the optional upgrades and non-critical replacements for RVs are purchased outside the normal product selling seasons, thereby causing certain Aftermarket Segment sales to be counter-seasonal, but this has been, and may in the future be, different ~~in 2021 and future years~~ as a result of the COVID-19 pandemic and related impacts.

According to ~~the~~ Go RVing, estimated RV ownership in the United States as of 2020 had increased to over 11 million households. ~~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.~~ This vibrant ~~secondary~~ market is a key driver for aftermarket sales, as we anticipate owners ~~of previously owned RVs~~ will likely upgrade their units as well as replace parts and accessories which have been subjected to normal wear and tear.

RESULTS OF OPERATIONS

Consolidated Highlights

•Consolidated net sales in the first quarter of 2022 were $1.6 billion, 64 percent higher than consolidated net sales for the same period of 2021 of $1.0 billion. The increase was primarily driven by record wholesale shipments, price increases, and Aftermarket Segment sales growth. Net sales from acquisitions completed in 2021 and the first three months of 2022, primarily Furrion Holdings Limited ("Furrion"), contributed approximately $79.0 million in the first quarter of 2022.

•Net income for the first quarter of 2022 was $196.2 million, or $7.71 per diluted share, compared to net income of $74.1 million, or $2.93 per diluted share, for the same period of 2021.

•Consolidated operating profit during the first quarter of 2022 was $269.7 million compared to $101.4 million in the same period of 2021. Operating profit margin was 16.4 percent in the first quarter of 2022 compared to 10.1 percent in the same period of 2021. The increase was primarily a result of increased selling prices which are

LCI INDUSTRIES

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)

~~RESULTS OF OPERATIONS~~

~~Consolidated Highlights~~

•Consolidated net sales in the first quarter of 2021 were $1.0 billion, 52 percent higher than consolidated net sales for the same period of 2020 of $659.7 million. The increase was primarily driven by record RV retail demandindexed to select commodities, pricing changes to targeted products, and strong Aftermarket Segment sales growth. Net sales from acquisitions completed in 2020 and 2021, primarily Veada Industries, Inc. and Challenger Door, LLC, contributed approximately $41.2 million in the first quarter of 2021. Additionally, the start of the pandemic in the first quarter of 2020 had a negative impact on sales in that quarter.

•~~Net income for the first quarter of 2021 was $74.1 million, or $2.93 per diluted share, compared to net income of $28.2 million, or $1.12 per diluted share, for the same period of 2020.~~

•Consolidated operating profit during the first quarter of 2021 was $101.4 million compared to $44.3 million in the same period of 2020. Operating profit margin was 10.1 percent in the first quarter of 2021 compared to 6.7 percent in the same period of 2020, primarily as a result ofleveraging fixed costs ~~being spread~~ over ~~a larger~~higher sales ~~base in the 2021 period~~volumes, partially offset by increased raw material and ~~COVID-19-related shutdowns that began in March 2020 which negatively impacted the 2020 period.~~freight costs.

•The cost of aluminum and steel used in certain of our manufactured components increased in the first quarter of ~~2021~~2022 compared to the same period of ~~2020.~~2021. Raw material costs are subject to continued fluctuation and are being offset ~~in part,~~ by contractual selling prices ~~that~~which are indexed to select commodities.

•The $54.2 million increase in selling, general and administrative costs in the first quarter of 2022 was primarily driven by increases in personnel costs of $20.3 million, increases in transportation costs of $13.1 million due to higher volumes and rising freight costs, incremental costs from recent acquisitions of $7.7 million, and incremental amortization of intangible assets from acquired businesses of $4.1 million.

•The effective tax rate of ~~24.9~~25.5 percent for the three months ended March 31, ~~2021~~2022 was ~~lower~~higher than the comparable prior year period of ~~27.8~~24.9 percent, primarily due to ~~the reduced rate impact of permanent tax differences with the growth in income before income taxes and an increase~~a decrease in the excess tax benefit related to the vesting of equity-based compensation awards and the cash surrender value of life insurance, as discussed below under ~~“Income~~"Income Taxes.”"

•In March ~~2021,~~2022, we paid a quarterly dividend of ~~$0.75~~$0.90 per share, aggregating to ~~$18.9~~$22.9 million.

OEM Segment - First Quarter

Net sales of the OEM Segment in the first quarter of ~~2021~~2022 increased ~~$283.9~~$580.3 million, compared to the same period of ~~2020.~~2021. Net sales of components to the following OEMs markets for the three months ended March 31 were:


(In thousands)	(In thousands)	2021		2020		Change		(In thousands)	2022		2021		Change
RV OEMs:	RV OEMs:							RV OEMs:
Travel trailers and fifth-wheels	Travel trailers and fifth-wheels	$	503,016	$	307,108	64	%	Travel trailers and fifth-wheels	$	953,226	$	503,016	90	%
Motorhomes	Motorhomes	62,593		38,087		64	%	Motorhomes	87,254		62,593		39	%
Adjacent Industries OEMs	Adjacent Industries OEMs	250,641		187,162		34	%	Adjacent Industries OEMs	356,102		250,641		42	%
Total OEM Segment net sales	Total OEM Segment net sales	$	816,250	$	532,357	53	%	Total OEM Segment net sales	$	1,396,582	$	816,250	71	%

According to the RVIA, industry-wide wholesale unit shipments for the three months ended March 31 were:

2021 2020 Change
Travel trailer and fifth-wheel RVs 131,200 88,000 49 %
Motorhomes 14,300 10,100 42 %

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


	2022	2021	Change
Travel trailer and fifth-wheel RVs	152,200	131,200	16	%
Motorhomes	15,800	14,300	10	%

The trend in our average product content per RV produced is an indicator of our overall market share of components for new RVs. Our average product content per type of RV, calculated based upon our net sales of components to domestic RV

~~LCI INDUSTRIES~~

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

~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Continued)~~

OEMs for the different types of RVs produced for the twelve months ended March 31, divided by the industry-wide wholesale shipments of the different product mix of RVs for the same period, was:


Content per:	Content per:	2021		2020		Change		Content per:	2022		2021		Change
Travel trailer and fifth-wheel RV	Travel trailer and fifth-wheel RV	$	3,476	$	3,354	4	%	Travel trailer and fifth-wheel RV	$	4,854	$	3,476	40	%
Motorhome	Motorhome	$	2,525	$	2,327	9	%	Motorhome	$	3,144	$	2,525	25	%

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, ~~as well as changes in the types of RVs produced industry-wide.~~market share gains, and acquisitions.

Our increase in net sales to RV OEMs of travel trailers, fifth-wheel, and motorhome components during the first quarter of ~~2021~~2022 was ~~primarily~~ driven by ~~a recovery in RV retail demand beginning later in the second quarter of 2020~~content gains and ~~continuing into the first quarter of 2021. The net sales increase further benefited from content~~price increases, market share gains, wholesale production growth, and acquisitions during the first quarter of ~~2021.~~2022.

Our increase in net sales to OEMs in Adjacent Industries during the first quarter of ~~2021~~2022 was driven by ~~acquisitions~~content gains and ~~a recovery in retail demand for the marine industry~~price increases, market share gains, and ~~other adjacent markets beginning later in the second quarter of 2020 and continuing into the first quarter of 2021.~~wholesale production growth.

LCI INDUSTRIES

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)

Operating profit of the OEM Segment was ~~$79.3~~$245.4 million in the first quarter of ~~2021,~~2022, an increase of ~~$36.1~~$166.1 million compared to the same period of ~~2020.~~2021. The operating profit margin of the OEM Segment in the first quarter of ~~2021~~2022 increased to ~~9.7~~17.6 percent compared to ~~8.1~~9.7 percent for the same period of ~~2020~~2021 and was positively impacted by:

•Selling prices contractually tied to indices of select commodities increased, resulting in an increase in operating profit of $142.0 million compared to the same period of 2021.

•Pricing changes to targeted products, resulting in an increase in operating profit of $71.6 million compared to the same period of 2021.

•Leveraging of fixed costs over a larger sales base, which increased operating profit by ~~$20.0~~$15.4 million related to fixed selling, general, and administrative costs and ~~$10.0~~$6.6 million related to fixed overhead costs.

•~~Pricing changes to targeted products, resulting in an increase in operating profit of $6.8 million compared to the same period of 2020.~~

Partially offset by:

•Increases in material commodity pricing, which negatively impacted operating profit by ~~$17.3~~$114.4 million, primarily related to increased steel and aluminum costs.

•~~Increases in direct labor costs due to production volumes and a tight labor market,~~Sales mix increase of lower margin products from the acquisition of Furrion, which negatively impacted operating profit by ~~$4.9~~$5.1 million.

•Additional amortization related to intangible assets from acquisitions completed in 2021, which reduced operating profit by $3.5 million.

Amortization expense on intangible assets for the OEM Segment was ~~$6.5~~$10.1 million in the first quarter of ~~2021,~~2022, compared to ~~$6.4~~$6.5 million in the same period in ~~2020.~~2021. Depreciation expense on fixed assets for the OEM Segment was ~~$12.2~~$14.5 million in the first quarter of ~~2021,~~2022, compared to ~~$12.1~~$12.2 million in the same period of ~~2020.~~2021.

Aftermarket Segment - First Quarter

Net sales of the Aftermarket Segment in the first quarter of ~~2021~~2022 increased 4535 percent, or ~~$56.7~~$64.0 million, compared to the same period of ~~2020.~~2021. Net sales of components in the Aftermarket Segment were as follows for the three months ended March 31:


(In thousands)	(In thousands)	2021		2020		Change		(In thousands)	2022		2021		Change
Total Aftermarket Segment net sales	Total Aftermarket Segment net sales	$	184,008	$	127,313	45	%	Total Aftermarket Segment net sales	$	247,986	$	184,008	35	%

Our net sales to the Aftermarket Segment increased during the first quarter of ~~2021,~~2022, primarily due to increased consumer demand in the outdoor recreational and transportation market and our distributor customers rebuilding their inventory levels.

Operating profit of the Aftermarket Segment was ~~$22.1~~$24.3 million in the first quarter of ~~2021,~~2022, an increase of ~~$21.1~~$2.2 million compared to the same period of ~~2020.~~2021. The operating profit margin of the Aftermarket Segment was 9.8 percent in the first quarter of 2022, compared to 12.0 percent in ~~2021, compared to 0.8 percent~~the same period in ~~2020,~~2021, and was ~~positively~~negatively impacted by:

•Increases in material commodity pricing, which negatively impacted operating profit by $18.5 million, primarily related to increased steel and aluminum costs.

•Increases in transportation costs, primarily for third party freight, which reduced operating profit by $4.3 million.

•Sales mix increase of lower margin products from the acquisition of Ranch Hand, which negatively impacted operating profit by $1.2 million.

•Increases in direct labor costs due to higher production volumes and a tight labor market, which reduced operating profit by $0.9 million.

•Investments in marketing and administrative wages of $4.5 million.

•Increases in production facilities and equipment costs in order to meet growing sales demands, which negatively impacted operating profit by $0.7 million.

LCI INDUSTRIES

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)

Partially offset by:

•Pricing changes to targeted products, resulting in an increase in operating profit of $20.6 million compared to the same period of 2021.

•Sales mix increase of higher margin products from the acquisition of Furrion, which positively impacted operating profit by $3.1 million.

•Leveraging of fixed costs over a larger sales base, which increased operating profit by ~~$11.2~~$1.7 million related to fixed selling, general, and administrative costs and ~~$4.0~~$0.9 million related to fixed overhead costs.

•~~The recognition of higher cost of sales in the first quarter of 2020 due to the inventory fair value step-up for CURT of $6.2 million.~~

~~Partially offset by:~~

•~~Increases in transportation costs, primarily for third party freight, which reduced operating profit by $3.4 million.~~

Amortization expense on intangible assets for the Aftermarket Segment was ~~$2.9~~$3.7 million in the first quarter of ~~2021,~~2022, compared to ~~$3.0~~$2.9 million in the same period of ~~2020.~~2021. Depreciation expense on fixed assets for the Aftermarket Segment was ~~$3.0~~$3.5 million in the first quarter of ~~2021,~~2022, compared to ~~$3.1~~$3.0 million in the same period of ~~2020.~~2021.

Income Taxes

The effective tax rates for the three months ended March 31, 2022 and 2021 ~~and 2020~~ were ~~24.9~~25.5 percent and ~~27.8~~24.9 percent, respectively. The effective tax rate for the three months ended March 31, ~~2021~~2022 differed from the Federal statutory rate primarily due to state taxes, foreign taxes, and non-deductible expenses, partially offset by the recognition of excess tax benefits as a component of the provision for income taxes, and Federal and Indiana research and development credits. The ~~decrease~~increase in the effective tax rate for the three months ended March 31, ~~2021~~2022 as compared to the same period in ~~2020~~2021 was primarily due to ~~the decreased rate impact of permanent tax differences with the growth in income before income taxes and an increase~~a decrease in the excess tax benefit related to the vesting of equity-based compensation ~~awards.~~awards and the cash surrender value of life insurance.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

As of March 31, ~~2021,~~2022, we had ~~$63.3~~$55.4 million in cash and cash equivalents, and ~~$142.4~~$129.8 million of availability under our revolving credit ~~facility. Additionally, we have~~facility under the ~~ability to request up to $150.0~~Credit Agreement. We paid off the full outstanding $50.0 million ~~in additional Senior Promissory Notes be purchased by Prudential under~~balance of our Shelf-Loan Facility ~~(each as defined~~ in ~~Note 8 of the Notes to Condensed Consolidated Financial Statements), subject to Prudential's approval.~~March 2022. See Note 89 of the Notes to Condensed Consolidated Financial Statements for a description of our credit facilities.

We maintain a level of liquidity sufficient to allow us to meet our cash needs in the short term. Over the long term, we manage our cash and capital structure to maximize shareholder return, maintain our financial condition, and maintain flexibility for our future strategic investments. We continuously assess our capital requirements, working capital needs, debt and leverage levels, debt and lease maturity schedules, capital expenditure requirements, dividends, future investments or acquisitions, and potential share repurchases. ~~As discussed above under "COVID-19 Update," with RV retail~~With elevated demand ~~at record levels through~~continuing into the first three months of ~~2021,~~2022, the industry has faced challenges with supply chain constraints, rising material costs, and a tightened labor market, especially in northern Indiana. To address these challenges, we have strategically managed working capital, including intentionally building up levels of certain inventory items to avoid future shortages, and have expanded our production capacity. As we build inventory levels and invest in additional production capacity, we also closely monitor our liquidity. In the event additional ~~need~~needs for cash arise, or if we refinance our existing debt, we may raise additional funds from a combination of sources, including the potential issuance of debt or equity securities. Additional financing might not be available on terms favorable to us, or at all.

We believe the availability under the revolving credit facility under the ~~Amended~~ Credit Agreement, ~~(as defined in Note 8 of the Notes to Condensed Consolidated Financial Statements),~~ along with our cash flows from operations, are adequate to finance our anticipated cash requirements for the next twelve months.

The Condensed Consolidated Statements of Cash Flows reflect the following for the three months ended March 31:


(In thousands)	2022		2021
Net cash flows provided by operating activities	$	134,926	$	4,847
Net cash flows used in investing activities	(92,345)		(24,341)
Net cash flows (used in) provided by financing activities	(49,316)		33,987
Effect of exchange rate changes on cash and cash equivalents	(712)		(2,995)
Net (decrease) increase in cash and cash equivalents	$	(7,447)	$	11,498

LCI INDUSTRIES

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)

~~The Condensed Consolidated Statements of Cash Flows reflect the following for the three months ended March 31:~~

(In thousands) 2021 2020
Net cash flows provided by operating activities $ 4,847 $ 44,759
Net cash flows used in investing activities (24,341) (101,749)
Net cash flows provided by financing activities 33,987 119,845
Effect of exchange rate changes on cash and cash equivalents (2,995) (215)
Net increase in cash and cash equivalents $ 11,498 $ 62,640

Cash Flows from Operations

Net cash flows provided by operating activities were $134.9 million in the first three months of 2022, compared to $4.8 million in the first three months of ~~2021, compared to $44.8 million in the first three months of 2020.~~2021. The ~~decrease~~increase in net cash flows provided by operating activities was primarily due to changes in net assets and liabilities, net of acquisitions of businesses, which generated $93.4 million less cash than in the first three months of 2020. During the first three months of 2021, in an effort to address challenges with supply chain constraints, rising material costs, and a tightened labor market, we strategically managed working capital, including intentionally building up levels of certain inventory items and expanded production capacity. As a result, increases in inventory and receivables related to increased wholesale RV demand were the primary uses of cash generated from net assets. The decrease was partially offset by a $53.5$128.9 million increase in net income, adjusted for depreciation and amortization, stock-based compensation expense, ~~deferred taxes,~~ and other non-cash items. The net change in assets and liabilities, net of acquisitions of businesses, were comparable in the first three months of 2022 compared to the same period in 2021. The primary use of cash in net assets was accounts receivable which increased driven by record sales in the month of March 2022. The primary source of cash in net assets was accrued expenses and other liabilities which increased driven by elevated income taxes payable due to improved profitability, as well as the acquisition-related holdback liability from the acquisition of Girard.

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

Depreciation and amortization was ~~$24.5~~$31.8 million in the first three months of ~~2021,~~2022, and is expected to be approximately ~~$100~~$130 to ~~$110~~$140 million for the full year ~~2021.~~2022. Non-cash stock-based compensation expense in the first three months of ~~2021~~2022 was ~~$7.4~~$6.5 million. Non-cash stock-based compensation expense is expected to be approximately ~~$20~~$25 to $30 million for the full year ~~2021.~~2022.

Cash Flows from Investing Activities

Cash flows used in investing activities of $92.3 million in the first three months of 2022 were primarily comprised of $50.1 million for the acquisitions of businesses and $42.0 million for capital expenditures. Cash flows used in investing activities of $24.3 million in the first three months of 2021 were primarily comprised of $21.0 million for capital expenditures and $2.8 million for the acquisitions of businesses, net of cash acquired. Cash flows used in investing activities of $101.7 million in the first three months of 2020 were primarily comprised of $95.8 million for the acquisitions of businesses, net of cash acquired, and $8.0 million for capital expenditures.

Our capital expenditures are primarily for replacement and ~~growth.~~growth, and during the first three months of 2022 included capacity expansions designed to meet elevated demand. Over the long term, based on our historical capital expenditures, the replacement portion of our capital expenditures has averaged approximately one to two percent of net sales, while the growth portion has averaged approximately two to three percent of net sales. However, there are many factors that can impact the actual spending compared to these historical averages. We estimate full year ~~2021~~2022 capital expenditures of $130 to $150 million, including capacity expansions to meet elevated demand, which we expect to fund with cash flows from operations or periodic borrowings under the revolving credit facility as needed.

Capital expenditures and acquisitions in the first three months of ~~2021~~2022 were funded by cash from operations and borrowings under our ~~credit agreement.~~Credit Agreement. Capital expenditures and acquisitions in the remainder of fiscal year ~~2021~~2022 are expected to be funded primarily from cash generated from operations, as well as periodic borrowings under our revolving credit facility.

Cash Flows from Financing Activities

Cash flows used in financing activities of $49.3 million in the first three months of 2022 were primarily comprised of $55.6 million in repayments under our shelf loan, term loan and other borrowings, payments of quarterly dividends of $22.9 million, and cash outflows of $10.6 million related to vesting of stock-based awards, net of shares tendered for payment of taxes, partially offset by $41.8 million in net borrowings under our revolving credit facility.

Cash flows provided by financing activities of $34.0 million in the first three months of 2021 were primarily comprised of $67.4 million in net borrowings under our revolving credit facility, partially offset by payments of quarterly dividends of $18.9 million, cash outflows of $7.8 million related to the vesting of stock-based awards, net of shares tendered for payment of taxes, and repayments of $3.9 million under ~~the~~our term loan and other borrowings.

~~LCI INDUSTRIES~~

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

~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Continued)~~

Cash flows provided by financing activities in the first three months of 2020 were primarily comprised of $144.8 million of net borrowings under our revolving credit facility, partially offset by cash outflows of $4.5 million related to the vesting of stock-based awards, net of shares tendered for payment of taxes.

In connection with certain business acquisitions, if established sales targets for the acquired business are achieved, we will pay additional cash consideration. We have recorded a ~~$4.5~~$5.0 million liability for the aggregate fair value of these expected contingent consideration liabilities at March 31, ~~2021.~~2022. For further information, see Note 1011 of the Notes to Condensed Consolidated Financial Statements.

LCI INDUSTRIES

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)

The ~~Amended~~ Credit Agreement and Shelf-Loan Facility include both financial and non-financial covenants. The covenants dictate that we shall not permit our net leverage ratio to exceed certain limits, shall maintain a minimum debt service coverage ratio, and must meet certain other financial requirements. At March 31, ~~2021,~~2022, we were in compliance with all such requirements, and we expect to remain in compliance for the next twelve months.

We have paid regular quarterly dividends since 2016. Future dividend policy with respect to our common stock will be determined by our Board of Directors in light of our prevailing financial needs, earnings, and other relevant factors, including any limitations in our debt agreements, such as maintenance of certain financial ratios. In October 2018, our Board of Directors authorized a stock repurchase program. No shares were repurchased in the first three months of 2021. See Note 11 of the Notes to Condensed Consolidated Financial Statements for additional information related to our dividend program.

CORPORATE GOVERNANCE

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

CONTINGENCIES

Information required by this item is included in Note 1011 of the Notes to Condensed Consolidated Financial Statements and is incorporated herein by reference.

INFLATION

The prices of key raw materials, consisting primarily of steel and aluminum, and components used by us which are made from these raw materials, are influenced by demand and other factors specific to these commodities, ~~rather than being directly affected~~as well as by inflationary pressures. We experienced elevated prices of these commodities in the first three months of 2022, and we expect commodity prices to remain elevated in the near term. Prices of these commodities have historically been volatile, and over the past few months prices have continued to fluctuate. ~~We did not experience any significant increases in~~Please see "Results of Operations" above for additional information regarding the impact of raw material costs on our results of operations for the first three months of 2022.

As a result of the competitive labor market and strong demand for our products, we experienced increased labor costs in the first three months of ~~2021 related~~2022 attributable to ~~inflation.~~higher wages and increased overtime and additional shifts for our team members, and we expect labor costs to remain elevated in the near term. Please see "Results of Operations" above for additional information regarding the impact of labor costs on our results of operations for the first three months of 2022.

NEW ACCOUNTING PRONOUNCEMENTS

Information required by this item is included in Note 2 of the Notes to Condensed Consolidated Financial Statements.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, net sales and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including, but not limited to, those related to product returns, sales and purchase rebates, accounts receivable, inventories, goodwill and other intangible assets, net assets of acquired businesses, income taxes, warranty and product recall obligations, self-insurance obligations, operating lease 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. We base our estimates on historical experience, other available information and various other

~~LCI INDUSTRIES~~

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

~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Continued)~~

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

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)

FORWARD-LOOKING STATEMENTS

This Form 10-Q contains certain ~~“forward-looking statements”~~"forward-looking statements" with respect to our financial condition, results of operations, business strategies, operating efficiencies or synergies, competitive position, growth opportunities, acquisitions, plans and objectives of management, markets for the ~~Company’s~~Company's common stock, the impact of legal proceedings, and other matters. Statements in this Form 10-Q that are not historical facts are ~~“forward-looking statements”~~"forward-looking statements" for the purpose of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as amended (the ~~“Exchange Act”~~"Exchange Act"), and Section 27A of the Securities Act of 1933, as amended, and involve a number of risks and uncertainties.

Forward-looking statements, including, without limitation, those relating to the ~~Company’s~~Company's future business prospects, net sales, expenses and income (loss), capital expenditures, tax rate, cash flow, financial condition, liquidity, covenant compliance, retail and wholesale demand, integration of acquisitions, R&D investments, and industry trends, whenever they occur in this Form 10-Q are necessarily estimates reflecting the best judgment of the ~~Company’s~~Company's senior management at the time such statements were made. There are a number of factors, many of which are beyond the Company’s control, which could cause actual results and events to differ materially from those described in the forward-looking statements. These factors include, in addition to other matters described in this Form 10-Q, the impacts of COVID-19, or other future pandemics, on the global economy and on the Company's customers, suppliers, employees, business and cash flows, pricing pressures due to domestic and foreign competition, costs and availability of, and tariffs on, raw materials (particularly steel and aluminum) and other components, seasonality and cyclicality in the industries to which we sell our products, availability of credit for financing the retail and wholesale purchase of products for which we sell our components, inventory levels of retail dealers and manufacturers, availability of transportation for products for which we sell our components, the financial condition of our customers, the financial condition of retail dealers of products for which we sell our components, retention and concentration of significant customers, the costs, pace of and successful integration of acquisitions and other growth initiatives, availability and costs of production facilities and labor, team member benefits, team member retention, realization and impact of expansion plans, efficiency improvements and cost reductions, the disruption of business resulting from natural disasters or other unforeseen events, the successful entry into new markets, the costs of compliance with environmental laws, laws of foreign jurisdictions in which we operate, other operational and financial risks related to conducting business internationally, and increased governmental regulation and oversight, information technology performance and security, the ability to protect intellectual property, warranty and product liability claims or product recalls, interest rates, oil and gasoline prices, and availability, the impact of international, national and regional economic conditions and consumer confidence on the retail sale of products for which we sell our components, and other risks and uncertainties discussed more fully under the caption ~~“Risk Factors”~~"Risk Factors" in the ~~Company’s~~Company's Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, and in the ~~Company’s~~Company's subsequent filings with the SEC, including the Company's Quarterly Reports on Form 10-Q. Readers of this report are cautioned not to place undue reliance on these forward-looking statements, since there can be no assurance that these forward-looking statements will prove to be accurate. The Company disclaims any obligation or undertaking to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made, except as required by law.

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LCI INDUSTRIES

ITEM 3 – QUANTITATIVE AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk related to changes in short-term interest rates on our variable rate debt. Depending on the interest rate option selected as more fully described in Note 89 of the Notes to Condensed Consolidated Financial Statements, interest is charged based on an indexed rate plus an applicable margin. Assuming a hypothetical increase of 0.25 percent in the indexed interest rate (which approximates a ~~ten~~15 percent increase of the weighted-average interest rate on our borrowings as of March 31, ~~2021)~~2022), our results of operations would not be materially affected.

We are also exposed to changes in the prices of raw materials, specifically steel and aluminum. We have, from time to time, entered into derivative instruments for the purpose of managing a portion of the exposures associated with fluctuations in steel and aluminum prices. While these derivative instruments are subject to fluctuations in value, these fluctuations are generally offset by the changes in fair value of the underlying exposures. We had no outstanding derivative instruments on commodities at March 31, 2022 and December 31, 2021.

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

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

ITEM 4 – CONTROLS AND PROCEDURES

a.Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is (i) recorded, processed, summarized and reported within the time periods specified in the ~~SEC’s~~SEC's rules and forms, and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure, in accordance with the definition of ~~“disclosure~~"disclosure controls and ~~procedures”~~procedures" in Rule 13a-15(e) under the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, cannot provide absolute assurance of achieving the desired control objectives. Management included in its evaluation the cost-benefit relationship of possible controls and procedures. We continually evaluate our disclosure controls and procedures to determine if changes are appropriate based upon changes in our operations or the business environment in which we operate.

As of the end of the period covered by this Form 10-Q, we performed an evaluation, under the supervision and with the participation of our management, including our principal executive officer and our principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of March 31, ~~2021.~~2022.

b.Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended March 31, ~~2021,~~2022, which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We began implementation of a new enterprise resource planning (“ERP”) system in late 2013. The roll-out plan is continually evaluated in the context of priorities for the business and may change as the needs of the business dictate. We anticipate enhancements to controls due to both the installation of the new ERP system and business process changes resulting therefrom.

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LCI INDUSTRIES

PART II – OTHER INFORMATION

ITEM 1 – LEGAL PROCEEDINGS

In the normal course of business, we are subject to proceedings, lawsuits, regulatory agency inquiries and other claims. All such matters are subject to uncertainties and outcomes that are not predictable with assurance. While these matters could materially affect operating results when resolved in future periods, it is management’s opinion that after final disposition, including anticipated insurance recoveries in certain cases, any monetary liability or financial impact to the Company beyond that provided in the Condensed Consolidated Balance Sheet as of March 31, ~~2021,~~2022, would not be material to our financial position or results of operations.

ITEM 1A – RISK FACTORS

There have been no material changes to the matters discussed in Part I, Item 1A – Risk Factors in our Annual Report on Form 10-K as filed with the SEC on February ~~26, 2021.~~25, 2022.

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

There has been no activity with respect to our stock repurchase program during the three months ended March 31, 2021. At March 31, 2021, we had $121.3 million remaining in the current share repurchase authorization. Please refer to our Annual Report on Form 10-K as filed with the SEC on February 26, 2021 for further information on the program.

ITEM 6 – EXHIBITS

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

1
3.1
LCI Industries Restated Certificate of Incorporation, as amended effective December 30, 2016 (incorporated by reference to Exhibit 3.1 included in the Registrant’s Form 10-K for the year ended December 31, 2016).
2
3.2
Amended and Restated Bylaws of LCI Industries, as amended May 25, 2017 (incorporated by reference to Exhibit 3.2 included in the Registrant’s Form 8-K filed on May 31, 2017).
3.
31.1
Certification of Chief Executive Officer required by Rule 13a-14(a). Exhibit 31.1 is filed herewith.
4.
31.2
Certification of Chief Financial Officer required by Rule 13a-14(a). Exhibit 31.2 is filed herewith.
5.
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.
6.
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.
7. 101
The following financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, formatted in Inline XBRL: (i) Condensed Consolidated Statements of Income; (ii) Condensed Consolidated Statements of Comprehensive Income; (iii) Condensed Consolidated Balance Sheets; (iv) Condensed Consolidated Statements of Cash Flows; (v) Condensed Consolidated Statements of Stockholders’ Equity; and (vi) Notes to Condensed Consolidated Financial Statements.
8. 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).


1	3.1	LCI Industries Restated Certificate of Incorporation, as amended effective December 30, 2016 (incorporated by reference to Exhibit 3.1 included in the Registrant’s Form 10-K for the year ended December 31, 2016).
2	3.2	Amended and Restated Bylaws of LCI Industries, as amended May 25, 2017 (incorporated by reference to Exhibit 3.2 included in the Registrant’s Form 8-K filed on May 31, 2017).
3	31.1	Certification of Chief Executive Officer required by Rule 13a-14(a).
4	31.2	Certification of Chief Financial Officer required by Rule 13a-14(a).
5	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.
6	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.
7	101	The following financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, formatted in Inline XBRL: (i) Condensed Consolidated Statements of Income; (ii) Condensed Consolidated Statements of Comprehensive Income; (iii) Condensed Consolidated Balance Sheets; (iv) Condensed Consolidated Statements of Cash Flows; (v) Condensed Consolidated Statements of Stockholders’ Equity; and (vi) Notes to Condensed Consolidated Financial Statements.
8	104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

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LCI INDUSTRIES

SIGNATURES

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


LCI INDUSTRIES
Registrant


By			/s/ Brian M. Hall
Brian M. Hall
Chief Financial Officer
May ~~4, 2021~~10, 2022

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