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,~~June 30, 2023


☐			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 28,~~(July 31, 2023) was ~~25,298,420~~25,324,433 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	910

	ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	2022

	ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	2932

	ITEM 4 – CONTROLS AND PROCEDURES	2932

PART II –	OTHER INFORMATION

	ITEM 1 – LEGAL PROCEEDINGS	3033

	ITEM 1A – RISK FACTORS	3033

	ITEM 5 – OTHER INFORMATION	33

	ITEM 6 – EXHIBITS	3033

SIGNATURES		3134

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 June 30,				Six Months Ended June 30,
		2023		2022				2023		2022		2023		2022
(In thousands, except per share amounts)	(In thousands, except per share amounts)						(In thousands, except per share amounts)

Net sales	Net sales	$	973,310	$	1,644,568		Net sales	$	1,014,639	$	1,536,150	$	1,987,949	$	3,180,718
Cost of sales	Cost of sales	787,239		1,180,325			Cost of sales	796,519		1,127,065		1,583,758		2,307,390
Gross profit	Gross profit	186,071		464,243			Gross profit	218,120		409,085		404,191		873,328
Selling, general and administrative expenses	Selling, general and administrative expenses	166,028		194,542			Selling, general and administrative expenses	162,946		190,296		328,974		384,838
Operating profit	Operating profit	20,043		269,701			Operating profit	55,174		218,789		75,217		488,490
Interest expense, net	Interest expense, net	10,394		6,252			Interest expense, net	10,249		6,191		20,643		12,443
Income before income taxes	Income before income taxes	9,649		263,449			Income before income taxes	44,925		212,598		54,574		476,047
Provision for income taxes	Provision for income taxes	2,390		67,268			Provision for income taxes	11,499		58,068		13,889		125,336
Net income	Net income	$	7,259	$	196,181		Net income	$	33,426	$	154,530	$	40,685	$	350,711

Net income per common share:	Net income per common share:						Net income per common share:
Basic	Basic	$	0.29	$	7.75		Basic	$	1.32	$	6.07	$	1.61	$	13.82
Diluted	Diluted	$	0.29	$	7.71		Diluted	$	1.31	$	6.06	$	1.60	$	13.76

Weighted average common shares outstanding:	Weighted average common shares outstanding:						Weighted average common shares outstanding:
Basic	Basic	25,228		25,329			Basic	25,329		25,438		25,273		25,377
Diluted	Diluted	25,293		25,461			Diluted	25,437		25,518		25,359		25,483

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 June 30,				Six Months Ended June 30,
		2023		2022				2023		2022		2023		2022
(In thousands)	(In thousands)						(In thousands)

Net income	Net income	$	7,259	$	196,181		Net income	$	33,426	$	154,530	$	40,685	$	350,711
Other comprehensive income (loss):	Other comprehensive income (loss):						Other comprehensive income (loss):
Net foreign currency translation adjustment	Net foreign currency translation adjustment	2,000		(2,882)			Net foreign currency translation adjustment	763		(13,688)		2,763		(16,570)

Actuarial gain on pension plans							Actuarial gain on pension plans	100		13,985		100		13,985

Total comprehensive income	Total comprehensive income	$	9,259	$	193,299		Total comprehensive income	$	34,289	$	154,827	$	43,548	$	348,126

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

LCI INDUSTRIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


		March 31,		December 31,	June 30,				December 31,
		2023				2022			2023		2022
(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	$	23,465			$	47,499	Cash and cash equivalents	$	22,094	$	47,499

Accounts receivable, net of allowances of $7,645 and $5,904 at March 31, 2023 and December 31, 2022, respectively		340,305				214,262
Accounts receivable, net of allowances of $7,790 and $5,904 at June 30, 2023 and December 31, 2022, respectively								Accounts receivable, net of allowances of $7,790 and $5,904 at June 30, 2023 and December 31, 2022, respectively	299,469		214,262
Inventories, net	Inventories, net	909,385				1,029,705		Inventories, net	830,020		1,029,705

Prepaid expenses and other current assets	Prepaid expenses and other current assets	91,624				99,310		Prepaid expenses and other current assets	83,662		99,310
Total current assets	Total current assets	1,364,779				1,390,776		Total current assets	1,235,245		1,390,776
Fixed assets, net	Fixed assets, net	480,904				482,185		Fixed assets, net	478,885		482,185
Goodwill	Goodwill	566,178				567,063		Goodwill	584,312		567,063
Other intangible assets, net	Other intangible assets, net	491,415				503,320		Other intangible assets, net	477,307		503,320
Operating lease right-of-use assets	Operating lease right-of-use assets	248,575				247,007		Operating lease right-of-use assets	241,146		247,007

Other long-term assets	Other long-term assets	57,516				56,561		Other long-term assets	59,502		56,561
Total assets	Total assets	$	3,209,367			$	3,246,912	Total assets	$	3,076,397	$	3,246,912

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	$	25,450			$	23,086	Current maturities of long-term indebtedness	$	27,712	$	23,086
Accounts payable, trade	Accounts payable, trade	169,883				143,529		Accounts payable, trade	182,637		143,529

Current portion of operating lease obligations	Current portion of operating lease obligations	35,516				35,447		Current portion of operating lease obligations	35,004		35,447
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	205,182				219,238		Accrued expenses and other current liabilities	196,099		219,238
Total current liabilities	Total current liabilities	436,031				421,300		Total current liabilities	441,452		421,300
Long-term indebtedness	Long-term indebtedness	1,055,625				1,095,888		Long-term indebtedness	915,756		1,095,888
Operating lease obligations	Operating lease obligations	224,451				222,478		Operating lease obligations	217,979		222,478
Deferred taxes	Deferred taxes	31,405				30,580		Deferred taxes	26,900		30,580
Other long-term liabilities	Other long-term liabilities	102,344				95,658		Other long-term liabilities	103,413		95,658
Total liabilities	Total liabilities	1,849,856				1,865,904		Total liabilities	1,705,500		1,865,904
Stockholders' equity	Stockholders' equity							Stockholders' equity
Common stock, par value $.01 per share	Common stock, par value $.01 per share	286				285		Common stock, par value $.01 per share	286		285
Paid-in capital	Paid-in capital	231,294				234,956		Paid-in capital	235,507		234,956
Retained earnings	Retained earnings	1,201,443				1,221,279		Retained earnings	1,207,753		1,221,279
Accumulated other comprehensive income	Accumulated other comprehensive income	8,704				6,704		Accumulated other comprehensive income	9,567		6,704
Stockholders' equity before treasury stock	Stockholders' equity before treasury stock	1,441,727				1,463,224		Stockholders' equity before treasury stock	1,453,113		1,463,224
Treasury stock, at cost	Treasury stock, at cost	(82,216)				(82,216)		Treasury stock, at cost	(82,216)		(82,216)
Total stockholders' equity	Total stockholders' equity	1,359,511				1,381,008		Total stockholders' equity	1,370,897		1,381,008
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	3,209,367			$	3,246,912	Total liabilities and stockholders' equity	$	3,076,397	$	3,246,912

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,					Six Months Ended June 30,
(In thousands)	(In thousands)	2023		2022		(In thousands)	2023		2022

Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	7,259	$	196,181	Net income	$	40,685	$	350,711
Adjustments to reconcile net income to cash flows provided by operating activities:	Adjustments to reconcile net income to cash flows provided by operating activities:					Adjustments to reconcile net income to cash flows provided by operating activities:
Depreciation and amortization	Depreciation and amortization	32,499		31,812		Depreciation and amortization	65,549		63,719
Stock-based compensation expense	Stock-based compensation expense	4,695		6,517		Stock-based compensation expense	9,080		13,701

Deferred taxes						Deferred taxes	—		(2,401)
Other non-cash items	Other non-cash items	877		1,771		Other non-cash items	2,192		2,025
Changes in assets and liabilities, net of acquisitions of businesses:	Changes in assets and liabilities, net of acquisitions of businesses:					Changes in assets and liabilities, net of acquisitions of businesses:
Accounts receivable, net	Accounts receivable, net	(123,072)		(240,404)		Accounts receivable, net	(80,952)		(95,479)
Inventories, net	Inventories, net	131,708		(31,278)		Inventories, net	209,346		(51,811)
Prepaid expenses and other assets	Prepaid expenses and other assets	5,577		20,495		Prepaid expenses and other assets	11,607		25,746
Accounts payable, trade	Accounts payable, trade	25,822		57,808		Accounts payable, trade	37,949		5,312
Accrued expenses and other liabilities	Accrued expenses and other liabilities	(10,689)		92,024		Accrued expenses and other liabilities	(21,891)		36,448
Net cash flows provided by operating activities	Net cash flows provided by operating activities	74,676		134,926		Net cash flows provided by operating activities	273,565		347,971
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Capital expenditures	Capital expenditures	(17,159)		(42,037)		Capital expenditures	(34,082)		(70,837)
Acquisitions of businesses	Acquisitions of businesses	(6,250)		(50,089)		Acquisitions of businesses	(25,851)		(51,789)

Other investing activities	Other investing activities	1,960		(219)		Other investing activities	4,344		2,204
Net cash flows used in investing activities	Net cash flows used in investing activities	(21,449)		(92,345)		Net cash flows used in investing activities	(55,589)		(120,422)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Vesting of stock-based awards, net of shares tendered for payment of taxes	Vesting of stock-based awards, net of shares tendered for payment of taxes	(8,888)		(10,569)		Vesting of stock-based awards, net of shares tendered for payment of taxes	(9,585)		(10,773)
Proceeds from revolving credit facility	Proceeds from revolving credit facility	165,300		372,400		Proceeds from revolving credit facility	234,200		729,400
Repayments under revolving credit facility	Repayments under revolving credit facility	(201,385)		(330,600)		Repayments under revolving credit facility	(402,726)		(836,500)
Repayments under shelf loan, term loan, and other borrowings	Repayments under shelf loan, term loan, and other borrowings	(5,276)		(55,642)		Repayments under shelf loan, term loan, and other borrowings	(10,703)		(60,902)

Payment of dividends	Payment of dividends	(26,563)		(22,870)		Payment of dividends	(53,154)		(49,572)
Payment of contingent consideration and holdbacks related to acquisitions	Payment of contingent consideration and holdbacks related to acquisitions	—		(2,031)		Payment of contingent consideration and holdbacks related to acquisitions	(517)		(6,039)
Other financing activities	Other financing activities	(12)		(4)		Other financing activities	(834)		(4)
Net cash flows used in financing activities	Net cash flows used in financing activities	(76,824)		(49,316)		Net cash flows used in financing activities	(243,319)		(234,390)
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	(437)		(712)		Effect of exchange rate changes on cash and cash equivalents	(62)		(1,067)
Net decrease in cash and cash equivalents	Net decrease in cash and cash equivalents	(24,034)		(7,447)		Net decrease in cash and cash equivalents	(25,405)		(7,908)
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	47,499		62,896		Cash and cash equivalents at beginning of period	47,499		62,896
Cash and cash equivalents cash at end of period	Cash and cash equivalents cash at end of period	$	23,465	$	55,449	Cash and cash equivalents cash at end of period	$	22,094	$	54,988
Supplemental disclosure of cash flow information:	Supplemental disclosure of cash flow information:					Supplemental disclosure of cash flow information:
Cash paid during the period for interest	Cash paid during the period for interest	$	9,052	$	3,943	Cash paid during the period for interest	$	20,804	$	10,558
Cash paid during the period for income taxes, net of refunds	Cash paid during the period for income taxes, net of refunds	$	390	$	192	Cash paid during the period for income taxes, net of refunds	$	5,724	$	110,871
Purchase of property and equipment in accrued expenses	Purchase of property and equipment in accrued expenses	$	2,304	$	2,400	Purchase of property and equipment in accrued expenses	$	1,704	$	3,157

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

Other comprehensive income														Other comprehensive income	—		—		—		297		—		297
Cash dividends ($1.05 per share)														Cash dividends ($1.05 per share)	—		—		(26,702)		—		—		(26,702)
Dividend equivalents on stock-based awards														Dividend equivalents on stock-based awards	—		453		(453)		—		—		—
Balance - June 30, 2022														Balance - June 30, 2022	$	285	$	224,231	$	1,231,089	$	(3,086)	$	(58,162)	$	1,394,357

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

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

LCI INDUSTRIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)


(In thousands, except shares and per share amounts)	Common Stock		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total Stockholders’ Equity
Balance - December 31, 2022	$	285	$	234,956	$	1,221,279	$	6,704	$	(82,216)	$	1,381,008
Net income	—		—		7,259		—		—		7,259
Issuance of 119,091 shares of common stock pursuant to stock-based awards, net of shares tendered for payment of taxes	1		(8,889)		—		—		—		(8,888)
Stock-based compensation expense	—		4,695		—		—		—		4,695
Other comprehensive income	—		—		—		2,000		—		2,000
Cash dividends ($1.05 per share)	—		—		(26,563)		—		—		(26,563)
Dividend equivalents on stock-based awards	—		532		(532)		—		—		—
Balance - March 31, 2023	$	286	$	231,294	$	1,201,443	$	8,704	$	(82,216)	$	1,359,511
Net income	—		—		33,426		—		—		33,426
Issuance of 26,445 shares of common stock pursuant to stock-based awards, net of shares tendered for payment of taxes	—		(697)		—		—		—		(697)
Stock-based compensation expense	—		4,385		—		—		—		4,385


Other comprehensive income	—		—		—		863		—		863
Cash dividends ($1.05 per share)	—		—		(26,591)		—		—		(26,591)
Dividend equivalents on stock-based awards	—		525		(525)		—		—		—
Balance - June 30, 2023	$	286	$	235,507	$	1,207,753	$	9,567	$	(82,216)	$	1,370,897

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, transportation products, and ~~transportation product~~housing markets, consisting primarily of recreational vehicles ("RVs") and adjacent industries including boats; buses; trailers used to haul boats, livestock, equipment, and other cargo; trucks; 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, as well as direct to retail customers via the Internet. At ~~March 31,~~June 30, 2023, the Company operated over 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 sales and profits have generally been the highest in the second quarter and lowest in the fourth quarter. However, 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 impact of severe weather conditions on the timing of industry-wide shipments from time to time, as well as the 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 certain Aftermarket Segment sales to be counter-seasonal, but this has been, and may in the future be, different as a result of the COVID-19 pandemic and related impacts.

The Company is not aware of any significant events which occurred subsequent to the balance sheet date but prior to the filing of this report that would have a material impact on the Condensed Consolidated Financial Statements. 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.

910

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Risks and Uncertainties

Negative conditions in the general economy in the United States or abroad, including conditions resulting from financial and credit market fluctuations, increased inflation and interest rates, changes in economic policy, trade uncertainty, including changes in tariffs, sanctions, international treaties, and other trade restrictions, including heightened tensions between China and Taiwan, the occurrence of a natural disaster or global public health crisis, such as the COVID-19 pandemic, or armed conflicts, such as the conflict between Russia and Ukraine, have negatively impacted, and could continue to negatively impact, the Company’s business, liquidity, financial condition and results of operations.

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, 2022 Annual Report on Form 10-K and should be read in conjunction with the Notes to Consolidated Financial Statements which appear in that report.

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

3. EARNINGS PER SHARE

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


		Three Months Ended March 31,		Three Months Ended June 30,			Six Months Ended June 30,
(In thousands)	(In thousands)	2023	2022		(In thousands)	2023	2022	2023	2022
Weighted average shares outstanding for basic earnings per share	Weighted average shares outstanding for basic earnings per share	25,228	25,329		Weighted average shares outstanding for basic earnings per share	25,329	25,438	25,273	25,377
Common stock equivalents pertaining to stock-based awards	Common stock equivalents pertaining to stock-based awards	65	132		Common stock equivalents pertaining to stock-based awards	108	80	86	106
Weighted average shares outstanding for diluted earnings per share	Weighted average shares outstanding for diluted earnings per share	25,293	25,461		Weighted average shares outstanding for diluted earnings per share	25,437	25,518	25,359	25,483

Equity instruments excluded from diluted net earnings per share calculation as the effect would have been antidilutive	Equity instruments excluded from diluted net earnings per share calculation as the effect would have been antidilutive	160	111		Equity instruments excluded from diluted net earnings per share calculation as the effect would have been antidilutive	165	112	162	111

For the Company's 1.125 percent convertible senior notes due 2026 (the "Convertible Notes") issued in May 2021, the dilutive effect is calculated using the if-converted method. The Company is required, pursuant to the indenture governing the Convertible Notes, dated May 13, 2021, by and between the Company and U.S. Bank National Association, as trustee (the "Indenture"), to settle the principal amount of the Convertible Notes in cash and may elect to settle the remaining conversion obligation (i.e., the stock price in excess of the conversion price) in cash, shares of the Company's common stock, or a combination thereof. Under the if-converted method, the Company includes the number of shares required to satisfy the conversion obligation, assuming all the Convertible Notes are converted. Because the average closing price of the Company's common stock for each of the three and six months ended ~~March 31,~~June 30, 2023, which is used as the basis for determining the dilutive effect on earnings per share, was less than the conversion price of $165.65, all associated shares were antidilutive.

In conjunction with the issuance of the Convertible Notes, the Company, in privately negotiated transactions with certain commercial banks (the "Counterparties"), sold warrants to purchase 2.8 million shares of the Company's common stock (the "Warrants"). The Warrants have a strike price of $259.84 per share, subject to customary anti-dilution adjustments. For calculating the dilutive effect of the Warrants, the Company uses the treasury stock method. With this method, the Company assumes exercise of the Warrants at the beginning of the period, or at time of issuance if later, and issuance of shares of common stock upon exercise. Proceeds from the exercise of the Warrants are assumed to be used to repurchase shares of the Company's common stock at the average market price during the period. The incremental shares, representing the number of shares assumed to be received upon the exercise of the Warrants less the number of shares repurchased, are included in diluted shares. For each of the three and six months ended ~~March 31,~~June 30, 2023, the average share price was below the Warrant strike price of $259.84 per share, and therefore 2.8 million shares were considered antidilutive.

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

~~LCI INDUSTRIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

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

4. ACQUISITIONS, GOODWILL AND OTHER INTANGIBLE ASSETS

Acquisitions Completed During the ~~Three~~Six Months Ended ~~March 31,~~June 30, 2023

During the ~~three~~six months ended ~~March 31,~~June 30, 2023, the Company completed two acquisitions for an ~~acquisition for $6.3~~aggregate $25.8 million of cash purchase consideration, plus holdback payments of $0.5 million to be paid over ~~the~~ two ~~years following the acquisition.~~years. The preliminary purchase price ~~allocation~~allocations resulted in ~~$4.2~~$18.3 million of goodwill (tax deductible). As ~~this acquisition is~~these acquisitions are not considered to have a material impact on the Company's financial statements, pro forma results of operations and other disclosures are not presented.

Acquisitions with Measurement Period Adjustments During the ~~Three~~Six Months Ended ~~March 31,~~June 30, 2023

Way

In November 2022, the Company acquired substantially all of the business assets of Way Interglobal Network LLC ("Way"), a distributor of innovative appliances and electronics to OEMs in the RV industry. The purchase price was $54.8 million, which includes a holdback payment of $2.0 million due on the first anniversary of the acquisition in November ~~2023.~~2023, and remains subject to adjustment as a result of net working capital true-up procedures. The results of the acquired business have been included in the Condensed Consolidated Statements of Income since the acquisition date, primarily in the Company's OEM Segment. As the operations of this acquisition are not considered to have a material impact on the Company's financial statements, pro forma results of operations and other disclosures are not presented.

During the ~~three~~six months ended ~~March 31,~~June 30, 2023, the Company adjusted the preliminary purchase price allocation reported in the Company's December 31, 2022 Annual Report on Form 10-K to account for updates to net working capital balances. These measurement period adjustments would not have resulted in a material impact on the prior period results if the adjustments had been recognized as of the acquisition date. The purchase price allocation is subject to further adjustment for net working capital and the fair value of intangible assets as additional information is obtained within the measurement period (not to exceed 12 months from the acquisition date).

Goodwill

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


(In thousands)	(In thousands)	OEM Segment		Aftermarket Segment		Total		(In thousands)	OEM Segment		Aftermarket Segment		Total
Net balance – December 31, 2022	Net balance – December 31, 2022	$	399,736	$	167,327	$	567,063	Net balance – December 31, 2022	$	399,736	$	167,327	$	567,063
Acquisitions – 2023	Acquisitions – 2023	3,345		836		4,181		Acquisitions – 2023	18,314		—		18,314
Measurement period adjustments	Measurement period adjustments	(7,125)		(289)		(7,414)		Measurement period adjustments	(2,905)		(143)		(3,048)
Foreign currency translation	Foreign currency translation	1,941		407		2,348		Foreign currency translation	1,721		262		1,983
Net balance – March 31, 2023		$	397,897	$	168,281	$	566,178
Net balance – June 30, 2023								Net balance – June 30, 2023	$	416,866	$	167,446	$	584,312

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.

1112

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Other Intangible Assets

Other intangible assets consisted of the following at ~~March 31,~~June 30, 2023:


(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	$	521,288	$	173,070	$	348,218	6	to	20	Customer relationships	$	517,588	$	180,257	$	337,331	6	to	20
Patents	Patents	121,674		65,254		56,420		3	to	20	Patents	122,373		67,697		54,676		3	to	20
Trade names (finite life)	Trade names (finite life)	98,206		22,705		75,501		3	to	20	Trade names (finite life)	98,650		24,050		74,600		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	11,484		8,164		3,320		3	to	6	Non-compete agreements	11,484		8,728		2,756		3	to	6
Other	Other	609		253		356		2	to	12	Other	609		265		344		2	to	12

Other intangible assets	Other intangible assets	$	760,861	$	269,446	$	491,415				Other intangible assets	$	758,304	$	280,997	$	477,307

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


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

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

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,	June 30,				December 31,
(In thousands)	(In thousands)	2023				2022		(In thousands)	2023		2022
Raw materials	Raw materials	$	529,497			$	600,601	Raw materials	$	503,777	$	600,601
Work in process	Work in process	46,951				44,850		Work in process	45,379		44,850
Finished goods	Finished goods	332,937				384,254		Finished goods	280,864		384,254
Inventories, net	Inventories, net	$	909,385			$	1,029,705	Inventories, net	$	830,020	$	1,029,705

At ~~March 31,~~June 30, 2023 and December 31, 2022, the Company had recorded inventory obsolescence reserves of ~~$55.8~~$61.5 million and $55.9 million, respectively.

6. FIXED ASSETS

Fixed assets consisted of the following at:


		March 31,		December 31,	June 30,				December 31,
(In thousands)	(In thousands)	2023				2022		(In thousands)	2023		2022
Fixed assets, at cost	Fixed assets, at cost	$	959,897			$	945,255	Fixed assets, at cost	$	976,047	$	945,255
Less accumulated depreciation and amortization	Less accumulated depreciation and amortization	478,993				463,070		Less accumulated depreciation and amortization	497,162		463,070
Fixed assets, net	Fixed assets, net	$	480,904			$	482,185	Fixed assets, net	$	478,885	$	482,185

1213

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

7. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

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


		March 31,		December 31,	June 30,				December 31,
(In thousands)	(In thousands)	2023				2022		(In thousands)	2023		2022
Employee compensation and benefits	Employee compensation and benefits	$	57,148			$	77,804	Employee compensation and benefits	$	54,837	$	77,804

Current portion of accrued warranty								Current portion of accrued warranty	41,988		35,148
Deferred acquisition payments and contingent consideration*	Deferred acquisition payments and contingent consideration*	34,086				34,013		Deferred acquisition payments and contingent consideration*	33,692		34,013
Current portion of accrued warranty		40,358				35,148

Other	Other	73,590				72,273		Other	65,582		72,273
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	$	205,182			$	219,238	Accrued expenses and other current liabilities	$	196,099	$	219,238

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

Estimated costs related to product warranties are accrued at the time products are sold. In estimating its future warranty obligations, the Company considers various factors, including the Company's historical warranty costs, warranty claim lag, and sales. The following table provides a reconciliation of the activity related to the Company's accrued warranty, including both the current and long-term portions, for the ~~three~~six months ended ~~March 31:~~June 30:


(In thousands)	(In thousands)	2023		2022		(In thousands)	2023		2022
Balance at beginning of period	Balance at beginning of period	$	54,528	$	52,114	Balance at beginning of period	$	54,528	$	52,114
Provision for warranty expense	Provision for warranty expense	20,827		15,441		Provision for warranty expense	40,128		28,164

Warranty costs paid	Warranty costs paid	(15,227)		(8,770)		Warranty costs paid	(31,968)		(18,646)
Balance at end of period	Balance at end of period	60,128		58,785		Balance at end of period	62,688		61,632
Less long-term portion	Less long-term portion	(19,770)		(20,530)		Less long-term portion	(20,700)		(21,460)
Current portion of accrued warranty at end of period	Current portion of accrued warranty at end of period	$	40,358	$	38,255	Current portion of accrued warranty at end of period	$	41,988	$	40,172

8. LONG-TERM INDEBTEDNESS

Long-term debt consisted of the following:


		March 31,		December 31,	June 30,				December 31,
(In thousands)	(In thousands)	2023				2022		(In thousands)	2023		2022

Convertible Notes	Convertible Notes	$	460,000			$	460,000	Convertible Notes	$	460,000	$	460,000
Term Loan	Term Loan	370,000				375,000		Term Loan	365,000		375,000
Revolving Credit Loan	Revolving Credit Loan	255,569				289,067		Revolving Credit Loan	122,960		289,067

Other	Other	3,838				3,959		Other	3,440		3,959
Unamortized deferred financing fees	Unamortized deferred financing fees	(8,332)				(9,052)		Unamortized deferred financing fees	(7,932)		(9,052)
		1,081,075				1,118,974			943,468		1,118,974
Less current portion	Less current portion	(25,450)				(23,086)		Less current portion	(27,712)		(23,086)
Long-term indebtedness	Long-term indebtedness	$	1,055,625			$	1,095,888	Long-term indebtedness	$	915,756	$	1,095,888

1314

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 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 and the satisfaction of certain other conditions.

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~~0.875 percent ~~(0.125~~(0.625 percent was applicable at ~~March 31,~~June 30, 2023) depending on the Company’s total net leverage ratio or (ii) term benchmark loans which bear interest at ~~LIBOR (or~~term Secured Overnight Financing Rate ("SOFR") plus a ~~relevant benchmark replacement rate)~~credit spread adjustment of 0.1 percent for an interest period selected by the Company plus additional interest ranging from 0.875 percent to ~~1.625~~1.875 percent ~~(1.125~~(1.625 percent was applicable at ~~March 31,~~June 30, 2023) 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,~~June 30, 2023, the Company had $4.6 million in issued, but undrawn, standby letters of credit under the LC Facility. Availability under the Company’s revolving credit facility, giving effect to certain limitations related to compliance with the maximum net leverage ratio covenant, was ~~$318.2~~$270.0 million at ~~March 31,~~June 30, 2023. A commitment fee ranging from 0.150 percent to ~~0.225~~0.275 percent ~~(0.175~~(0.225 percent was applicable at ~~March 31,~~June 30, 2023) depending on the Company's total net leverage ratio accrues on the actual daily amount that the revolving commitment exceeds the revolving credit exposure.

Shelf-Loan Facility

The Company and certain of its subsidiaries had a $150.0 million shelf-loan facility (the "Shelf-Loan Facility") with PGIM, Inc. (formerly Prudential Investment Management, Inc.) and its affiliates ("Prudential"). On March 29, 2019, the Company issued $50.0 million of Series B Senior Notes (the "Series B Notes") to certain affiliates of Prudential for a term of three years, at a fixed interest rate of 3.80 percent per annum, payable quarterly in arrears. The Series B Notes were paid in full in March 2022, and the Shelf-Loan Facility expired on November 11, 2022.

Convertible Notes

On May 13, 2021, the Company issued $460.0 million in aggregate principal amount of 1.125 percent Convertible Notes due 2026 in a private placement to certain qualified institutional buyers, resulting in net proceeds to the Company of approximately $447.8 million after deducting the initial purchasers' discounts and offering expenses payable by the Company. The Convertible Notes bear interest at a coupon rate of 1.125 percent per annum, payable semiannually in arrears on May 15 and November 15 of each year, beginning on November 15, 2021. The Convertible Notes will mature on May 15, 2026, unless earlier converted, redeemed, or repurchased, in accordance with their terms.

As of ~~March 31,~~June 30, 2023, the conversion rate of the Convertible Notes was ~~6.1297~~6.1469 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

~~LCI INDUSTRIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

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~~circumstances as set forth in the Indenture. On or after January 15, 2026, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their Convertible Notes at any ~~time, regardless of the foregoing circumstances.~~time. Upon conversion, the Company will pay cash up to the aggregate principal amount of the Convertible Notes to be converted and pay or deliver, as the case may be, cash, shares of the

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Company's common stock, or a combination of cash and shares of the Company's common stock, at the Company's election, in respect of the remainder, if any, of the Company's conversion obligation in excess of the aggregate principal amount of the Convertible Notes being converted.

The Company may not redeem the Convertible Notes prior to May 20, 2024. On or after May 20, 2024, the Company may redeem for cash all or any portion of the Convertible Notes, at the Company's option, if the last reported sale price of the Company's common stock has been at least 130 percent of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the 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 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 ~~$414.0~~$443.9 million at ~~March 31,~~June 30, 2023 was estimated using Level 1 inputs, as it is based on quoted prices for these instruments in active markets.

General

At ~~March 31,~~June 30, 2023, the fair value of the Company's long-term debt under the Credit Agreement approximates the carrying value, as estimated using quoted market prices and discounted future cash flows based on similar borrowing arrangements.

Pursuant to the Credit Agreement, 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. On May 23, 2023, the Company entered into an amendment to the Credit Agreement that, among other things, provided for adjustments to certain of the financial covenants by increasing the maximum total net leverage ratio and decreasing the minimum debt service coverage ratio, in each case for the two fiscal quarters ending June 30, 2023 and September 30, 2023. At ~~March 31,~~June 30, 2023, the Company was in compliance with all ~~such requirements.~~financial covenants.

The Credit Agreement includes 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. This limitation reduced the Company's remaining availability under its revolving credit facility at ~~March 31,~~June 30, 2023. The Company believes the availability of ~~$318.2~~$270.0 million under the revolving credit facility under the Credit Agreement, along with its cash flows from operations, are adequate to finance the Company's anticipated cash requirements for the next twelve months.

1516

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

9. 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 expense for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 was primarily driven by capacity expansions and leases assumed in acquisitions. The components of lease expense were as follows:


		Three Months Ended March 31,				Three Months Ended June 30,		Six Months Ended June 30,
(In thousands)	(In thousands)	2023		2022			(In thousands)	2023		2022		2023		2022
Operating lease expense	Operating lease expense	$	15,244	$	12,912		Operating lease expense	$	15,670	$	13,236	$	30,914	$	26,148
Short-term lease expense	Short-term lease expense	1,480		1,840			Short-term lease expense	1,307		1,934		2,787		3,774
Variable lease expense	Variable lease expense	1,000		713			Variable lease expense	1,200		936		2,200		1,649
Total lease expense	Total lease expense	$	17,724	$	15,465		Total lease expense	$	18,177	$	16,106	$	35,901	$	31,571

10. COMMITMENTS AND CONTINGENCIES

Holdback Payments and Contingent Consideration

From time to time, the Company finances a portion of its business combinations with deferred acquisition payments ("holdback payments") and/or contingent earnout provisions. Holdback payments are accrued at their discounted present value. As required, the liability for contingent consideration is measured at fair value quarterly, considering actual sales of the acquired products, updated sales projections, and the updated market participant weighted average cost of capital. Depending upon the weighted average costs of capital and future sales of the products which are subject to contingent consideration, the Company could record adjustments in future periods. See Note 4 - Acquisitions, Goodwill and Other Intangible Assets for information on certain holdback payments. Contingent consideration balances were not material at ~~March 31,~~June 30, 2023.

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

1617

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

11. STOCKHOLDERS' EQUITY

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


		March 31,	December 31,	June 30,			December 31,
(In thousands)	(In thousands)	2023			2022	(In thousands)	2023	2022
Common stock authorized	Common stock authorized	75,000			75,000	Common stock authorized	75,000	75,000
Common stock issued	Common stock issued	28,639			28,519	Common stock issued	28,665	28,519
Treasury stock	Treasury stock	3,341			3,341	Treasury stock	3,341	3,341
Common stock outstanding	Common stock outstanding	25,298			25,178	Common stock outstanding	25,324	25,178

The table below summarizes the regular quarterly dividends declared and paid during the periods ended ~~March 31,~~June 30, 2023 and December 31, 2022:


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

First Quarter 2023	First Quarter 2023	$	1.05	03/10/23	03/24/23	$	26,563	First Quarter 2023	$	1.05	03/10/23	03/24/23	$	26,563
Second Quarter 2023								Second Quarter 2023	1.05		06/02/23	06/16/23	26,591

Total 2023								Total 2023	$	2.10			$	53,154

Deferred and Restricted Stock Units

The LCI Industries 2018 Omnibus Incentive Plan (the "2018 Plan") provides for the grant or issuance of stock units, including those that have deferral periods, such as deferred stock units ("DSUs"), and those with time-based vesting provisions, such as restricted stock units ("RSUs"), to directors, employees, and other eligible persons. Recipients of DSUs and RSUs are entitled to receive shares at the end of a specified vesting or deferral period. Holders of DSUs and RSUs receive dividend equivalents based on dividends granted to holders of the common stock, 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. In addition, DSUs are issued in lieu of certain cash compensation. Transactions in DSUs and RSUs under the 2018 Plan are summarized as follows:


		Number of Shares	Weighted Average Price			Number of Shares	Weighted Average Price
Outstanding at December 31, 2022	Outstanding at December 31, 2022	277,774	$	120.92	Outstanding at December 31, 2022	277,774	$	120.92
Issued	Issued	881	109.87		Issued	1,630	117.45
Granted	Granted	146,821	114.26		Granted	159,640	114.22
Dividend equivalents	Dividend equivalents	3,080	104.48		Dividend equivalents	5,695	112.11
Forfeited	Forfeited	(10,888)	121.85		Forfeited	(13,752)	121.41
Vested	Vested	(106,546)	112.79		Vested	(129,583)	112.24
Outstanding at March 31, 2023		311,122	$	118.06
Outstanding at June 30, 2023					Outstanding at June 30, 2023	301,404	$	118.55

1718

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Performance Stock Units

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


		Number of Shares	Weighted Average Price			Number of Shares	Weighted Average Price
Outstanding at December 31, 2022	Outstanding at December 31, 2022	162,381	$	120.12	Outstanding at December 31, 2022	162,381	$	120.12

Granted	Granted	129,821	108.13		Granted	140,953	108.42
Dividend equivalents	Dividend equivalents	1,996	104.48		Dividend equivalents	3,727	112.19
Forfeited	Forfeited	(3,245)	96.55		Forfeited	(3,245)	96.55
Vested	Vested	(90,332)	96.55		Vested	(100,046)	101.11
Outstanding at March 31, 2023		200,621	$	123.39
Outstanding at June 30, 2023					Outstanding at June 30, 2023	203,770	$	122.57

Stock Repurchase Program

On May 19, 2022, the Company's Board of Directors authorized a stock repurchase program granting the Company authority to repurchase up to $200.0 million of the Company's common stock over a three-year period, ending on May 19, 2025. The timing of stock repurchases and the number of shares will depend upon the market conditions and other factors. Share repurchases, if any, will be made in the open market and in privately negotiated transactions in accordance with applicable securities laws. The stock repurchase program may be modified, suspended, or terminated at any time by the Board of Directors. In 2022, the Company purchased 253,490 shares at a weighted average price of $94.89 per share, totaling $24.1 million. No purchases were made during the ~~three~~six months ended ~~March 31,~~June 30, 2023.

12. SEGMENT REPORTING

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

The OEM Segment, which accounted for 7876 percent and 8584 percent of consolidated net sales for the ~~three~~six months ended ~~March 31,~~June 30, 2023 and 2022, respectively, manufactures and distributes a broad array of engineered components for the leading OEMs in the recreation, transportation products, and ~~transportation product~~housing markets, consisting primarily of RVs and adjacent industries, including boats; buses; trailers used to haul boats, livestock, equipment, and other cargo; trucks; trains; manufactured homes; and modular housing. Approximately 44 percent of the Company's OEM Segment net sales for the ~~three~~six months ended ~~March 31,~~June 30, 2023 were of components for travel trailer and fifth-wheel RVs.

The Aftermarket Segment, which accounted for 2224 percent and 1516 percent of consolidated net sales for the ~~three~~six months ended ~~March 31,~~June 30, 2023 and 2022, respectively, supplies engineered components to the related aftermarket channels of the recreation, transportation products, and ~~transportation product~~housing markets, primarily to retail dealers, wholesale distributors, and service centers, as well as direct to retail customers via the Internet. The Aftermarket Segment also includes biminis, covers, buoys, fenders to the marine industry, towing products, truck accessories, appliances, air conditioners, televisions, sound systems, tankless water heaters, and the sale of replacement glass and awnings to fulfill insurance claims.

Decisions concerning the allocation of the Company's resources are made by the Company's chief operating decision maker ("CODM"), with oversight by the Board of Directors. The CODM evaluates the performance of each segment based upon segment operating profit or loss, generally defined as income or loss before interest and income taxes. Decisions concerning the allocation of resources are also based on each segment's utilization of assets. Management of debt is a corporate function. The accounting policies of the OEM and Aftermarket Segments are the same as those described in Note 2 of the Notes to Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

1819

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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


		Three Months Ended March 31, 2023							Three Months Ended March 31, 2022								Three Months Ended June 30, 2023						Three Months Ended June 30, 2022
(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	$	314,982	$	15,571		$	330,553	$	937,635	$	15,591		$	953,226	Travel trailers and fifth-wheels	$	326,824	$	11,915	$	338,739	$	800,315	$	14,194	$	814,509
Motorhomes	Motorhomes	44,004		25,547			69,551		60,146		27,108			87,254		Motorhomes	40,689		30,496		71,185		64,008		27,472		91,480
Adjacent Industries OEMs	Adjacent Industries OEMs	309,466		48,603			358,069		311,648		44,454			356,102		Adjacent Industries OEMs	298,355		50,729		349,084		323,715		46,574		370,289
Total OEM Segment net sales	Total OEM Segment net sales	668,452		89,721			758,173		1,309,429		87,153			1,396,582		Total OEM Segment net sales	665,868		93,140		759,008		1,188,038		88,240		1,276,278
Aftermarket Segment:	Aftermarket Segment:															Aftermarket Segment:
Total Aftermarket Segment net sales	Total Aftermarket Segment net sales	200,486		14,651			215,137		230,167		17,819			247,986		Total Aftermarket Segment net sales	234,901		20,730		255,631		240,246		19,626		259,872
Total net sales	Total net sales	$	868,938	$	104,372		$	973,310	$	1,539,596	$	104,972		$	1,644,568	Total net sales	$	900,769	$	113,870	$	1,014,639	$	1,428,284	$	107,866	$	1,536,150

						Six Months Ended June 30, 2023							Six Months Ended June 30, 2022

(In thousands)																(In thousands)	U.S. (a)		Int’l (b)		Total		U.S. (a)		Int’l (b)		Total
OEM Segment:																OEM Segment:
RV OEMs:																RV OEMs:
Travel trailers and fifth-wheels																Travel trailers and fifth-wheels	$	641,806	$	27,486	$	669,292	$	1,737,950	$	29,785	$	1,767,735
Motorhomes																Motorhomes	84,693		56,043		140,736		124,154		54,580		178,734
Adjacent Industries OEMs																Adjacent Industries OEMs	607,820		99,332		707,152		635,363		91,028		726,391
Total OEM Segment net sales																Total OEM Segment net sales	1,334,319		182,861		1,517,180		2,497,467		175,393		2,672,860
Aftermarket Segment:																Aftermarket Segment:
Total Aftermarket Segment net sales																Total Aftermarket Segment net sales	435,388		35,381		470,769		470,413		37,445		507,858
Total net sales																Total net sales	$	1,769,707	$	218,242	$	1,987,949	$	2,967,880	$	212,838	$	3,180,718

(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 ~~(loss)~~ profit by segment:


		Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	(In thousands)	2023		2022			(In thousands)	2023		2022		2023		2022
Operating (loss) profit:
Operating profit:							Operating profit:
OEM Segment	OEM Segment	$	(721)	$	245,374		OEM Segment	$	18,642	$	190,577	$	17,921	$	435,951
Aftermarket Segment	Aftermarket Segment	20,764		24,327			Aftermarket Segment	36,532		28,212		57,296		52,539
Total operating profit	Total operating profit	$	20,043	$	269,701		Total operating profit	$	55,174	$	218,789	$	75,217	$	488,490

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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


		Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	(In thousands)	2023		2022			(In thousands)	2023		2022		2023		2022
OEM Segment:	OEM Segment:						OEM Segment:
Chassis, chassis parts, and slide-out mechanisms	Chassis, chassis parts, and slide-out mechanisms	$	198,056	$	559,720		Chassis, chassis parts, and slide-out mechanisms	$	202,735	$	486,591	$	400,791	$	1,046,311
Windows and doors	Windows and doors	218,611		330,358			Windows and doors	220,094		301,985		438,705		632,343
Furniture and mattresses	Furniture and mattresses	140,563		242,226			Furniture and mattresses	125,346		229,520		265,909		471,746
Axles and suspension solutions	Axles and suspension solutions	75,749		97,045			Axles and suspension solutions	88,635		93,378		164,384		190,423
Other	Other	125,194		167,233			Other	122,198		164,804		247,391		332,037
Total OEM Segment net sales	Total OEM Segment net sales	758,173		1,396,582			Total OEM Segment net sales	759,008		1,276,278		1,517,180		2,672,860
Total Aftermarket Segment net sales	Total Aftermarket Segment net sales	215,137		247,986			Total Aftermarket Segment net sales	255,631		259,872		470,769		507,858
Total net sales	Total net sales	$	973,310	$	1,644,568		Total net sales	$	1,014,639	$	1,536,150	$	1,987,949	$	3,180,718

1921

LCI INDUSTRIES

ITEM 2 – MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Company's Condensed Consolidated Financial Statements and Notes thereto included in Item 1 of Part 1 of this report, as well as the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

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, transportation products, and ~~transportation product~~housing markets, consisting primarily of recreational vehicles ("RVs") and adjacent industries, including boats; buses; trailers used to haul boats, livestock, equipment, and other cargo; trucks; 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, as well as direct to retail customers via the Internet.

We have two reportable segments, the OEM Segment and the Aftermarket Segment. Intersegment sales are insignificant. At ~~March 31,~~June 30, 2023, we operated over 120 manufacturing and distribution facilities located throughout North America and Europe. See Note 12 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 RVs and adjacent industries, including boats; buses; trailers used to haul boats, livestock, equipment, and other cargo; trucks; trains; manufactured homes; and modular housing. Approximately 5458 percent of our OEM Segment net sales for the twelve months ended ~~March 31,~~June 30, 2023 were of components for travel trailer and fifth-wheel RVs, including:


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

The Aftermarket Segment supplies many of these engineered components to the related aftermarket channels of the recreation, transportation products, and ~~transportation product~~housing markets, primarily to retail dealers, wholesale distributors, and service centers, as well as direct to retail customers via the Internet. The Aftermarket Segment also includes biminis, covers, buoys, fenders to the marine industry, towing products, truck accessories, appliances, air conditioners, televisions, sound systems, tankless water heaters, and the sale of replacement glass and awnings to fulfill insurance claims.

Most industries where 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, 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 impact of severe weather conditions on the timing of industry-wide shipments from time to time, as well as the 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 Aftermarket Segment sales to be counter-seasonal, but this has been, and may in the future be, different as a result of the COVID-19 pandemic and related impacts.

2022

LCI INDUSTRIES

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)

conflicts, such as the conflict between Russia and Ukraine, have negatively impacted, and could continue to negatively impact, the Company’s business, liquidity, financial condition and results of operations.

INDUSTRY BACKGROUND

OEM Segment

North American Recreational Vehicle Industry

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

The annual sales cycle for the RV industry generally starts in October after the "Open House" in Elkhart, Indiana where many of the largest RV OEMs display product to RV retail dealers and ends after the conclusion of the summer selling season in September in the following calendar year. Between October and March, industry-wide wholesale shipments of travel trailer and fifth-wheel RVs have historically exceeded retail sales as dealers build inventories to support anticipated sales. Between April and September, the spring and summer selling seasons, retail sales of travel trailer and fifth-wheel RVs have historically exceeded industry-wide wholesale shipments. Due to the COVID-19 pandemic, the 2021 and 2020 Open Houses were canceled, but an Open House was held in September ~~2022.~~2022, and this year's Open House is scheduled for September 2023. The seasonality of the RV industry has been 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, our primary RV market, decreased 6054 percent to ~~61,200~~132,800 units in the first ~~three~~six months of 2023, compared to the first ~~three~~six months of 2022, primarily due to decreased retail demand. Retail demand for travel trailer and fifth-wheel RVs decreased 2521 percent in the first ~~three~~six months of 2023 compared to the same period in 2022. Retail demand has declined from recent elevated levels, partially driven by rising interest rates impacting retail consumers. Retail demand is typically revised upward in subsequent months, primarily due to delayed RV registrations.

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						Estimated
		Wholesale		Retail		Unit Impact on		Wholesale		Retail		Unit Impact on
		Units	Change	Units	Change	Dealer Inventories		Units	Change	Units	Change	Dealer Inventories
Quarter ended June 30, 2023							Quarter ended June 30, 2023	71,600	(46)%	105,300	(19)%	(33,700)
Quarter ended March 31, 2023	Quarter ended March 31, 2023	61,200	(60)%	71,700	(25)%	(10,500)	Quarter ended March 31, 2023	61,200	(60)%	71,400	(25)%	(10,200)
Quarter ended December 31, 2022	Quarter ended December 31, 2022	62,400	(52)%	59,000	(23)%	3,400	Quarter ended December 31, 2022	62,000	(52)%	59,000	(23)%	3,000
Quarter ended September 30, 2022		73,400	(46)%	105,900	(19)%	(32,500)
Quarter ended September 31, 2022							Quarter ended September 31, 2022	73,400	(46)%	106,000	(19)%	(32,600)
Twelve months ended June 30, 2023							Twelve months ended June 30, 2023	268,200	(51)%	341,700	(21)%	(73,500)

Quarter ended June 30, 2022	Quarter ended June 30, 2022	133,700	0%	129,500	(28)%	4,200	Quarter ended June 30, 2022	133,800	0%	129,600	(28)%	4,200
Twelve months ended March 31, 2023		330,700	(40)%	366,100	(24)%	(35,400)

Quarter ended March 31, 2022	Quarter ended March 31, 2022	152,200	16%	95,000	(17)%	57,200	Quarter ended March 31, 2022	152,400	16%	95,000	(17)%	57,400
Quarter ended December 31, 2021	Quarter ended December 31, 2021	130,400	13%	76,700	(14)%	53,700	Quarter ended December 31, 2021	130,400	13%	76,700	(14)%	53,700
Quarter ended September 30, 2021	Quarter ended September 30, 2021	136,000	24%	131,000	(18)%	5,000	Quarter ended September 30, 2021	136,000	24%	131,000	(18)%	5,000
Quarter ended June 30, 2021		133,800	100%	180,600	36%	(46,800)
Twelve months ended March 31, 2022		552,400	31%	483,300	(2)%	69,100
Twelve months ended June 30, 2022							Twelve months ended June 30, 2022	552,600	13%	432,300	(20)%	120,300

According to the RVIA, industry-wide wholesale shipments of motorhome RVs in the first ~~three~~six months of 2023 decreased 1517 percent to ~~13,400~~25,500 units compared to the first ~~three~~six months of 2022. Retail demand for motorhome RVs decreased 1812 percent year-over-year in the first ~~three~~six months of 2023, compared to a ~~two~~11 percent year-over-year decrease in retail demand in the

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ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)

~~in the~~ same period of 2022. We believe the decline in retail demand has been partially driven by inflation and rising interest rates impacting retail consumers.

Our current estimate for full-year 2023 industry-wide wholesale shipments from the United States of travel trailer, fifth-wheel, and motorhome RVs is approximately ~~310,000~~290,000 to ~~330,000~~310,000 units. This estimate is based on the current RVIA forecast and suggests a decrease of 3741 to 3337 percent compared to actual wholesale shipments in 2022. This projected decline is being driven by current dealer inventory levels, inflation, and rising interest rates impacting retail consumers.

Adjacent Industries

Our portfolio of products used in RVs can also be used in other applications, including boats; buses; trailers used to haul boats, livestock, equipment, and other cargo; trucks; trains; manufactured homes; and modular housing (collectively, "Adjacent Industries"). In many cases, OEM customers of the Adjacent Industries are affiliated with RV OEMs through related subsidiaries. We believe there are significant opportunities in these Adjacent Industries.

We currently expect economic uncertainty to negatively impact consumer discretionary purchases such as trailers and boats as we progress further into the second half of 2023; however, we currently anticipate that production of manufactured homes, buses, and trains should remain at or near current run rates through 2023.

Aftermarket Segment

Many of our OEM Segment products are also sold through various aftermarket channels of the recreation, transportation products, and ~~transportation product~~housing 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 product, delivery, and technical support. This support is designed for a rapid response to critical repairs, so customer downtime is minimal. The Aftermarket Segment also includes biminis, covers, buoys, fenders to the marine industry, towing products, truck accessories, appliances, air conditioners, televisions, sound systems, tankless water heaters, and the sale of replacement glass and awnings to fulfill insurance claims. Many of the optional upgrades and non-critical replacement parts for RVs are purchased outside the normal product selling season, thereby causing certain Aftermarket Segment sales to be counter-seasonal, but this has been, and may in the future be, different as a result of the COVID-19 pandemic and the continuing impact of market and supply chain disruptions.

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

We currently expect to see a slight increase in aftermarket ~~volume~~sales over prior year levels in the second half of 2023 as distribution ~~stocking levels return to normal and the new vehicle chip shortage ameliorates.~~channel inventories stabilize. We expect these gains will be tempered by the impact of inflation and rising interest rates on consumers' discretionary spending.

RESULTS OF OPERATIONS

Consolidated Highlights

•Consolidated net sales in the ~~first~~second quarter of 2023 were ~~$973.3 million, 41~~$1.0 billion, 34 percent lower than consolidated net sales for the same period of 2022 of ~~$1.6~~$1.5 billion. The decrease was primarily driven by a nearly 6044 percent decrease in North American ~~towable~~ RV wholesale shipments and decreased selling prices which are indexed to select commodities, partially offset by acquisitions. Net sales from acquisitions completed in the twelve months ended ~~March 31,~~June 30, 2023 ~~primarily Way Interglobal Network LLC and Girard Systems and Girard Products LLC,~~ contributed approximately ~~$28.5~~$17.2 million in the ~~first~~second quarter of 2023.

•Net income for the ~~first~~second quarter of 2023 was ~~$7.3~~$33.4 million, or ~~$0.29~~$1.31 per diluted share, compared to net income of ~~$196.2~~$154.5 million, or ~~$7.71~~$6.06 per diluted share, for the same period of 2022.

•Consolidated operating profit during the ~~first~~second quarter of 2023 was ~~$20.0~~$55.2 million, compared to ~~$269.7~~$218.8 million in the same period of 2022. Operating profit margin was ~~2.1~~5.4 percent in the ~~first~~second quarter of 2023 compared to ~~16.4~~14.2 percent in the same period of 2022. The decrease was primarily due to ~~the impact of fixed costs on reduced organic sales~~decreased selling prices which are indexed

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ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)

~~and decreased selling prices which are indexed~~ to select commodities and the impact of fixed costs on reduced organic sales, partially offset by decreases in material commodity costs.

•The cost of steel consumed in certain of our manufactured components decreased in the ~~first~~second quarter of 2023 compared to the same period of 2022. Raw material costs are subject to continued fluctuation and impact certain contractual selling prices which are indexed to select commodities.

•The effective tax rate of ~~24.8~~25.4 percent for the ~~three~~six months ended ~~March 31,~~June 30, 2023 was lower than the comparable prior year period of ~~25.5~~26.3 percent, primarily due to an increased discrete benefit related to the cash surrender value of life insurance, as discussed below under "Income Taxes."

•In ~~March~~June 2023, we paid a quarterly dividend of $1.05 per share, aggregating to $26.6 million.

•We made net repayments of long-term indebtedness of $179.2 million year-to-date through June 30, 2023.

OEM Segment - ~~First~~Second Quarter

Net sales of the OEM Segment in the ~~first~~second quarter of 2023 decreased ~~$638.4~~$517.3 million, compared to the same period of 2022. Net sales of components to the following OEMs markets for the three months ended ~~March 31~~June 30 were:


(In thousands)	(In thousands)	2023		2022		Change		(In thousands)	2023		2022		Change
RV OEMs:	RV OEMs:							RV OEMs:
Travel trailers and fifth-wheels	Travel trailers and fifth-wheels	$	330,553	$	953,226	(65)	%	Travel trailers and fifth-wheels	$	338,739	$	814,509	(58)	%
Motorhomes	Motorhomes	69,551		87,254		(20)	%	Motorhomes	71,185		91,480		(22)	%
Adjacent Industries OEMs	Adjacent Industries OEMs	358,069		356,102		1	%	Adjacent Industries OEMs	349,084		370,289		(6)	%
Total OEM Segment net sales	Total OEM Segment net sales	$	758,173	$	1,396,582	(46)	%	Total OEM Segment net sales	$	759,008	$	1,276,278	(41)	%

According to the RVIA, industry-wide wholesale unit shipments for the three months ended ~~March 31~~June 30 were:


		2023	2022	Change			2023	2022	Change
Travel trailer and fifth-wheels	Travel trailer and fifth-wheels	61,200	152,200	(60)	%	Travel trailer and fifth-wheels	71,600	133,800	(46)	%
Motorhomes	Motorhomes	13,400	15,800	(15)	%	Motorhomes	12,100	14,800	(18)	%

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 OEMs for the different types of RVs produced for the twelve months ended ~~March 31,~~June 30, divided by the industry-wide wholesale shipments of the different product mix of RVs for the same period, was:


Content per:	Content per:	2023		2022		Change		Content per:	2023		2022		Change
Travel trailer and fifth-wheel	Travel trailer and fifth-wheel	$	5,881	$	4,854	21	%	Travel trailer and fifth-wheel	$	5,487	$	5,379	2	%
Motorhome	Motorhome	$	3,985	$	3,144	27	%	Motorhome	$	3,760	$	3,557	6	%

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 changes in selling prices for our products, market share gains, and acquisitions.

Our decrease in net sales to RV OEMs during the ~~first~~second quarter of 2023 was driven by a ~~nearly 55~~44 percent reduction in North American wholesale shipments during the ~~first~~second quarter of ~~2023.~~2023, driven by current dealer inventory levels, inflation, and rising interest rates impacting retail consumers. The decrease was partially offset by average product content expansion.

Our decrease in net sales to OEMs in Adjacent Industries during the ~~first~~second quarter of 2023 was ~~approximately consistent with the same period of 2022.~~primarily due to lower sales to North American marine OEMs and in manufactured housing, driven by inflation and rising interest rates impacting retail consumers.

Operating ~~loss~~profit of the OEM Segment was ~~$0.7~~$18.6 million in the ~~first~~second quarter of 2023, a decrease of ~~$246.1~~$171.9 million compared to operating profit of the OEM Segment of ~~$245.4~~$190.6 million in the same period of 2022. The operating ~~loss~~profit margin of the OEM Segment in the ~~first~~second quarter of 2023 decreased to ~~(0.1)~~2.5 percent compared to the operating profit margin of ~~17.6~~14.9 percent for the same period of 2022 and was negatively impacted by:

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LCI INDUSTRIES

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)

•The impact of fixed costs on reduced organic sales, which decreased operating profit by $33.9 million related to fixed selling, general, and administrative costs and $29.1 million related to fixed production overhead costs.

•Selling prices contractually tied to indices of select commodities decreased, resulting in a decrease in operating profit of ~~$59.9~~$83.1 million compared to the same period of 2022.

•~~Incremental~~The impact of fixed costs ~~incurred due to volatile OEM schedules resulting in a decrease in~~on reduced organic sales, which decreased operating profit by $27.8 million related to fixed selling, general, and administrative costs and $22.9 million related to fixed production overhead costs.

•Sales mix increase of ~~$30.8 million compared to the same period of 2022.~~lower margin products, which negatively impacted operating profit by $8.3 million.

Partially offset by:

•Decreases in material commodity costs, which positively impacted operating profit by ~~$25.7~~$37.3 million, primarily related to decreased steel costs.

•A reduction in general and administrative costs resulting in an increase in operating profit of $7.8 million compared to the same period of 2022.

•Price increases to targeted products, resulting in an increase in operating profit of $4.4 million compared to the same period of 2022.

•A decrease in production labor primarily related to reduced overtime and temporary staffing, resulting in an increase in operating profit of $1.9 million compared to the same period of 2022.

Amortization expense on intangible assets for the OEM Segment was ~~$10.5~~$10.2 million in the ~~first~~second quarter of 2023, compared to $10.1 million in the same period in 2022. Depreciation expense on fixed assets for the OEM Segment was ~~$14.4~~$14.7 million in the ~~first~~second quarter of 2023, compared to ~~$14.5~~$14.4 million in the same period of 2022.

OEM Segment – Year to Date

Net sales of the OEM Segment in the first six months of 2023 decreased 43 percent, or $1.2 billion, compared to the first six months of 2022. Net sales of components to OEMs were to the following markets for the six months ended June 30:


(In thousands)	2023		2022		Change
RV OEMs:
Travel trailers and fifth-wheels	$	669,292	$	1,767,735	(62)	%
Motorhomes	140,736		178,734		(21)	%
Adjacent Industries OEMs	707,152		726,391		(3)	%
Total OEM Segment net sales	$	1,517,180	$	2,672,860	(43)	%

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


	2023	2022	Change
Travel trailer and fifth-wheel RVs	132,800	286,200	(54)	%
Motorhomes	25,500	30,700	(17)	%

Our decrease in net sales to RV OEMs during the first six months of 2023 was driven by a 50 percent reduction in North American wholesale shipments during the first six months of 2023, driven by current dealer inventory levels, inflation, and rising interest rates impacting retail consumers. The decrease was partially offset by average product content expansion.

Our decrease in net sales to OEMs in Adjacent Industries during the first six months of 2023 was primarily due to lower sales to North American marine OEMs and in manufactured housing, driven by inflation and rising interest rates impacting retail consumers. We continue to believe there are significant opportunities in Adjacent Industries.

Operating profit of the OEM Segment was $17.9 million in the first six months of 2023, a decrease of $418.0 million compared to the same period of 2022. The operating profit margin of the OEM Segment in the first six months of 2023 decreased to 1.2 percent, compared to 16.3 percent for the same period of 2022, and was negatively impacted by:

•Selling prices contractually tied to indices of select commodities decreased, resulting in a decrease in operating profit of $149.2 million compared to the same period of 2022.

•The impact of fixed costs on reduced organic sales, which decreased operating profit by $59.7 million related to fixed selling, general, and administrative costs and $51.5 million related to fixed production overhead costs.

LCI INDUSTRIES

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)

•Incremental costs incurred due to volatile OEM schedules resulting in a decrease in operating profit of $20.2 million compared to the same period of 2022.

•Sales mix increase of lower margin products from recent acquisitions and related integration costs, which negatively impacted operating profit by $12.3 million.

Partially offset by:

•Decreases in material commodity costs, which positively impacted operating profit by $57.6 million, primarily related to decreased steel costs.

•A reduction in general and administrative costs resulting in an increase in operating profit of $11.6 million compared to the same period of 2022.

•Pricing changes to targeted products, resulting in an increase in operating profit of $4.1 million compared to the same period of 2022.

Amortization expense on intangible assets for the OEM Segment was $20.7 million in the first six months of 2023, compared to $20.2 million in the same period of 2022. Depreciation expense on fixed assets for the OEM Segment was $29.0 million in the first six months of 2023, compared to $28.9 million in the same period of 2022.

Aftermarket Segment - ~~First~~Second Quarter

Net sales of the Aftermarket Segment in the ~~first~~second quarter of 2023 decreased by ~~$32.8~~$4.2 million, compared to the same period of 2022. Net sales of components in the Aftermarket Segment were as follows for the three months ended ~~March 31:~~June 30:


(In thousands)	(In thousands)	2023		2022		Change		(In thousands)	2023		2022		Change
Total Aftermarket Segment net sales	Total Aftermarket Segment net sales	$	215,137	$	247,986	(13)	%	Total Aftermarket Segment net sales	$	255,631	$	259,872	(2)	%

~~The decrease in net~~Net sales of the Aftermarket Segment ~~was primarily due to~~for the second quarter of 2023 were slightly lower ~~volumes due to fully stocked distribution channels, chip shortages~~than the same period in 2022, driven by inflationary pressures impacting ~~truck markets, and the impacts of inflation and rising interest rates on consumers' discretionary spending, partially offset by decreases in material commodity costs.~~consumer demand.

Operating profit of the Aftermarket Segment was ~~$20.8~~$36.5 million in the ~~first~~second quarter of 2023, ~~a decrease~~an increase of ~~$3.6~~$8.3 million compared to the same period of 2022. The operating profit margin of the Aftermarket Segment was ~~9.7~~14.3 percent in the ~~first~~second quarter of 2023, compared to ~~9.8~~10.9 percent in the same period in 2022, and was ~~negatively~~positively impacted by:

•Decreases in material commodity costs, which positively impacted operating profit by $9.5 million, primarily related to decreased steel costs.

•Pricing changes to targeted products, resulting in an increase in operating profit of $2.6 million compared to the same period of 2022.

Partially offset by:

•The impact of fixed costs on reduced organic sales, which decreased operating profit by ~~$5.4~~$1.0 million related to fixed selling, general, and administrative costs and ~~$1.8~~$0.4 million related to fixed production overhead costs.

•~~Investments in administrative structure of $1.0 million.~~

•Increases in production overhead costs in the current period resulting from investments to expand capacity over the past year, which negatively impacted operating profit by ~~$1.0~~$0.7 million in the current period.

~~Partially offset~~Amortization expense on intangible assets for the Aftermarket Segment was $4.0 million in the second quarter of 2023, compared to $3.8 million in the same period of 2022. Depreciation expense on fixed assets for the Aftermarket Segment was $4.2 million in the second quarter of 2023, compared to $3.6 million in the same period of 2022.

Aftermarket Segment – Year to Date

Net sales of the Aftermarket Segment in the first six months of 2023 decreased 7 percent, or $37.1 million, compared to the same period of 2022. Net sales of components in the Aftermarket Segment were as follows for the six months ended June 30:


(In thousands)	2023		2022		Change
Total Aftermarket Segment net sales	$	470,769	$	507,858	(7)	%

LCI INDUSTRIES

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)

Net sales of the Aftermarket Segment decreased during the first six months of 2023 primarily driven by lower volumes within the truck and marine markets due to fully stocked distribution channels and the impacts of inflation and rising interest rates on consumers' discretionary spending.

Operating profit of the Aftermarket Segment was $57.3 million in the first six months of 2023, an increase of $4.8 million compared to the same period of 2022. The operating profit margin of the Aftermarket Segment was 12.2 percent in the first six months of 2023, compared to 10.3 percent in the same period in 2022, and was positively impacted by:

•Decreases in material commodity costs, which positively impacted operating profit by ~~$7.9~~$12.7 million, primarily related to decreased steel and aluminum costs.

•Pricing changes to targeted products, resulting in an increase in operating profit of ~~$0.7~~$6.7 million compared to the same period of 2022.

•Partially offset by:

•The impact of fixed costs due to reduced organic volumes, which decreased operating profit by $7.3 million related to fixed selling, general, and administrative costs and $2.4 million related to fixed overhead costs.

•Higher production facility costs in the current period resulting from investments to expand capacity over the past year, which reduced operating profit by $2.0 million in the current period.

Amortization expense on intangible assets for the Aftermarket Segment was ~~$3.8~~$7.8 million in the first ~~quarter~~six months of 2023, compared to ~~$3.7~~$7.6 million in the same period of 2022. Depreciation expense on fixed assets for the Aftermarket Segment was ~~$3.9~~$8.1 million in the first ~~quarter~~six months of 2023, compared to ~~$3.5~~$7.1 million in the same period of 2022.

Interest Expense

Interest expense, net was ~~$10.4~~$20.6 million for the ~~three~~six months ended ~~March 31,~~June 30, 2023, compared to ~~$6.3~~$12.4 million in the same period of 2022. The increase in interest expense was primarily due to higher global interest rates on our adjustable rate Term Loan (as defined in Note 8 of the Notes to Condensed Consolidated Financial Statements) and revolving credit facility, partially offset by principal payments on the Term Loan, net repayments on our revolving credit facility, and the payoff of the

~~LCI INDUSTRIES~~

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

~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Continued)~~

shelf loan balance in March 2022. See Note 8 of the Notes to Condensed Consolidated Financial Statements for a description of our credit facilities.

Income Taxes

The effective tax rates for the ~~three~~six months ended ~~March 31,~~June 30, 2023 and 2022 were ~~24.8~~25.4 percent and ~~25.5~~26.3 percent, respectively. The effective tax rate for the ~~three~~six months ended ~~March 31,~~June 30, 2023 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 on stock-based compensation as a component of the provision for income taxes, and Federal and Indiana research and development credits. The decrease in the effective tax rate for the ~~three~~six months ended ~~March 31,~~June 30, 2023 as compared to the same period in 2022 was primarily due to an increased benefit related to the cash surrender value of life insurance.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

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. We believe our operating cash flows, credit facilities, as well as any potential future borrowings, will be sufficient to fund our future payments and long-term initiatives.

As of ~~March 31,~~June 30, 2023, we had ~~$23.5~~$22.1 million in cash and cash equivalents, and ~~$318.2~~$270.0 million of availability under our revolving credit facility under the Credit Agreement (as defined in Note 8 of the Notes to Condensed Consolidated Financial Statements). We also have the ability to request an increase to the revolving and/or incremental term loan facilities by up to an additional $400.0 million in the aggregate upon approval of the lenders providing any such increase and the satisfaction of

LCI INDUSTRIES

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)

certain other conditions. See Note 8 of the Notes to Condensed Consolidated Financial Statements for a description of our credit facilities.

We believe the availability under the revolving credit facility under the Credit Agreement, 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~~six months ended ~~March 31:~~June 30:


(In thousands)	(In thousands)	2023		2022		(In thousands)	2023		2022
Net cash flows provided by operating activities	Net cash flows provided by operating activities	$	74,676	$	134,926	Net cash flows provided by operating activities	$	273,565	$	347,971
Net cash flows used in investing activities	Net cash flows used in investing activities	(21,449)		(92,345)		Net cash flows used in investing activities	(55,589)		(120,422)
Net cash flows used in financing activities	Net cash flows used in financing activities	(76,824)		(49,316)		Net cash flows used in financing activities	(243,319)		(234,390)
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	(437)		(712)		Effect of exchange rate changes on cash and cash equivalents	(62)		(1,067)
Net decrease in cash and cash equivalents	Net decrease in cash and cash equivalents	$	(24,034)	$	(7,447)	Net decrease in cash and cash equivalents	$	(25,405)	$	(7,908)

Cash Flows from Operations

Net cash flows provided by operating activities were ~~$74.7~~$273.6 million in the first ~~three~~six months of 2023, compared to ~~$134.9~~$348.0 million in the first ~~three~~six months of 2022. The decrease in net cash flows provided by operating activities was primarily due to a decrease in net income of ~~$188.9~~$310.0 million. The decrease in net income was partially offset by the net change in assets and liabilities, net of acquired businesses, as it generated ~~$130.7~~$235.8 million more cash in the first ~~three~~six months of 2023 compared to the same period in 2022. The primary provider of cash generated from net assets in the first ~~three~~six months of 2023 was the decrease in inventory of ~~$131.7~~$209.3 million, due to decreasing commodity and freight costs and initiatives to reduce inventory as RV production demand has slowed from record levels seen during the first half of 2022. The primary use of cash in net assets was the increase of ~~$123.1~~$81.0 million in accounts receivable due to seasonally higher sales in the first ~~three~~six months of 2023.

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

~~LCI INDUSTRIES~~

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

~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Continued)~~

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 as we continue to reduce inventory balances.

Depreciation and amortization was ~~$32.5~~$65.5 million in the first ~~three~~six months of 2023, and is expected to be approximately $130 to $140 million for the full year 2023. Non-cash stock-based compensation expense in the first ~~three~~six months of 2023 was ~~$4.7~~$9.1 million. Non-cash stock-based compensation expense is expected to be approximately ~~$25~~$18 to ~~$30~~$23 million for the full year 2023.

Cash Flows from Investing Activities

Cash flows used in investing activities of ~~$21.4~~$55.6 million in the first ~~three~~six months of 2023 were primarily comprised of ~~$17.2~~$34.1 million for capital expenditures and ~~$6.3~~$25.9 million for the acquisitions of businesses. Cash flows used in investing activities of ~~$92.3~~$120.4 million in the first ~~three~~six months of 2022 were primarily comprised of ~~$50.1~~$70.8 million for capital expenditures and $51.8 million for the acquisitions of businesses, net of cash ~~acquired and $42.0 million for capital expenditures.~~acquired.

Our capital expenditures are primarily for replacement and growth. Over the long term, based on our historical capital expenditures, the replacement portion has averaged approximately one to two percent of net sales, while the growth portion has averaged approximately two to three percent of net sales. However, there are many factors that can impact the actual spending compared to these historical averages. We estimate full year 2023 capital expenditures of ~~$80~~$60 to ~~$100~~$80 million, including investments in automation and lean projects.

Capital expenditures and acquisitions in the first ~~three~~six months of 2023 were funded by cash generated from operations and borrowings under our Credit Agreement. Capital expenditures and acquisitions in the remainder of fiscal year 2023 are expected to be funded primarily from cash generated from operations, as well as periodic borrowings under our revolving credit facility as needed.

Cash Flows from Financing Activities

Cash flows used in financing activities of ~~$76.8~~$243.3 million in the first ~~three~~six months of 2023 were primarily comprised of ~~$36.1~~$168.5 million in net repayments under our revolving credit facility, payments of quarterly dividends of ~~$26.6~~$53.2 million, $10.7 million in repayments under our Term Loan and other borrowings, and cash outflows of ~~$8.9~~$9.6 million related to vesting of stock-based awards, net of shares tendered for payment of ~~taxes, and $5.3 million in repayments under our Term Loan and other borrowings.~~taxes.

LCI INDUSTRIES

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)

Cash flows used in financing activities of ~~$49.3~~$234.4 million in the first ~~three~~six months of 2022 were primarily comprised of ~~$55.6~~$107.1 million in net repayments under our revolving credit facility, $60.9 million in repayments under our shelf loan, Term Loan, and other borrowings, payments of quarterly dividends of ~~$22.9~~$49.6 million, and cash outflows of ~~$10.6~~$10.8 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.~~taxes.

The Credit Agreement includes 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. On May 23, 2023, we entered into an amendment to the Credit Agreement that, among other things, provided for adjustments to certain of the financial covenants by increasing the maximum total net leverage ratio and decreasing the minimum debt service coverage ratio, in each case for the two fiscal quarters ending June 30, 2023 and September 30, 2023. At ~~March 31,~~June 30, 2023, we were in compliance with all ~~such requirements. In connection with the planned phase-out of LIBOR, we are working with the administrative agent under~~financial covenants. The amendment to the Credit Agreement ~~to amend~~also provided for the ~~Credit Agreement to replace the interest rate benchmark for U.S. dollars~~transition from LIBOR to a term SOFR as the benchmark rate ~~based~~for purposes of calculating interest on the secured overnight financing rate (SOFR). In addition, while we expect to maintain compliance with the Credit Agreement financial covenants at each of June 30, 2023 and September 30, 2023, due to the uncertainties affecting our business, industry, and the global economy as discussed in Note 1 of the Notes to Condensed Consolidated Financial Statements and elsewhere in this Management's Discussion and Analysis of Financial Condition and Results of Operations, we are also discussing with the administrative agent a potential increase to the net leverage ratio limit and a decrease in the minimum debt service coverage ratio as of those two dates.certain outstanding borrowings.

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.

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

~~LCI INDUSTRIES~~

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

~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Continued)~~

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 (800-461-9330) 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 10 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, as well as by inflationary pressures. We experienced reduced prices of these commodities in the first ~~three~~six months of 2023, but prices of these commodities have historically been volatile, and over the past few months prices have continued to fluctuate. As a result, while we currently expect commodity prices in upcoming quarters in 2023 to remain generally consistent with prices in the first ~~quarter~~six months of 2023, there can be no assurance that raw material costs will not increase. 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~~six months of 2023.

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,

LCI INDUSTRIES

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)

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 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.

FORWARD-LOOKING STATEMENTS

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

Forward-looking statements, including, without limitation, those relating to the Company's future business prospects, net sales, expenses and income (loss), capital expenditures, tax rate, cash flow, financial condition, liquidity, covenant compliance, retail and wholesale demand, integration of acquisitions, R&D investments, commodity prices and industry trends, whenever they occur in this Form 10-Q are necessarily estimates reflecting the best judgment of the Company's senior management at the time such statements were made. There are a number of factors, many of which are beyond the Company’s control, which could cause actual results and events to differ materially from those described in the forward-looking statements. These factors include, in addition to other matters described in this Form 10-Q, the impacts of COVID-19, or other future

~~LCI INDUSTRIES~~

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

~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Continued)~~

pandemics, the Russia-Ukraine war, and heightened tensions between China and Taiwan 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" in the Company's Annual Report on Form 10-K for the year ended December 31, 2022, and in the 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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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 8 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 seven percent increase of the weighted-average interest rate on our borrowings as of ~~March 31,~~June 30, 2023), 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,~~June 30, 2023 and December 31, 2022.

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 that future cost increases, if any, can be partially or fully passed on to customers, or that the timing of such sales price increases will match raw material cost increases.

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

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 reports under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is (i) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and (ii) accumulated and communicated to 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 controls and 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,~~June 30, 2023.

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,~~June 30, 2023, which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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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,~~June 30, 2023, 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 24, 2023.

ITEM 5 - OTHER INFORMATION

During the three months ended June 30, 2023, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted or terminated any contract, instruction, or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act or any non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K).

ITEM 6 – EXHIBITS

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


1	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).	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	2	3.2	Amended and Restated Bylaws of LCI Industries, effective March 9, 2023.	2	3.2	Amended and Restated Bylaws of LCI Industries, effective March 9, 2023 (incorporated by reference to Exhibit 3.2 included in the Registrant's Form 10-Q filed on May 9, 2023).
3	3	10.1	Offer Letter between LCI Industries and Lillian Etzkorn, accepted on March 30, 2023 (incorporated by reference to Exhibit 10.1 included in the Registrant’s Form 8-K filed on April 5, 2023).	3	10.1	Amendment No. 5 to Fourth Amended and Restated Credit Agreement, dated as of May 23, 2023, by and among LCI Industries, Lippert Components, Inc., LCI Industries B.V., LCI Industries Pte. Ltd., each other Subsidiary of the Company listed on the signature pages thereto, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 included in the Registrant’s Form 8-K filed on May 24, 2023).
4	4	31.1	Certification of Chief Executive Officer required by Rule 13a-14(a).	4	31.1	Certification of Chief Executive Officer required by Rule 13a-14(a).
5	5	31.2	Certification of Chief Financial Officer required by Rule 13a-14(a).	5	31.2	Certification of Chief Financial Officer required by Rule 13a-14(a).
6	6	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	32.1	Certification of Chief Executive Officer required by Rule 13a-14(b) and Section 1350 Chapter 63 of Title 18 of the United States Code.
7	7	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	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.
8	8	101	The following financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, 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	101	The following financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, 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.
9	9	104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).	9	104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

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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/ Lillian D. Etzkorn
Lillian D. Etzkorn
Chief Financial Officer
~~May 9,~~August 8, 2023

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