EXECUTIVEA MESSAGE FROM OUR COMPENSATION
A Message COMMITTEE2022 was another year of incredible performance by LCI Industries, which achieved record net sales of $5.2 billion, an increase of 16% from our Compensation Committee
Looking back at 2020 is a tale of several stories –full year 2021 net sales, while expanding margins, leading to record net income of $395 million. The increase in year-over-year net sales was primarily driven by price realization, successful acquisitions, and an increase in net sales to OEMs in adjacent industries, partially offset by decreased North American RV wholesale shipments. Our experienced leadership team, agile operational execution, and diversified cost structure helped us deliver a banner year despite macro-economic headwinds. Equally important, our strong business performance in many of the markets in which LCI Industries participates. Despite the disappointmentsculture and challenges of 2020, including a period of uncertainty and temporary suspension of production for non-essential manufacturing, the recreational vehicle (“RV”) market soared as individuals saw the opportunity to get away with their families or friends in the safety and security of an RV as an alternative to using the airlines or going on a cruise.
The RV, recreational boat, and other markets in which LCI Industries provides products and services historically have been characterized by cycles of growth and contraction in consumer demand, often because the purchase of such products is viewed as a consumer discretionary purchase. While in the past, periods of economic recession have adversely affected operating results, 2020 was largely a different story.
In late March, in an effort to protect the health and safety of itstalented Lippert team members enabled us to deliver new innovations for our customers and adhere to government mandates, LCI Industriesstockholders. Our team’s deep industry knowledge and its operating subsidiary, Lippert Components, Inc., temporarily suspendedexperience navigating fluctuating production at select manufacturing facilities across North Americaschedules will guide us in 2023 and Europe. The suspension of production on a plant-by-plant basis was consistent with government mandates or due to customer closures. Production at facilities considered essential continued, utilizing reduced staff in conjunction with heightened cleaning and sanitization processes. Then, in early April, the Company announced an update affecting cash compensation of its senior executives. In response to the initial challenges resulting from the COVID-19 pandemic, the executive leadership team, general managers, and other executives across the Company voluntarily took temporary reductions to their base salaries. See the following page to learn more about these pandemic-related pay actions.
beyond.As production resumed in May and June, the executive leadership team demonstrated exceptional care and performance. They worked tirelessly to protect the health and safety of team members and comply with government mandates while meeting the needs of the market. Examples of some of the actions taken by leadership include:
Developing a pandemic playbook to guide reopening of production;
Ensuring that medical premiums were covered for furloughed team members;
Introducing a mobile COVID-19 testing site for production team members, and later creating a drive-through testing facility;
Continuing to pay team members who were out due to the virus; and, most recently,
Offering team members the opportunity to be a part of a Johnson & Johnson vaccine trial group.
As further detailed on the following page, these actions allowed the business to grow during uncertain times, returning value to stockholders and, ultimately, reaching an all-time high in the LCII stock price.
During the fall and winter, as a result of the 2020 say-on-pay vote, the Compensation Committee,
spent significant effort gathering feedback from holders of 71% of our institutionally held shares and incorporating that feedback, along with that of proxy advisory firms, into our compensation decisions. An overview of our efforts and the key themes we
heard is included on pages 30–31 of the Compensation Discussion and Analysis (“CD&A”).We strive to pay for performance
and to ensure the goals and objectives of the executive leadership team are aligned with those of
stockholders.our stockholders, and, at the same time, we maintain pay programs that help retain and motivate Management to drive long-term success for LCI Industries. As you review the following
CD&A,Compensation Discussion and Analysis, you will see that the strong business performance we
saw after emerging from the mandated temporary shutdownachieved in 2022 informed our decisions related to executive compensation payouts. We also
considerconsidered the market and the unique situation in Elkhart County, Indiana, where our geographic proximity to so many
other RV companiescompetitors and industry peers means competition for talent is
high, sohigh. This presents a unique challenge as many of our local competitors are privately held, with largely cash-based compensation programs.At the same time, we must payremain very committed to stockholder input. For 2022, we updated our compensation program in direct response to investor feedback. First, a portion of the 2022 annual cash incentive available to the named executive officers was shifted to equity and incorporated into each executive’s annual equity long-term incentive grant to better align the executives’ interests with those of our stockholders. In addition, the performance stock units awarded to the named executive officers in March 2022 provide that the number of units that can be earned is based on whether and to what extent Return on Invested Capital (“ROIC”) performance goals for a three-year period from January 1, 2022, through December 31, 2024, are satisfied — increasing the PSU performance measurement period from two years to ensure the Company can retain its exceptional leadership team – helping continue to move LCI Industries into a strong future.
three years.The Compensation Committee of the Board of Directors oversees LCI Industries’ executive compensation philosophy and reviews and approves compensation for our named executive officers. While LCI Industries’ Management and our independent compensation consultant provide input, it is the sole responsibility of the Compensation Committee to approve our executive compensation philosophy, plans, policies, programs, and decisions.
We look forward to reporting on our performance and compensation programs in the future, and we thank you for your engagement.The Compensation Committee
Tracy D. Graham,Frank J. Crespo, Chairman
