lcii-20240331

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, 2024


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

For the transition period from _________________ to _________________

Commission File Number: 001-13646

LCI INDUSTRIES

(Exact name of registrant as specified in its charter)


Delaware		13-3250533
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification Number)

3501 County Road 6 East		46514
Elkhart,	Indiana	(Zip Code)
(Address of principal executive offices)

(574) 535-1125

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report) N/A

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.01 par value	LCII	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

Large accelerated filer ☒ Accelerated filer ☐

Non-accelerated filer ☐ Smaller reporting company ☐

Emerging growth company ☐

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

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

The number of shares outstanding of the registrant’s common stock, as of the latest practicable date (April 30, 2024) was 25,449,794 shares of common stock.

LCI INDUSTRIES

TABLE OF CONTENTS


		Page
PART I –	FINANCIAL INFORMATION

	ITEM 1 – FINANCIAL STATEMENTS

	CONDENSED CONSOLIDATED STATEMENTS OF INCOME	4

	CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	5

	CONDENSED CONSOLIDATED BALANCE SHEETS	6

	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	7

	CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY	8

	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	9

	ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	20

	ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	29

	ITEM 4 – CONTROLS AND PROCEDURES	29

PART II –	OTHER INFORMATION

	ITEM 1 – LEGAL PROCEEDINGS	30

	ITEM 1A – RISK FACTORS	30

	ITEM 5 – OTHER INFORMATION	30

	ITEM 6 – EXHIBITS	30

SIGNATURES		31

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,
	2024		2023
(In thousands, except per share amounts)

Net sales	$	968,029	$	973,310
Cost of sales	744,123		787,239
Gross profit	223,906		186,071
Selling, general and administrative expenses	166,295		166,028
Operating profit	57,611		20,043
Interest expense, net	9,321		10,394
Income before income taxes	48,290		9,649
Provision for income taxes	11,745		2,390
Net income	$	36,545	$	7,259

Net income per common share:
Basic	$	1.44	$	0.29
Diluted	$	1.44	$	0.29

Weighted average common shares outstanding:
Basic	25,374		25,228
Diluted	25,389		25,293

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,
	2024		2023
(In thousands)

Net income	$	36,545	$	7,259
Other comprehensive (loss) income:
Net foreign currency translation adjustment	(3,263)		2,000


Total comprehensive income	$	33,282	$	9,259

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

LCI INDUSTRIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	March 31,		December 31,
	2024			2023
(In thousands, except per share amount)

ASSETS
Current assets
Cash and cash equivalents	$	22,625		$	66,157

Accounts receivable, net of allowances of $7,181 and $5,701 at March 31, 2024 and December 31, 2023, respectively	344,406			214,707
Inventories, net	734,360			768,407

Prepaid expenses and other current assets	68,068			67,599
Total current assets	1,169,459			1,116,870
Fixed assets, net	454,071			465,781
Goodwill	587,791			589,550
Other intangible assets, net	432,728			448,759
Operating lease right-of-use assets	242,442			245,388

Other long-term assets	94,845			92,971
Total assets	$	2,981,336		$	2,959,319

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term indebtedness	$	568		$	589
Accounts payable, trade	193,933			183,697

Current portion of operating lease obligations	37,322			36,269
Accrued expenses and other current liabilities	177,217			174,437
Total current liabilities	409,040			394,992
Long-term indebtedness	854,774			846,834
Operating lease obligations	218,236			222,680
Deferred taxes	31,211			32,345
Other long-term liabilities	111,191			107,432
Total liabilities	1,624,452			1,604,283
Stockholders' equity
Common stock, par value $.01 per share	288			287
Paid-in capital	241,514			245,659
Retained earnings	1,186,289			1,177,034
Accumulated other comprehensive income	11,009			14,272
Stockholders' equity before treasury stock	1,439,100			1,437,252
Treasury stock, at cost	(82,216)			(82,216)
Total stockholders' equity	1,356,884			1,355,036
Total liabilities and stockholders' equity	$	2,981,336		$	2,959,319

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,
(In thousands)	2024		2023

Cash flows from operating activities:
Net income	$	36,545	$	7,259
Adjustments to reconcile net income to cash flows (used in) provided by operating activities:
Depreciation and amortization	32,689		32,499
Stock-based compensation expense	4,327		4,695

Other non-cash items	1,107		877
Changes in assets and liabilities, net of acquisitions of businesses:
Accounts receivable, net	(131,059)		(123,072)
Inventories, net	32,892		131,708
Prepaid expenses and other assets	(2,392)		5,577
Accounts payable, trade	12,038		25,822
Accrued expenses and other liabilities	6,199		(10,689)
Net cash flows (used in) provided by operating activities	(7,654)		74,676
Cash flows from investing activities:
Capital expenditures	(8,608)		(17,159)
Acquisitions of businesses	—		(6,250)


Other investing activities	173		1,960
Net cash flows used in investing activities	(8,435)		(21,449)
Cash flows from financing activities:
Vesting of stock-based awards, net of shares tendered for payment of taxes	(9,040)		(8,888)
Proceeds from revolving credit facility	86,248		165,300
Repayments under revolving credit facility	(76,927)		(201,385)
Repayments under term loan and other borrowings	(5)		(5,276)




Payment of dividends	(26,721)		(26,563)

Other financing activities	(2)		(12)
Net cash flows used in financing activities	(26,447)		(76,824)
Effect of exchange rate changes on cash and cash equivalents	(996)		(437)
Net decrease in cash and cash equivalents	(43,532)		(24,034)
Cash and cash equivalents at beginning of period	66,157		47,499
Cash and cash equivalents at end of period	$	22,625	$	23,465

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	7,391	$	9,052
Income taxes, net of refunds	359		390
Non-cash investing and financing activities:
Purchase of property and equipment in accrued expenses	407		2,304

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



Balance - December 31, 2023	$	287	$	245,659	$	1,177,034	$	14,272	$	(82,216)	$	1,355,036
Net income	—		—		36,545		—		—		36,545
Issuance of 122,023 shares of common stock pursuant to stock-based awards, net of shares tendered for payment of taxes	1		(9,041)		—		—		—		(9,040)
Stock-based compensation expense	—		4,327		—		—		—		4,327
Other comprehensive loss	—		—		—		(3,263)		—		(3,263)
Cash dividends ($1.05 per share)	—		—		(26,721)		—		—		(26,721)
Dividend equivalents on stock-based awards	—		569		(569)		—		—		—
Balance - March 31, 2024	$	288	$	241,514	$	1,186,289	$	11,009	$	(82,216)	$	1,356,884

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 highly engineered components for the leading original equipment manufacturers ("OEMs") in the recreation and transportation 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, 2024, the Company operated over 110 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, because of fluctuations in dealer inventories, the impact of international, national, and regional economic conditions, consumer confidence on retail sales of RVs and other products for which we sell our components, the timing of dealer orders, and the impact of severe weather conditions on the timing of industry-wide shipments from time to time, current and future seasonal industry trends have been, and may in the future be, different than in prior years. 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.

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

In the opinion of management, the information furnished in this Form 10-Q reflects all adjustments necessary for a fair statement of the financial position and results of operations for the interim periods presented. The Condensed Consolidated Financial Statements have been prepared in accordance with the instructions to Form 10-Q, and therefore do not include some information necessary to conform to annual reporting requirements. Results for interim periods should not be considered indicative of results for the full year.

Use of Estimates

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

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,

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

including changes in tariffs, sanctions, international treaties, and other trade restrictions, geopolitical tensions, armed conflicts, natural disasters or global public health crises, have negatively impacted, and could continue to negatively impact, the Company’s business, liquidity, financial 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, 2023 Annual Report on Form 10-K and should be read in conjunction with the Notes to Consolidated Financial Statements which appear in that report.

Recent Accounting Pronouncements

Recently issued accounting pronouncements not yet adopted

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 820): Improvements to Reportable Segment Disclosures, which requires entities to report incremental information about significant segment expenses included in a segment's profit or loss measure as well as the name and title of the chief operating decision maker. The new standard also requires interim disclosures related to reportable segment profit or loss and assets that had previously only been disclosed annually. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company is evaluating the effect of adopting this new accounting guidance.

In December 2023, the FASB issued ASU 2023-09, Income Taxes - Improvements to Income Tax Disclosures, requiring enhancements and further transparency to certain income tax disclosures, most notably the tax rate reconciliation and income taxes paid. The new standard also eliminates certain existing disclosure requirements related to uncertain tax positions and unrecognized deferred tax liabilities. This ASU is effective for fiscal years beginning after December 15, 2024 on a prospective basis and retrospective application is permitted. The Company is evaluating the effect of adopting this new accounting guidance.

3. EARNINGS PER SHARE

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


	Three Months Ended March 31,
(In thousands)	2024	2023
Weighted average shares outstanding for basic earnings per share	25,374	25,228
Common stock equivalents pertaining to stock-based awards	15	65
Weighted average shares outstanding for diluted earnings per share	25,389	25,293

Equity instruments excluded from diluted net earnings per share calculation as the effect would have been antidilutive	291	160

For the Company's 1.125 percent convertible senior notes due 2026 (the "Convertible Notes") issued in May 2021, the dilutive effect is calculated using the if-converted method. The Company is required, pursuant to the indenture governing the Convertible Notes, dated May 13, 2021, by and between the Company and U.S. Bank National Association, as trustee (the "Indenture"), to settle the principal amount of the Convertible Notes in cash and may elect to settle the remaining conversion obligation (i.e., the stock price in excess of the conversion price) in cash, shares of the Company's common stock, or a combination thereof. Under the if-converted method, the Company includes the number of shares required to satisfy the conversion obligation, assuming all the Convertible Notes are converted. Because the average closing price of the Company's common stock for the three months ended March 31, 2024, 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

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(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 the three months ended March 31, 2024, the average share price was below the Warrant strike price of $259.84 per share, and therefore 2.8 million shares were considered antidilutive.

In connection with the issuance of the Convertible Notes, the Company entered into privately negotiated call option contracts on the Company's common stock (the "Convertible Note Hedge Transactions") with the Counterparties. The Company paid an aggregate amount of $100.1 million to the Counterparties pursuant to the Convertible Note Hedge Transactions. The Convertible Note Hedge Transactions cover, subject to anti-dilution adjustments substantially similar to those in the Convertible Notes, approximately 2.8 million shares of the Company's common stock, the same number of shares initially underlying the Convertible Notes, at a strike price of approximately $165.65, subject to customary anti-dilution adjustments. The Convertible Note Hedge Transactions will expire upon the maturity of the Convertible Notes, subject to earlier exercise or termination. Exercise of the Convertible Note Hedge Transactions would reduce the number of shares of the Company's common stock outstanding, and therefore would be antidilutive.

4. ACQUISITIONS, GOODWILL AND OTHER INTANGIBLE ASSETS

Subsequent Event

Camping World Furniture

In May 2024, the Company acquired the business and certain assets of the furniture operations of CWDS, LLC, a subsidiary of Camping World Holdings, Inc., in exchange for cash consideration of $20 million. The acquisition, which qualifies as a business combination for accounting purposes, expands the Company's furniture portfolio and will serve customers in both the OEM and Aftermarket segments.

Goodwill

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


(In thousands)	OEM Segment		Aftermarket Segment		Total
Net balance – December 31, 2023	$	421,701	$	167,849	$	589,550


Foreign currency translation	(1,575)		(184)		(1,759)
Net balance – March 31, 2024	$	420,126	$	167,665	$	587,791

Goodwill represents the excess of the total consideration given in an acquisition of a business over the fair value of the net tangible and identifiable intangible assets acquired. Goodwill is not amortized, but instead is tested at the reporting unit level for impairment annually in November, or more frequently if certain circumstances indicate a possible impairment may exist.

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Other Intangible Assets

Other intangible assets consisted of the following at March 31, 2024:


(In thousands)	Gross Cost		Accumulated Amortization		Net Balance		Estimated Useful Life in Years
Customer relationships	$	508,140	$	199,501	$	308,639	6	to	20
Patents	114,459		69,815		44,644		3	to	20
Trade names (finite life)	99,136		28,587		70,549		3	to	20
Trade names (indefinite life)	7,432		—		7,432		Indefinite
Non-compete agreements	10,104		8,948		1,156		3	to	6
Other	609		301		308		2	to	12

Other intangible assets	$	739,880	$	307,152	$	432,728

Other intangible assets consisted of the following at December 31, 2023:


(In thousands)	Gross Cost		Accumulated Amortization		Net Balance		Estimated Useful Life in Years
Customer relationships	$	509,505	$	189,967	$	319,538	6	to	20
Patents	114,864		67,602		47,262		3	to	20
Trade names (finite life)	99,366		26,978		72,388		3	to	20
Trade names (indefinite life)	7,600		—		7,600		Indefinite
Non-compete agreements	10,104		8,453		1,651		3	to	6
Other	609		289		320		2	to	12

Other intangible assets	$	742,048	$	293,289	$	448,759

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,
(In thousands)	2024			2023
Raw materials	$	427,320		$	457,877
Work in process	43,688			45,112
Finished goods	263,352			265,418
Inventories, net	$	734,360		$	768,407

At March 31, 2024 and December 31, 2023, the Company had recorded inventory obsolescence reserves of $76.1 million and $71.3 million, respectively.

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

6. FIXED ASSETS

Fixed assets consisted of the following at:


	March 31,		December 31,
(In thousands)	2024			2023
Fixed assets, at cost	$	986,971		$	983,548
Less accumulated depreciation and amortization	532,900			517,767
Fixed assets, net	$	454,071		$	465,781

7. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

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


	March 31,		December 31,
(In thousands)	2024			2023
Employee compensation and benefits	$	58,183		$	58,999

Current portion of accrued warranty	46,725			48,468
Customer rebates	20,697			19,403

Other	51,612			47,567
Accrued expenses and other current liabilities	$	177,217		$	174,437

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 months ended March 31:


(In thousands)	2024		2023
Balance at beginning of period	$	71,578	$	54,528
Provision for warranty expense	13,123		20,827

Warranty costs paid	(14,586)		(15,227)
Balance at end of period	70,115		60,128
Less long-term portion	(23,390)		(19,770)
Current portion of accrued warranty at end of period	$	46,725	$	40,358

8. LONG-TERM INDEBTEDNESS

Long-term debt consisted of the following:


	March 31,		December 31,
(In thousands)	2024			2023

Convertible Notes	$	460,000		$	460,000
Term Loan	315,000			315,000
Revolving Credit Loan	83,122			75,909

Other	3,088			3,138
Unamortized deferred financing fees	(5,868)			(6,624)
	855,342			847,423
Less current portion	(568)			(589)
Long-term indebtedness	$	854,774		$	846,834

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 Company prepaid $37.5 million of principal on the Term Loan during 2023, which was applied to pay in full the scheduled principal amortization payments due through March 31, 2025. 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 0.875 percent (0.625 percent was applicable at March 31, 2024) depending on the Company’s total net leverage ratio or (ii) term benchmark loans which bear interest at term Secured Overnight Financing Rate ("SOFR") plus a credit spread adjustment of 0.1 percent for an interest period selected by the Company plus additional interest ranging from 0.875 percent to 1.875 percent (1.625 percent was applicable at March 31, 2024) depending on the Company’s total net leverage ratio. Foreign currency borrowings have the same additional interest margins applicable to term benchmark loans based on the Company's total net leverage ratio. At March 31, 2024, the Company had $4.8 million in issued, but undrawn, standby letters of credit under the LC Facility. A commitment fee ranging from 0.150 percent to 0.275 percent (0.225 percent was applicable at March 31, 2024) depending on the Company's total net leverage ratio accrues on the actual daily amount that the revolving commitment exceeds the revolving credit exposure.

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. At March 31, 2024, the Company was in compliance with all financial covenants. The maximum net leverage ratio covenant limits the amount of consolidated outstanding indebtedness that the Company may incur on a trailing twelve-month EBITDA. Availability under the Company’s revolving credit facility, giving effect to this limitation, was $153.8 million at March 31, 2024. The Company believes the availability 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.

At March 31, 2024, the fair value of the Company's floating rate 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.

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, 2024, the conversion rate of the Convertible Notes was 6.1946 shares of the Company's common stock per $1,000 principal amount of the Convertible Notes. The conversion rate of the Convertible Notes is subject to further adjustment upon the occurrence of certain specified events. In addition, upon the occurrence of a make-whole fundamental change (as defined in the Indenture) or upon a notice of redemption, the Company will, in certain circumstances, increase the conversion rate for a holder that elects to convert its Convertible Notes in connection with such make-whole fundamental change or notice of redemption, as the case may be.

Prior to the close of business on the business day immediately preceding January 15, 2026, the Convertible Notes are convertible at the option of the holders only under certain circumstances as set forth in the Indenture. On or after January 15,

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

2026, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their Convertible Notes at any time. Upon conversion, the Company will pay cash up to the aggregate principal amount of the Convertible Notes to be converted and pay or deliver, as the case may be, cash, shares of the Company's common stock, or a combination of cash and shares of the Company's common stock, at the Company's election, in respect of the remainder, if any, of the Company's conversion obligation in excess of the aggregate principal amount of the Convertible Notes being converted.

The Company may not redeem the Convertible Notes prior to May 20, 2024. On or after May 20, 2024, the Company may redeem for cash all or any portion of the Convertible Notes, at the Company's option, if the last reported sale price of the Company's common stock has been at least 130 percent of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the 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 $454.5 million at March 31, 2024 was estimated using Level 1 inputs, as it is based on quoted prices for these instruments in active markets.

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 components of lease expense were as follows:


	Three Months Ended March 31,
(In thousands)	2024		2023
Operating lease expense	$	15,688	$	15,244
Short-term lease expense	987		1,480
Variable lease expense	886		1,000
Total lease expense	$	17,561	$	17,724

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 fixed payments and 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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

consideration, the Company could record adjustments in future periods. Holdback payment and contingent consideration balances were not material at March 31, 2024.

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. Product recall reserves were not material at March 31, 2024.

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. Environmental reserves were not material at March 31, 2024.

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, 2024, would not be material to the Company's financial position or results of operations.

11. STOCKHOLDERS' EQUITY

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


	March 31,	December 31,
(In thousands)	2024		2023
Common stock authorized	75,000		75,000
Common stock issued	28,789		28,667
Treasury stock	3,341		3,341
Common stock outstanding	25,448		25,326

The table below summarizes the regular quarterly dividends declared and paid during the periods ended March 31, 2024 and December 31, 2023:


(In thousands, except per share data)	Per Share		Record Date	Payment Date	Total Paid
First Quarter 2023	$	1.05	03/10/23	03/24/23	$	26,563
Second Quarter 2023	1.05		06/02/23	06/16/23	26,591
Third Quarter 2023	1.05		09/01/23	09/15/23	26,590
Fourth Quarter 2023	1.05		12/01/23	12/15/23	26,592
Total 2023	$	4.20			$	106,336

First Quarter 2024	$	1.05	03/08/24	03/22/24	$	26,721

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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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
Outstanding at December 31, 2023	296,305	$	118.60
Issued	527	123.06
Granted	130,957	126.56
Dividend equivalents	2,748	116.35
Forfeited	(7,563)	121.95
Vested	(114,728)	115.68
Outstanding at March 31, 2024	308,246	$	120.05

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
Outstanding at December 31, 2023	207,279	$	122.57

Granted	108,096	132.77
Dividend equivalents	2,136	116.35

Vested	(78,695)	143.54
Outstanding at March 31, 2024	238,816	$	120.26

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 months ended March 31, 2024.

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 78 percent of consolidated net sales for each of the three months ended March 31, 2024 and 2023, manufactures and distributes a broad array of highly engineered components for the leading OEMs in the recreation and transportation 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.

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Approximately 52 percent of the Company's OEM Segment net sales for the three months ended March 31, 2024 were of components for travel trailer and fifth-wheel RVs.

The Aftermarket Segment, which accounted for 22 percent of consolidated net sales for each of the three months ended March 31, 2024 and 2023, supplies engineered components to the related aftermarket channels of the recreation and transportation products, 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.