LCI INDUSTRIES

Previous wording

Our OEM Segment manufactures and distributes a broad array of highly 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 49 percent of our OEM Segment net sales for the twelve months ended March 31, 2024 were of components for travel trailer and fifth-wheel RVs, including:

Current wording

Our OEM Segment manufactures and distributes a broad array of highly 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 51 percent of our OEM Segment net sales for the twelve months ended June 30, 2024 were of components for travel trailer and fifth-wheel RVs, including:

Previous wording

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, increased 17 percent to 73,500 units in the first three months of 2024, compared to the first three months of 2023, as retail dealers restocked inventories in the first quarter of 2024 compared to destocking efforts in the same period of 2023. Retail demand for travel trailer and fifth-wheel RVs decreased 8 percent in the first three months of 2024 compared to the same period in 2023. Retail demand has declined from elevated post-pandemic levels, primarily driven by inflation and higher interest rates impacting retail consumers' discretionary spending. Retail demand is typically revised upward in subsequent months, primarily due to delayed RV registrations.

Current wording

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, increased 16 percent to 155,500 units in the first six months of 2024, compared to the same period in 2023, as retail dealers restocked inventories during the first six months of 2024 compared to destocking efforts in the same period of 2023. Retail demand for travel trailer and fifth-wheel RVs decreased 11 percent in the first six months of 2024 compared to the same period in 2023. Retail demand has declined from elevated post-pandemic levels, primarily driven by inflation and elevated interest rates impacting retail consumers' discretionary spending. Retail demand is typically revised upward in subsequent months, primarily due to delayed RV registrations.

Previous wording

According to the RVIA, industry-wide wholesale shipments of motorhome RVs in the first three months of 2024 decreased 22 percent to 10,400 units compared to the first three months of 2023. Retail demand for motorhome RVs decreased ten percent year-over-year in the first three months of 2024, compared to a 15 percent year-over-year decrease in retail demand in the same period of 2023. Retail demand has declined from post-pandemic elevated levels, partially driven by inflation and higher interest rates impacting retail consumers' discretionary spending.

Current wording

According to the RVIA, industry-wide wholesale shipments of motorhome RVs in the first six months of 2024 decreased 25 percent to 19,200 units compared to the first six months of 2023. Retail demand for motorhome RVs in the first six months of 2024 decreased 17 percent to 21,300 units compared to the first six months of 2023. Retail demand has declined from post-pandemic elevated levels, primarily driven by inflation and higher interest rates impacting retail consumers' discretionary spending.

Previous wording

•Net income for the first quarter of 2024 was $36.5 million, or $1.44 per diluted share, compared to net income of $7.3 million, or $0.29 per diluted share, for the same period of 2023.

Current wording

•Net income for the second quarter of 2024 was $61.2 million, or $2.40 per diluted share, compared to net income of $33.4 million, or $1.31 per diluted share, for the same period of 2023.

Previous wording

•Consolidated operating profit during the first quarter of 2024 was $57.6 million, compared to $20.0 million in the same period of 2023. Operating profit margin was 6.0 percent in the first quarter of 2024 compared to 2.1 percent in the same period of 2023. The increase was primarily due to decreases in material commodity and freight costs.

Current wording

•Consolidated operating profit during the second quarter of 2024 was $90.6 million, compared to $55.2 million in the same period of 2023. Operating profit margin was 8.6 percent in the second quarter of 2024 compared to 5.4 percent in the same period of 2023. The increase was primarily due to decreases in material and freight costs.

Previous wording

•The cost of steel and aluminum consumed in certain of our manufactured components decreased in the first quarter of 2024 compared to the same period of 2023. Raw material costs are subject to continued fluctuation and impact certain contractual selling prices which are indexed to select commodities.

Current wording

•The cost of steel and aluminum consumed in certain of our manufactured components decreased in the second quarter of 2024 compared to the same period of 2023. Raw material costs are subject to continued fluctuation and impact certain contractual selling prices which are indexed to select commodities.

Previous wording

Net sales of the OEM Segment in the first quarter of 2024 increased by $0.1 million, compared to the same period of 2023. Net sales of components to OEMs were to the following markets for the three months ended March 31:

Current wording

Net sales of the OEM Segment in the second quarter of 2024 increased by $37.1 million, compared to the same period of 2023. Net sales of components to OEMs were to the following markets for the three months ended June 30:

Previous wording

Our increase in net sales to RV OEMs during the first quarter of 2024 was driven by a nine percent increase in North American RV wholesale shipments during the first quarter of 2024, primarily due to current dealer inventory restocking, partially offset by decreased selling prices which are indexed to select commodities.

Current wording

Our increase in net sales to RV OEMs during the second quarter of 2024 was driven by a 15 percent increase in North American travel trailer and fifth-wheel wholesale shipments, increased selling prices which are indexed to select commodities, and market share gains. The increase in North American travel trailer and fifth-wheel wholesale shipments was due to retail dealers restocking inventories during the 2024 period compared to destocking efforts in the same period of 2023.

Previous wording

Our decrease in net sales to OEMs in Adjacent Industries during the first quarter of 2024 was primarily due to lower sales to North American marine OEMs, driven by inflation and rising interest rates impacting retail consumers.

Current wording

Our decrease in net sales to OEMs in Adjacent Industries during the second quarter of 2024 was primarily due to lower sales to North American marine and utility trailer OEMs, driven by current dealer inventory levels, inflation, and rising interest rates impacting retail consumers.

Previous wording

•The impact of fixed costs due to reduced volumes, which decreased operating profit by $1.2 million related to fixed selling, general, and administrative costs and $0.6 million related to fixed overhead costs.

Current wording

•The impact of fixed costs spread over increased sales, which increased operating profit by $4.0 million related to fixed production overhead costs and $2.8 million related to fixed selling, general, and administrative costs.

Previous wording

•A decrease in warranty costs primarily due to reduced warranty claim payments, resulting in an increase in operating profit of $7.2 million compared to the same period of 2023.

Current wording

•A decrease in warranty costs primarily due to reduced warranty claim payments, which increased operating profit by $4.4 million compared to the same period in 2023.

Previous wording

•Sales mix increase of lower margin products, which negatively impacted operating profit by $12.0 million.

Current wording

•Sales mix increase of lower margin products, which negatively impacted operating profit by $7.0 million compared to the same period in 2023.

Previous wording

Amortization expense on intangible assets for the OEM Segment was $10.3 million in the first quarter of 2024, compared to $10.5 million in the same period in 2023. Depreciation expense on fixed assets for the OEM Segment was $14.0 million in the first quarter of 2024, compared to $14.4 million in the same period of 2023.

Current wording

Amortization expense on intangible assets for the OEM Segment was $10.2 million in the second quarter of 2024, consistent with the same period in 2023. Depreciation expense on fixed assets for the OEM Segment was $13.7 million in the second quarter of 2024, compared to $14.7 million in the same period of 2023.

Previous wording

Net sales of the Aftermarket Segment in the first quarter of 2024 decreased by $5.4 million, compared to the same period of 2023. Net sales of components in the Aftermarket Segment were as follows for the three months ended March 31:

Current wording

Net sales of the Aftermarket Segment in the second quarter of 2024 increased by $2.8 million, compared to the same period of 2023. Net sales of components in the Aftermarket Segment were as follows for the three months ended June 30:

Previous wording

Net sales of the Aftermarket Segment for the first quarter of 2024 were slightly lower than for the same period in 2023, primarily driven by lower volumes within marine markets and the impacts of inflation and elevated interest rates on consumers' discretionary spending, partially offset by growth in the automotive aftermarket driven by market share gains.

Current wording

Net sales of the Aftermarket Segment for the second quarter of 2024 were slightly higher than for the same period in 2023, primarily driven by market share gains in the automotive aftermarket, partially offset by lower volumes within marine and RV aftermarkets, which have been negatively impacted by lower consumers' discretionary spending.

Previous wording

Interest expense, net was $9.3 million for the three months ended March 31, 2024, compared to $10.4 million in the same period of 2023. The decrease in interest expense was primarily due to net repayments of $215.9 million on the revolving credit facility during 2023 and principal prepayments of $37.5 million on our Term Loan (as defined in Note 8 of the Notes to Condensed Consolidated Financial Statements) in the third and fourth quarters of 2023, partially offset by higher global interest rates on our adjustable rate debt including the Term Loan and revolving credit facility, and net borrowings on the revolving credit facility in the first three months of 2024. See Note 8 of the Notes to Condensed Consolidated Financial Statements for a description of our credit facilities.

Current wording

Interest expense, net was $17.3 million for the six months ended June 30, 2024, compared to $20.6 million in the same period of 2023. The decrease in net interest expense was primarily due to net repayments of $47.4 million on the revolving credit facility in the second half of 2023 and $1.5 million in the six months ended June 30, 2024, principal prepayments on our Term Loan (as defined in Note 8 of the Notes to Condensed Consolidated Financial Statements) of $37.5 million in the second half of 2023 and $15.0 million in the three months ended June 30, 2024, and interest income of $0.9 million for the six months ended June 30, 2024, partially offset by higher global interest rates on our adjustable rate debt including the Term Loan and revolving credit facility. See Note 8 of the Notes to Condensed Consolidated Financial Statements for a description of our credit facilities.

Previous wording

The effective tax rates for the three months ended March 31, 2024 and 2023 were 24.3 percent and 24.8 percent, respectively. The effective tax rate for the three months ended March 31, 2024 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 months ended March 31, 2024 as compared to the same period in 2023 was primarily due to decreases in non-deductible executive compensation costs and effective state tax rates.

Current wording

The effective tax rate for each of the six months ended June 30, 2024 and 2023 was 25.4 percent. The effective tax rate for the six months ended June 30, 2024 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.

Previous wording

As of March 31, 2024, we had $22.6 million in cash and cash equivalents, and $153.8 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 certain other conditions. See Note 8 of the Notes to Condensed Consolidated Financial Statements for a description of our credit facilities.

Current wording

As of June 30, 2024, we had $130.4 million in cash and cash equivalents, and $373.1 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 certain other conditions. See Note 8 of the Notes to Condensed Consolidated Financial Statements for a description of our credit facilities.

Previous wording

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

Current wording

The Condensed Consolidated Statements of Cash Flows reflect the following for the six months ended June 30:

Previous wording

Net cash flows used in operating activities were $7.7 million in the first three months of 2024, compared to cash provided by operating activities of $74.7 million in the first three months of 2023. The change in net cash flows used in operating activities was primarily due to the net change in assets and liabilities, net of acquired businesses, as it used $111.7 million more cash in the first three months of 2024 compared to the same period in 2023. The net change in assets and liabilities was partially offset by an increase in net income of $29.3 million. The primary use of cash in net assets was the increase of $131.1 million in accounts receivable due to seasonally higher sales in the first three months of 2024. While we continued to reduce inventory in the first three months of 2024, the larger decrease in inventory in the first three months of 2023 was due to decreasing commodity and freight costs and initiatives to reduce inventory as RV production demand slowed from record levels seen during the first half of 2022.

Current wording

Net cash flows provided by operating activities were $185.3 million in the first six months of 2024, compared to $273.6 million in the first six months of 2023. The decrease in net cash flows provided by operating activities was primarily due to the net change in assets and liabilities, net of acquired businesses, as it used $144.8 million more cash in the first six months of 2024 compared to the same period in 2023. The net change in assets and liabilities was partially offset by an increase in net income of $57.0 million. The primary use of cash in net assets was the increase of $119.0 million in accounts receivable due to seasonally higher sales in the first six months of 2024. While we continued to reduce inventory in the first six months of 2024, the larger decrease in inventory in the first six months of 2023 was due to initiatives to reduce inventory as RV production demand slowed from record levels seen during the first half of 2022 and decreasing commodity and freight costs.

Previous wording

Depreciation and amortization was $32.7 million in the first three months of 2024, and is expected to be approximately $130 to $140 million for the full year 2024. Non-cash stock-based compensation expense in the first three months of 2024 was $4.3 million. Non-cash stock-based compensation expense is expected to be approximately $18 to $23 million for the full year 2024.

Current wording

Depreciation and amortization was $64.7 million in the first six months of 2024, and is expected to be approximately $125 to $135 million for the full year 2024. Non-cash stock-based compensation expense in the first six months of 2024 was $9.3 million. Non-cash stock-based compensation expense is expected to be approximately $17 to $22 million for the full year 2024.

Previous wording

Cash flows used in investing activities of $8.4 million in the first three months of 2024 were primarily comprised of $8.6 million for capital expenditures. Cash flows used in investing activities of $21.4 million in the first three months of 2023 were primarily comprised of $17.2 million for capital expenditures and $6.3 million for the acquisitions of businesses.

Current wording

Cash flows used in investing activities of $40.7 million in the first six months of 2024 were primarily comprised of $21.3 million for capital expenditures and $20.0 million for the acquisition of a business. Cash flows used in investing activities of $55.6 million in the first six months of 2023 were primarily comprised of $34.1 million for capital expenditures and $25.9 million for the acquisitions of businesses.

Previous wording

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 2024 capital expenditures of $55 to $75 million, including investments in automation and lean projects.

Current wording

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 2024 capital expenditures of $40 to $60 million, including investments in automation and lean projects.

Previous wording

Capital expenditures in the first three months of 2024 were funded by cash on hand and borrowings under our Credit Agreement. Capital expenditures and any acquisitions in the remainder of fiscal year 2024 are expected to be funded primarily from cash generated from operations, as well as periodic borrowings under our revolving credit facility.

Current wording

Capital expenditures and acquisitions of businesses in the first six months of 2024 were funded by cash on hand and borrowings under our Credit Agreement. Capital expenditures and any acquisitions in the remainder of fiscal year 2024 are expected to be funded primarily from cash generated from operations, as well as periodic borrowings under our revolving credit facility.

Previous wording

Cash flows used in financing activities of $26.4 million in the first three months of 2024 were primarily comprised of payments of quarterly dividends of $26.7 million and cash outflows of $9.0 million related to vesting of stock-based awards, net of shares tendered for payment of taxes, partially offset by $9.3 million in net borrowings under our revolving credit facility.

Current wording

Cash flows used in financing activities of $79.1 million in the first six months of 2024 were primarily comprised of payments of quarterly dividends of $53.5 million, net debt repayments of $16.5 million under our revolving credit facility, Term Loan, and other borrowings, and cash outflows of $9.1 million related to vesting of stock-based awards, net of shares tendered for payment of taxes.

Previous wording

Cash flows used in financing activities of $76.8 million in the first three months of 2023 were primarily comprised of $36.1 million in net repayments under our revolving credit facility, payments of quarterly dividends of $26.6 million, cash outflows of $8.9 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.

Current wording

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

Previous wording

In May 2022, our Board of Directors authorized a stock repurchase program for the purchase of up to $200.0 million of our common stock over a three-year period ending on May 19, 2025. No shares were repurchased during the three months ended March 31, 2024 and 2023. As of March 31, 2024, there was $175.9 million remaining under the stock repurchase program.

Current wording

In May 2022, our Board of Directors authorized a stock repurchase program for the purchase of up to $200.0 million of our common stock over a three-year period ending on May 19, 2025. No shares were repurchased during the six months ended June 30, 2024 and 2023. As of June 30, 2024, there was $175.9 million remaining under the stock repurchase program.

Previous wording

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 months of 2024, but prices of these commodities have historically been volatile. As a result, while we currently expect commodity prices for the remainder of the year to remain generally consistent with the first quarter of 2024, 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 months of 2024.

Current wording

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 six months of 2024, but prices of these commodities have historically been volatile. As a result, while we currently expect commodity prices for the remainder of the year to remain generally consistent with the second quarter of 2024, 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 six months of 2024.

Previous wording

Forward-looking statements, including, without limitation, those relating to the Company's production levels, 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, addressable markets, 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 future pandemics, geopolitical tensions, armed conflicts, or natural disasters 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

Current wording

Forward-looking statements, including, without limitation, those relating to the Company's production levels, 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, addressable markets, 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 future pandemics, geopolitical tensions, armed conflicts, or natural disasters 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, 2023, and in the Company's subsequent filings with the SEC, including the Compan…

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