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 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:

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 52 percent of our OEM Segment net sales for the twelve months ended September 30, 2024 were of components for travel trailer and fifth-wheel RVs, including:

Previous wording

We are executing a strategic initiative to diversify the markets we serve outside of the historical concentration within the North American RV OEM industry. Approximately 57 percent of net sales for the three months ended June 30, 2024 were generated outside of the North American RV OEM market. We believe our diversification strategy has helped offset downswings in the North American RV OEM industry, while maintaining our strong position and ability to ramp up quickly to take advantage of upswings.

Current wording

We are executing a strategic initiative to diversify the markets we serve outside of the historical concentration within the North American RV OEM industry. Approximately 57 percent of net sales for the nine months ended September 30, 2024 were generated outside of the North American RV OEM market. We believe our diversification strategy has helped offset downswings in the North American RV OEM industry, while maintaining our strong position and ability to ramp up quickly to take advantage of upswings.

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 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.

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 14 percent to 224,000 units in the first nine months of 2024, compared to the same period in 2023, as retail dealers restocked inventories during the first nine months of 2024 compared to destocking efforts in the same period of 2023. Retail demand for travel trailer and fifth-wheel RVs decreased 9 percent in the first nine 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 consumer 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 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.

Current wording

According to the RVIA, industry-wide wholesale shipments of motorhome RVs in the first nine months of 2024 decreased 25 percent to 26,900 units compared to the first nine months of 2023. Retail demand for motorhome RVs in the first nine months of 2024 decreased 15 percent to 31,800 units compared to the first nine months of 2023. Retail demand has declined from post-pandemic elevated levels, primarily driven by inflation and higher interest rates impacting retail consumer discretionary spending.

Previous wording

•Consolidated net sales in the second quarter of 2024 increased 3.9 percent to $1.1 billion, from $1.0 billion in the same period of 2023.

Current wording

•Consolidated net sales in the third quarter of 2024 decreased 4.6 percent to $915.5 million, from $959.3 million in the same period of 2023.

Previous 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.

Current wording

•Net income for the third quarter of 2024 was $35.6 million, or $1.39 per diluted share, compared to net income of $25.9 million, or $1.02 per diluted share, for the same period of 2023.

Previous 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.

Current wording

•Consolidated operating profit during the third quarter of 2024 was $53.9 million, compared to $45.6 million in the same period of 2023. Operating profit margin was 5.9 percent in the third quarter of 2024 compared to 4.8 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 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.

Current wording

•The cost of steel consumed in certain of our manufactured components decreased in the third 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 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:

Current wording

Net sales of the OEM Segment in the third quarter of 2024 decreased by $44.0 million, compared to the same period of 2023. Net sales of components to OEMs were to the following markets for the three months ended September 30:

Previous wording

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. For the twelve months ended June 30, 2024, travel trailer and fifth-wheel RV content declined year-over-year primarily due to pricing decreases indexed to commodity and freight indices and unit mix, partially offset by market share gains.

Current wording

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, acquisitions, changes in unit mix and timing differences between wholesale production and shipments. For the twelve months ended September 30, 2024, travel trailer and fifth-wheel RV content declined year-over-year primarily due to an increasing shift in unit mix towards lower content single axle travel trailers and pricing decreases indexed to commodity and freight indices, partially offset by market share gains and alignment in wholesale unit production and shipments compared to wholesale unit shipments outpacing production as a result of inventory destocking efforts for the twelve months ended September 30, 2023.

Previous 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.

Current wording

Our decrease in net sales to RV OEMs during the third quarter of 2024 was primarily driven by a 25 percent decrease in motorhome wholesale shipments and a shift in unit mix towards lower content single axle travel trailers, partially offset by a 11 percent increase in North American travel trailer and fifth-wheel wholesale shipments and market share gains. The increase in North American travel trailer and fifth-wheel wholesale shipments was primarily 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 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.

Current wording

Our decrease in net sales to OEMs in Adjacent Industries during the third 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 elevated interest rates impacting retail consumers.

Previous wording

Operating profit of the OEM Segment was $50.6 million in the second quarter of 2024, an increase of $31.9 million compared to the same period of 2023. The operating profit margin of the OEM Segment increased to 6.4 percent in the second quarter of 2024, compared to 2.5 percent for the same period of 2023 and was positively impacted by:

Current wording

Operating profit of the OEM Segment was $21.8 million in the third quarter of 2024, an increase of $10.7 million compared to the same period of 2023. The operating profit margin of the OEM Segment increased to 3.2 percent in the third quarter of 2024, compared to 1.5 percent for the same period of 2023, and was positively impacted by:

Previous 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.

Current wording

•A decrease in warranty costs, primarily due to product quality initiatives that resulted in reduced warranty claim payments, which increased operating profit by $8.2 million compared to the same period in 2023.

Previous 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.

Current wording

•The impact of fixed costs spread over decreased sales, which decreased operating profit by $4.9 million related to fixed production overhead costs and $4.7 million related to fixed selling, general, and administrative costs.

Previous wording

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

Current wording

•Sales mix increase of lower margin products, which negatively impacted operating profit by $1.4 million compared to the same period in 2023.

Previous wording

Net sales of the OEM Segment in the first six months of 2024 increased by $37.3 million, compared to the same period of 2023. Net sales of components to OEMs were to the following markets for the six months ended June 30:

Current wording

Net sales of the OEM Segment in the first nine months of 2024 decreased by $6.8 million, compared to the same period of 2023. Net sales of components to OEMs were to the following markets for the nine months ended September 30:

Previous wording

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

Current wording

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

Previous wording

Our increase in net sales to RV OEMs during the first six months of 2024 was driven by a 16 percent increase in North American travel trailer and fifth-wheel wholesale shipments during the first six months of 2024, as retail dealers restocked inventories during the 2024 period compared to destocking efforts in the same period of 2023.

Current wording

Our increase in net sales to RV OEMs during the first nine months of 2024 was primarily driven by a 14 percent increase in North American travel trailer and fifth-wheel wholesale shipments during the first nine months of 2024, partially offset by a shift in unit mix towards lower content single axle travel trailers. The increase in North American travel trailer and fifth-wheel wholesale shipments was primarily 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 six months 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.

Current wording

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

Previous wording

Operating profit of the OEM Segment was $83.4 million in the first six months of 2024, an increase of $65.5 million compared to the same period of 2023. The operating profit margin of the OEM Segment increased to 5.4 percent in the first six months of 2024, compared to 1.2 percent for the same period in 2023, and was positively impacted by:

Current wording

Operating profit of the OEM Segment was $105.2 million in the first nine months of 2024, an increase of $76.1 million compared to the same period of 2023. The operating profit margin of the OEM Segment increased to 4.7 percent in the first nine months of 2024, compared to 1.3 percent for the same period in 2023, and was positively impacted by:

Previous wording

•A decrease in warranty costs primarily due to reduced warranty claim payments, which increased operating profit by $11.6 million compared to the same period in 2023.

Current wording

•A decrease in warranty costs, primarily due to product quality initiatives that resulted in reduced warranty claim payments, which increased operating profit by $20.6 million compared to the same period in 2023.

Previous wording

•Sales mix increase of lower margin products, which negatively impacted operating profit by $14.0 million compared to the same period in 2023.

Current wording

•Sales mix increase of lower margin products, which negatively impacted operating profit by $15.8 million compared to the same period in 2023.

Previous 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:

Current wording

Net sales of the Aftermarket Segment in the third quarter of 2024 increased by $0.2 million, compared to the same period of 2023. Net sales of components in the Aftermarket Segment were as follows for the three months ended September 30:

Previous 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.

Current wording

Net sales of the Aftermarket Segment for the third 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 the RV aftermarket, which has been negatively impacted by lower consumer discretionary spending.

Previous wording

•Increases in production labor costs, which negatively impacted operating profit by $2.9 million compared to the same period of 2023.

Current wording

•Increases in production labor costs due to product mix, which negatively impacted operating profit by $3.0 million compared to the same period of 2023.

Previous wording

•Increased production facility costs resulting from investments to expand capacity in the automotive aftermarket over the past year, which reduced operating profit by $1.3 million.

Current wording

•Increased production facility costs resulting from investments to expand capacity in the automotive aftermarket over the past year, which reduced operating profit by $2.5 million.

Previous wording

Amortization expense on intangible assets for the Aftermarket Segment was $4.0 million in the second quarter of 2024, consistent with the same period of 2023. Depreciation expense on fixed assets for the Aftermarket Segment was $4.2 million in the second quarter of 2024, consistent with the same period of 2023.

Current wording

Amortization expense on intangible assets for the Aftermarket Segment was $3.9 million in the third quarter of 2024, consistent with the same period of 2023. Depreciation expense on fixed assets for the Aftermarket Segment was $4.1 million in the third quarter of 2024, compared to $4.0 million in the same period of 2023.

Previous wording

Net sales of the Aftermarket Segment in the first six months of 2024 decreased by $2.6 million, compared to the same period of 2023. Net sales of components in the Aftermarket Segment were as follows for the six months ended June 30:

Current wording

Net sales of the Aftermarket Segment in the first nine months of 2024 decreased by $2.4 million, compared to the same period of 2023. Net sales of components in the Aftermarket Segment were as follows for the nine months ended September 30:

Previous wording

Net sales of the Aftermarket Segment decreased during the first six months of 2024, primarily driven by lower volumes within marine and RV aftermarkets, which have been negatively impacted by lower consumers' discretionary spending, partially offset by market share gains in the automotive aftermarket.

Current wording

Net sales of the Aftermarket Segment decreased during the first nine months of 2024, primarily driven by lower volumes within the RV and marine aftermarkets, which have been negatively impacted by lower consumer discretionary spending, partially offset by market share gains in the automotive aftermarket.

Previous wording

•Increases in production labor costs, which negatively impacted operating profit by $4.7 million compared to the same period of 2023.

Current wording

•Increases in production labor costs due to product mix, which negatively impacted operating profit by $7.5 million compared to the same period of 2023.

Previous wording

•Increased production facility costs resulting from investments to expand capacity in the automotive aftermarket over the past year, which reduced operating profit by $2.1 million.

Current wording

•Increased production facility costs resulting from investments to expand capacity in the automotive aftermarket over the past year, which reduced operating profit by $5.0 million.

Previous 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.

Current wording

Interest expense, net was $23.8 million for the nine months ended September 30, 2024, compared to $31.0 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 nine months ended September 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 $25.0 million in the nine months ended September 30, 2024, and interest income of $2.8 million for the nine months ended September 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 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.

Current wording

The effective tax rate for the nine months ended September 30, 2024 and 2023 was 25.2 percent and 25.9 percent, respectively. The effective tax rate for the nine months ended September 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. The decrease in the effective tax rate for the nine months ended September 30, 2024 as compared to the same period in 2023 was primarily due to a reduction in effective state tax rates.

Previous 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.

Current wording

As of September 30, 2024, we had $161.2 million in cash and cash equivalents, and $383.1 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 six months ended June 30:

Current wording

The Condensed Consolidated Statements of Cash Flows reflect the following for the nine months ended September 30:

Previous 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.

Current wording

Net cash flows provided by operating activities were $263.7 million in the first nine months of 2024, compared to $389.3 million in the first nine 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 $189.8 million more cash in the first nine 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 $66.7 million. The primary use of cash in net assets was the increase of $102.1 million in accounts receivable due to seasonally higher sales in the first nine months of 2024. While we continued to reduce inventory in the first nine months of 2024, the larger decrease in inventory in the first nine 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 $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.

Current wording

Depreciation and amortization was $96.0 million in the first nine 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 nine months of 2024 was $14.0 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 $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.

Current wording

Cash flows used in investing activities of $50.6 million in the first nine months of 2024 were primarily comprised of $31.4 million for capital expenditures and $20.0 million for the acquisition of a business. Cash flows used in investing activities of $71.6 million in the first nine months of 2023 were primarily comprised of $50.1 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 $40 to $60 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 $35 to $45 million, including investments in automation and lean projects.