LCI INDUSTRIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Other Intangible Assets
Other intangible assets consisted of the following at June 30, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Gross
Cost
|
|
Accumulated
Amortization
|
|
Net
Balance
|
|
Estimated Useful
Life in Years
|
|
|
|
Customer relationships
|
$
|
191,709
|
|
$
|
61,022
|
|
$
|
130,687
|
|
6
|
to
|
16
|
|
Patents
|
57,975
|
|
42,022
|
|
15,953
|
|
3
|
to
|
19
|
|
Trade names (finite life)
|
10,310
|
|
6,106
|
|
4,204
|
|
3
|
to
|
15
|
|
Trade names (indefinite life)
|
7,600
|
|
—
|
|
7,600
|
|
Indefinite
|
|
|
|
Non-compete agreements
|
6,428
|
|
4,541
|
|
1,887
|
|
3
|
to
|
6
|
|
Other
|
309
|
|
157
|
|
152
|
|
2
|
to
|
12
|
|
Purchased research and development
|
4,687
|
|
—
|
|
4,687
|
|
Indefinite
|
|
|
|
Other intangible assets
|
$
|
279,018
|
|
$
|
113,848
|
|
$
|
165,170
|
|
|
|
|
Other intangible assets consisted of the following at December 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Gross
Cost
|
|
Accumulated
Amortization
|
|
Net
Balance
|
|
Estimated Useful
Life in Years
|
|
|
|
Customer relationships
|
$
|
191,919
|
|
$
|
54,889
|
|
$
|
137,030
|
|
6
|
to
|
16
|
|
Patents
|
58,787
|
|
40,079
|
|
18,708
|
|
3
|
to
|
19
|
|
Trade names (finite life)
|
10,885
|
|
5,507
|
|
5,378
|
|
3
|
to
|
15
|
|
Trade names (indefinite life)
|
7,600
|
|
—
|
|
7,600
|
|
Indefinite
|
|
|
|
Non-compete agreements
|
6,919
|
|
4,148
|
|
2,771
|
|
3
|
to
|
6
|
|
Other
|
309
|
|
141
|
|
168
|
|
2
|
to
|
12
|
|
Purchased research and development
|
4,687
|
|
—
|
|
4,687
|
|
Indefinite
|
|
|
|
Other intangible assets
|
$
|
281,106
|
|
$
|
104,764
|
|
$
|
176,342
|
|
|
|
|
4. 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
December 31,
|
|
(In thousands)
|
2019
|
|
|
|
2018
|
|
Raw materials
|
$
|
246,504
|
|
|
|
$
|
284,467
|
|
Work in process
|
11,529
|
|
|
|
12,291
|
|
Finished goods
|
43,126
|
|
|
|
43,857
|
|
Inventories, net
|
$
|
301,159
|
|
|
|
$
|
340,615
|
5. FIXED ASSETS
Fixed assets consisted of the following at:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
December 31,
|
|
(In thousands)
|
2019
|
|
|
|
2018
|
|
Fixed assets, at cost
|
$
|
599,781
|
|
|
|
$
|
559,234
|
|
Less accumulated depreciation and amortization
|
260,168
|
|
|
|
236,358
|
|
Fixed assets, net
|
$
|
339,613
|
|
|
|
$
|
322,876
|
LCI INDUSTRIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
6. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consisted of the following at:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
December 31,
|
|
(In thousands)
|
2019
|
|
|
|
2018
|
|
Employee compensation and benefits
|
$
|
36,214
|
|
|
|
$
|
33,835
|
|
Current portion of accrued warranty
|
36,760
|
|
|
|
32,180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
43,954
|
|
|
|
33,213
|
|
Accrued expenses and other current liabilities
|
$
|
116,928
|
|
|
|
$
|
99,228
|
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 (i) historical warranty costs, (ii) current trends, (iii) product mix, and (iv) 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 six months ended June 30, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
Balance at beginning of period
|
$
|
46,530
|
|
|
|
|
|
Provision for warranty expense
|
19,958
|
|
|
|
|
|
|
|
|
|
|
|
|
Warranty costs paid
|
(14,588)
|
|
|
|
|
|
Balance at end of period
|
51,900
|
|
|
|
|
|
Less long-term portion
|
15,140
|
|
|
|
|
|
Current portion of accrued warranty at end of period
|
$
|
36,760
|
|
|
|
|
7. LONG-TERM INDEBTEDNESS
Long-term indebtedness consisted of the following at:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
December 31,
|
|
(In thousands)
|
2019
|
|
|
|
2018
|
|
Revolving Credit Facility
|
$
|
190,600
|
|
|
|
$
|
240,060
|
|
Shelf-Loan Facility
|
50,000
|
|
|
|
50,000
|
|
Other
|
5,651
|
|
|
|
4,425
|
|
Unamortized deferred financing fees
|
(328)
|
|
|
|
(361)
|
|
|
245,923
|
|
|
|
294,124
|
|
Less current portion
|
(613)
|
|
|
|
(596)
|
|
Long-term indebtedness
|
$
|
245,310
|
|
|
|
$
|
293,528
|
On December 14, 2018, the Company refinanced its credit agreement with JPMorgan Chase, N.A., Wells Fargo Bank, N.A., Bank of America, N.A., and other bank lenders (the “Amended Credit Agreement”). The Amended Credit Agreement amended and restated an existing credit agreement dated April 27, 2016 and now expires on December 14, 2023.
The Amended Credit Agreement increased the revolving credit facility from $325.0 million to $600.0 million, and permits the Company to borrow up to $250.0 million in approved foreign currencies, including Australian dollars, Canadian dollars, pounds sterling and euros ($45.6 million, or €40.0 million drawn at June 30, 2019). The maximum borrowings under the credit facility may be further increased by $300.0 million in additional revolving loans or incremental term loans, subject to the consent of the lenders providing such incremental facilities and certain other conditions. Interest on borrowings under the revolving credit facility is designated from time to time by the Company as either (i) the Alternate Base Rate (defined in the Amended Credit Agreement as the greatest of (a) the Prime Rate of JPMorgan Chase Bank, N.A., (b) the federal funds effective rate plus 0.5 percent and (c) the Adjusted LIBO Rate (as defined in the Amended Credit Agreement) for a one month interest period plus 1.0 percent), plus additional interest ranging from 0.0 percent to 0.625 percent (0.0 percent at June 30, 2019) depending on the Company’s total net leverage ratio, or (ii) the Adjusted LIBO Rate for a period equal to one, two, three, six or twelve months (with the consent of each lender) as selected by the Company, plus additional interest ranging from 0.875 percent to 1.625 percent (0.875 percent at June 30, 2019) depending on the Company’s total net leverage ratio. At
LCI INDUSTRIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 2019, the Company had $2.5 million in issued, but undrawn, standby letters of credit under the revolving credit facility. Availability under the Company’s revolving credit facility was $406.9 million at June 30, 2019.
On February 24, 2014, the Company entered into a $150.0 million shelf-loan facility (as amended, the “Shelf-Loan Facility”) with PGIM, Inc. (formerly Prudential Investment Management, Inc.) and its affiliates (“Prudential”). On March 20, 2015, the Company issued $50.0 million of Senior Promissory Notes (“Series A Notes”) to Prudential for a term of
five
years, at a fixed interest rate of 3.35 percent per annum, payable quarterly in arrears. On March 29, 2019, the Company issued $50.0 million of Series B Senior Notes (the “Series B Notes”) to certain affiliates of Prudential for a term of three years, at a fixed interest rate of 3.80 percent per annum, payable quarterly in arrears, of which the entire amount was outstanding at June 30, 2019. The net proceeds of the Series B Notes were used to repay the Series A Notes. At June 30, 2019, the fair value of the Company’s long-term debt approximates the carrying value, as estimated using quoted market prices and discounted future cash flows based on similar borrowing arrangements.
The Shelf-Loan Facility provides for Prudential to consider purchasing, at the Company’s request, in one or a series of transactions, Senior Promissory Notes of the Company in the aggregate principal amount of up to $150.0 million (excluding the Company’s Series B Notes already outstanding). Prudential has no obligation to purchase the Senior Promissory Notes. Interest payable on the Senior Promissory Notes will be at rates determined by Prudential within five business days after the Company issues a request to Prudential.
Borrowings under both the Amended Credit Agreement and the Shelf-Loan Facility are secured on a pari-passu basis by first priority liens on the capital stock or other equity interests of the Company’s direct and indirect subsidiaries (including up to 65 percent of the equity interest of certain “controlled foreign corporations”).
Pursuant to the Amended Credit Agreement and Shelf-Loan Facility, the Company shall not permit its net leverage ratio to exceed certain limits, shall maintain minimum debt service coverage ratio and must meet certain other financial requirements. At June 30, 2019, the Company was in compliance with all such requirements, and expects to remain in compliance for the next twelve months.
Availability under the Amended Credit Agreement and the Shelf-Loan Facility is subject to a maximum net leverage ratio covenant which limits the amount of consolidated outstanding indebtedness on a trailing twelve-month EBITDA, as defined. This limitation did not impact the Company’s borrowing availability at June 30, 2019. The remaining availability under these facilities was $556.9 million at June 30, 2019. The Company believes the availability under the Amended Credit Agreement and Shelf-Loan Facility is adequate to finance the Company’s anticipated cash requirements for the next twelve months.
8. 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 operating leases have remaining terms of up to 12 years and some leases include options to purchase, terminate or extend for one or more years. The options are included in the lease term when it is reasonably certain that the option will be exercised. Leases with an initial term of 12 months or less are recognized in lease expense on a straight-line basis over the lease term and not recorded on the Condensed Consolidated Balance Sheet.
The Company uses its incremental borrowing rate based on information available at lease inception in determining the present value of the lease payments. The Company applies a portfolio approach for determining the incremental borrowing rate based on applicable lease terms and the current economic environment.
Certain of the Company’s lease arrangements contain lease components (such as minimum rent payments) and non-lease components (such as common-area or other maintenance costs and taxes). The Company generally accounts for each component separately based on the estimated standalone price of each component. Some of the Company’s lease arrangements include rental payments that are adjusted periodically for an index rate. These leases are initially measured using the projected payments in effect at the inception of the lease. Certain of the Company’s leased semi-tractors, trailers and forklifts include variable costs for usage or mileage. Such variable costs are expensed as incurred and included in the variable lease cost item noted in the table below. The Company’s lease agreements do not contain any significant residual value guarantees or restrictive covenants. The components of lease cost for the periods ended June 30, 2019 were as follows:
LCI INDUSTRIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Three Months Ended
June 30, 2019
|
|
Six Months Ended
June 30, 2019
|
|
Operating lease cost
|
$
|
5,873
|
|
$
|
10,782
|
|
Short-term lease cost
|
676
|
|
1,474
|
|
Variable lease cost
|
424
|
|
830
|
|
Total lease cost
|
$
|
6,973
|
|
$
|
13,086
|
Future minimum lease payments under operating leases as of June 30, 2019 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
Year Ending December 31,
|
|
|
|
|
2019 (excluding the six months ended June 30, 2019)
|
$
|
9,388
|
|
|
|
2020
|
15,729
|
|
|
|
2021
|
13,032
|
|
|
|
2022
|
9,465
|
|
|
|
2023
|
6,748
|
|
|
|
Thereafter
|
25,491
|
|
|
|
Total future minimum lease payments
(a)
|
79,853
|
|
|
|
Less: Interest
|
(14,304)
|
|
|
|
Present value of operating lease liabilities
|
$
|
65,549
|
|
|
(a)
Refer to the Company’s Annual Report on Form 10-K for disclosure of future minimum lease payments at December 31, 2018 under ASC Topic 840, the accounting standard applicable to leases prior to the adoption of Topic 842.
At June 30, 2019, the Company’s operating leases had a weighted-average remaining lease term of 6.7 years and a weighted-average discount rate of 5.7 percent.
Cash Flows
The initial right-of-use assets of $66.4 million were recognized as non-cash asset additions upon adoption of Topic 842. Additional right-of use assets of $4.3 million were recognized as non-cash asset additions that resulted from new operating lease obligations during the six months ended June 30, 2019. Cash paid for amounts included in the present value of operating lease obligations and included in cash flows from operations was $10.6 million for the six months ended June 30, 2019.
Finance Leases
The Company has various leases classified as finance leases, which are included in fixed assets, net and long-term indebtedness on the Condensed Consolidated Balance Sheets. These leases are not material to the Condensed Consolidated Financial Statements as of June 30, 2019.
Lessor
The Company has various lease arrangements to lease office space and other real estate under which the Company is the lessor. These leases are classified as operating leases and income associated with these leases is not material.
9. COMMITMENTS AND CONTINGENCIES
Contingent Consideration
In connection with several business acquisitions, if certain sales targets for the acquired products are achieved, the Company would pay additional cash consideration. The Company has recorded a liability for the fair value of this contingent
LCI INDUSTRIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
consideration at June 30, 2019, based on the present value of the expected future cash flows using a market participant’s weighted average cost of capital of 11.7 percent.
As required, the liability for this contingent consideration is measured at fair value quarterly, considering actual sales of the acquired products, updated sales projections and the updated market participant weighted average cost of capital. Depending upon the weighted average costs of capital and future sales of the products which are subject to contingent consideration, the Company could record adjustments in future periods. The following table provides a reconciliation of the Company’s contingent consideration liability for the six months ended June 30, 2019:
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
Balance at beginning of period
|
$
|
7,302
|
|
|
|
|
|
|
|
|
Payments
|
(4)
|
|
|
|
Accretion
(a)
|
409
|
|
|
|
|
|
|
|
|
Net foreign currency translation adjustment
|
15
|
|
|
|
Balance at end of the period
(b)
|
7,722
|
|
|
|
Less current portion in accrued expenses and other current liabilities
|
(5,624)
|
|
|
|
Total long-term portion in other long-term liabilities
|
$
|
2,098
|
|
|
(a)
Recorded in selling, general and administrative expenses in the Condensed Consolidated Statements of Income.
(b)
Amounts represent the fair value of estimated remaining payments. The total estimated remaining undiscounted payments as of June 30, 2019 were $9.1 million. The liability for contingent consideration expires at various dates through September 2029. Certain of the contingent consideration arrangements are subject to a maximum payment amount, while the remaining arrangements have no maximum contingent consideration.
Furrion Distribution and Supply Agreement
In July 2015, the Company entered into a
six
-year exclusive distribution and supply agreement with Furrion Limited (“Furrion”), a Hong Kong based firm that designs, engineers and supplies premium electronics. This agreement provides the Company with the rights to distribute Furrion’s complete line of products to OEMs and aftermarket customers in the RV, specialty vehicle, utility trailer, horse trailer, marine, transit bus and school bus industries throughout the United States and Canada. Furrion currently supplies a premium line of televisions, sound systems, navigation systems, wireless backup cameras, solar prep units, power solutions and kitchen appliances, primarily to the RV industry.
In connection with this agreement, the Company entered into minimum purchase obligations (“MPOs”), which Furrion and the Company agreed to review after the first year on an annual basis and adjust as necessary based upon current economic and industry conditions, the development and customer acceptance of new Furrion products, competition and other factors which impact demand for Furrion products.
Subject to agreed upon revisions to the MPOs, Furrion has the right to either terminate the distribution agreement with six months’ notice or remove exclusivity from the Company if the Company misses an MPO in any given year by more than ten percent, after taking into account excess purchases from the previous year. If exclusivity is withdrawn, the Company at its election may terminate the distribution agreement with six months’ notice. Upon termination of the agreement, Furrion has agreed to purchase from the Company any non-obsolete stocks of Furrion products at the cost paid by the Company.
Product Recalls
From time to time, the Company cooperates with and assists its customers on their product recalls and inquiries, and occasionally receives inquiries directly from the National Highway Traffic Safety Administration regarding reported incidents involving the Company’s products. As a result, the Company has incurred expenses associated with product recalls from time to time, and may incur expenditures for future investigations or product recalls.
Environmental
The Company’s operations are subject to certain Federal, state and local regulatory requirements relating to the use, storage, discharge and disposal of hazardous materials used during the manufacturing processes. Although the Company believes its operations have been consistent with prevailing industry standards, and are in substantial compliance with
LCI INDUSTRIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
applicable environmental laws and regulations, one or more of the Company’s current or former operating sites, or adjacent sites owned by third-parties, have been affected, and may in the future be affected, by releases of hazardous materials. As a result, the Company may incur expenditures for future investigation and remediation of these sites, including in conjunction with voluntary remediation programs or third-party claims.
Litigation
In the normal course of business, the Company is subject to proceedings, lawsuits, regulatory agency inquiries and other claims. All such matters are subject to uncertainties and outcomes that are not predictable with assurance. While these matters could materially affect operating results when resolved in future periods, management believes that, after final disposition, including anticipated insurance recoveries in certain cases, any monetary liability or financial impact to the Company beyond that provided in the Condensed Consolidated Balance Sheet as of June 30, 2019, would not be material to the Company’s financial position or annual results of operations.
10. STOCKHOLDERS’ EQUITY
The following table summarizes information about shares of the Company’s common stock at:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
December 31,
|
|
(In thousands)
|
2019
|
|
|
|
2018
|
|
Common stock authorized
|
75,000
|
|
|
|
75,000
|
|
Common stock issued
|
28,113
|
|
|
|
27,948
|
|
Treasury stock
|
3,087
|
|
|
|
3,087
|
The following reconciliation details the denominator used in the computation of basic and diluted earnings per share for the periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
|
Six Months Ended
June 30,
|
|
|
|
(In thousands)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Weighted average shares outstanding for basic earnings per share
|
25,024
|
|
25,233
|
|
24,963
|
|
25,195
|
|
Common stock equivalents pertaining to stock-based awards
|
67
|
|
221
|
|
42
|
|
332
|
|
Weighted average shares outstanding for diluted earnings per share
|
25,091
|
|
25,454
|
|
25,005
|
|
25,527
|
|
|
|
|
|
|
|
|
|
|
Equity instruments excluded from diluted net earnings per share calculation as the effect would have been anti-dilutive
|
122
|
|
464
|
|
122
|
|
463
|
LCI INDUSTRIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The table below summarizes the regular quarterly dividends declared and paid during the periods ended June 30, 2019 and December 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands, except per share data)
|
Per Share
|
|
Record Date
|
|
Payment Date
|
|
Total Paid
|
|
First Quarter 2018
|
$
|
0.55
|
|
03/16/18
|
|
03/29/18
|
|
$
|
13,858
|
|
Second Quarter 2018
|
0.60
|
|
06/04/18
|
|
06/15/18
|
|
15,127
|
|
Third Quarter 2018
|
0.60
|
|
08/31/18
|
|
09/14/18
|
|
15,129
|
|
Fourth Quarter 2018
|
0.60
|
|
11/26/18
|
|
12/07/18
|
|
15,156
|
|
Total 2018
|
$
|
2.35
|
|
|
|
|
|
$
|
59,270
|
|
|
|
|
|
|
|
|
|
|
First Quarter 2019
|
$
|
0.60
|
|
03/08/19
|
|
03/22/19
|
|
$
|
14,999
|
|
Second Quarter 2019
|
0.65
|
|
06/07/19
|
|
06/21/19
|
|
16,267
|
|
|
|
|
|
|
|
|
|
|
Total 2019
|
$
|
1.25
|
|
|
|
|
|
$
|
31,266
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 LCI Industries Equity Award and Incentive Plan, as Amended and Restated (“the 2011 Plan”) or the 2018 Plan, as applicable, are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
Weighted Average Price
|
|
Outstanding at December 31, 2018
|
264,406
|
|
$
|
83.84
|
|
Issued
|
3,436
|
|
82.84
|
|
Granted
|
248,043
|
|
80.89
|
|
Dividend equivalents
|
5,642
|
|
81.42
|
|
Forfeited
|
(6,175)
|
|
91.37
|
|
Vested
|
(148,538)
|
|
74.58
|
|
Outstanding at June 30, 2019
|
366,814
|
|
$
|
84.45
|
Stock Awards and Performance Stock Units
The 2011 Plan provides for stock awards and the 2018 Plan provides for performance stock units (“PSUs”) that vest at a specific future date based on achievement of specified performance conditions.
LCI INDUSTRIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Transactions in performance-based stock awards and PSUs under the 2011 Plan or the 2018 Plan, as applicable, are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
Weighted Average Price
|
|
Outstanding at December 31, 2018
|
187,368
|
|
$
|
91.39
|
|
|
|
|
|
|
Granted
|
48,995
|
|
78.11
|
|
Dividend equivalents
|
1,998
|
|
81.33
|
|
Forfeited
|
(8,459)
|
|
106.10
|
|
Vested
|
(102,434)
|
|
77.93
|
|
Outstanding at June 30, 2019
|
127,468
|
|
$
|
96.12
|
11. FAIR VALUE MEASUREMENTS
Recurring
The following table presents the Company’s liabilities measured at fair value on a recurring basis at:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
|
|
|
|
|
|
December 31, 2018
|
|
|
|
|
|
|
|
(In thousands)
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration
|
$
|
7,722
|
|
$
|
—
|
|
$
|
—
|
|
7,722
|
|
$
|
7,302
|
|
$
|
—
|
|
$
|
—
|
|
$
|
7,302
|
|
Derivative liabilities
|
2,519
|
|
—
|
|
2,519
|
|
—
|
|
1,108
|
|
—
|
|
1,108
|
|
—
|
Contingent Consideration Related to Acquisitions
Liabilities for contingent consideration related to acquisitions were estimated at fair value using management’s projections for long-term sales forecasts, including assumptions regarding market share gains and future industry-specific economic and market conditions, and a market participant’s weighted average cost of capital. Over the next six years, the Company’s long-term sales growth forecasts for products subject to contingent consideration arrangements average approximately 13 percent per year. For further information on the inputs used in determining the fair value, and a roll-forward of the contingent consideration liability, see Note 9 of the Notes to Condensed Consolidated Financial Statements.
Changes in either of the inputs in isolation would result in a change in the fair value measurement. A change in the assumptions used for sales forecasts would result in a directionally similar change in the fair value liability, while a change in the weighted average cost of capital would result in a directionally opposite change in the fair value liability. If there is an increase in the fair value liability, the Company would record a charge to selling, general and administrative expenses, and if there is a decrease in the fair value liability, the Company would record a benefit in selling, general and administrative expenses.
Derivative Instruments
The Company’s objectives in using commodity derivatives are to add stability to expense and to manage its exposure to certain commodity price movements. To accomplish this objective, the Company uses commodity swaps as part of its commodity risk management strategy. Commodity swaps designated as cash flow hedges involve fixing the price on a fixed volume of a commodity on specified dates. The commodity swaps are typically cash settled for their fair value at or close to their settlement dates.
At June 30, 2019, the Company had six commodity swap derivative instruments for a total of 38.8 million pounds of steel used to hedge its commodity price risk on a portion of the exposure to movements associated with steel costs at an average steel price of $0.37 per pound. These derivatives expire at various dates through April 2020. At December 31, 2018, the Company had five commodity swap derivative instruments for a total of 34.4 million pounds of steel at an average steel price of $0.39 per pound. These derivatives are designated and qualify as cash flow hedges of commodity price risk; therefore, the gain or loss on the derivative is recorded in accumulated other comprehensive income (loss) and subsequently reclassified in the period during which the hedged transactions affects earnings within the same income statement line item as the earnings effect
LCI INDUSTRIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
of the hedged transaction. These derivative instruments were valued at fair value using a market approach based on the quoted market prices of similar instruments at the end of the reporting period. At June 30, 2019, the $2.5 million corresponding liability was recorded in accrued expenses and other current liabilities as reflected in the Condensed Consolidated Balance Sheets. At December 31, 2018, the $1.1 million corresponding liability was recorded in accrued expenses and other current liabilities ($0.9 million) and other long-term liabilities ($0.2 million) as reflected in the Consolidated Balance Sheets.
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 89 percent and 91 percent of consolidated net sales for the six months ended June 30, 2019 and 2018, respectively, manufactures or distributes a broad array of engineered components for the leading OEMs in the recreation and industrial product markets, consisting of RVs and adjacent industries, including buses; trailers used to haul boats, livestock, equipment and other cargo; trucks; boats; trains; manufactured homes; and modular housing. Approximately 61 percent of the Company’s OEM Segment net sales for the six months ended June 30, 2019 were of components for travel trailer and fifth-wheel RVs.
The Aftermarket Segment, which accounted for 11 percent and nine percent of consolidated net sales for the six months ended June 30, 2019 and 2018, respectively, supplies engineered components to the related aftermarket channels of the recreation and industrial product markets, primarily to retail dealers, wholesale distributors and service centers. The Aftermarket Segment also includes the sale of replacement glass and awnings to fulfill insurance claims.
Decisions concerning the allocation of the Company’s resources are made by the Company’s chief operating decision maker (“CODM”), with oversight by the Board of Directors. The CODM evaluates the performance of each segment based upon segment operating profit or loss, generally defined as income or loss before interest and income taxes. Decisions concerning the allocation of resources are also based on each segment’s utilization of assets. Management of debt is a corporate function. The accounting policies of the OEM and Aftermarket Segments are the same as those described in Note 2 of the Notes to Consolidated Financial Statements of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.
The following table presents the Company’s revenues disaggregated by segment and geography based on the billing address of the Company’s customers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2019
|
|
|
|
|
|
Three Months Ended June 30, 2018
|
|
|
|
|
|
(In thousands)
|
U.S.
(a)
|
|
Int’l
(b)
|
|
Total
|
|
U.S.
(a)
|
|
Int’l
(b)
|
|
Total
|
|
OEM Segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
RV OEMs:
|
|
|
|
|
|
|
|
|
|
|
|
|
Travel trailers and fifth-wheels
|
$
|
340,025
|
|
$
|
3,026
|
|
$
|
343,051
|
|
$
|
397,511
|
|
$
|
1,953
|
|
$
|
399,464
|
|
Motorhomes
|
28,943
|
|
12,414
|
|
41,357
|
|
37,553
|
|
11,518
|
|
49,071
|
|
Adjacent Industries OEMs
|
155,754
|
|
13,206
|
|
168,960
|
|
158,880
|
|
9,503
|
|
168,383
|
|
Total OEM Segment net sales
|
524,722
|
|
28,646
|
|
553,368
|
|
593,944
|
|
22,974
|
|
616,918
|
|
Aftermarket Segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Aftermarket Segment net sales
|
72,870
|
|
2,830
|
|
75,700
|
|
64,429
|
|
3,108
|
|
67,537
|
|
Total net sales
|
$
|
597,592
|
|
$
|
31,476
|
|
$
|
629,068
|
|
$
|
658,373
|
|
$
|
26,082
|
|
$
|
684,455
|
LCI INDUSTRIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2019
|
|
|
|
|
|
Six Months Ended June 30, 2018
|
|
|
|
|
|
(In thousands)
|
U.S.
(a)
|
|
Int’l
(b)
|
|
Total
|
|
U.S.
(a)
|
|
Int’l
(b)
|
|
Total
|
|
OEM Segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
RV OEMs:
|
|
|
|
|
|
|
|
|
|
|
|
|
Travel trailers and fifth-wheels
|
$
|
653,392
|
|
$
|
6,530
|
|
$
|
659,922
|
|
$
|
801,253
|
|
$
|
3,168
|
|
$
|
804,421
|
|
Motorhomes
|
60,864
|
|
25,493
|
|
86,357
|
|
80,959
|
|
21,027
|
|
101,986
|
|
Adjacent Industries OEMs
|
312,490
|
|
26,379
|
|
338,869
|
|
292,288
|
|
18,402
|
|
310,690
|
|
Total OEM Segment net sales
|
1,026,746
|
|
58,402
|
|
1,085,148
|
|
1,174,500
|
|
42,597
|
|
1,217,097
|
|
Aftermarket Segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Aftermarket Segment net sales
|
129,402
|
|
6,690
|
|
136,092
|
|
111,775
|
|
6,075
|
|
117,850
|
|
Total net sales
|
$
|
1,156,148
|
|
$
|
65,092
|
|
$
|
1,221,240
|
|
$
|
1,286,275
|
|
$
|
48,672
|
|
$
|
1,334,947
|
(a)
Net sales to customers in the United States of America
(b)
Net sales to customers in countries domiciled outside of the United States of America
The following table presents the Company’s operating profit by segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
|
Six Months Ended
June 30,
|
|
|
|
(In thousands)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Operating profit:
|
|
|
|
|
|
|
|
|
OEM Segment
|
$
|
52,679
|
|
$
|
53,591
|
|
$
|
93,087
|
|
$
|
107,531
|
|
Aftermarket Segment
|
12,978
|
|
10,497
|
|
20,325
|
|
16,377
|
|
Total operating profit
|
$
|
65,657
|
|
$
|
64,088
|
|
$
|
113,412
|
|
$
|
123,908
|
The following table presents the Company’s revenue disaggregated by product:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
|
Six Months Ended
June 30,
|
|
|
|
(In thousands)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
OEM Segment:
|
|
|
|
|
|
|
|
|
Chassis, chassis parts and slide-out mechanisms
|
$
|
213,209
|
|
$
|
247,811
|
|
$
|
417,592
|
|
$
|
500,514
|
|
Windows and doors
|
156,064
|
|
169,372
|
|
307,983
|
|
318,892
|
|
Furniture and mattresses
|
93,562
|
|
105,278
|
|
184,919
|
|
210,796
|
|
Axles and suspension solutions
|
33,957
|
|
33,148
|
|
66,192
|
|
66,753
|
|
Other
|
56,576
|
|
61,309
|
|
108,462
|
|
120,142
|
|
Total OEM Segment net sales
|
553,368
|
|
616,918
|
|
1,085,148
|
|
1,217,097
|
|
Total Aftermarket Segment net sales
|
75,700
|
|
67,537
|
|
136,092
|
|
117,850
|
|
Total net sales
|
$
|
629,068
|
|
$
|
684,455
|
|
$
|
1,221,240
|
|
$
|
1,334,947
|
LCI INDUSTRIES
ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Company’s Condensed Consolidated Financial Statements and Notes thereto included in Item 1 of Part 1 of this Report, as well as the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.
LCI Industries (“LCII”, and collectively with its subsidiaries, the “Company”), through its wholly-owned subsidiary, Lippert Components, Inc. and its subsidiaries (collectively, “Lippert Components” or “LCI”), supplies, domestically and internationally, a broad array of engineered components for the leading original equipment manufacturers (“OEMs”) in the recreation and industrial product markets, consisting of recreational vehicles (“RVs”) and adjacent industries, including buses; trailers used to haul boats, livestock, equipment and other cargo; trucks; boats; 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.
The Company has two reportable segments, the OEM Segment and the Aftermarket Segment. Intersegment sales are insignificant. At June 30, 2019, the Company operated over 65 manufacturing and distribution facilities located throughout the United States and in Canada, Ireland, Italy and the United Kingdom. See Note 12 of the Notes to the Condensed Consolidated Financial Statements for further information regarding the Company’s segments.
The Company’s OEM Segment manufactures or distributes a broad array of engineered components for the leading OEMs of leisure and mobile transportation industries. Approximately 61 percent of the Company’s OEM Segment net sales for the twelve months ended June 30, 2019 were of components for travel trailer and fifth-wheel RVs, including:
|
|
|
|
|
|
|
|
● Steel chassis and related components
|
● Furniture and mattresses
|
|
● Axles and suspension solutions
|
● Electric and manual entry steps
|
|
● Slide-out mechanisms and solutions
|
● Awnings and awning accessories
|
|
● Thermoformed bath, kitchen and other products
|
● Electronic components
|
|
● Vinyl, aluminum and frameless windows
|
● Appliances
|
● Manual, electric and hydraulic stabilizer and
leveling systems
|
● Televisions, sound systems, navigation
systems and backup cameras
|
|
● Entry, luggage, patio and ramp doors
|
● Other accessories
|
The Aftermarket Segment supplies many of these engineered components to the related aftermarket channels of the recreation and industrial product markets, primarily to retail dealers, wholesale distributors and service centers. The Aftermarket Segment also includes the sale of replacement glass and awnings to fulfill insurance claims.
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 and consumer confidence on retail sales of RVs and other products for which the Company sells its 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 may be different than in prior years. Additionally, sales of engineered components to the aftermarket channels of these industries tend to be counter-seasonal.
INDUSTRY BACKGROUND
OEM Segment
Recreational Vehicle Industry
An RV is a vehicle designed as temporary living quarters for recreational, camping, travel or seasonal use. RVs may be motorized (motorhomes) or towable (travel trailers, fifth-wheel travel trailers, folding camping trailers and truck campers).
The annual sales cycle for the RV industry generally starts in October after the “Open House” in Elkhart, Indiana where many of the largest RV OEMs display product to RV retail dealers, and ends after the conclusion of the summer selling
LCI INDUSTRIES
ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
season in September in the following calendar year. Between October and March, industry-wide wholesale shipments of travel trailer and fifth-wheel RVs have historically exceeded retail sales as dealers build inventories to support anticipated sales. Between April and September, the spring and summer selling seasons, retail sales of travel trailer and fifth-wheel RVs have historically exceeded industry-wide wholesale shipments. Despite a recent disruption in wholesale shipments as dealers normalize their inventory levels, the Company expects the inventory normalization to be in the final stages of correction and return to the normal wholesale cycle in late 2019.
According to the Recreation Vehicle Industry Association (“RVIA”), industry-wide wholesale shipments of travel trailer and fifth-wheel RVs, the Company’s primary RV market, decreased 20 percent to 185,700 units in the first six months of 2019, as compared to the same period of 2018. The decrease was a result of an estimated 20,600 units, or nine percent, decrease in retail sales in the first six months of 2019, as compared to the same period of 2018, and a normalization of retail inventories as evidenced by RV dealers decreasing inventory levels by an estimated 24,600 units for the first six months of 2019, compared to an increase in inventory levels of 1,500 units in the same period of 2018. Retail demand is typically revised upward in subsequent months, primarily due to delayed RV registrations.
While the Company measures its OEM Segment RV sales against industry-wide wholesale shipment statistics, the underlying health of the RV industry is determined by retail demand. A comparison of the number of units and the year-over-year percentage change in industry-wide wholesale shipments and retail sales of travel trailers and fifth-wheel RVs, as reported by Statistical Surveys, Inc., as well as the resulting estimated change in dealer inventories, for both the United States and Canada, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
Wholesale
|
|
|
|
Retail
|
|
|
|
Unit Impact on
|
|
|
Units
|
|
Change
|
|
Units
|
|
Change
|
|
Dealer Inventories
|
|
Quarter ended June 30, 2019
|
101,000
|
|
(13)%
|
|
|
133,300
|
|
(11)%
|
|
|
(32,300)
|
|
Quarter ended March 31, 2019
|
84,700
|
|
(28)%
|
|
|
77,000
|
|
(6)%
|
|
|
7,700
|
|
Quarter ended December 31, 2018
|
90,300
|
|
(17)%
|
|
|
66,800
|
|
(2)%
|
|
|
23,500
|
|
Quarter ended September 30, 2018
|
92,300
|
|
(11)%
|
|
|
123,600
|
|
2%
|
|
|
(31,300)
|
|
Twelve months ended June 30, 2019
|
368,300
|
|
(17)%
|
|
|
400,700
|
|
(5)%
|
|
|
(32,400)
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended June 30, 2018
|
115,500
|
|
—%
|
|
|
149,300
|
|
7%
|
|
|
(33,800)
|
|
Quarter ended March 31, 2018
|
116,900
|
|
15%
|
|
|
81,600
|
|
12%
|
|
|
35,300
|
|
Quarter ended December 31, 2017
|
108,200
|
|
20%
|
|
|
68,100
|
|
17%
|
|
|
40,100
|
|
Quarter ended September 30, 2017
|
103,900
|
|
26%
|
|
|
120,600
|
|
11%
|
|
|
(16,700)
|
|
Twelve months ended June 30, 2018
|
444,500
|
|
14%
|
|
|
419,600
|
|
11%
|
|
|
24,900
|
|
|
|
|
|
|
|
|
|
|
|
According to the RVIA, industry-wide wholesale shipments of motorhome RVs in the first six months of 2019 decreased 18 percent to 25,500 units compared to the same period of 2018. Additionally, retail demand for motorhome RVs decreased 14 percent in the first six months of 2019, following a two percent decrease in retail demand in full year 2018.
The RVIA has projected a modest decrease in industry-wide wholesale shipments of travel trailer and fifth-wheel RVs for 2019. Several RV OEMs, however, are introducing new product lines and additional features. Retail sales of RVs historically have been closely tied to general economic conditions, as well as consumer confidence, which was above historical averages in 2018. Industry resources report strong attendance and high consumer interest at RV shows around the United States and Canada in the first half of 2019.
Over the long term, the Company expects RV industry sales to be aided by positive demographics and the continued popularity of the “RV Lifestyle”. The number of consumers between the ages of 55 and 70 are projected to total 56 million by 2020, 27 percent higher than in 2010, according to U.S. Census figures, and one in ten vehicle-owning households between the ages of 50 and 64 own at least one RV. The RVIA reported much of the success of the RV industry has been driven by the Baby Boomer generation. The size of that generation is beginning to wane, and younger generations, Generation X and Millennials, are becoming more relevant to future industry growth. Generation X and Millennials are more diverse, requiring new and creative marketing approaches to attract them to the RV industry. The RVIA has an advertising campaign promoting the “RV Lifestyle” targeted at both parents aged 30 - 49 with children at home, as well as couples aged 50 - 64 with no children
LCI INDUSTRIES
ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
at home. In addition, the RV OEMs have developed more entry level units, specifically targeting younger families, in both towables and motorhomes. The popularity of traveling in RVs to NASCAR and other sporting events, more family-oriented domestic vacations, and using RVs as second homes, are trends that could continue to motivate consumer demand for RVs. RVIA studies indicate RV vacations cost significantly less than other forms of vacation travel, even when factoring in fuel prices and the cost of RV ownership. More details can be found at www.RVIA.org.
Adjacent Industries
The Company’s portfolio of products used in RVs can also be used in other applications, including buses; trailers used to haul boats, livestock, equipment and other cargo; trucks; boats; trains; manufactured homes; and modular housing (collectively, “Adjacent Industries”). In many cases, OEM customers of the Adjacent Industries are affiliated with RV OEMs through related subsidiaries. The Company believes there are significant opportunities in these Adjacent Industries and, as a result, three of the last four business acquisitions completed by the Company through the date of this report were focused in Adjacent Industries.
The estimated potential content per unit the Company may supply to the Adjacent Industries varies by OEM product and differs from RVs. As a means to understand the potential of each of these markets, management reviews the number of retail units sold. The following are key target markets for Adjacent Industries component sales:
•
Enclosed trailers. According to Statistical Surveys, approximately 214,000 and 216,000 enclosed trailers were sold in 2018 and 2017, respectively.
•
Traditional power boats. Statistical Surveys also reported approximately 210,500 and 203,200 traditional power boats were sold in 2018 and 2017, respectively. Traditional power boats include bass, deck, jet, pontoon, ski-wake, and other boats. Included in this total, Statistical Surveys reported approximately 55,900 and 52,400 pontoon boats were sold in 2018 and 2017, respectively.
•
School buses. According to School Bus Fleet, there were approximately 44,400 school buses sold in each of 2018 and 2017.
•
Manufactured housing. According to the Institute for Building Technology and Safety, there were approximately 96,600 and 92,900 manufactured home wholesale shipments in 2018 and 2017, respectively.
Aftermarket Segment
Many of the Company’s OEM Segment products are also sold through various aftermarket channels, including dealerships, wholesale distributors and service centers, as well as direct to retail customers via the Internet. This includes discretionary accessories and replacement service parts. The Company has teams dedicated to product technical and installation training as well as marketing support for its Aftermarket Segment customers. The Company also supports three call centers to provide responses to customers for both product delivery and technical support. This support is designed for a rapid response to critical repairs, so customer downtime is minimized. The Aftermarket Segment also includes the sale of replacement glass and awnings to fulfill the insurance claims industry. It also has expanded into biminis, covers, buoys, and fenders to the marine industry. Many of the optional upgrades and non-critical replacements are purchased outside the normal product selling seasons, thereby causing Aftermarket Segment sales to be counter-seasonal.
According to the RVIA, estimated RV ownership in the United States has increased to over nine million units. Additionally, as a result of a vibrant secondary market, one third of current owners purchased their RV new while the remaining two-thirds purchased a previously owned RV. This vibrant secondary market is a key driver for aftermarket sales, as the Company anticipates owners of previously owned RVs will likely upgrade their units as well as replace parts and accessories which have been subjected to normal wear and tear.
LCI INDUSTRIES
ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
RESULTS OF OPERATIONS
Consolidated Highlights
•
Consolidated net sales in the second quarter of 2019 were $629.1 million, eight percent lower than consolidated net sales for the same period of 2018 of $684.5 million. Acquisitions completed by the Company over the twelve months ended June 30, 2019, added $8.6 million in net sales in the second quarter of 2019. The Company organically increased sales to the Aftermarket Segment and international markets.
•
Net income for the second quarter of 2019 was $47.5 million, or $1.89 per diluted share, compared to net income of $47.2 million, or $1.86 per diluted share, for the same period of 2018.
•
Consolidated operating profit during the second quarter of 2019 was $65.7 million compared to $64.1 million in the same period of 2018. Operating profit margin was 10.4 percent in the second quarter of 2019 compared to nine percent in the same period of 2018, primarily due to pricing changes of targeted products and operational efficiencies.
•
The cost of aluminum and steel used in certain of the Company’s manufactured components continued to be elevated in the second quarter of 2019 compared to the same period for 2018, primarily driven by tariffs on these commodities. Raw material costs continue to fluctuate and are expected to remain volatile. Prices have decreased from recent highs and are expected to favorably impact margins while being offset, in part, by contractual reductions in customer selling prices that are indexed to select commodities.
•
The Company seeks to continuously manage its labor cost, particularly indirect labor, while supporting the growth of the business. Lean manufacturing teams continue working to reduce cost and implement processes to better utilize manufacturing capacity. The Company has also reduced direct labor attrition, which improves efficiency and reduces other costs associated with workforce turnover.
•
The effective tax rate for the six months ended June 30, 2019 was higher than the comparable prior year period, primarily due to a year-over-year reduction in the excess tax benefits related to the vesting of equity-based compensation awards and an increase in state income taxes, as discussed below under “Income Taxes.”
•
In March and June 2019, the Company paid a quarterly dividend of $0.60 and $0.65 per share, aggregating to $15.0 million and $16.3 million, respectively.
OEM Segment - Second Quarter
Net sales of the OEM Segment in the second quarter of 2019 decreased 10 percent, or $63.6 million, compared to the same period of 2018. Net sales of components to OEMs were to the following markets for the three months ended June 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
2019
|
|
2018
|
|
Change
|
|
RV OEMs:
|
|
|
|
|
|
|
Travel trailers and fifth-wheels
|
$
|
343,051
|
|
$
|
399,464
|
|
(14)
|
%
|
|
Motorhomes
|
41,357
|
|
49,071
|
|
(16)
|
%
|
|
Adjacent Industries OEMs
|
168,960
|
|
168,383
|
|
—
|
%
|
|
Total OEM Segment net sales
|
$
|
553,368
|
|
$
|
616,918
|
|
(10)
|
%
|
According to the RVIA, industry-wide wholesale unit shipments for the three months ended June 30 were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
Change
|
|
Travel trailer and fifth-wheel RVs
|
101,000
|
|
115,500
|
|
(13)
|
%
|
|
Motorhomes
|
12,800
|
|
15,600
|
|
(18)
|
%
|
The trend in the Company’s average product content per RV produced is an indicator of the Company’s overall market share of components for new RVs. The Company’s average product content per type of RV, calculated based upon the
LCI INDUSTRIES
ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Company’s net sales of components to domestic RV OEMs for the different types of RVs produced for the twelve months ended June 30, divided by the industry-wide wholesale shipments of the different product mix of RVs for the same period, was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Content per:
|
2019
|
|
2018
|
|
Change
|
|
Travel trailer and fifth-wheel RV
|
$
|
3,486
|
|
$
|
3,412
|
|
2
|
%
|
|
Motorhome
|
$
|
2,468
|
|
$
|
2,438
|
|
1
|
%
|
The Company’s 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 market share gains, acquisitions, new product introductions and changes in selling prices for the Company’s products, as well as changes in the types of RVs produced industry-wide.
The Company’s decrease in net sales to RV OEMs of travel trailers, fifth-wheel, and motorhome components during the second quarter of 2019 related to declines in industry-wide wholesale unit shipments. The net sales decrease was partially offset by content gains during the second quarter of 2019.
Operating profit of the OEM Segment was $52.7 million in the second quarter of 2019, a decrease of $0.9 million compared to the same period of 2018. While the operating profit of the OEM Segment decreased, the operating profit margin improved in the second quarter of 2019 compared to the same period of 2018. The operating profit margin of the OEM Segment in the second quarter of 2019 was positively impacted by:
•
Pricing changes of targeted products, resulting in an increase of $11.8 million in net sales of these products in the second quarter of 2019 compared to the same period of 2018.
•
Investments over the past several years to improve operating efficiencies, including lean manufacturing initiatives, increased use of automation and employee retention initiatives, which reduced direct labor costs by $5.3 million in second quarter of 2019 compared to the same period of 2018.
•
Reductions in insurance related costs of $5.3 million in the second quarter of 2019.
Partially offset by:
•
Fixed costs being spread over an OEM Segment sales base that decreased by $63.6 million.
•
Higher material costs for certain raw materials and product mix had a negative impact on material margins by $4.4 million in the second quarter of 2019. Material costs are subject to global supply and demand forces and are expected to remain volatile.
•
Significant investments over the past couple of years in manufacturing capacity to prepare for future sales growth resulting in higher facility costs, including rent, utilities, and depreciation expense that negatively impacted operating profit by $1.6 million in the second quarter of 2019.
OEM Segment – Year to Date
Net sales of the OEM Segment in the first six months of 2019 decreased 11 percent, or $131.9 million, compared to the first six months of 2018. Net sales of components to OEMs were to the following markets for the six months ended June 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
2019
|
|
2018
|
|
Change
|
|
RV OEMs:
|
|
|
|
|
|
|
Travel trailers and fifth-wheels
|
$
|
659,922
|
|
$
|
804,421
|
|
(18)
|
%
|
|
Motorhomes
|
86,357
|
|
101,986
|
|
(15)
|
%
|
|
Adjacent Industries OEMs
|
338,869
|
|
310,690
|
|
9
|
%
|
|
Total OEM Segment net sales
|
$
|
1,085,148
|
|
$
|
1,217,097
|
|
(11)
|
%
|
According to the RVIA, industry-wide wholesale unit shipments for the six months ended June 30, were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
Change
|
|
Travel trailer and fifth-wheel RVs
|
185,700
|
|
232,400
|
|
(20)
|
%
|
|
Motorhomes
|
25,500
|
|
33,100
|
|
(23)
|
%
|
LCI INDUSTRIES
ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
The Company’s decrease in net sales to RV OEMs of travel trailers, fifth-wheel, and motorhome components during the first six months of 2019 related to declines in industry-wide wholesale unit shipments. The net sales decrease was partially offset by content gains during the first six months of 2019.
The Company’s net sales to Adjacent Industries OEMs increased during the first six months of 2019, primarily due to acquisitions completed in 2019 and 2018 and market share gains. OEM marine net sales were $92 million in the first six months of 2019, an increase of $16 million compared to the same period of 2018. The Company continues to believe there are significant opportunities in Adjacent Industries.
Operating profit of the OEM Segment was $93.1 million in the first six months of 2019, a decrease of $14.4 million compared to the same period of 2018. The operating profit margin of the OEM Segment in the first six months of 2019 also decreased compared to the same period of 2018 and was negatively impacted by:
•
Fixed costs being spread over an OEM Segment sales base that decreased by $131.9 million.
•
Higher material costs for certain raw materials. Steel, aluminum and foam costs continued to be at elevated levels in the first six months of 2019 primarily driven by tariffs on steel and aluminum, which increased material costs by $12.1 million in the first six months of 2019 compared to the same period of 2018. Material costs are subject to global supply and demand forces and are expected to remain volatile.
•
Higher production facility costs due to acquired businesses and capacity expansions which negatively impacted operating profit by $7.4 million in the first six months of 2019.
Partially offset by:
•
Pricing changes of targeted products, resulting in an increase of $30.7 million in net sales of these products for the first six months of 2019 compared to the same period of 2018.
•
Investments over the past several years to improve operating efficiencies, including lean manufacturing initiatives, increased use of automation and employee retention initiatives, which reduced direct labor costs by $10.2 million during the first six months of 2019 compared to the first six months of 2018.
•
Reductions in insurance related costs of $6.8 million in the first six months of 2019.
Aftermarket Segment - Second Quarter
Net sales of the Aftermarket Segment in the second quarter of 2019 increased 12 percent, or $8.2 million, compared to the same period of 2018. Net sales of components in the Aftermarket Segment were as follows for the three months ended June 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
2019
|
|
2018
|
|
Change
|
|
Total Aftermarket Segment net sales
|
$
|
75,700
|
|
$
|
67,537
|
|
12
|
%
|
The Company’s net sales to the Aftermarket Segment increased during the second quarter of 2019 primarily due to the Company’s focus on building out well qualified, customer-focused teams and infrastructure to service this market.
Operating profit of the Aftermarket Segment was $13.0 million in the second quarter of 2019, an increase of $2.5 million compared to the same period of 2018, primarily due to an increase in net sales. Operating profit margin of the Aftermarket Segment was 17.1 percent in the second quarter of 2019, compared to 15.5 percent in the same period of 2018.
Aftermarket Segment – Year to Date
Net sales of the Aftermarket Segment in the first six months of 2019 increased 15 percent, or $18.2 million, compared to the same period of 2018. Net sales of components in the Aftermarket Segment were as follows for the six months ended June 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
2019
|
|
2018
|
|
Change
|
|
Total Aftermarket Segment net sales
|
$
|
136,092
|
|
$
|
117,850
|
|
15
|
%
|
LCI INDUSTRIES
ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
The Company’s net sales to the Aftermarket Segment increased during the first six months of 2019 primarily due to an increase in net sales, acquisitions, and the Company’s focus on building out well qualified, customer-focused teams and infrastructure to service this market.
Operating profit of the Aftermarket Segment was $20.3 million in the first six months of 2019, an increase of $3.9 million compared to the same period of 2018, primarily due to an increase in net sales. Operating profit margin of the Aftermarket Segment was 14.9 percent in the first six months of 2019, compared to 13.9 percent in the same period of 2018.
Income Taxes
The effective tax rates for the six months ended June 30, 2019 and 2018 were 25 percent and 22 percent, respectively. The effective tax rate for the six months ended June 30, 2019 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 as a component of the provision for income taxes attributable to the adoption of Accounting Standards Update (“ASU”) 2016-09, and Federal and Indiana research and development credits. The increase in effective tax rate for the six months ended June 30, 2019 as compared to the same period in 2018 was due primarily to a reduction in the excess tax benefits related to the vesting of equity-based compensation awards and an increase in state income taxes.
LIQUIDITY AND CAPITAL RESOURCES
The Condensed Consolidated Statements of Cash Flows reflect the following for the six months ended June 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
2019
|
|
2018
|
|
Net cash flows provided by operating activities
|
$
|
180,115
|
|
$
|
78,929
|
|
Net cash flows used in investing activities
|
(44,065)
|
|
(206,970)
|
|
Net cash flows (used in) provided by financing activities
|
(88,500)
|
|
119,843
|
|
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
|
(1,818)
|
|
—
|
|
Net increase (decrease) in cash, cash equivalents, and restricted cash
|
$
|
45,732
|
|
$
|
(8,198)
|
Cash Flows from Operations
Net cash flows provided by operating activities were $180.1 million in the first six months of 2019, compared to $78.9 million in the first six months of 2018. Net assets and liabilities in the first six months of 2019 generated $109.5 million more cash than the same period in the prior year. This was partially offset by a $8.3 million decrease in net income, adjusted for depreciation and amortization, stock-based compensation expense, and non-cash items. Reduced inventory levels as the Company worked through elevated year-end inventory levels partially offset by a reduction in accounts receivable due to a decrease of net sales in the second quarter of 2019 compared to the same period of 2018, were the primary sources of cash in net assets.
Over the long term, based on the Company’s historical collection and payment patterns, as well as inventory turnover, and also giving consideration to emerging trends and changes to the sales mix, the Company expects working capital to increase or decrease equivalent to approximately 10 to 15 percent of the increase or decrease, respectively, in net sales. However, there are many factors that can impact this relationship, especially in the short term.
Depreciation and amortization was $37.1 million in the first six months of 2019, and is expected to be approximately $70 million to $75 million for the full year 2019. Non-cash stock-based compensation in the first six months of 2019 was $7.8 million. Non-cash stock-based compensation is expected to be approximately $15 million to $17 million for the full year 2019.
Cash Flows from Investing Activities
Cash flows from investing activities of $44.1 million in the first six months of 2019 were primarily comprised of $35.8 million for capital expenditures and $8.5 million for the acquisitions of businesses. Cash flows from investing activities of $207.0 million in the first six months of 2018 were primarily comprised of $153.4 million for the acquisitions of businesses and $54.5 million for capital expenditures.
LCI INDUSTRIES
ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
The Company’s capital expenditures are primarily for replacement and growth. Over the long term, based on the Company’s historical capital expenditures, the replacement portion has averaged approximately 2 percent of net sales, while the growth portion has averaged approximately 7 to 10 percent of the annual increase in net sales. However, there are many factors that can impact the actual spending compared to these historical averages.
Capital expenditures and acquisitions in the first six months of 2019 were funded by cash from operations. Capital expenditures and acquisitions in the remainder of fiscal year 2019 are expected to be funded primarily from cash generated from operations, as well as periodic borrowings under the Company’s revolving credit facility.
Cash Flows from Financing Activities
Cash flows from financing activities in the first six months of 2019 were primarily comprised of net $49.7 million in net repayments under the Company’s line of credit and payments of quarterly dividends of $0.60 and $0.65 per share, of the Company’s common stock, representing an aggregate of $15.0 million and $16.3 million, paid to stockholders of record as of March 8, 2019 and June 7, 2019, respectively. In addition, the Company had $7.1 million of shares tendered for payment of taxes.
Cash flows from financing activities in the first six months of 2018 were primarily from net borrowings under the Company’s line of credit to fund acquisitions, partially offset by payments of quarterly dividends of $0.55 and $0.60 per share, of the Company’s common stock, representing an aggregate of $13.9 million and $15.1 million, paid to stockholders of record as of March 16, 2018 and June 4, 2018, respectively. In addition, the Company had $14.1 million of shares tendered for payment of taxes and payment of $3.0 million in contingent consideration related to acquisitions.
In connection with certain business acquisitions, if established sales targets for the acquired business are achieved, the Company will pay additional cash consideration. The Company has recorded a $7.7 million liability for the aggregate fair value of these expected contingent consideration liabilities at June 30, 2019. For further information, see Note 9 of the Notes to the Condensed Consolidated Financial Statements.
Credit Facilities
See Note 7 in the Notes to Condensed Consolidated Financial Statements for a description of our credit facilities.
The Company believes its cash flows from operations and the availability under the line of credit and Shelf-Loan Facility (as defined in Note 7 in the Notes to Condensed Consolidated Financial Statements) is adequate to finance the Company’s anticipated cash requirements for the next twelve months.
CORPORATE GOVERNANCE
The Company is in compliance with the corporate governance requirements of the SEC and the New York Stock Exchange. The Company’s governance documents and committee charters and key practices have been posted to the “Investors” section of the Company’s website (
www.lci1.com
) and are updated periodically. The website also contains, or provides direct links to, all SEC filings, press releases and investor presentations. The Company has also established a Whistleblower Policy, which includes a toll-free hotline (877-373-9123) to report complaints about the Company’s accounting, internal controls, auditing matters or other concerns. The Whistleblower Policy and procedure for complaints can be found on the Company’s website (
www.lci1.com
).
CONTINGENCIES
Information required by this item is included in Note 9 of the Notes to the Condensed Consolidated Financial Statements under Item 1 of Part I of this Quarterly Report on Form 10-Q.
INFLATION
The prices of key raw materials, consisting primarily of steel and aluminum, and components used by the Company which are made from these raw materials, are influenced by demand and other factors specific to these commodities, rather than being directly affected by inflationary pressures. Prices of these commodities have historically been volatile, and over the past few months prices have continued to fluctuate. The Company did not experience any significant increases in its labor costs in the first six months of 2019 related to inflation.
LCI INDUSTRIES
ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
NEW ACCOUNTING PRONOUNCEMENTS
Information required by this item is included in Note 2 of the Notes to the Condensed Consolidated Financial Statements.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires 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, 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.
FORWARD-LOOKING STATEMENTS
This Form 10-Q contains certain “forward-looking statements” with respect to the Company’s financial condition, results of operations, business strategies, operating efficiencies or synergies, competitive position, growth opportunities, acquisitions, plans and objectives of management, markets for the Company’s common stock, the impact of legal proceedings, and other matters. Statements in this Form 10-Q that are not historical facts are “forward-looking statements” for the purpose of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 27A of the Securities Act of 1933, as amended, and involve a number of risks and uncertainties.
Forward-looking statements, including, without limitation, those relating to the Company’s future business prospects, net sales, expenses and income (loss), cash flow, and financial condition, 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, 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 the Company sells its products, availability of credit for financing the retail and wholesale purchase of products for which the Company sells its components, inventory levels of retail dealers and manufacturers, availability of transportation for products for which the Company sells its components, the financial condition of the Company’s customers, the financial condition of retail dealers of products for which the Company sells its 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, employee benefits, employee 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, 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 the Company sells its 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, 2018, and in the Company’s subsequent filings with the Securities and Exchange Commission. Readers of this report are cautioned not to place undue reliance on these forward-looking statements, since there can be no assurance that these forward-looking statements will prove to be accurate. The Company disclaims any obligation or undertaking to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made, except as required by law.
LCI INDUSTRIES
ITEM 3 – QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk related to changes in short-term interest rates on our variable rate debt. Depending on the interest rate option selected as fully described in Note 7 of the Notes to Condensed Consolidated Financial Statements, interest is charged based on an indexed rate plus an applicable margin. Assuming a hypothetical increase of 0.25 percent in the indexed interest rate (which approximates a ten percent increase of the weighted-average interest rate on our borrowings as of June 30, 2019), our results of operations would not be materially affected.
The Company is also exposed to changes in the prices of raw materials, specifically steel and aluminum. The Company has, from time to time, entered into derivative instruments for the purpose of managing a portion of the exposures associated with fluctuations in steel and aluminum prices. While these derivative instruments are subject to fluctuations in value, these fluctuations are generally offset by the changes in fair value of the underlying exposures. See Note 11 of the Notes to Condensed Consolidated Financial Statements for a more detailed discussion of derivative instruments.
The Company has historically been able to obtain sales price increases to partially offset the majority of raw material cost increases. However, there can be no assurance future cost increases, if any, can be partially or fully passed on to customers, or that the timing of such sales price increases will match raw material cost increases.
Additional information required by this item is included under the caption “Inflation” in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of this Report.
ITEM 4 – CONTROLS AND PROCEDURES
a.
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure, in accordance with the definition of “disclosure controls and procedures” in Rule 13a-15 under the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, cannot provide absolute assurance of achieving the desired control objectives. Management included in its evaluation the cost-benefit relationship of possible controls and procedures. The Company continually evaluates its disclosure controls and procedures to determine if changes are appropriate based upon changes in the Company’s operations or the business environment in which it operates.
As of the end of the period covered by this Form 10-Q, the Company performed an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s principal executive officer and the Company’s principal financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on the foregoing, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2019.
b.
Changes in Internal Control over Financial Reporting
During the six months ended June 30, 2019, the Company implemented controls to support the adoption ASU 2016-02,
Leases (Topic 842)
. There were no other changes in the Company’s internal control over financial reporting during the quarter ended June 30, 2019, which have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
The Company began implementation of a new enterprise resource planning (“ERP”) system in late 2013. To date, 27 locations have been put on this ERP system. The roll-out plan is continually evaluated in the context of priorities for the business and may change as needs of the business dictate. The Company anticipates enhancements to controls due to both the installation of the new ERP system and business process changes resulting therefrom.
LCI INDUSTRIES