LCI INDUSTRIES

CONDENSED CONSOLIDATED ~~BALANCE SHEETS~~STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
(In thousands)

Net income	$	68,347	$	35,809	$	109,747	$	117,702
Other comprehensive income (loss):
Net foreign currency translation adjustment	3,399		819		(102)		(1,850)
Actuarial gain on Dutch pension plans	0		0		6,299		0
Unrealized gain (loss) on fair value of derivative instruments	0		(19)		1,642		(2,061)
Total comprehensive income	$	71,746	$	36,609	$	117,586	$	113,791

September 30, December 31,
2017 2016 2016
(In thousands, except per share amount)

ASSETS
Current assets
Cash and cash equivalents $ 19,762
$ 95,060
$ 86,170
Accounts receivable, net 139,144
89,626
57,374
Inventories, net 229,763
161,312
188,743
Prepaid expenses and other current assets 45,384
28,572
35,107
Total current assets 434,053
374,570
367,394
Fixed assets, net 210,304
153,167
172,748
Goodwill 123,001
93,925
89,198
Other intangible assets, net 134,761
109,553
112,943
Deferred taxes 32,380
29,208
31,989
Other assets 21,277
14,095
12,632
Total assets $ 955,776
$ 774,518
$ 786,904

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable, trade $ 88,148
$ 55,681
$ 50,616
Accrued expenses and other current liabilities 109,849
97,733
98,735
Total current liabilities 197,997
153,414
149,351
Long-term indebtedness 49,918
49,940
49,949
Other long-term liabilities 60,805
39,796
37,335
Total liabilities 308,720
243,150
236,635

Stockholders’ equity
Common stock, par value $.01 per share 276
273
274
Paid-in capital 201,814
179,434
185,981
Retained earnings 472,154
381,723
395,279
Accumulated other comprehensive income (loss) 2,279
(595 ) (1,798 )
Stockholders’ equity before treasury stock 676,523
560,835
579,736
Treasury stock, at cost (29,467 ) (29,467 ) (29,467 )
Total stockholders’ equity 647,056
531,368
550,269
Total liabilities and stockholders’ equity $ 955,776
$ 774,518
$ 786,904

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

LCI INDUSTRIES

CONDENSED CONSOLIDATED ~~STATEMENTS OF CASH FLOWS~~BALANCE SHEETS

(Unaudited)

Nine Months Ended
September 30,
2017 2016
(In thousands)
Cash flows from operating activities:
Net income $ 115,420
$ 103,372
Adjustments to reconcile net income to cash flows provided by operating activities:
Depreciation and amortization 39,856
33,720
Stock-based compensation expense 15,042
11,421
Deferred taxes —
183
Other non-cash items 3,655
1,728
Changes in assets and liabilities, net of acquisitions of businesses:
Accounts receivable, net (69,720 ) (46,028 )
Inventories, net (33,780 ) 13,451
Prepaid expenses and other assets (18,662 ) (7,659 )
Accounts payable, trade 29,856
23,827
Accrued expenses and other liabilities 27,192
30,093
Net cash flows provided by operating activities 108,859
164,108
Cash flows from investing activities:
Capital expenditures (60,342 ) (21,927 )
Acquisitions of businesses, net of cash acquired (67,876 ) (34,237 )
Proceeds from sales of fixed assets 348
533
Other investing activities (105 ) (316 )
Net cash flows used for investing activities (127,975 ) (55,947 )
Cash flows from financing activities:
Exercise of stock-based awards, net of shares tendered for payment of taxes (7,313 ) 409
Proceeds from line of credit borrowings 9,715
81,458
Repayments under line of credit borrowings (9,715 ) (81,458 )
Payment of dividends (37,346 ) (22,078 )
Payment of contingent consideration related to acquisitions (2,574 ) (2,719 )
Other financing activities (59 ) (1,018 )
Net cash flows used for financing activities (47,292 ) (25,406 )

Net (decrease) increase in cash and cash equivalents (66,408 ) 82,755

Cash and cash equivalents at beginning of period 86,170
12,305
Cash and cash equivalents at end of period $ 19,762
$ 95,060

Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 1,291
$ 1,525
Cash paid during the period for income taxes, net of refunds $ 48,181
$ 51,524
Purchase of property and equipment in accrued expenses $ 1,205
$ 279


	September 30,		December 31,
	2020			2019
(In thousands, except per share amount)

ASSETS
Current assets
Cash and cash equivalents	$	68,187		$	35,359

Accounts receivable, net of allowances of $6,060 and $3,144 at September 30, 2020 and December 31, 2019, respectively	313,264			199,976
Inventories, net	369,160			393,607

Prepaid expenses and other current assets	45,061			41,849
Total current assets	795,672			670,791
Fixed assets, net	368,422			366,309
Goodwill	413,068			351,114
Other intangible assets, net	373,941			341,426
Operating lease right-of-use assets	97,580			98,774

Other assets	62,000			34,181
Total assets	$	2,110,683		$	1,862,595

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current maturities of long-term indebtedness	$	19,861		$	17,883
Accounts payable, trade	175,492			99,262

Current portion of operating lease obligations	23,772			21,693
Accrued expenses and other current liabilities	181,398			132,420
Total current liabilities	400,523			271,258
Long-term indebtedness	616,076			612,906
Operating lease obligations	77,619			79,848
Deferred taxes	46,946			35,740
Other long-term liabilities	93,957			62,171
Total liabilities	1,235,121			1,061,923

Stockholders’ equity
Common stock, par value $.01 per share	282			281
Paid-in capital	222,257			212,485
Retained earnings	702,223			644,945
Accumulated other comprehensive income	8,962			1,123
Stockholders’ equity before treasury stock	933,724			858,834
Treasury stock, at cost	(58,162)			(58,162)
Total stockholders’ equity	875,562			800,672
Total liabilities and stockholders’ equity	$	2,110,683		$	1,862,595

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

LCI INDUSTRIES

CONDENSED CONSOLIDATED ~~STATEMENT~~STATEMENTS OF ~~STOCKHOLDERS’ EQUITY~~CASH FLOWS

(Unaudited)


	Nine Months Ended September 30,
	2020		2019
(In thousands)
Cash flows from operating activities:
Net income	$	109,747	$	117,702
Adjustments to reconcile net income to cash flows provided by operating activities:
Depreciation and amortization	73,366		55,882
Stock-based compensation expense	13,646		12,061

Other non-cash items	1,818		837
Changes in assets and liabilities, net of acquisitions of businesses:
Accounts receivable, net	(103,209)		(42,367)
Inventories, net	24,423		24,410
Prepaid expenses and other assets	(29,489)		15,119
Accounts payable, trade	68,379		8,437
Accrued expenses and other liabilities	53,806		17,461
Net cash flows provided by operating activities	212,487		209,542
Cash flows from investing activities:
Capital expenditures	(28,663)		(47,767)
Acquisitions of businesses, net of cash acquired	(94,909)		(53,923)


Other investing activities	3,972		364
Net cash flows used in investing activities	(119,600)		(101,326)
Cash flows from financing activities:
Vesting of stock-based awards, net of shares tendered for payment of taxes	(4,807)		(7,194)
Proceeds from revolving credit facility	285,827		404,228
Repayments under revolving credit facility	(273,130)		(443,921)
Repayments under term loan and other borrowings	(15,385)		0

Payment of dividends	(51,535)		(47,533)

Other financing activities	(176)		(405)
Net cash flows used in financing activities	(59,206)		(94,825)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(853)		(842)
Net increase in cash, cash equivalents, and restricted cash	32,828		12,549
Cash, cash equivalents, and restricted cash at beginning of period	35,359		14,928
Cash, cash equivalents, and restricted cash at end of period	$	68,187	$	27,477

Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	12,743	$	6,156
Cash paid during the period for income taxes, net of refunds	$	16,457	$	28,416
Purchase of property and equipment in accrued expenses	$	2,588	$	588

Common
Stock
Paid-in
Capital
Retained
Earnings
Accumulated Other Comprehensive (Loss) Income
Treasury
Stock
Total
Stockholders’
Equity
(In thousands, except shares and per share amounts)
Balance - December 31, 2016 $ 274
$ 185,981
$ 395,279
$ (1,798 ) $ (29,467 ) $ 550,269
Net income —
—
115,420
—
—
115,420
Issuance of 190,753 shares of common stock pursuant to stock-based awards, net of shares tendered for payment of taxes 2
(7,315 ) —
—
—
(7,313 )
Stock-based compensation expense —
15,042
—
—
—
15,042
Issuance of 63,677 deferred stock units relating to prior year compensation —
6,907
—
—
—
6,907
Other comprehensive income —
—
—
4,077
—
4,077
Cash dividends ($1.50 per share) —
—
(37,346 ) —
—
(37,346 )
Dividend equivalents on stock-based awards —
1,199
(1,199 ) —
—
—
Balance - September 30, 2017 $ 276
$ 201,814
$ 472,154
$ 2,279
$ (29,467 ) $ 647,056

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

LCI INDUSTRIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)


(In thousands, except shares and per share amounts)	Common Stock		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total Stockholders’ Equity
Balance - December 31, 2018	$	280	$	203,246	$	563,496	$	(2,605)	$	(58,162)	$	706,255
Net income	—		—		34,366		—		—		34,366
Issuance of 137,040 shares of common stock pursuant to stock-based awards, net of shares tendered for payment of taxes	1		(6,349)		—		—		—		(6,348)
Stock-based compensation expense	—		3,733		—		—		—		3,733
Other comprehensive loss	—		—		—		(1,328)		—		(1,328)
Cash dividends ($0.60 per share)	—		—		(14,999)		—		—		(14,999)
Dividend equivalents on stock-based awards	—		304		(304)		—		—		0
Balance - March 31, 2019	281		200,934		582,559		(3,933)		(58,162)		721,679
Net income	—		—		47,527		—		—		47,527
Issuance of 27,965 shares of common stock pursuant to stock-based awards, net of shares tendered for payment of taxes	—		(795)		—		—		—		(795)
Stock-based compensation expense	—		4,115		—		—		—		4,115
Other comprehensive loss	—		—		—		(3,383)		—		(3,383)
Cash dividends ($0.65 per share)	—		—		(16,267)		—		—		(16,267)
Dividend equivalents on stock-based awards	—		318		(318)		—		—		0
Balance - June 30, 2019	281		204,572		613,501		(7,316)		(58,162)		752,876
Net income	—		—		35,809		—		—		35,809
Issuance of 1,429 shares of common stock pursuant to stock-based awards, net of shares tendered for payment of taxes	—		(50)		—		—		—		(50)
Stock-based compensation expense	—		4,213		—		—		—		4,213
Other comprehensive income	—		—				800		—		800
Cash dividends ($0.65 per share)	—				(16,267)		—		—		(16,267)
Dividend equivalents on stock-based awards	—		318		(318)		—		—		0
Balance - September 30, 2019	$	281	$	209,053	$	632,725	$	(6,516)	$	(58,162)	$	777,381

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

LCI INDUSTRIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)


(In thousands, except shares and per share amounts)	Common Stock		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total Stockholders’ Equity
Balance - December 31, 2019	$	281	$	212,485	$	644,945	$	1,123	$	(58,162)	$	800,672
Net income	—		—		28,214		—		—		28,214
Issuance of 87,833 shares of common stock pursuant to stock-based awards, net of shares tendered for payment of taxes	1		(4,518)		—		—		—		(4,517)
Stock-based compensation expense	—		3,295		—		—		—		3,295
Other comprehensive loss	—		—		—		(3,540)		—		(3,540)
Cash dividends ($0.65 per share)	—		—		(16,321)		—		—		(16,321)
Dividend equivalents on stock-based awards	—		297		(297)		—		—		0
Balance - March 31, 2020	282		211,559		656,541		(2,417)		(58,162)		807,803
Net income	—		—		13,186		—		—		13,186
Issuance of 16,251 shares of common stock pursuant to stock-based awards, net of shares tendered for payment of taxes	—		(99)		—		—		—		(99)
Stock-based compensation expense	—		4,109		—		—		—		4,109
Other comprehensive income	—		—		—		7,980		—		7,980
Cash dividends ($0.65 per share)	—		—		(16,349)		—		—		(16,349)
Dividend equivalents on stock-based awards	—		295		(295)		—		—		0
Balance - June 30, 2020	282		215,864		653,083		5,563		(58,162)		816,630
Net income	—		—		68,347		—		—		68,347
Issuance of 3,998 shares of common stock pursuant to stock-based awards, net of shares tendered for payment of taxes	—		(191)		—		—		—		(191)
Stock-based compensation expense	—		6,242		—		—		—		6,242
Other comprehensive income	—		—		—		3,399		—		3,399
Cash dividends ($0.75 per share)	—		—		(18,865)		—		—		(18,865)
Dividend equivalents on stock-based awards	—		342		(342)		—		—		0
Balance - September 30, 2020	$	282	$	222,257	$	702,223	$	8,962	$	(58,162)	$	875,562

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

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BASIS OF PRESENTATION

The Condensed Consolidated Financial Statements include the accounts of LCI Industries and its wholly-owned subsidiaries (“LCII” and collectively with its subsidiaries, the ~~“Company”~~“Company,” "we," "us," or "our"). LCII has no unconsolidated subsidiaries. LCII, through its wholly-owned subsidiary, Lippert Components, Inc. and its subsidiaries (collectively, “Lippert Components” or “LCI”), supplies, domestically and internationally, a broad array of engineered components for the leading original equipment manufacturers (“OEMs”) in the recreation and transportation product markets, consisting primarily of recreational vehicles (“RVs”) and adjacent industries including buses; trailers used to haul boats, livestock, equipment, and other cargo; trucks; ~~pontoon~~ 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. At September 30, ~~2017,~~2020, the Company operated 52over 90 manufacturing and distribution facilities located throughout ~~the United States~~North America and ~~in Canada and Italy.~~Europe.

Most industries where the Company sells products or where its products are used historically have been seasonal and are generally at the highest levels when the weather is moderate. Accordingly, the Company’s sales and profits have generally been the highest in the second quarter and lowest in the fourth quarter. However, because of fluctuations in dealer inventories, the impact of international, national, and regional economic conditions, ~~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.~~years, particularly as a result of the coronavirus ("COVID-19") pandemic and related impacts. Additionally, sales of certain engineered components to the aftermarket channels of these industries tend to be ~~counter-seasonal.~~counter-seasonal, but may be different in 2020 and future years as a result of the COVID-19 pandemic and related impacts.

The Company is not aware of any significant events, except as disclosed in the Notes to Condensed Consolidated Financial Statements, which occurred subsequent to the balance sheet date but prior to the filing of this report that would have a material impact on the Condensed Consolidated Financial Statements.

In the opinion of management, the information furnished in this Form 10-Q reflects all adjustments necessary for a fair statement of the financial position and results of operations for the interim periods presented. The Condensed Consolidated Financial Statements ~~presented herein~~ have been prepared ~~by the Company~~ in accordance with the ~~accounting policies described in its December 31, 2016 Annual Report on~~instructions to Form ~~10-K~~10-Q, and should be read in conjunction with the Notes to Consolidated Financial Statements which appear in that report. All significant intercompany balances and transactions have been eliminated. Certain prior year balances have been reclassifiedtherefore do not include some information necessary to conform to ~~current year presentation.~~annual reporting requirements. Results for interim periods should not be considered indicative of results for the full year.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, net sales and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates, including, but not limited to, those related to product returns, sales and purchase rebates, accounts receivable, inventories, goodwill and other intangible assets, net assets of acquired businesses, income taxes, warranty and product recall obligations, self-insurance obligations, operating lease ~~terminations,~~right-of-use assets and obligations, asset retirement obligations, long-lived assets, pension and post-retirement benefits, stock-based compensation, segment allocations, contingent consideration, environmental liabilities, contingencies, and litigation. The Company bases its estimates on historical experience, other available information, and various other assumptions believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities not readily apparent from other resources. Actual results and events could differ significantly from management estimates.

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Impact of COVID-19

On March 11, 2020, the ~~opinion~~World Health Organization declared the outbreak of ~~management,~~COVID-19 a pandemic, and on March 13, 2020, the ~~information furnished~~United States declared a national emergency related to COVID-19. The pandemic has caused significant uncertainty and disruption in ~~this Form 10-Q reflects~~the global economy and financial markets.

On March 25, 2020, the Company issued a press release providing a business update regarding COVID-19, including that it was temporarily suspending production at select manufacturing facilities across North America and Europe. The temporary suspension of production was made on a plant-by-plant basis, consistent with government mandates or due to customer closures. Production at facilities considered essential continued, utilizing reduced staff in conjunction with heightened cleaning and sanitation processes. On April 8, 2020, the Company issued a press release with additional business updates related to COVID-19, including cost savings and cash preservation measures that it had taken, including temporary executive salary and director retainer reductions, rightsizing its workforce to match demand levels, delaying certain capital expenses and reducing or eliminating non-critical business expenses, initiating temporary hiring freezes in all ~~adjustments necessary~~locations and furloughs for ~~a fair statement~~non-critical team members, lease payment deferrals, postponing merit increases for salaried employees until the end of the fiscal year, and engaging with banking partners regarding options relative to future financial ~~position~~liquidity. Additionally, the April 8 press release announced community support initiatives including donations of personal protective equipment and other supplies throughout local communities, manufacturing medical face shields used by doctors and nurses in Italy, and the establishment of a temporary emergency fund to aid team members who have faced personal and financial difficulties due to the COVID-19 pandemic.

The Company resumed operations to varying degrees for the majority of its facilities on May 4, 2020 to meet the demand requirements of its customers, and by later in the second quarter, the Company's facilities were fully operational. As the Company returned to fully operational status, several of the cost savings and cash preservation measures previously announced on April 8, 2020 were reversed, including executive salary and director retainer reductions, furloughs, and hiring freezes, and discussions with banking partners about financing options were halted. Due to the uncertainty surrounding the COVID-19 pandemic, the Company remains disciplined with other cost savings and cash preservation measures, such as delaying certain capital expenditures and reducing or eliminating non-critical business expenses including travel.

The extent to which COVID-19 may impact the Company's liquidity, financial condition, and results of operations ~~for the interim periods presented.~~ remains uncertain.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Condensed Consolidated Financial Statements presented herein have been prepared by the Company in accordance with the ~~instructions~~accounting policies described in its December 31, 2019 Annual Report on Form 10-K and should be read in conjunction with the Notes to ~~Form 10-Q,~~Consolidated Financial Statements which appear in that report. All significant intercompany balances and ~~therefore do~~transactions have been eliminated.

Recent Accounting Pronouncements

Recently issued accounting pronouncements not ~~include some information necessary~~yet adopted

In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes, eliminates certain exceptions within Accounting Standards Codification ("ASC") 740, Income Taxes, and clarifies certain aspects of the current guidance to ~~conform~~promote consistency among reporting entities. The new standard is effective for fiscal years beginning after December 15, 2021. Most amendments within the standard are required to ~~annual~~be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company is evaluating the effect of adopting this new accounting guidance.

Recently adopted accounting pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires the Company to measure all expected credit losses for financial instruments held at the reporting ~~requirements.~~date based on historical experience, current conditions, and reasonable forecasts. This ASU replaced the previous incurred loss model and is applicable to the measurement of credit losses on financial assets, including

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2.(Unaudited)

trade receivables. The Company adopted this ASU effective January 1, 2020 using the modified retrospective transition method. The adoption did not have a material impact on the Company's consolidated financial statements.

3. ACQUISITIONS, GOODWILL AND OTHER INTANGIBLE ASSETS

Acquisitions Completed During the Nine Months Ended September 30, ~~2017~~2020

~~Metallarte S.r.l.~~Polyplastic

In ~~June 2017,~~January 2020, the Company acquired 100 percent of the equity interests of ~~Metallarte S.r.l. (“Metallarte”~~Polyplastic Group B.V. (with its subsidiaries “Polyplastic”), a ~~manufacturer of entry and compartment doors for~~premier window supplier to the ~~European caravan market located near Siena, Italy, and its subsidiary, RV Doors, S.r.l., a manufacturer of driver-side doors located near Venice, Italy.~~caravanning industry, headquartered in Rotterdam, Netherlands. The purchase price was ~~$14.1~~$95.8 million, ~~paid at closing,~~net of cash acquired, plus contingent consideration up to $7.7 million, based on future sales by this operation. The results of the acquired business have been included ~~primarily in the Company’s OEM Segment and~~ in the Condensed Consolidated Statements of Income since the acquisition ~~date.~~date, primarily in the Company’s OEM Segment. As the acquisition of Polyplastic is not considered to have a material impact on the Company’s financial statements, pro forma results of operations and other disclosures are not presented.

During the three months ended September 30, 2020, the Company adjusted the preliminary purchase price allocation reported at June 30, 2020 to account for updates to assumptions and estimates which increased the fair value of customer relationships and other intangible assets by $10.0 million, and decreased net tangible assets, excluding pension obligations by $0.4 million. The ~~Company~~valuations of the assumed pension plan obligations and intangible assets are still in process. The purchase price allocation is ~~validating account balances and finalizing~~subject to adjustment as additional information is obtained within the ~~valuation for~~measurement period (not to exceed 12 months from the ~~acquisition.~~

~~LCI INDUSTRIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(Continued)~~

~~(Unaudited)~~

acquisition date). The acquisition of this business was ~~preliminarily~~ recorded, as updated, on the acquisition date as follows( (in thousands):


Cash consideration, net of cash acquired	$	95,766
Contingent consideration	2,796
Total fair value of consideration given	$	98,562

Customer relationship and other identifiable intangible assets	$	63,626
Net tangible assets, excluding pension obligation	15,460
Unfunded pension benefit obligation	(28,665)
Total fair value of net assets acquired	$	50,421

Goodwill (not tax deductible)	$	48,141

The acquisition of Polyplastic included the assumption of two partially-funded defined benefit pension plans (the "Dutch pension plans") based in ~~thousands)~~:the Netherlands. The Dutch pension plans, which are qualified defined benefit pension plans, provide benefits based on years of service and average pay. The benefits earned by the employees are immediately vested. The Company funds the future obligations of the Dutch pension plans by purchasing an insurance contract from a large multi-national insurance company. Each year the Company will make premium payments to the insurance company (1) to provide for the benefit obligation of the current year of service based on each employee's age, gender, and current salary, and (2) for indexations for both active and post-active participants. The Company determines the fair value of the plan asset with the assistance of an actuary using observable inputs (Level 2), which is determined as the present value of the accrued benefits guaranteed by the insurer. The Company recorded the estimated unfunded pension benefit obligation of the Dutch pension plans in other long-term liabilities on the Condensed Consolidated Balance Sheet. The key assumptions used to measure the benefit obligation at the acquisition date were a discount rate of 1.2 percent, an expected rate of return on plan assets of 1.2 percent, wage inflation of 2.0 percent, and expected indexation that conforms to the growth path established by Dutch pension law, which ranged from 0.0 percent at acquisition to 2.0 percent in 2033. The Company also recorded a deferred tax asset related to the Dutch pension plans, which is included in net tangible assets in the above table. Contributions and net periodic pension costs for the Dutch pension plans were not material for the period from the acquisition date through September 30, 2020.

Cash consideration, net of cash acquired $ 13,501
Contingent consideration 2,366
Total fair value of consideration given $ 15,867

Customer relationships $ 7,000
Other identifiable intangible assets 2,150
Net tangible assets 167
Total fair value of net assets acquired $ 9,317

Goodwill (not tax deductible) $ 6,550

The customer ~~relationships~~relationship intangible asset is being amortized over its estimated useful life of 15 years. The fair value of this asset was determined using a discounted cash flow model, which is a level 3 input in the fair value hierarchy. The

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

consideration given was greater than the fair value of the net assets acquired, resulting in goodwill, because the Company anticipates the attainment of synergies and an increase in the markets for the acquired products.

Acquisitions with Measurement Period Adjustments During the Nine Months Ended September 30, 2020

CURT

In December 2019, the Company acquired 100 percent of the equity interests of CURT Acquisition Holdings, Inc. (with its subsidiaries “CURT”), a leading manufacturer and distributor of branded towing products and truck accessories for the aftermarket, headquartered in Eau Claire, Wisconsin. The purchase price was $336.6 million, net of cash acquired. The results of the acquired business have been included in the Condensed Consolidated Statements of Income since the acquisition date, primarily in the Company’s Aftermarket Segment.

During the nine months ended September 30, 2020, the Company adjusted the preliminary purchase price allocation reported at December 31, 2019 to account for updates to assumptions and estimates related to the fair value of intangible assets and inventories, and to adjust the purchase price for final net working capital balances. These measurement period adjustments would not have resulted in a material impact on the prior period results if the adjustments had been recognized as of the acquisition date. The purchase price allocation is subject to adjustment as additional information is obtained within the measurement period (not to exceed 12 months from the acquisition date). The acquisition of this business was recorded, as updated, on the acquisition date as follows (in thousands):


	Preliminary at December 31, 2019		Measurement Period Adjustments		As Adjusted at September 30, 2020
Cash consideration, net of cash acquired	$	337,640	$	(1,053)	$	336,587

Assets Acquired
Accounts receivable	$	28,611	$	—	$	28,611
Inventories	88,765		(6,648)		82,117
Fixed assets	24,036		—		24,036
Customer relationship	112,000		(7,800)		104,200
Tradename and other identifiable intangible assets	37,705		(300)		37,405
Operating lease right-of-use assets	27,925		—		27,925
Other tangible assets	4,060		(1,550)		2,510
Liabilities Assumed
Accounts payable	(18,577)		—		(18,577)
Current portion of operating lease obligations	(5,360)		—		(5,360)
Accrued expenses and other current liabilities	(10,002)		—		(10,002)
Operating lease obligations	(22,565)		—		(22,565)
Deferred taxes	(31,877)		1,752		(30,125)
Total fair value of net assets acquired	$	234,721	$	(14,546)	$	220,175

Goodwill (not tax deductible)	$	102,919	$	13,493	$	116,412

The fair values of the customer relationship and tradename intangible assets are being amortized over their estimated useful lives of 16 years and 20 years, respectively. The fair values of these assets were determined using a discounted cash flow model, which is a level 3 input in the fair value hierarchy. The consideration given was greater than the fair value of the net assets acquired, resulting in goodwill, because the Company anticipates the attainment of synergies and an increase in the markets for the acquired products.

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Lewmar Marine Ltd.

In August 2019, the Company acquired 100 percent of the equity interests of Lewmar Marine Ltd. and related entities (collectively, “Lewmar”), a supplier of leisure marine equipment, headquartered in Havant, United Kingdom. The purchase price was $43.2 million, net of cash acquired. The results of the acquired business have been included in the Condensed Consolidated Statements of Income since the acquisition date in the Company’s OEM Segment and Aftermarket Segment.


	Preliminary at December 31, 2019		Measurement Period Adjustments		As Adjusted at September 30, 2020
Cash consideration, net of cash acquired	$	43,224	$	—	$	43,224

Customer relationship and other identifiable intangible assets	$	19,580	$	2,170	$	21,750
Net tangible assets	3,286		(705)		2,581
Total fair value of net assets acquired	$	22,866	$	1,465	$	24,331

Goodwill (not tax deductible)	$	20,358	$	(1,465)	$	18,893

The customer relationship intangible asset is being amortized over its estimated useful life of 15 years. The consideration given was greater than the fair value of the net assets acquired, resulting in goodwill, because the Company anticipates the attainment of synergies and an increase in the markets for the acquired products.

~~Lexington~~

In May 2017, the Company acquired the business and certain assets of Lexington LLC (“Lexington”), a manufacturer of high quality seating solutions for the marine, RV, transportation, medical and office furniture industries located in Elkhart, Indiana. The purchase price was $40.1 million paid at closing. The results of the acquired business have been included primarily in the Company’s OEM Segment and in the Condensed Consolidated Statements of Income since the acquisition date. The Company is validating account balances and finalizing the valuation for the acquisition. The acquisition of this business was preliminarily recorded on the acquisition date as follows ~~(in thousands)~~:

Cash consideration $ 40,062

Customer relationships $ 16,900
Other identifiable intangible assets 1,820
Net tangible assets 4,928
Total fair value of net assets acquired $ 23,648

Goodwill (tax deductible) $ 16,414

~~The customer relationships intangible asset is being amortized over its estimated useful life of~~ ~~15 years~~. The consideration given was greater than the fair value of the net assets acquired, resulting in goodwill, because the Company anticipates the attainment of synergies and an increase in the markets for the acquired products.

~~Sessa Klein S.p.A.~~

In February 2017, the Company acquired 100 percent of the outstanding shares of Sessa Klein S.p.A. (“Sessa Klein”), a manufacturer of highly engineered side window systems for both high speed and commuter trains, located near Varese, Italy. The purchase price was $8.5 million paid at closing, plus contingent consideration based on future sales by this operation. The results of the acquired business have been included primarily in the Company’s OEM Segment and in the Condensed Consolidated Statements of Income since the acquisition date. The Company is validating account balances and finalizing the valuation for the acquisition.

~~LCI INDUSTRIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(Continued)~~

~~(Unaudited)~~

~~The acquisition of this business was preliminarily recorded on the acquisition date as follows~~ ~~(in thousands)~~:

Cash consideration, net of cash acquired $ 6,502
Contingent consideration 4,922
Total fair value of consideration given $ 11,424

Customer relationships $ 3,189
Other identifiable intangible assets 1,329
Net tangible assets 585
Total fair value of net assets acquired $ 5,103

Goodwill (not tax deductible) $ 6,321

~~Acquisitions During the Nine Months Ended September 30, 2016~~

~~Project 2000 S.r.l.~~

In May 2016, the Company acquired 100 percent of the equity interest of Project 2000 S.r.l. (“Project 2000”), a manufacturer of innovative, space-saving bed lifts and retractable steps, located near Florence, Italy. The purchase price was $18.8 million paid at closing, plus contingent consideration based on future sales by this operation. The results of the acquired business have been included primarily in the Company’s OEM Segment and in the Consolidated Statements of Income since the acquisition date. The acquisition of this business was recorded on the acquisition date as follows ~~(in thousands)~~:

Cash consideration, net of cash acquired $ 16,618
Contingent consideration 1,322
Total fair value of consideration given $ 17,940

Customer relationships $ 9,696
Other identifiable intangible assets 6,141
Net other liabilities (3,482 )
Total fair value of net assets acquired $ 12,355

Goodwill (not tax deductible) $ 5,585

The customer relationships intangible asset is being amortized over its estimated useful life of 15 years. The consideration given was greater than the fair value of the net assets acquired, resulting in goodwill, because the Company anticipates the attainment of synergies and an increase in the markets for the acquired products.

~~Flair Interiors~~

In February 2016, the Company acquired the business and certain assets of Flair Interiors, Inc. (“Flair”), a manufacturer of RV furniture located in Goshen, Indiana. The purchase price was $8.1 million paid at closing. The results of the acquired business have been included primarily in the Company’s OEM Segment and in the Condensed Consolidated Statements of Income since the acquisition date.

~~LCI INDUSTRIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(Continued)~~

~~(Unaudited)~~

~~The acquisition of this business was recorded on the acquisition date as follows~~ ~~(in thousands)~~:

Cash consideration $ 8,100

Customer relationships $ 3,700
Net other assets 2,378
Total fair value of net assets acquired $ 6,078

Goodwill (tax deductible) $ 2,022

~~Highwater Marine Furniture~~

In January 2016, the Company acquired the business and certain assets of the pontoon furniture manufacturing operation of Highwater Marine, LLC (“Highwater”), a leading manufacturer of pontoon and other recreational boats located in Elkhart, Indiana. The purchase price was $10.0 million paid at closing. The results of the acquired business have been included primarily in the Company’s OEM Segment and in the Condensed Consolidated Statements of Income since the acquisition date. The acquisition of this business was recorded on the acquisition date as follows ~~(in thousands)~~:

Cash consideration $ 10,000

Customer relationships $ 8,100
Net tangible assets 1,307
Total fair value of net assets acquired $ 9,407

Goodwill (tax deductible) $ 593

The customer relationships intangible asset is being amortized over its estimated useful life of 15 years. The consideration given was greater than the fair value of the net assets acquired, resulting in goodwill, because the Company anticipates leveraging its existing experience and manufacturing capacity with respect to these product lines.

Goodwill

Goodwill by reportable segment was as follows:


(In thousands)	OEM Segment		Aftermarket Segment		Total
Net balance – December 31, 2019	$	215,620	$	135,494	$	351,114
Acquisitions – 2020	48,141		0		48,141
Measurement period adjustments	(2,251)		12,613		10,362
Foreign currency translation	3,575		(124)		3,451
Net balance – September 30, 2020	$	265,085	$	147,983	$	413,068

(In thousands) OEM Segment Aftermarket Segment Total
Net balance – December 31, 2016 $ 74,663
$ 14,535
$ 89,198
Acquisitions – 2017 29,277
—
29,277
Other 4,519
7
4,526
Net balance – September 30, 2017 $ 108,459
$ 14,542
$ 123,001

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

~~Changes in goodwill resulting from foreign currency translations and purchase accounting adjustments are presented as “Other” in the above table.~~

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(Continued)~~

(Unaudited)

Other Intangible Assets

Other intangible assets consisted of the following at September 30, ~~2017:~~2020:


(In thousands)	Gross Cost		Accumulated Amortization		Net Balance		Estimated Useful Life in Years
Customer relationships	$	352,370	$	88,674	$	263,696	6	to	17
Patents	88,340		45,691		42,649		3	to	20
Trade names (finite life)	63,766		10,516		53,250		3	to	20
Trade names (indefinite life)	7,600		—		7,600		Indefinite
Non-compete agreements	6,379		4,439		1,940		3	to	6
Other	309		190		119		2	to	12
Purchased research and development	4,687		—		4,687		Indefinite
Other intangible assets	$	523,451	$	149,510	$	373,941

(In thousands) Gross
Cost Accumulated
Amortization Net
Balance Estimated Useful
Life in Years
Customer relationships $ 138,941
$ 39,792
$ 99,149
6 to 16
Patents 57,416
37,277
20,139
3 to 19
Trade names 10,416
4,708
5,708
3 to 15
Non-compete agreements 8,479
3,609
4,870
3 to 6
Other 309
101
208
2 to 12
Purchased research and development 4,687
—
4,687
Indefinite
Other intangible assets $ 220,248
$ 85,487
$ 134,761

~~Other intangible assets consisted of the following at September 30, 2016:~~

(In thousands) Gross
Cost Accumulated
Amortization Net
Balance Estimated Useful
Life in Years
Customer relationships $ 106,316
$ 30,226
$ 76,090
6 to 16
Patents 55,172
32,290
22,882
3 to 19
Trade names 9,876
5,332
4,544
3 to 15
Non-compete agreements 4,569
3,460
1,109
3 to 6
Other 309
68
241
2 to 12
Purchased research and development 4,687
—
4,687
Indefinite
Other intangible assets $ 180,929
$ 71,376
$ 109,553

Other intangible assets consisted of the following at December 31, ~~2016:~~2019:


(In thousands)	Gross Cost		Accumulated Amortization		Net Balance		Estimated Useful Life in Years
Customer relationships	$	319,934	$	69,008	$	250,926	6	to	17
Patents	76,206		44,611		31,595		3	to	19
Trade names (finite life)	50,917		7,086		43,831		3	to	20
Trade names (indefinite life)	7,600		—		7,600		Indefinite
Non-compete agreements	7,598		4,947		2,651		3	to	6
Other	309		173		136		2	to	12
Purchased research and development	4,687		—		4,687		Indefinite
Other intangible assets	$	467,251	$	125,825	$	341,426

Information relating to segments follows for the:
Nine Months Ended
September 30, Three Months Ended
September 30,
(In thousands) 2017 2016 2017 2016
Net sales:
OEM Segment:
RV OEMs:
Travel trailers and fifth-wheels $ 1,045,465
$ 836,634
$ 357,940
$ 263,579
Motorhomes 114,887
85,762
41,595
29,373
Adjacent industries OEMs 310,373
253,088
106,386
82,963
Total OEM Segment net sales 1,470,725
1,175,484
505,921
375,915
Aftermarket Segment:
Total Aftermarket Segment net sales 129,908
100,515
48,893
36,455
Total net sales $ 1,600,633
$ 1,275,999
$ 554,814
$ 412,370
Operating profit:
OEM Segment $ 151,867
$ 144,102
$ 41,025
$ 39,049
Aftermarket Segment 18,229
16,152
6,902
6,089
Total operating profit $ 170,096
$ 160,254
$ 47,927
$ 45,138

~~11. NEW ACCOUNTING PRONOUNCEMENTS~~

~~In August 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-12,~~ ~~Targeted Improvements to Accounting for Hedging Activities,~~ ~~which amends ASC 815,~~ ~~Derivatives and Hedging.~~ This ASU better aligns an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. This ASU is effective for interim and annual reporting periods beginning after December 15, 2018, and early adoption is permitted. The Company is evaluating the effect of adopting this new accounting guidance.

~~In May 2017, the FASB issued ASU 2017-09,~~ ~~Compensation - Stock Compensation: Scope of Modification Accounting.~~ This ASU provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The updated guidance is effective for interim and annual periods beginning after December 15, 2017, and early adoption is permitted. The Company does not believe the updated requirements will materially impact the Company’s consolidated financial statements.

~~In January 2017, the FASB issued ASU 2017-04,~~ ~~Simplifying the Test for Goodwill Impairment,~~ ~~which amends ASC 350,~~ ~~Intangibles - Goodwill and Other.~~ This ASU simplifies how an entity is required to test goodwill for impairment by eliminating step 2 from the goodwill impairment test. Step 2 measures goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. This ASU is effective for interim and annual reporting periods, beginning after December 15, 2019 with early adoption permitted. The Company does not expect the adoption of this ASU to have a material impact on the Company’s consolidated financial statements.

~~In January 2017, the FASB issued ASU 2017-01,~~ ~~Clarifying the Definition of a Business,~~ ~~which amends ASC 805,~~ ~~Business Combinations. This ASU clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating~~

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(Continued)~~

(Unaudited)

~~whether transactions should be accounted for as acquisition (or disposals) of assets or businesses. This ASU is effective for interim~~The following tables present the Company’s revenues disaggregated by segment and ~~annual reporting periods beginning after December 15, 2017. The adoption of this ASU 2017-01 is not expected to have a material impact~~geography based on the ~~Company’s consolidated financial statements.~~

~~In August 2016, the FASB issued ASU 2016-15,~~ ~~Classification~~billing address of ~~Certain Cash Receipts and Cash Payments, which amends ASC 230,~~ ~~Statement of Cash Flows~~. This ASU provides guidance on the statement of cash flows presentation of certain transactions where diversity in practice exists. This ASU is effective for annual and interim periods beginning after December 15, 2017, and should be applied retrospectively with early adoption permitted at the beginning of an interim or annual reporting period. The Company is evaluating the effect of adopting this new accounting guidance, but does not expect adoption will have a material impact on the Company’s ~~consolidated financial statements.~~customers:


	Three Months Ended September 30, 2020						Three Months Ended September 30, 2019
(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	$	407,485	$	9,565	$	417,050	$	311,446	$	2,610	$	314,056
Motorhomes	29,707		14,734		44,441		25,944		8,866		34,810
Adjacent Industries OEMs	151,572		28,991		180,563		143,264		19,420		162,684
Total OEM Segment net sales	588,764		53,290		642,054		480,654		30,896		511,550
Aftermarket Segment:
Total Aftermarket Segment net sales	179,510		6,165		185,675		70,284		4,387		74,671
Total net sales	$	768,274	$	59,455	$	827,729	$	550,938	$	35,283	$	586,221

~~In March 2016,~~


	Nine Months Ended September 30, 2020						Nine Months Ended September 30, 2019
(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	$	916,144	$	20,532	$	936,676	$	964,838	$	9,140	$	973,978
Motorhomes	70,126		37,115		107,241		86,808		34,359		121,167
Adjacent Industries OEMs	406,727		91,579		498,306		455,754		45,799		501,553
Total OEM Segment net sales	1,392,997		149,226		1,542,223		1,507,400		89,298		1,596,698
Aftermarket Segment:
Total Aftermarket Segment net sales	455,799		15,142		470,941		199,686		11,077		210,763
Total net sales	$	1,848,796	$	164,368	$	2,013,164	$	1,707,086	$	100,375	$	1,807,461

(a) Net sales to customers in the ~~FASB issued ASU 2016-09,~~ ~~Improvements~~United States of America

(b) Net sales to ~~Employee Share-Based Payment Accounting, which amended ASC 718,~~ ~~Compensation - Stock Compensation. This ASU simplifies several aspects~~customers in countries domiciled outside of the ~~accounting for share-based payment transactions, including income tax consequences, the classification~~United States of awards as either equity or liabilities, and the classification on the statement of cash flows. Under the new standard, all excess tax benefits and tax deficiencies are recorded as a component of the provision for income taxes in the reporting period in which they occur. Additionally, ASU 2016-09 requires that the Company present excess tax benefits on the consolidated statement of cash flows as an operating activity. The adoption of the ASU resulted in the recognition of excess tax benefits in the provision for income taxes within the Condensed Consolidated Financial Statements of $5.2 million for the nine months ended September 30, 2017. Additionally, the Condensed Consolidated Statement of Cash Flows now present excess tax benefits as an operating activity, adjusted prospectively. Finally, the Company elected to continue to estimate forfeitures based on historical data and recognizes forfeiture compensation expense over the vesting period of the award. The Company adopted ASU 2016-09 in the first quarter of 2017 and elected to apply this adoption prospectively. Prior periods have not been adjusted.America

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases~~. This ASU requires, in most instances, a lessee to recognize on its balance sheet a liability to make lease payments (the lease liability) and also a right-of-use asset representing its right to use the underlying asset for the lease term. The amendments are effective for fiscal years beginning after December 15, 2018, including interim periods within those periods, using a modified retrospective approach with early adoption permitted. The Company is evaluating the effect of adopting this new accounting guidance.

~~In May 2014, the FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers~~. This ASU outlines a single, comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance issued by the FASB, including industry specific guidance. ASU 2014-09 provides accounting guidance for all revenue arising from contracts with customers and affects all entities that enter into contracts with customers to provide goods and services. The guidance also provides a model for the measurement and recognition of gains and losses on the sale of certain non-financial assets, such as property and equipment, including real estate. ASU 2014-09 is effective for annual reporting periods, including interim reporting periods within those periods, beginning after December 15, 2017. The new standard must be adopted using either a full retrospective approach for all periods presented in the period of adoption or a modified retrospective approach. ASU 2014-09 also requires entities to disclose both quantitative and qualitative information to enable users of the financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.

The ~~Company does not anticipate~~following table presents the adoption of this standard will have a material impact on its reported current net sales; however, given its acquisition strategy, there may be additional revenue streams acquired prior to the adoption date. The Company’s technical analysis is on-going with respect to variable consideration, whether certain contracts’ revenues will be recognized over time or at a point in time, and whether costs to obtain a contract will be capitalized. Further, the Company is continuing to assess what disaggregated revenue disclosures, in addition to current disclosures in Note 10 - Segment Reporting, will be required in its consolidated financial statements. The Company plans to adopt ASU 2014-09 using the modified retrospective approach on January 1, 2018.operating profit by segment:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2020		2019		2020		2019
Operating profit:
OEM Segment	$	65,533	$	38,347	$	110,485	$	131,434
Aftermarket Segment	28,900		10,806		48,996		31,131
Total operating profit	$	94,433	$	49,153	$	159,481	$	162,565

LCI INDUSTRIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table presents the Company’s revenue disaggregated by product:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2020		2019		2020		2019
OEM Segment:
Chassis, chassis parts, and slide-out mechanisms	$	253,182	$	193,354	$	586,985	$	610,946
Windows and doors	173,102		145,360		438,829		453,343
Furniture and mattresses	105,226		79,512		250,068		264,431
Axles and suspension solutions	42,708		31,405		103,450		97,597
Other	67,836		61,919		162,891		170,381
Total OEM Segment net sales	642,054		511,550		1,542,223		1,596,698
Total Aftermarket Segment net sales	185,675		74,671		470,941		210,763
Total net sales	$	827,729	$	586,221	$	2,013,164	$	1,807,461

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, ~~2016.~~2019.

LCI Industries (“LCII”, and collectively with its subsidiaries, the ~~“Company”~~“Company,” “we,” “us,” or “our”), 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 transportation product markets, consisting primarily of recreational vehicles (“RVs”) and adjacent industries, including buses; trailers used to haul boats, livestock, equipment, and other cargo; trucks; ~~pontoon~~ 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 September 30, ~~2017,~~2020, the Company operated 52over 90 manufacturing and distribution facilities located throughout the United States and in Canada, Ireland, Italy, the Netherlands, and ~~Italy.~~the United Kingdom. See Note 1012 of the Notes to ~~the~~ Condensed Consolidated Financial ~~Statements.~~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 ~~RVs~~leisure and ~~adjacent~~mobile transportation industries. Approximately 7161 percent of the Company’s OEM Segment net sales for the twelve months ended September 30, ~~2017~~2020 were of components for travel trailer and fifth-wheel RVs, including:



● Steel chassis and related components		● ~~Furniture~~Entry, luggage, patio, and ~~mattresses~~ramp doors
● Axles and suspension solutions		● Furniture and mattresses
● Slide-out mechanisms and solutions		● Electric and manual entry steps
~~● Slide-out mechanisms and solutions~~		~~● Awnings and awning accessories~~
● Thermoformed bath, kitchen, and other products	● ~~Electronic components~~Awnings and awning accessories
● Vinyl, aluminum, and frameless windows		● ~~Appliances~~Electronic components
● 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 RVrecreation and ~~adjacent industries,~~transportation product markets, primarily to retail dealers, wholesale distributors, and service centers. The Aftermarket Segment also includes biminis, covers, buoys, fenders to the marine industry, towing products, truck accessories, and 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.~~years, particularly as a result of the COVID-19 pandemic and related impacts. Additionally, many of the optional upgrades and non-critical replacement parts for RVs are purchased outside the normal product selling season, thereby causing these Aftermarket Segment sales to be counter-seasonal, but may be different in 2020 and future years as a result of the COVID-19 pandemic and related impacts.

IMPACT OF COVID-19

On March 11, 2020, the World Health Organization declared the outbreak of coronavirus ("COVID-19") a pandemic, and on March 13, 2020 the United States declared a national emergency related to COVID-19. The pandemic has caused significant uncertainty and disruption in the global economy and financial markets. The Company continues to closely monitor the impact of COVID-19 on all aspects of its business. For risks relating to the COVID-19 outbreak, see Item 1A. Risk Factors in Part II of this Report.

LCI INDUSTRIES

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)

Health and Safety

During this unprecedented crisis, the health and safety of the Company's team members has remained the top priority. The Company instituted a travel ban for all team members in early March and on March 25, 2020, the Company issued a press release providing a business update regarding COVID-19, including that it was temporarily suspending production at select manufacturing facilities across North America and Europe. The temporary suspension of production was made on a plant-by-plant basis, consistent with government mandates or due to customer closures. Production at facilities considered essential continued, utilizing reduced staff in conjunction with heightened cleaning and sanitation processes. Team members that do not need to be physically present on the manufacturing floor to perform their work were required to work from home. The Company implemented a number of actions to ensure adherence to guidelines set forth by the World Health Organization and the Centers for Disease Control and Prevention.

The Company enacted rigorous health and safety protocols as it resumed production in early May. For example, the Company implemented health screenings of team members for potential symptoms, conducts extensive and frequent disinfecting of workspaces, implemented social distancing restrictions for production personnel, provided masks to team members who must be physically present, and set up temporary COVID-19 testing sites for team members with symptoms or potential exposure. These health and safety protocols remain in effect currently.

Operations

As a result of the COVID-19 pandemic, governmental authorities have implemented and are continuing to implement numerous and constantly evolving measures in attempts to contain the virus, such as travel bans and restrictions, limits on gatherings, face mask requirements, quarantines, shelter-in-place orders, and business shutdowns. The Company temporarily suspended production at certain facilities, starting with locations in Italy and other parts of Europe. Certain of the Company's North American operations, which were considered non-essential, were temporarily suspended starting the last week of March, negatively impacting the Company's results of operations for the first quarter of 2020, especially in the OEM Segment. These temporary production shutdowns continued through April, and most of the Company's facilities reopened in early May. By later in the second quarter, all of the Company's facilities were fully operational, and they continued to be fully operational through the third quarter of 2020. The shutdowns negatively impacted the Company's results of operations through the first half of the second quarter of 2020.

The Company instituted several cost saving and cash preservation measures starting in late March and continuing into the second quarter in an effort to conserve liquidity and mitigate the impact of lost revenue from suspended operations. The following list includes many, but not all, of the cost savings and cash preservation measures employed to date:

•temporary layoffs of production employees at suspended facilities;

•salary reductions for the executive leadership team;

•reduction of the quarterly retainer for the Board of Directors;

•elimination of discretionary spending;

•delay of non-essential capital expenditures;

•deferral of lease payments to lessors;

•temporary hiring freezes and furloughs of non-critical team members; and

•postponing merit increases for salaried employees until the end of the fiscal year.

The Company cannot assure you that these cost-saving efforts will be successful in mitigating the impact of the COVID-19 pandemic on its business, liquidity, results of operations, or financial condition. As the Company returned to fully operational status later in the second quarter, several of the cost savings and cash preservation measures listed above were reversed, including executive salary and director retainer reductions, furloughs, and hiring freezes. Due to the uncertainty surrounding the COVID-19 pandemic, the Company remains disciplined with other cost savings and cash preservation measures, such as delaying certain capital expenditures and reducing or eliminating non-critical business expenses including travel.

Most of the OEM customers the Company supplies in North America resumed operations in early May 2020 at reduced capacity to fulfill retail dealer backlog orders. The Company resumed operations to varying degrees for the majority of its facilities on May 4, 2020 to meet the demand requirements of its customers, and by later in the second quarter, all of the Company's facilities were fully operational. Retail demand, especially in the RV and marine markets, picked up significantly

LCI INDUSTRIES

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)

later in the second quarter, leading to a record month of June for net sales for the Company with fully operational facilities. Retail demand continued at elevated levels through the third quarter of 2020 with net sales for the Company remaining at record levels. While production at the Company's facilities has continued through the third quarter, current plans are subject to change as the ultimate duration and impact of the COVID-19 pandemic on the Company's and its customers' operations is presently unclear.

Customers and Demand

Prior to the COVID-19 impact in mid-March, the RV industry experienced a return to positive retail sales growth. This growth concluded 16 months of consecutive year-over-year declines, and provided an indication that the inventory re-balancing the industry had been addressing had reached its conclusion. As a result of the COVID-19 pandemic and many government mandated stay-at-home orders and campground closures, retail sales abruptly declined beginning in mid-March. Despite the abrupt decline in retail sales to the Company's OEM channels, many aftermarket channels remained open through the period as dealerships remained open to service customers' products.

The Company stayed in close communication with its OEM customers in regards to their plans to resume operations and ramped up production quickly to meet its customers' demand when facilities reopened in early May. As noted above, later in the second quarter, retail demand in the North American RV and marine markets increased significantly resulting in the highest monthly total net sales in Company history in June, July, August and September. The sharp rebound in sales following the shutdowns also resulted in a significant increase in accounts receivable. The Company continues to closely monitor cash collections of its trade receivables, and to date has not identified any significant collection concerns with its customers.

The Company experienced a positive impact following the initial shutdown from the COVID-19 pandemic, as interest rates and fuel prices remain at historic lows, both of which are favorable for the industries the Company serves, and retail consumers are looking for vacation options that avoid large gatherings and allow for social distancing. The end products for many of the markets the Company supplies, such as RVs and boats, can provide safer alternatives for vacations and recreation as opposed to air travel, visiting large cities, theme parks, and cruises. However, given the significant negative effects and uncertainties associated with the COVID-19 pandemic, other impacts, such as long-term U.S. and global economic disruptions, may ultimately be counter to, and outweigh, any positive vacation and recreation factors.

Suppliers

Certain of our suppliers have or are expected to face difficulties maintaining operations due to government-ordered restrictions, future outbreaks, and shelter-in-place mandates. Although the Company regularly monitors the financial health of companies in the Company's supply chain, financial hardship on the Company's suppliers caused by the COVID-19 pandemic could cause a disruption in the Company's ability to obtain raw materials or components required to manufacture its products, adversely affecting operations. To mitigate the risk of any potential supply chain interruptions from the COVID-19 pandemic, the Company increased certain inventory levels during the first quarter of 2020, which has continued through the third quarter and is expected to continue into the foreseeable future. Additionally, restrictions or disruptions of transportation, such as reduced availability of air transport, port closures, and increased border controls or closures, could result in higher costs or delays, which could harm our profitability, make our products less competitive, or cause our customers to seek alternative suppliers.

Liquidity

In response to the COVID-19 pandemic, the Company borrowed a series of draws under its revolving credit facility to increase its cash position and improve financial flexibility in March and April 2020. During the second quarter, the Company also engaged with banking partners regarding options relative to future liquidity. The Company made net repayments on its revolving credit facility of approximately $162 million from May through September 30, 2020 as production resumed and operating cash flow improved with the increase in retail demand. The Company also ceased its discussions with banking partners about financing options. See "Liquidity and Capital Resources - Credit Facilities" section below for further discussion on liquidity.

LCI INDUSTRIES

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)

FURRION UPDATE

In August 2019, the Company and Furrion Limited ("Furrion") agreed to terminate their distribution and supply agreement effective December 31, 2019, and transition all sale and distribution of Furrion products then handled by the Company to Furrion. Effective January 1, 2020, Furrion took responsibility for distributing its products directly to the customer and assumed all responsibilities previously carried out by the Company relating to Furrion products. Upon termination of the agreement, Furrion purchased from the Company all non-obsolete stock and certain obsolete and slow-moving stock of Furrion products at the cost paid by the Company. At September 30, 2020 the Company had a receivable of $49.0 million recorded for purchases of inventory stock by Furrion. The agreement required Furrion to make periodic payments throughout 2020 and the first six months of 2021. Due to the impacts of the COVID-19 pandemic, the Company is currently in negotiations that would impact the timing of the repayment of this receivable. Accordingly, the Company has classified $27.0 million of the receivable as long-term, and recorded the receivable at its present value at September 30, 2020 based on the currently proposed payment plan.

Due to the nature of the Furrion distribution and supply arrangement, the historical operating margin related to sales of ~~components~~Furrion products were dilutive to the ~~aftermarket channels~~Company's consolidated operating margin. Sales of ~~these industries tend to be counter-seasonal.~~Furrion products included in the historical results of the Company are presented below by period and by market within the Company's segments.


(In thousands)	Q1 2019		Q2 2019		Q3 2019		Q4 2019		Full Year 2019
OEM Segment Furrion sales:
RV OEMs:
Travel trailers and fifth-wheel RVs	$	23,574	$	25,636	$	23,375	$	22,393	$	94,978
Motorhomes	830		1,037		971		780		3,618
Adjacent industries OEMs	490		612		573		607		2,282
Total OEM Segment Furrion sales	24,894		27,285		24,919		23,780		100,878
Aftermarket Segment Furrion sales:
Total Aftermarket Segment Furrion sales	8,915		9,545		8,473		3,614		30,547
Total Furrion Sales	$	33,809	$	36,830	$	33,392	$	27,394	$	131,425


(In thousands)	Q1 2018		Q2 2018		Q3 2018		Q4 2018		Full Year 2018
OEM Segment Furrion sales:
RV OEMs:
Travel trailers and fifth-wheel RVs	$	23,367	$	22,964	$	23,117	$	21,572	$	91,020
Motorhomes	739		812		828		875		3,254
Adjacent industries OEMs	468		485		309		281		1,543
Total OEM Segment Furrion sales	24,574		24,261		24,254		22,728		95,817
Aftermarket Segment Furrion sales:
Total Aftermarket Segment Furrion sales	3,951		7,011		5,454		3,250		19,666
Total Furrion Sales	$	28,525	$	31,272	$	29,708	$	25,978	$	115,483

INDUSTRY BACKGROUND

OEM Segment

North American 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).

LCI INDUSTRIES

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)

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 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

~~LCI INDUSTRIES~~

~~ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF~~

~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Continued)~~

industry-wide wholesale shipments. ~~Based on~~Due to the ~~strength~~COVID-19 pandemic, the 2020 Open House was canceled. The seasonality of ~~retail sales~~the RV industry has been, and will likely continue to be, impacted by the COVID-19 pandemic, and the ~~current outlook from several RV OEMs and their dealer networks, most industry analysts continue~~timing of a return to ~~report that RV dealer inventory~~historical seasonality is ~~in line with anticipated retail demand.~~not possible to predict at this time.

According to the Recreation Vehicle Industry Association ~~(“RVIA”~~("RVIA"), industry-wide wholesale shipments from the United States of travel trailer and fifth-wheel RVs in the first nine months of ~~2017,~~2020, the Company’s primary RV market, ~~increased 18~~decreased one percent to ~~321,300~~264,900 units, compared to the ~~same period~~first nine months of ~~2016, as a result of:~~

~~An estimated 30,100 unit increase~~2019, primarily due to OEM plant shutdowns in response to COVID-19, partially offset by higher retail demand. Retail demand for travel trailer and fifth-wheel RVs increased seven percent in the first nine months of ~~2017, or 10 percent, as~~2020 compared to the same period ~~of 2016. In addition, retail~~in 2019. Retail demand is typically revised upward ~~over the~~in subsequent ~~quarter by approximately five to ten percent,~~months, primarily due to delayed RV registrations.

Partially offset by RV dealers seasonally decreasing inventory levels by an estimated 3,200 units for the period ended September 30, 2017, lower than the decrease in inventory levels of 22,000 units in the same period of 2016.

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 September 30, 2017⁽¹⁾
103,900
26% 113,700
5% (9,800)
Quarter ended June 30, 2017 115,900
17% 138,000
12% (22,100)
Quarter ended March 31, 2017 101,500
12% 72,800
16% 28,700
Quarter ended December 31, 2016 90,300
20% 58,300
17% 32,000
Twelve months ended September 30, 2017⁽¹⁾
411,600
18% 382,800
11% 28,800

Quarter ended September 30, 2016 82,400
20% 108,700
9% (26,300)
Quarter ended June 30, 2016 99,200
12% 122,800
9% (23,600)
Quarter ended March 31, 2016 90,800
11% 62,900
15% 27,900
Quarter ended December 31, 2015 75,000
4% 49,900
16% 25,100
Twelve months ended September 30, 2016 347,400
12% 344,300
12% 3,100


⁽¹⁾	~~Retail sales data for September 2017 has not been published; therefore retail and dealer inventory data includes a Company estimate for retail units sold in September.~~


					Estimated
	Wholesale		Retail		Unit Impact on
	Units	Change	Units	Change	Dealer Inventories
Quarter ended September 30, 2020	110,100	37%	151,100	28%	(41,000)
Quarter ended June 30, 2020	66,800	(34)%	131,100	(6)%	(64,300)
Quarter ended March 31, 2020	88,000	4%	74,500	(4)%	13,500
Quarter ended December 31, 2019	83,300	(8)%	63,600	(6)%	19,700
Twelve months ended September 30, 2020	348,200	(2)%	420,300	5%	(72,100)

Quarter ended September 30, 2019	80,600	(13)%	118,000	(6)%	(37,400)
Quarter ended June 30, 2019	101,000	(13)%	138,800	(7)%	(37,800)
Quarter ended March 31, 2019	84,800	(27)%	77,400	(5)%	7,400
Quarter ended December 31, 2018	90,300	(17)%	67,500	(1)%	22,800
Twelve months ended September 30, 2019	356,700	(18)%	401,700	(5)%	(45,000)

According to the RVIA, industry-wide wholesale shipments of motorhome RVs in the first nine months of ~~2017 increased 14~~2020 decreased 22 percent to ~~47,300~~28,300 units compared to the ~~same period~~first nine months of ~~2016. The Company estimates retail~~2019, primarily due to OEM plant shutdowns in response to COVID-19. Retail demand for motorhome RVs ~~increased 13~~decreased 10 percent in the first nine months of ~~2017,~~2020, following ~~an 11~~a 13 percent ~~increase~~decrease in retail demand in ~~2016.~~the same period of 2019.

The RVIA has projected an 11 percent increase in industry-wide wholesale shipments of travel trailer and fifth-wheel RVs for 2017 and a two percent increase for 2018. Several RV OEMs, however, are introducing new product lines, additional features and adding production capacity. Retail sales of RVs historically have been closely tied to general economic conditions, as well as consumer confidence which was above historical averages in 2016. Additionally, retail sales of travel trailer and fifth-wheel RVs have increased in 93 of the last 95 months on a year-over-year basis. Industry resources report strong attendance and high consumer interest at RV shows around the United States and Canada thus far in 2017.

Although future retail demand is inherently uncertain, RV industry fundamentals in the first nine months of 2017, including generally low unemployment, low fuel prices and available credit for dealers and RV consumers, were strong, as evidenced by the 10 percent increase in industry-wide retail sales of travel trailer and fifth-wheel RVs in the first nine months of 2017. The Company believes the strong RV industry fundamentals, aided by product innovation, demographic tailwinds, industry promotion and the advent of stronger dealer networks, are positive signs for the remainder of 2017. The Company also remains confident in its ability

~~LCI INDUSTRIES~~

~~ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF~~

~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Continued)~~

to exceed industry growth rates through new product introductions, market share gains, aftermarket sales, acquisitions and ongoing investments in research and development, engineering, quality and customer service.

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 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; ~~pontoon~~ 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, five of the last eight business acquisitions completed by the Company 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:

LCI INDUSTRIES

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF

~~Enclosed trailers. According to Statistical Surveys, approximately 192,000 and 183,500 enclosed trailers were sold in 2016 and 2015, respectively.~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~Pontoon boats. Statistical Surveys also reported approximately 49,600 and 45,400 pontoon boats were sold in 2016 and 2015, respectively.~~(Continued)

~~School buses. According to Wards Communications and R.L. Polk & Co., there were approximately 32,800 and 29,600 school buses sold in 2016 and 2015, respectively.~~

~~Manufactured housing. According to the Institute for Building Technology and Safety, there were approximately 81,100 and 70,500 manufactured home wholesale shipments in 2016 and 2015, respectively.~~

Aftermarket Segment

Many of the Company’s OEM Segment products are also sold through various aftermarket channels, including dealerships, ~~warehouse~~wholesale distributors, and service centers, as well as direct to retail ~~customers.~~customers via the Internet. This includes discretionary accessories and replacement service parts. The Company has teams dedicated to product technical and installation training ~~and~~as well as marketing support for its Aftermarket Segment customers. The Company also supports ~~two~~multiple call centers to provide ~~quick~~ 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 Company's call centers are considered essential services and have continued to provide service throughout the COVID-19 pandemic. The Aftermarket Segment also includes biminis, covers, buoys, fenders to the marine industry, towing products, truck accessories, and the sale of replacement glass and awnings to fulfill insurance claims. Many of the optional upgrades and non-critical replacements for RVs are purchased outside the normal product selling seasons, thereby causing certain Aftermarket Segment sales to be ~~counter-seasonal.~~counter-seasonal, but may be different in 2020 and future years as a result of the COVID-19 pandemic and related impacts.

According to the RVIA, ~~current~~ estimated RV ownership ~~is nearly~~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 ~~the~~ 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.

RESULTS OF OPERATIONS

Consolidated Highlights

•Consolidated net sales in the third quarter of 2020 were $827.7 million, 41 percent higher than consolidated net sales for the same period of 2019 of $586.2 million. The increase was primarily driven by a recovery in retail demand in the RV and marine markets beginning later in the second quarter and continuing into the third quarter of 2020, as well as sales from acquired businesses of $98.6 million primarily from the CURT and Polyplastic acquisitions.

•Net income for the third quarter of 2020 was $68.3 million, or $2.70 per diluted share, compared to net income of $35.8 million, or $1.42 per diluted share, for the same period of 2019.

•Consolidated operating profit during the third quarter of 2020 was $94.4 million compared to $49.2 million in the same period of 2019. Operating profit margin was 11.4 percent in the third quarter of 2020 compared to 8.4 percent in the same period of 2019, primarily as a result of fixed costs being spread over a larger sales base.

•The cost of aluminum and steel used in certain of the Company’s manufactured components decreased in the third quarter of 2020 compared to the same period of 2019. Raw material costs are subject to continued fluctuation and are being offset, in part, by contractual selling prices that are indexed to select commodities.

•The increase in selling, general, and administrative costs of $40.7 million was driven by incremental costs from recent acquisitions of $30.7 million, including warehousing and distribution costs of $13.1 million associated with CURT, and amortization on intangible assets from acquired businesses of $4.2 million, in the third quarter of 2020 compared to the same period of 2019.

•The effective tax rate of 26.2 percent for the nine months ended September 30, 2020 was higher than the comparable prior year period of 24.6 percent, primarily due to a year-over-year reduction in the excess tax benefits related to the vesting of equity-based compensation awards, the reduction of income before income taxes, and an increase in non-deductible expenses, as discussed below under “Income Taxes.”

•In March, June, and September 2020, the Company paid a quarterly dividend of $0.65, $0.65, and $0.75 per share, aggregating to $16.3 million, $16.3 million, and $18.9 million, respectively.

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 third quarter of 2017 increased to $555 million, 35 percent higher than consolidated net sales for the third quarter of 2016 of $412 million. Acquisitions completed by the Company over the twelve months ended September 30, 2017, added $24 million in net sales in the third quarter of 2017. The 26 percent increase in industry-wide wholesale shipments of travel trailer and fifth-wheel RVs, LCI’s primary OEM market, as well as increased content per RV unit, positively impacted net sales growth in the third quarter of 2017. Further, the Company organically increased sales to adjacent industries and the aftermarket.

~~Net income for the third quarter of 2017 increased to $32.1 million, or $1.26 per diluted share, up from net income of $29.8 million, or $1.19 per diluted share, compared to the third quarter of 2016.~~

Consolidated operating profits during the third quarter of 2017 increased six percent, to $47.9 million from $45.1 million in the third quarter of 2016. Operating profit margin decreased to nine percent in the third quarter of 2017 from 11 percent compared to the third quarter of 2016.

The improvement in the Company’s operating results were partially offset by continued increases in input costs, primarily steel, aluminum and direct labor. Aluminum costs have increased in excess of 20 percent over the prior year. Labor continues to remain a challenge with Elkhart County unemployment rates at less than three percent, and, as a result, the Company has initiated price increases that will be fully implemented by the first quarter of 2018.

Lean manufacturing teams continue working to reduce cost and implement processes to better utilize available floorspace. The Company also has reduced direct labor attrition which improves efficiency and on-time deliveries, while reducing other costs associated with workforce turnover. The Company has implemented a number of cost saving initiatives during the third quarter of 2017.

The cost of aluminum, steel and foam used in certain of the Company’s manufactured components declined during the first half of 2016; however, certain commodities experienced cost increases in the second half of 2016 and the first nine months of 2017 from market low points. Raw material costs continue to fluctuate and are expected to remain volatile.

~~Thus far in 2017, the Company completed three acquisitions:~~

◦

In June 2017, the Company acquired 100 percent of the equity interests of Metallarte S.r.l. (“Metallarte”), a manufacturer of entry and compartment doors for the European caravan market located near Siena, Italy, and its subsidiary, RV Doors, S.r.l., a manufacturer of driver-side doors located near Venice, Italy. The purchase price was $14.1 million paid at closing, plus contingent consideration based on future sales by this operation.


◦	In May 2017, the Company acquired the business and certain assets of Lexington LLC (“Lexington”), a manufacturer of high quality seating solutions for the marine, RV, transportation, medical and office furniture industries located in Elkhart, Indiana. The purchase price was $40.1 million paid at closing.


◦	In February 2017, the Company acquired 100 percent of the outstanding shares of Sessa Klein S.p.A. (“Sessa Klein”), a manufacturer of highly engineered side window systems for both high speed and commuter trains, located near Varese, Italy. The purchase price was $8.5 million paid at closing, plus contingent consideration based on future sales by this operation.

Integration activities for these and previously acquired businesses are underway and proceeding in line with established plans. The Company plans to grow sales and leverage its purchasing power, manufacturing capabilities, engineering expertise and design resources to improve the cost structure of the acquired operations.

The effective tax rate for the nine months ended September 30, 2017, was substantially lower than the comparable prior year period, primarily due to the recognition of excess tax benefits attributable to the adoption by the Company of Accounting Standards Update 2016-09, which simplified several aspects of the accounting for share-based payment transactions, including income tax consequences. The excess tax benefit equated to $5.9 million recognized in the first nine months of 2017.

~~Return on equity for the twelve months ended September 30, 2017, which is calculated by taking net income over equity, was 24.2 percent.~~

~~In March, June and September 2017, the Company paid a quarterly dividend of $0.50 per share, aggregating to $12.4 million, $12.4 million and $12.5 million, respectively.~~

~~LCI INDUSTRIES~~

~~ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF~~

~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Continued)~~

OEM Segment - Third Quarter

Net sales of the OEM Segment in the third quarter of ~~2017~~2020 increased ~~35 percent, or $130~~$130.5 million, compared to the same period of ~~2016.~~2019. Net sales of components to OEMs were to the following markets for the three months ended September 30:


(In thousands)	2020		2019		Change
RV OEMs:
Travel trailers and fifth-wheels	$	417,050	$	314,056	33	%
Motorhomes	44,441		34,810		28	%
Adjacent Industries OEMs	180,563		162,684		11	%
Total OEM Segment net sales	$	642,054	$	511,550	26	%

(In thousands) 2017 2016 Change
RV OEMs:
Travel trailers and fifth-wheels $ 357,940
$ 263,579
36 %
Motorhomes 41,595
29,373
42 %
Adjacent industries OEMs 106,386
82,963
28 %
Total OEM Segment net sales $ 505,921
$ 375,915
35 %

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


	2020	2019	Change
Travel trailer and fifth-wheel RVs	110,100	80,600	37	%
Motorhomes	11,300	10,800	5	%

2017 2016 Change
Travel trailer and fifth-wheel RVs 103,900
82,400
26 %
Motorhomes 14,500
12,800
13 %

The ~~Company’s net~~Company's calculations of content in the OEM Segment discussion that follows were adjusted to remove Furrion sales ~~growth in components for travel trailer and fifth-wheel RVs during~~from all prior periods to enhance comparability between periods following the ~~third quarter~~termination of ~~2017 exceeded~~ the ~~increase in industry-wide wholesale shipments~~agreement at the end of ~~travel trailer and fifth-wheel RVs during the same period, primarily due to market share gains.~~2019.

The Company’s net sales growth in components for motorhomes during the third quarter of 2017 exceeded the increase in industry-wide wholesale shipments of motorhomes during the same period, primarily due to acquisitions completed in 2017. Over the past few years, the Company has been expanding its product line of components for motorhomes in order to increase its customer base and market penetration, and further growth is expected.

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 Company’s net sales of components to domestic RV OEMs for the different types of RVs produced for the twelve months ended September 30, divided by the industry-wide wholesale shipments of the different ~~types~~product mix of RVs for the same period, was:


Content per:	2020		2019		Change
Travel trailer and fifth-wheel RV	$	3,428	$	3,268	5	%
Motorhome	$	2,399	$	2,328	3	%

Content per: 2017 2016 Change
Travel trailer and fifth-wheel RV $ 3,172
$ 3,025
5 %
Motorhome $ 2,152
$ 1,957
10 %

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 increase in net ~~OEM~~ sales to ~~Adjacent Industries increased~~RV OEMs of travel trailers, fifth-wheel, and motorhome components during the third quarter of ~~2017~~2020 was primarily ~~due~~driven by a recovery in RV retail demand beginning later in the second quarter and continuing into the third quarter of 2020, partially offset by the termination of the Furrion supply agreement. The net sales increase further benefited from content gains during the third quarter of 2020.

The Company's increase in net sales to ~~acquisitions completed in 2017 and 2016 and market share gains. The Company continues to believe there are significant opportunities~~OEMs in Adjacent ~~Industries.~~Industries during the third quarter of 2020 was driven by a recovery in retail demand for the marine industry and other adjacent markets beginning later in the second quarter and continuing into the third quarter of 2020.

Operating profit of the OEM Segment was ~~$41.0~~$65.5 million in the third quarter of ~~2017,~~2020, an ~~improvement~~increase of ~~$2.0~~$27.2 million compared to the same period of ~~2016.~~2019. The operating profit margin of the OEM Segment in the third quarter of ~~2017~~2020 increased to 10.2 percent compared to 7.5 percent for the same period of 2019 and was positively impacted by:

~~Better fixed cost absorption by spreading~~•Leveraging of fixed costs over a larger sales base, ~~that~~net of lost Furrion product sales, which increased operating profit by ~~$130 million.~~

~~Increased sales~~$6.9 million related to ~~Adjacent Industries OEMs.~~

~~Pricing changes of targeted products.~~

~~Investments over the past several years~~fixed overhead costs and $9.5 million related to ~~increase capacity~~fixed selling, general, and ~~improve operating efficiencies. Further, the Company has implemented efficiency improvements, including lean manufacturing initiatives, increased use of automation~~

administrative costs.

LCI INDUSTRIES

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)

•Reductions in material commodity pricing of $5.6 million, primarily related to decreased steel and aluminum costs.

~~and employee retention initiatives. The Company has also reduced direct labor attrition which improves efficiency and reduces other costs associated with workforce turnover.~~

~~Offset~~Partially offset by:

~~Higher material costs~~•Selling price changes from contractual reductions indexed to select commodities of $5.3 million.

•Additional amortization related to intangible assets from acquisitions in the past twelve months, which reduced operating profit by $2.0 million.

Amortization expense on intangible assets for ~~certain raw materials. Steel, aluminum and foam costs increased~~the OEM Segment was $6.9 million in the third quarter of ~~2017. Material costs are subject~~2020, compared to ~~global supply and demand forces and are expected to remain volatile.~~

~~Higher labor costs. While~~$5.3 million in the ~~Company seeks to continuously manage its labor cost, it has added staff to support~~same period of 2019. Depreciation expense on fixed assets for the growth of the business. The results also reflect variable compensation increases based on achieving profitability targets. Additionally, competition for skilled workers has continued to tighten the labor market which has increased the cost of labor.

~~Fixed costs, which were approximately $3~~OEM Segment was $11.9 million ~~to $4 million higher than~~ in the third quarter of ~~2016. Over~~2020, compared to $11.4 million in the ~~past couple~~same period of years, the Company made significant investments in manufacturing capacity, both facilities and personnel, to prepare for the expected increase in net sales in 2017 and beyond. In addition to investments in fixed costs to expand manufacturing capacity, the Company has made improvements in marketing, human resources, engineering, customer service and other critical departments. The Company also added the teams from acquired businesses, as well as amortization costs of intangible assets related to those businesses.2019.

OEM Segment – Year to Date

Net sales of the OEM Segment in the first nine months of ~~2017 increased 25~~2020 decreased 3 percent, or ~~$295~~$54.5 million, compared to the first nine months of ~~2016.~~2019. Net sales of components to OEMs were to the following markets for the nine months ended September 30:


(In thousands)	2020		2019		Change
RV OEMs:
Travel trailers and fifth-wheels	$	936,676	$	973,978	(4)	%
Motorhomes	107,241		121,167		(11)	%
Adjacent Industries OEMs	498,306		501,553		(1)	%
Total OEM Segment net sales	$	1,542,223	$	1,596,698	(3)	%

(In thousands) 2017 2016 Change
RV OEMs:
Travel trailers and fifth-wheels $ 1,045,465
$ 836,634
25 %
Motorhomes 114,887
85,762
34 %
Adjacent industries OEMs 310,373
253,088
23 %
Total OEM Segment net sales $ 1,470,725
$ 1,175,484
25 %

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


	2020	2019	Change
Travel trailer and fifth-wheel RVs	264,900	266,400	(1)	%
Motorhomes	28,300	36,400	(22)	%

2017 2016 Change
Travel trailer and fifth-wheel RVs 321,300
272,400
18 %
Motorhomes 47,300
41,600
14 %

The Company’s decrease in net sales ~~growth in~~to RV OEMs of travel trailers, fifth-wheel, and motorhome components ~~for travel trailer and fifth-wheel RVs~~ during the first nine months of ~~2017 exceeded~~2020 related to the ~~increase~~termination of the Furrion supply agreement as well as declines in ~~industry-wide~~motorhome wholesale ~~shipments of travel trailer and fifth-wheel RVs during the same period primarily due to market share gains and acquisitions completed in 2017 and 2016.~~

unit shipments. The ~~Company’s~~ net sales ~~growth in components for motorhomes~~decrease was partially offset by content gains during the first nine months of ~~2017 exceeded the increase in industry-wide wholesale shipments of motorhomes during the same period, primarily due to acquisitions completed in 2017~~2020 for both travel trailer and ~~2016~~fifth-wheel RVs and market share gains. Over the past few years, the Company has been expanding its product line of components for motorhomes in order to increase its customer base and market penetration, and further growth is expected.motorhomes.

The Company’s net sales to Adjacent Industries ~~increased~~OEMs decreased during the first nine months of ~~2017,~~2020, primarily due to ~~acquisitions completed~~OEM plant shutdowns in ~~the fourth quarter of 2016 and~~response to COVID-19. The net sales decrease was almost fully offset by market share gains. OEM marine net sales were $118.1 million in the first nine months of ~~2017, and market share gains. Acquisitions added $33~~2020, a decrease of $8.9 million ~~in net sales during~~compared to the ~~first nine months~~same period of ~~2017.~~2019. The Company continues to believe there are significant opportunities in Adjacent Industries.

Operating profit of the OEM Segment was ~~$151.9~~$110.5 million in the first nine months of ~~2017, an improvement~~2020, a decrease of ~~$7.8~~$20.9 million compared to the ~~first nine months~~same period of ~~2016.~~2019. The operating profit margin of the OEM Segment in the first nine months of ~~2017~~2020 decreased to 7.2 percent compared to 8.2 percent for the same period of 2019 and was negatively impacted by:

•The impact of COVID-19 as OEMs suspended production beginning in March 2020 due to government mandates and a temporary reduction in customer demand during the COVID-19 pandemic, which negatively impacted operating profit by an estimated $31.0 million.

•Selling price changes from contractual reductions indexed to select commodities of $18.8 million.

•Additional amortization related to intangible assets from acquisitions in the past twelve months, which reduced operating profit by $5.8 million.

Partially offset by:

•Reductions in material commodity pricing of $15.1 million, primarily related to decreased steel and aluminum costs.

LCI INDUSTRIES

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)

~~Better fixed cost absorption by spreading fixed costs over a sales base that increased by $295 million.~~

~~Increased sales to Adjacent Industries OEMs.~~

~~Pricing changes of targeted products.~~

•Investments over the past several years to ~~increase capacity and~~ improve operating ~~efficiencies. Further, the Company has implemented efficiency improvements,~~efficiencies, including lean manufacturing initiatives and increased use of automation, ~~and employee retention initiatives. The Company has also~~which reduced ~~direct~~ labor ~~attrition which improves efficiency and reduces other costs associated with workforce turnover.~~expenses by $9.8 million.

~~Lower group health claims. The Company actively works to manage and reduce these costs, however, these costs remain subject to fluctuation.~~

~~Partially offset by:~~

Fixed costs, which were approximately $8 million to $9 million higher than in the first nine months of 2016. Over the past couple of years, the Company made significant investments in manufacturing capacity, both facilities and personnel, to prepare for the expected increase in net sales in 2017 and beyond. In addition to investments in fixed costs to expand manufacturing capacity, the Company has made improvements in marketing, human resources, engineering, customer service and other critical departments. The Company also added the teams from acquired businesses, as well as amortization costs of intangible assets related to those businesses.

Higher material costs for certain raw materials. Steel, aluminum and foam costs increased in the first nine months of 2017. Material costs are subject to global supply and demand forces and are expected to remain volatile.

Higher labor costs. While the Company seeks to continuously manage its labor cost, it has added staff to support the growth of the business. The results also reflect variable compensation increases based on achieving profitability targets. Additionally, competition for skilled workers has continued to tighten the labor market which has increased the cost of labor.

Aftermarket Segment - Third Quarter

Net sales of the Aftermarket Segment in the third quarter of ~~2017~~2020 increased 34149 percent, or ~~$12~~$111.0 million, compared to the same period of ~~2016.~~2019. Net sales of components in the Aftermarket Segment were as follows for the three months ended September 30:


(In thousands)	2020		2019		Change
Total Aftermarket Segment net sales	$	185,675	$	74,671	149	%

(In thousands) 2017 2016 Change
Total Aftermarket Segment net sales $ 48,893
$ 36,455
34 %

The Company’s net sales to the Aftermarket Segment increased during the third quarter of ~~2017~~2020, primarily due to acquisitions that contributed approximately $78.0 million in sales, increases in market share, and the Company’s focus on building out ~~well qualified,~~well-qualified, customer-focused teams, and infrastructure to service this market. ~~With an estimated nine million households in North America owning an RV and~~The increase was partially offset by lost sales related to the ~~Company’s increasing content per unit,~~termination of the ~~Company continues to believe there are significant opportunities in the RV aftermarket as the components sold to OEMs are subject to normal wear and tear over time.~~Furrion supply agreement.

Operating profit of the Aftermarket Segment was ~~$6.9~~$28.9 million in the third quarter of ~~2017,~~2020, an increase of ~~$0.8~~$18.1 million compared to the same period of ~~2016; however, operating margin has decreased~~2019 primarily due to sales from acquisitions. The operating profit margin of the ~~increase~~Aftermarket Segment was 15.6 percent in 2020, compared to 14.5 percent in 2019, and was positively impacted by:

•Leveraging of fixed costs over a larger sales base, net of lost Furrion product sales, which increased operating profit by $1.8 million related to ~~wholesale distributors with lower margins traditionally experienced~~fixed overhead costs and $1.7 million related to fixed selling, general, and administrative costs.

Partially offset by:

•Additional amortization and depreciation related to long-lived assets from the CURT and Lewmar acquisitions, which reduced operating profit by $2.2 million.

Amortization expense on intangible assets for the Aftermarket Segment was $2.9 million in ~~aftermarket channels. As indicated, this business is still~~the third quarter of 2020, compared to $0.7 million in ~~an early growth stage and~~ the ~~Company has added staff~~same period of 2019. Depreciation expense on fixed assets for the Aftermarket Segment was $2.9 million in the third quarter of 2020, compared to ~~support anticipated growth and anticipates further cost increases~~$1.4 million in ~~this area as it builds up~~ the ~~capabilities~~same period of ~~this business.~~2019.

Aftermarket Segment – Year to Date

Net sales of the Aftermarket Segment in the first nine months of ~~2017~~2020 increased 29123 percent, or ~~$29~~$260.2 million, compared to the same period of ~~2016.~~2019. Net sales of components in the Aftermarket Segment were as follows for the nine months ended September 30:


(In thousands)	2020		2019		Change
Total Aftermarket Segment net sales	$	470,941	$	210,763	123	%

(In thousands) 2017 2016 Change
Total Aftermarket Segment net sales $ 129,908
$ 100,515
29 %

The Company’s net sales to the Aftermarket Segment increased during the first nine months of ~~2017~~2020 primarily due to sales from acquisitions of $220.7 million and organic growth of $39.5 million.

Operating profit of the ~~Company’s focus on building out well qualified, customer-focused teams~~Aftermarket Segment was $49.0 million in the first nine months of 2020, an increase of $17.9 million compared to the same period of 2019, primarily due to sales from acquisitions, partially offset by the impact of COVID-19. The operating profit margin of the Aftermarket Segment was 10.4 percent in 2020, compared to 14.8 percent in 2019, and ~~infrastructure~~was negatively impacted by:

•Sales mix of lower margin CURT and Lewmar products, which negatively impacted operating profit by $9.3 million.

•The recognition of higher cost of sales due to ~~service this market. With an estimated nine~~the inventory fair value step-up for CURT of $7.3 million.

•Additional amortization and depreciation related to long-lived assets from the CURT and Lewmar acquisitions, which reduced operating profit by $6.8million.

LCI INDUSTRIES

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)

Partially offset by:

~~million households in North America owning an RV and the Company’s increasing content per unit, the Company continues to believe there are significant opportunities in the RV aftermarket~~•The benefit of organic sales growth coupled with no sales of lower-margin Furrion products as ~~the components sold to OEMs are subject to normal wear and tear over time.~~

~~Operating profit~~a result of the ~~Aftermarket Segment was $18.2 million in~~termination of the ~~first nine months of 2017, an increase of $2.1 million compared to the same period of 2016; however,~~Furrion supply agreement, which increased operating margin has decreased primarily due to the increase in net sales to wholesale distributors with lower margins traditionally experienced in aftermarket channels. As indicated, this business is still in an early growth stage and the Company has added staff to support anticipated growth and anticipates further cost increases in this area as it builds up the capabilities of this business.profit by $6.0 million.

Income Taxes

The effective tax rates for the nine months ended September 30, ~~2017~~2020 and ~~2016~~2019 were ~~31.7%~~26.2 percent and ~~35.0%,~~24.6 percent, respectively. The effective tax rate for the nine months ended September 30, ~~2017~~2020 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 ASU 2016-09, the tax benefit relating to U.S. manufacturer’s deduction~~ and Federal and Indiana research and development ~~(“R&D”) credits offset by state taxes, foreign taxes and non-deductible expenses.~~credits. The ~~decrease~~increase in the effective tax rate for the nine months ended September 30, ~~2017~~2020 as compared to the same period in ~~2016~~2019 was due primarily to a reduction in the ~~recognition of~~ excess tax benefits ~~attributable~~related to the ~~adoption~~vesting of ~~ASU 2016-09~~equity-based compensation awards, an increase in ~~the first quarter of 2017.~~non-deductible expenses, and lower income before income taxes.

Generally, calendar years 2014 - 2016 remain open for federal and state income tax purposes. The Company is currently being audited by the Internal Revenue Service for the tax year ended December 31, 2014.

The net amount of tax liability for unrecognized tax benefits may change within the next twelve months due to changes in audit status, expiration of statutes of limitations, settlements of tax assessments and other events which could impact our determination of unrecognized tax benefits. Although the ultimate timing for resolution of the disputed tax issues is uncertain, we may resolve certain tax matters within the next twelve months and pay amounts for other unresolved tax matters in order to limit the potential impact of interest charges. The resolution of these audits are not expected to be material to our consolidated financial statements.

LIQUIDITY AND CAPITAL RESOURCES

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


(In thousands)	2020		2019
Net cash flows provided by operating activities	$	212,487	$	209,542
Net cash flows used in investing activities	(119,600)		(101,326)
Net cash flows used in financing activities	(59,206)		(94,825)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(853)		(842)
Net increase in cash, cash equivalents, and restricted cash	$	32,828	$	12,549

(In thousands) 2017 2016
Net cash flows provided by operating activities $ 108,859
$ 164,108
Net cash flows used for investing activities (127,975 ) (55,947 )
Net cash flows used for financing activities (47,292 ) (25,406 )
Net (decrease) increase in cash and cash equivalents $ (66,408 ) $ 82,755

Cash Flows from Operations

Net cash flows ~~from~~provided by operating activities ~~in first nine months of 2017~~ were ~~$55.2~~$212.5 million ~~lower than the same period of 2016, primarily due to:~~

~~A $69.7 million seasonal increase in accounts receivable~~ in the first nine months of ~~2017~~2020, compared to ~~a $46.0~~$209.5 million increase in the same period of 2016, primarily due to increased net sales partially offset by the timing of payments by the Company’s customers. Overall, accounts receivable balances remain current with an increase in days sales outstanding to 22 at September 30, 2017, compared to 19 at September 30, 2016. The increase in days sales outstanding is due to growth in sales to adjacent and international customers which pay with longer terms.

~~A $33.8 million increase in inventory~~ in the first nine months of ~~2017 compared~~2019. The increase in net cash flows provided by operating activities was primarily due to a $13.5 million decrease in the same period of 2016. Inventory turnover for the twelve months ended September 30, 2017 increased to 7.8 turns compared to 7.3 turns for the same period of 2016. The Company is working to improve inventory turnover;

~~LCI INDUSTRIES~~

~~ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF~~

~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Continued)~~

~~however, inventory turns may trend lower due to growth in product categories such as imported furniture and Furrion electronics.~~

~~A $27.2~~$12.1 million increase in ~~accrued expenses~~net income, adjusted for depreciation and amortization, stock-based compensation expense, deferred taxes, and other non-cash items. Changes in net assets and liabilities, net of acquisitions of businesses, in the first nine months of ~~2017 compared to a $30.1~~2020 generated $9.2 million ~~increase~~less cash than in the ~~same period of 2016, primarily due to timing of these payments.~~

~~Partially offset by:~~

~~A $12.0 million increase in net income in~~ first nine months of ~~2017 compared to~~2019. Increased receivables as OEMs resumed production was the ~~same period~~primary use of ~~2016.~~cash generated from 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, ~~and other emerging trends,~~ 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, respectively.~~sales. However, there are many factors that can impact this relationship, especially in the short term.

Depreciation and amortization was ~~$39.9~~$73.4 million in the first nine months of ~~2017,~~2020, and is expected to be approximately ~~$55~~$95 million to ~~$60~~$105 million for ~~fiscal~~the full year ~~2017.~~2020. Non-cash stock-based compensation expense in the first nine months of ~~2017~~2020 was ~~$15.0~~$13.6 million. Non-cash stock-based compensation expense is expected to be approximately ~~$19~~$15 million to ~~$21~~$20 million ~~in 2017.~~for the full year 2020.

Cash Flows from Investing Activities

Cash flows used ~~for~~in investing activities of ~~$128.0~~$119.6 million in the first nine months of ~~2017~~2020 were primarily comprised of ~~$60.3~~$94.9 million for the acquisitions of businesses, net of cash acquired, and $28.7 million for capital ~~expenditures and $67.9 million for the acquisition of businesses.~~expenditures. Cash flows used ~~for~~in investing activities of ~~$55.9~~$101.3 million in the first nine months of ~~2016~~2019 were primarily comprised of ~~$21.9~~$53.9 million for the acquisitions of businesses, net of cash acquired, and $47.8 million for capital expenditures and $34.2 million for the acquisition of businesses. Information detailing out the acquisitions in the first nine months of 2017 and 2016 are included in Note 2 of the Notes to the Condensed Consolidated Financial Statements.expenditures.

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 2one to two percent of net sales, while the growth portion has averaged approximately 8two to 11three percent of ~~the annual increase in~~ net sales. However, there are many factors that can impact ~~the~~ actual spending compared to these historical averages. ~~During 2017,~~

LCI INDUSTRIES

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Continued)

Capital expenditures and acquisitions in the ~~Company has focused capital investment in growth, automation and lean manufacturing initiatives.~~

~~The~~ first nine months of ~~2017 capital expenditures and acquisitions~~2020 were ~~primarily~~ funded by cash from ~~operations.~~operations and borrowings under the Company's credit agreement. In response to the COVID-19 pandemic, the Company delayed certain non-essential capital expenditures. Although sales volume rebounded beginning in the second half of the second quarter, the Company plans to remain disciplined with capital spending going forward. Capital expenditures and acquisitions in ~~2017~~the remainder of fiscal year 2020 are expected to be funded primarily from cash generated from operations, as well as periodic borrowings under the Company’s ~~line of credit.~~revolving credit facility.

Cash Flows from Financing Activities

Cash flows used ~~for~~in financing activities in the first nine months of ~~2017~~2020 were primarily comprised of payments of quarterly dividends of ~~$0.50 per share~~$51.5 million, repayments of $15.4 million under the term loan and other borrowings, and $12.7 million in net borrowings under the Company’s common stock, representing an aggregate of $12.4 million, $12.4 million and $12.5 million, respectively, paid to stockholders of record as of March 6, 2017, May 19, 2017 and August 18, 2017, respectively.revolving credit facility. In addition, the Company had ~~$7.3~~cash outflows of $4.8 million related to vesting of stock-based awards, net of shares tendered for payment of taxes. ~~Further, the Company paid $2.6 million in contingent consideration related to acquisitions.~~

Cash flows used ~~for~~in financing activities in the first nine months of ~~2016~~2019 were primarily comprised of ~~payments of dividends of $0.30 per share of~~$39.7 million in net repayments under the Company’s common stock, representing an aggregate of $7.3 million, $7.4 million and $7.4 million, respectively, paid to stockholders of record as of April 1, 2016, June 6, 2016 and August 19, 2016, respectively.Company's revolving credit facility. In addition, the Company ~~received $3.6~~had cash outflows of $7.2 million ~~in cash and~~related to the ~~related tax benefits from the exercise~~vesting of stock-based ~~compensation, which was partially offset by $3.2 million~~awards, net of shares tendered for payment of taxes. ~~Further, the Company paid $2.7 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 ~~$17.0~~$6.2 million liability for the aggregate fair value of these expected contingent consideration liabilities at September 30, ~~2017, including $6.6 million recorded as a current liability.~~2020. For further information, see Note 9 of the Notes to Condensed Consolidated Financial Statements.

Credit Facilities

See Note 7 of the Notes to ~~the~~ Condensed Consolidated Financial ~~Statements.~~Statements for a description of our credit facilities.

On April 27, 2016, the Company refinanced its line of credit through an agreement with JPMorgan Chase Bank, N.A., Wells Fargo Bank, N.A., Bank of America, N.A., and 1st Source Bank. The agreement amended and restated the existing line of credit, which now expires on April 27, 2021 (the “Amended Credit Agreement”). In connection with this amendment and

~~LCI INDUSTRIES~~

~~ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF~~

~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Continued)~~

restatement, the line of credit was increased from $100.0 million to $200.0 million, and contains a feature allowing the Company to draw up to $50.0 million in approved foreign currencies, including Australian dollars, Canadian dollars, pound sterling and euros. The maximum borrowings under the line of credit can be further increased by $125.0 million, subject to certain conditions. At September 30, 2017, the Company had $2.4 million in issued, but undrawn, standby letters of credit under the line of credit. Availability under the Company’s line of credit was $197.6 million at September 30, 2017.

On March 30, 2017, the Company amended its “shelf-loan” facility with Prudential Investment Management, Inc. and its affiliates (“Prudential”) to extend the term through March 30, 2020. In connection with this amendment, the 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 A 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. Availability under the Company’s “shelf-loan” facility was $150.0 million at September 30, 2017. However, the Amended Credit Agreement limits the aggregate indebtedness outstanding to Prudential from time to time to $150.0 million; therefore, currently the Company can only access an additional $100 million under the shelf-loan facility.

Pursuant to the Amended Credit Agreement and “shelf-loan” facility, the Company is required to maintain minimum interest and fixed charge coverages, and to meet certain other financial requirements. At September 30, 2017, the Company was in compliance with all such requirements, and expects to remain in compliance for the next twelve months.

Availability under both the Amended Credit Agreement and the “shelf-loan” facility is subject to a maximum leverage ratio covenant which limits the amount of consolidated outstanding indebtedness to 2.5 times the trailing twelve-month EBITDA, as defined. This limitation did not impact the Company’s borrowing availability at September 30, 2017. The remaining availability under these facilities, not including the potential increase of $125 million under the Amended Credit Agreement, was $297.6 million at September 30, 2017. The Company believes its cash flows from operations and the availability under the ~~Amended Credit Agreement~~revolving credit facility and ~~“shelf-loan” facility is~~potential note issuances under the Shelf-Loan Facility (as defined in Note 7 of the Notes to Condensed Consolidated Financial Statements) are adequate to finance the Company’s anticipated cash requirements for the next twelve months.

~~Additional information on~~The Company's debt agreements require that it maintain certain financial and other covenants. Although the ~~Company’s Amended Credit Agreement~~Company currently expects continued compliance with its debt covenants and ~~“shelf-loan” facility is included in Note 6~~believes it has adequate liquidity, events resulting from the effects of COVID-19 may negatively impact the ~~Notes~~Company's ability to comply with these covenants or require the ~~Condensed Consolidated Financial Statements.~~Company to pursue alternative financing.

CORPORATE GOVERNANCE

The Company is in compliance with the corporate governance requirements of the Securities and Exchange Commission (“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/investors~~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/investors~~www.lci1.com).

CONTINGENCIES

Information required by this item is included in Note 79 of the Notes to ~~the~~ Condensed Consolidated Financial ~~Statements and under Item 1 of Part I of this Quarterly Report on Form 10-Q.~~Statements.

INFLATION

The prices of key raw materials, consisting primarily of steel ~~aluminum,~~ and ~~foam,~~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 nine months of 2020 related to inflation.

~~NEW ACCOUNTING PRONOUNCEMENTS~~

~~Information required by this item is included in Note 11 of the Notes to the Condensed Consolidated Financial Statements.~~

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 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 ~~terminations,~~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's~~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~~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), capital expenditures, tax rate, cash flow, ~~and~~ financial condition, liquidity, covenant compliance, consumer demand, integration of acquisitions, R&D investments, and resumption or suspension of normal operations, whenever they occur in this Form 10-Q are necessarily estimates reflecting the best judgment of the Company’s senior management at the time such statements were made. There are a number of factors, many of which are beyond the Company’s control, which could cause actual results and events to differ materially from those described in the forward-looking statements. These factors include, in addition to other matters described in this Form 10-Q, the impacts of COVID-19, or other future pandemics, on the global economy and on the Company's customers, suppliers, employees, business and cash flows, pricing pressures due to domestic and foreign competition, costs and availability of, and tariffs on, raw materials (particularly steel and aluminum) and other components, seasonality and cyclicality in the industries to which 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~~team member benefits, ~~employee~~team member retention, realization and impact of expansion plans, efficiency improvements and cost reductions, the disruption of business resulting from natural disasters or other unforeseen events, the successful entry into new markets, the costs of compliance with environmental laws, laws of foreign jurisdictions in which ~~we operate,~~the Company operates, 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, ~~2016,~~2019, and in the Company’s subsequent filings with the ~~Securities~~SEC, including the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020 and ~~Exchange Commission.~~June 30, 2020, and this Quarterly Report on Form 10-Q. 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

~~At September 30, 2017, the~~The Company ~~had $49.9 million of fixed~~is exposed to market risk related to changes in short-term interest rates on our variable rate ~~debt outstanding. Assuming there is a decrease of 100 basis points in~~debt. Depending on the interest rate ~~for~~option selected as more 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 ~~a similar nature subsequent to~~ September 30, ~~2017, which the Company becomes unable to capitalize on in the short-term as a result~~2020), our results of ~~the structure of its fixed rate financing, future cash flows~~operations would not be ~~approximately $0.5 million lower per annum than if the fixed rate financing could be obtained at current market rates.~~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 9 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~~

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.~~effective as of September 30, 2020.


b)	~~Changes in Internal Control over Financial Reporting~~

b.Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2020, which have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

The Company ~~has selected~~began implementation of a new enterprise resource planning (“ERP”) ~~system. Implementation of the new ERP software began~~system in late 2013. To date, 2335 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 the 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.

There were no changes in the Company’s internal controls over financial reporting during the quarter ended September 30, 2017, which have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

LCI INDUSTRIES

PART II – OTHER INFORMATION

ITEM 1 – LEGAL PROCEEDINGS

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, it is management’s opinion 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 ~~Sheets~~Sheet as of September 30, ~~2017,~~2020, would not be material to the Company’s financial position or ~~annual~~ results of operations.

ITEM 1A – RISK FACTORS

There have been no material changes to the matters discussed in Part I, Item 1A – Risk Factors in our Annual Report on Form 10-K as filed with the ~~Securities and Exchange Commission~~SEC on February ~~28, 2017.~~27, 2020, except for the following:

The coronavirus (COVID-19) pandemic, or other outbreaks of disease or similar public health threats, has materially and adversely affected, and could in the future materially and adversely affect our business, financial condition, and results of operations, the nature and extent of which are highly uncertain and unpredictable.

The recent COVID-19 pandemic, and any other outbreaks of contagious diseases or other adverse public health developments in the United States or internationally, has had, and in the future could again have a material adverse effect on our business, financial condition, and results of operations. In 2020, COVID-19 has significantly impacted the global economy and financial markets, and it could continue to negatively impact our business in a number of ways. These effects include, but are not limited to:

•Disruptions or restrictions on our employees' ability to work effectively due to illness, quarantines, travel bans, shelter-in-place orders or other limitations.

•Temporary closures of our facilities or the facilities of our customers or suppliers, which could impact our ability to timely meet our customers' orders or negatively impact our supply chain.

•Our election to, or a government's requirement that we, allocate manufacturing capacity (for example, pursuant to the U.S. Defense Production Act) in an effort to increase the availability of needed medical and other supplies and products in a way that adversely affects our regular operations and negatively impacts our reputation and customer and supplier relationships.

•Resulting costs increases from the effects of a pandemic such as COVID-19 may not be fully recoverable.

•The failure of third parties on which we rely, including our suppliers, customers, contractors, commercial banks and other business partners, to meet their respective obligations to the Company, or significant disruptions in their ability to do so, which may be caused by their own financial or operational difficulties.

•Significant increases in economic and demand uncertainty have led to disruption and volatility in the global credit and financial markets, which increases the cost of capital and adversely impacts access to capital for both the Company and our customers and suppliers.

•Negative impacts of the COVID-19 pandemic could result in a breach of the covenants and/or restrictions contained in our debt agreements. Breaches of these covenants could result in defaults under the instruments governing the applicable indebtedness, which may permit the lenders under these debt agreements to exercise remedies. These defaults could have an adverse material impact on our business, results of operations and financial condition.

•Commodity costs have become more volatile due to the COVID-19 pandemic, and that volatility may worsen and/or last for an extended period of time.

•Reduced demand by our OEMs or consumers, potentially for an extended period of time.

•Increased cybersecurity and privacy risks and risks related to the reliability of technology to support remote operations.

•The Company may not be able to return cash to shareholders through quarterly cash dividends at the same amount it has in the past, or at all.

•Disruptions or uncertainties related to the COVID-19 pandemic for an extended period of time could result in delays or modifications to our strategic plans and hinder our ability to achieve our strategic goals.

The extent to which the COVID-19 pandemic, or other outbreaks of disease or similar public health threats, materially and adversely impacts our business, financial condition, and results of operations is highly uncertain and will depend on future developments. Such developments may include the geographic spread and duration of the virus, the severity of the disease and the actions that may be taken by various governmental authorities and other third parties in response to the outbreak. In addition, how quickly, and to what extent, normal economic and operating conditions can resume cannot be predicted, and the resumption of normal operations may be delayed or constrained by lingering effects of the COVID-19 pandemic on our suppliers, third-party service providers, and/or customers.

In addition, the COVID-19 pandemic could exacerbate or trigger other risks discussed in our Annual Report on Form 10-K as filed with the SEC on February 27, 2020, any of which could have a material and adverse effect on our business, results of operations, and financial condition.

ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

There has been no activity with respect to the Company’s stock repurchase program during the nine months ended September 30, 2020. At September 30, 2020, the Company has $121.3 million remaining in the current share repurchase authorization. Please refer to our Annual Report on Form 10-K as filed with the SEC on February 27, 2020 for further information on the program.

ITEM 6 – EXHIBITS

a) Exhibits as required by item 601 of Regulation S-K:

~~31.1~~ ~~Certification of Chief Executive Officer required by Rule 13a-14(a). Exhibit 31.1 is filed herewith.~~


1	3.1	LCI Industries Restated Certificate of Incorporation, as amended effective December 30, 2016 (incorporated by reference to Exhibit 3.1 included in the Registrant’s Form 10-K for the year ended December 31, 2016).
2	3.2	Amended and Restated Bylaws of LCI Industries, as amended May 25, 2017 (incorporated by reference to Exhibit 3.2 included in the Registrant’s Form 8-K filed on May 31, 2017).
3.	10.1	Second Amendment to Fifth Amended and Restated Note Purchase and Private Shelf Agreement, dated as of September 21, 2020, among Lippert Components, Inc., LCI Industries, PGIM, Inc. and the Noteholders party thereto. Exhibit 10.1 is filed herewith.
4.	31.1	Certification of Chief Executive Officer required by Rule 13a-14(a). Exhibit 31.1 is filed herewith.
5.	31.2	Certification of Chief Financial Officer required by Rule 13a-14(a). Exhibit 31.2 is filed herewith.
6.	32.1	Certification of Chief Executive Officer required by Rule 13a-14(b) and Section 1350 Chapter 63 of Title 18 of the United States Code. Exhibit 32.1 is filed herewith.
7.	32.2	Certification of Chief Financial Officer required by Rule 13a-14(b) and Section 1350 Chapter 63 of Title 18 of the United States Code. Exhibit 32.2 is filed herewith.
8.	101	The following financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, formatted in Inline XBRL: (i) Condensed Consolidated Statements of Income; (ii) Condensed Consolidated Statements of Comprehensive Income; (iii) Condensed Consolidated Balance Sheets; (iv) Condensed Consolidated Statements of Cash Flows; (v) Condensed Consolidated Statements of Stockholders’ Equity; and (vi) Notes to Condensed Consolidated Financial Statements.
9.	104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).


2)	~~31.2~~ ~~Certification of Chief Financial Officer required by Rule 13a-14(a). Exhibit 31.2 is filed herewith.~~


3)	~~32.1~~ ~~Certification of Chief Executive Officer required by Rule 13a-14(b) and Section 1350 Chapter 63 of Title 18 of the United States Code. Exhibit 32.1 is filed herewith.~~


4)	~~32.2~~ ~~Certification of Chief Financial Officer required by Rule 13a-14(b) and Section 1350 Chapter 63 of Title 18 of the United States Code. Exhibit 32.2 is filed herewith.~~


5)	~~101 Interactive Data Files.~~

LCI INDUSTRIES

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


LCI INDUSTRIES
Registrant


~~LCI INDUSTRIES~~
~~Registrant~~
By

By	/s/ Brian M. Hall
Brian M. Hall
Chief Financial Officer
November ~~7, 2017~~2, 2020



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

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


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



	Page
PART I –		FINANCIAL INFORMATION

		ITEM 1 – FINANCIAL STATEMENTS

		CONDENSED CONSOLIDATED STATEMENTS OF INCOME	4

		CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	5

		CONDENSED CONSOLIDATED BALANCE SHEETS	6

		CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	7

		CONDENSED CONSOLIDATED ~~STATEMENT~~STATEMENTS OF STOCKHOLDERS’ EQUITY	8

		NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	910

		ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	2225

		ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	3337

		ITEM 4 – CONTROLS AND PROCEDURES	3337

PART II –		OTHER INFORMATION

		ITEM 1 – LEGAL PROCEEDINGS	3438

		ITEM 1A – RISK FACTORS	3438

		ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	39

		ITEM 6 – EXHIBITS	3440

SIGNATURES			3541

EXHIBIT 31.1 - SECTION 302 CEO CERTIFICATION

EXHIBIT 31.2 - SECTION 302 CFO CERTIFICATION

EXHIBIT 32.1 - SECTION 906 CEO CERTIFICATION

EXHIBIT 32.2 - SECTION 906 CFO CERTIFICATION


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
(In thousands, except per share amounts)

Net sales	$	827,729	$	586,221	$	2,013,164	$	1,807,461
Cost of sales	606,290		450,748		1,504,378		1,390,741
Gross profit	221,439		135,473		508,786		416,720
Selling, general and administrative expenses	127,006		86,320		349,305		254,155
Operating profit	94,433		49,153		159,481		162,565
Interest expense, net	1,948		1,900		10,843		6,506
Income before income taxes	92,485		47,253		148,638		156,059
Provision for income taxes	24,138		11,444		38,891		38,357
Net income	$	68,347	$	35,809	$	109,747	$	117,702

Net income per common share:
Basic	$	2.72	$	1.43	$	4.37	$	4.71
Diluted	$	2.70	$	1.42	$	4.35	$	4.70

Weighted average common shares outstanding:
Basic	25,162		25,031		25,125		24,984
Diluted	25,313		25,156		25,220		25,053



	Nine Months Ended September 30,				Three Months Ended September 30,
	2017		2016		2017		2016
(In thousands, except per share amounts)

Net sales	$	1,600,633	$	1,275,999	$	554,814	$	412,370
Cost of sales	1,224,312		945,104		433,594		306,820
Gross profit	376,321		330,895		121,220		105,550
Selling, general and administrative expenses	206,225		170,641		73,293		60,412
Operating profit	170,096		160,254		47,927		45,138
Interest expense, net	1,162		1,285		311		396
Income before income taxes	168,934		158,969		47,616		44,742
Provision for income taxes	53,514		55,597		15,478		14,898
Net income	$	115,420	$	103,372	$	32,138	$	29,844

Net income per common share:
Basic	$	4.62	$	4.20	$	1.28	$	1.21
Diluted	$	4.56	$	4.15	$	1.26	$	1.19

Weighted average common shares outstanding:
Basic	24,993		24,587		25,060		24,724
Diluted	25,332		24,882		25,459		25,060



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



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



Cash consideration, net of cash acquired	$	13,501
Contingent consideration	2,366
Total fair value of consideration given	$	15,867

Customer relationships	$	7,000
Other identifiable intangible assets	2,150
Net tangible assets	167
Total fair value of net assets acquired	$	9,317

Goodwill (not tax deductible)	$	6,550



Cash consideration	$	40,062

Customer relationships	$	16,900
Other identifiable intangible assets	1,820
Net tangible assets	4,928
Total fair value of net assets acquired	$	23,648

Goodwill (tax deductible)	$	16,414



Cash consideration, net of cash acquired	$	6,502
Contingent consideration	4,922
Total fair value of consideration given	$	11,424

Customer relationships	$	3,189
Other identifiable intangible assets	1,329
Net tangible assets	585
Total fair value of net assets acquired	$	5,103

Goodwill (not tax deductible)	$	6,321



Cash consideration, net of cash acquired	$	16,618
Contingent consideration	1,322
Total fair value of consideration given	$	17,940

Customer relationships	$	9,696
Other identifiable intangible assets	6,141
Net other liabilities	(3,482		)
Total fair value of net assets acquired	$	12,355

Goodwill (not tax deductible)	$	5,585



Cash consideration	$	8,100

Customer relationships	$	3,700
Net other assets	2,378
Total fair value of net assets acquired	$	6,078

Goodwill (tax deductible)	$	2,022



Cash consideration	$	10,000

Customer relationships	$	8,100
Net tangible assets	1,307
Total fair value of net assets acquired	$	9,407

Goodwill (tax deductible)	$	593


(In thousands)
Balance at beginning of period	$	4,396
Acquisitions	2,796
Payments	(9)
^{Accretion (a)}	~~Recorded in selling, general and administrative expense in the Condensed Consolidated Statements of Income.~~591


^{Fair value adjustments (a) (b)}	Amounts represent the fair value of estimated remaining payments. The total estimated remaining payments as of September 30, 2017 are $20.2 million undiscounted. The liability for contingent consideration expires(1,885)
Net foreign currency translation adjustment	269
Balance at ~~various dates through September 2029. Certain~~end of the ~~contingent consideration arrangements are subject to a maximum payment amount, while the remaining arrangements have no maximum contingent consideration.~~period (c)	6,158
Less current portion in accrued expenses and other current liabilities	(4,163)
Total long-term portion in other long-term liabilities	$	1,995


(In thousands, except per share data)	Per Share		Record Date	Payment Date	Total Paid
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
Third Quarter 2019	0.65		09/06/19	09/20/19	16,267
Fourth Quarter 2019	0.65		12/06/19	12/20/19	16,280
Total 2019	$	2.55			$	63,813

First Quarter 2020	$	0.65	03/06/20	03/20/20	$	16,321
Second Quarter 2020	0.65		06/05/20	06/19/20	16,349
Third Quarter 2020	0.75		09/04/20	09/18/20	18,865
Total 2020	$	2.05			$	51,535


	Number of Shares	Weighted Average Price
Outstanding at December 31, 2019	346,148	$	87.54
Issued	4,582	89.53
Granted	150,319	97.70
Dividend equivalents	8,185	86.22
Forfeited	(15,219)	91.53
Vested	(153,411)	87.64
Outstanding at September 30, 2020	340,604	$	89.98


	September 30, 2020							December 31, 2019
(In thousands)	Total		Level 1		Level 2		Level 3	Total		Level 1		Level 2		Level 3


Liabilities
Contingent consideration	$	6,158	$	0	$	0	6,158	$	4,396	$	0	$	0	$	4,396



	September 30, 2017								December 31, 2016
(In thousands)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets
Unrealized gain on derivative instruments	$	1,180	$	—	$	1,180	$	—	$	2,296	$	—	$	2,296	$	—
Liabilities
Contingent consideration	$	17,045	$	—	$	—	$	17,045	$	9,241	$	—	$	—	$	9,241