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2022 ANNUAL REPORT | LCI INDUSTRIES TABLE OF CONTENTS
4-5
TO OUR SHAREHOLDERS
6-7
FINANCIAL DATA
8-9
CORPORATE INFORMATION
1-86
2022 FORM 10-K
3
2022 ANNUAL REPORT | LCI INDUSTRIES TO OUR SHAREHOLDERS
Jason D. Lippert
President and Chief Executive Officer
LIPPERT’S DIVERSIFICATION STRATEGY DELIVERS: ACHIEVING RECORD
REVENUE IN 2022 WHILE NAVIGATING INDUSTRY CHALLENGES AND
EXPANDING INNOVATIVE PRODUCT OFFERINGS
In 2022, Lippert achieved impressive results,
generating a record $5.2 billion in revenue
and aggressively increasing our Adjusted
EBITDA generation and innovative product
offerings. By the second quarter, we
delivered over $1 billion in cumulative year-
over-year revenue growth, the second time
we’ve achieved this type of expansion over
a twelve-month period. This performance
was the result of the collective effort of
our dedicated team members, under the
guidance of our experienced leaders.
We skillfully executed our diversification
strategy and navigated the rapid shift in
the RV industry production environment in
the second half of the year, enabling us to
maintain our profitable growth trajectory.
In recent years, we have made strategic
investments that have greatly increased
the resilience of our business. These
investments shaped our response
to challenges in 2022. We leveraged
continuous improvement and automation
initiatives, as well as more agile operating
teams, to swiftly adjust our capacity
and shift manufacturing costs between
business segments. This helped us mitigate
the impact of increased input costs and
reduced production levels from RV OEMs.
In addition to our operations, we made
significant investments to our innovative
product portfolio in 2022, which contributed
to the record content growth we achieved
during the year. We completed four
acquisitions, including the business assets
of Girard Products and Way Interglobal,
which substantially expanded the range
of cutting-edge offerings we provide to
meet the increasing consumer demand
for new and sophisticated technologies.
Internally, we continue to strengthen
our innovative capabilities, with a
200-person research and development
team dedicated to identifying new ways
to enhance the customer experience
across all the markets we compete in.
In September 2022, we had the opportunity
to showcase these capabilities at our
Investor Briefing Event. We featured our
OneControl system and concept EV
chassis, among other key technologies
that are keeping us at the forefront
of significant growth trends. Another
development we are incredibly proud of
is the transformational introduction of
our revolutionary ABS braking system,
an industry first for RV axles and the RV
industry as a whole. We are excited to keep
bringing these types of innovative products
to market as we differentiate the Lippert
brand, driving long-term market share
growth and ongoing content expansion
in RV, Marine, and other markets.
Despite the industry-wide slowdown in RV
production in the back half of the year, we
delivered strong performance, surpassing
the levels seen in pre-pandemic years. We
achieved revenue growth in each of our
non-RV businesses, thanks to our solid
execution of the diversification strategy.
We also benefited from the growing
popularity of the outdoor lifestyle. Our
company is now more diversified than
4
2022 ANNUAL REPORT | LCI INDUSTRIES Our commitment to being responsible
stewards of our environment and
communities is integral to our company
culture. In 2022, we made significant
progress on our environmental, social,
and governance (ESG) initiatives. We
increased the number of environmental
and safety management certifications
for our manufacturing sites, and we
implemented solar power at 14 of our
facilities. Our teams also volunteered for
a combined 150,000 hours of community
service, bringing our total collective
volunteer work to over 700,000 hours
since 2017. We also expanded the gender
diversity of our Board of Directors with the
appointment of Linda Myers, former partner
at Kirkland & Ellis LLP, as an independent
director. We will provide additional
details on our sustainability journey in our
upcoming Corporate Social Responsibility
(CSR) Report, which will include new
disclosures on scope 1 and 2 greenhouse
gas emissions and references to Global
Reporting Initiative (GRI) standards.
Lastly, I want to express my gratitude
to all of our Lippert team members for
their hard work and commitment to our
company values, which resulted in another
year of record results. We are excited to
continue generating long-term value for
our customers and shareholders in 2023.
JASON D. LIPPERT
President and Chief Executive Officer
ever before, securing ongoing, sustainable
growth and cementing a leading position
in the broader outdoor recreation space.
We diversified our revenues, in part,
to mitigate cyclicality, and our Marine
and Aftermarket divisions delivered
encouraging results. Marine production
remained stable throughout the year, and
we have ample opportunities to grow our
market share in this space as we expand
our product offerings. In our Aftermarket
division, we anticipate continued growth
in our products and services due to
the record number of RVs on the road
and the increasing need for service and
repairs as new vehicle sales decline.
Creating a best-in-class customer
experience has been a vital driver for both
our Marine and Aftermarket businesses.
This emphasis on customer satisfaction
is central to fostering lifelong relationships
and brand recognition. To achieve this,
we have established a Customer Care
Center, as well as several engagement
groups, including the Campground Project,
Lippert Captains, and Lippert Scouts.
Through these groups, we maintain close
contact with our customers, providing
them with critical support and gathering
valuable feedback on our products to
drive improvements whenever possible.
Our long-term success has been built
on our strong cultural foundation. 2022
marked the 10th year of our culture journey,
which has brought us recognition both
inside and outside our industry, while
significantly contributing to our productivity
and enabling us to generate billions of
dollars in new sales growth. Throughout our
company, we have focused on fostering a
healthy working environment and providing
opportunities for personal and professional
growth for all team members. To achieve
this, we have implemented a range of
programs, including leadership coaching,
our Leadership Academy, and our Take
the Step program. These programs equip
our team members with the resources
they need to improve Lippert’s workplace
culture while driving our business forward.
5
2022 ANNUAL REPORT | LCI INDUSTRIES FINANCIAL DATA
OPERATING DATA:
Net sales
Operating profit
Income before income taxes
Provision for income taxes
Net income
Net income per common share:
Basic
Diluted
Cash dividends per common share
FINANCIAL DATA:
Working capital
Total assets
Long-term obligations
Stockholders’ equity
2018
2019
2020
2021
2022
Year Ended December 31
$
$
$
$
$
$
$
$
$
$
$
$
2,475,807
$ 2,371,482
198,788
192,352
43,801
148,551
5.90
5.83
2.35
349,069
1,243,893
360,056
706,255
$
$
$
$
$
$
$
$
$
$
$
200,210
191,414
44,905
146,509
5.86
5.84
2.55
399,533
1,862,595
790,665
800,672
$
$
$
$
$
$
$
$
$
$
$
$
2,796,166
222,934
209,481
51,041
158,440
6.30
6.27
2.80
453,407
2,298,031
973,311
908,326
$
$
$
$
$
$
$
$
$
$
$
$
4,472,697
398,410
382,044
94,305
287,739
11.39
11.32
3.45
$
$
$
$
$
$
$
$
5,207,143
553,028
525,455
130,481
394,974
15.57
15.48
4.05
939,669
$
969,476
3,288,094
$ 3,246,912
1,568,003
$ 1,444,604
1,092,875
$ 1,381,008
In thousands, except per share amounts
TOTAL SALES
(in millions)
NET INCOME PER COMMON SHARE
(diluted)
7
0
2
,
5
$
3
7
4
,
4
$
6
9
7
,
2
$
6
7
4
,
2
$
1
7
3
,
2
$
5,500
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
16
15
14
13
12
11
10
9
8
7
6
5
4
3
2
1
8
4
.
5
1
$
.
2
3
1
1
$
3
8
.
5
$
4
8
.
5
$
7
2
.
6
$
2018
2019
2020
2021
2022
2018
2019
2020
2021
2022
6
2022 ANNUAL REPORT | LCI INDUSTRIES
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN*
Among LCI Industries, the Russell 2000 Index, S&P Composite 1500 Auto Parts & Equipment Index and a Peer Group*
LCI Industries
Russell 2000
S&P Composite 1500
Auto Parts & Equipment
Peer Group
12/2017
12/2018
12/2019
12/2020
12/2021
12/2022
LCI Industries
Russell 2000
S&P Composite 1500
Auto Parts & Equipment
Peer Group
$100.00
$100.00
$100.00
$100.00
$52.79
$88.99
$68.60
$57.20
$87.15
$111.70
$91.52
$84.38
$108.22
$134.00
$133.14
$153.85
$112.66
$137.88
$102.64
$134.55
$81.89
$122.41
$93.20
$96.59
The stock price performance included in this graph is not necessarily indicative of future stock price performance.
*$100 invested on 12/31/17 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.
Copyright© 2023 Russell Investment Group. All rights reserved.
The graph above matches the cumulative 5-year total return of holders of LCI Industries’ common stock with the cumulative total returns of the Russell 2000 Index,
S&P Composite 1500 Auto Parts & Equipment Index and a customized peer group of seven companies that includes: Brunswick Corp, Cavco Industries Inc,
Patrick Industries Inc, Shyft Group Inc, Thor Industries Inc, Trimas Corp and Winnebago Industries Inc. The graph assumes that the value of the investment in our
common stock, in each index and in the peer group (including reinvestment of dividends) was $100 on 12/31/2017 and tracks it through 12/31/2022.
7
$0$20$40$60$80$100$120$140$160$180$20012/1712/1812/1912/2012/2112/222022 ANNUAL REPORT | LCI INDUSTRIES
BOARD OF DIRECTORS
Tracy D. Graham (1)(3)
Chairman of the Board of LCI
Industries, Chief Executive
Officer and Managing Principal
of Graham-Allen Partners
Brendan J. Deely (2)(3)(5)
President and Chief Executive
Officer of Banner Solutions
Virginia L. Henkels (1)(2)
Chief Financial Officer and
Secretary of Empowerment
& Inclusion Capital 1 Corp.
Stephanie K. Mains (1)(2)
Chief Executive Officer of LSC
Communications MCL, LLC
Kieran M. O’Sullivan (1)(3)(4)
President, Chief Executive Officer
and Chairman of the Board of
CTS Corporation
John A. Sirpilla (4)(5)
Founder and Chief Executive
Officer of Encourage LLC
Frank J. Crespo (2)(4)
Former Senior Vice President
and Chief Supply Chain
Officer of Indigo Agriculture, Inc.
James F. Gero (1)(3)
Private Investor
Jason D. Lippert
President and Chief Executive
Officer of LCI Industries
Linda K. Myers (1)(3)(4)
Former partner at Kirkland & Ellis LLP
David A. Reed (4)(5)
President of a privately-held family
investment management company
LCI INDUSTRIES COMMITTEES
(1) Audit Committee - Chair: Virginia L. Henkels
(2) Compensation Committee - Chair: Frank J. Crespo
(3) Corporate Governance, Nominating, and Sustainability Committee - Chair: Brendan J. Deely
(4) Risk Committee - Chair: Kieran M. O’Sullivan
(5) Strategy, Acquisition and Capital Deployment - Chair: David A. Reed
8
2022 ANNUAL REPORT | LCI INDUSTRIES CORPORATE OFFICERS
Jason D. Lippert
President and
Chief Executive Officer
Brian M. Hall
Executive Vice President and
Chief Financial Officer
Andrew J. Namenye
Executive Vice President, Chief Legal
Officer and Corporate Secretary
Ryan R. Smith
Group President - North America
Jamie M. Schnur
Group President - Aftermarket
Nick C. Fletcher
Executive Vice President and
Chief Human Resources Officer
Kip A. Emenhiser
Vice President of Finance and Treasurer
I
EXECUTIVE OFFICES
3501 County Road 6 East
Elkhart, IN 46514
(574) 535-1125
website: www.lci1.com
E-mail: lcii@lci1.com
CORPORATE INFORMATION
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
KPMG LLP
Aon Center
200 East Randolph
Chicago, IL 60601
I
TRANSFER AGENT
AND REGISTRAR
American Stock Transfer & Trust Company
59 Maiden Lane
New York, NY 10038
(212) 936-5100
(800) 937-5449
website: www.amstock.com
I
CORPORATE GOVERNANCE
Copies of the Company’s Governance
Principles, Guidelines for Business
Conduct, Code of Ethics for Senior Financial
Officers, Whistleblower Policy, Charters
of the Audit, Compensation, Corporate
Governance, Nominating and Sustainability.
Risk and Strategy and Acquisition
Committees, and the Key Practices of the
Audit, Compensation, and Sustainability
Committees are on the Company’s website
at lci1.com/investors, and are available upon
request, without charge, by writing to:
Secretary
LCI Industries
52567 Independence Ct
Elkhart, IN 46514
CEO/CFO CERTIFICATIONS
The most recent certifications by our Chief
Executive Officer and Chief Financial Officer,
pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002, are filed as exhibits to
our Form 10-K. We have also filed with the
New York Stock Exchange the most recent
Annual CEO Certification as required by
Section 303A.12(a) of the New York Stock
Exchange Listed Company Manual.
I
PAY-FOR-PERFORMANCE
Through a combination of performance-based
incentives and stock-based awards, LCI
strives to attract, motivate and retain talented,
entrepreneurial and innovative management.
We have designed our pay-for-performance
incentive compensation program to be
the “workhorse” of our management
compensation. Performance-based
incentive compensation has historically
represented the major portion of the overall
compensation of our key managers. We
believe that those key employees who have
the greatest ability to influence the company’s
results should be compensated primarily
based on the financial results of those
operations for which they are responsible.
Our stock-based awards ensure that our
managers have a continuing personal
interest in the long-term success of the
company and create a culture of ownership
among management, while also rewarding
long-term return to stockholders.
9
2022 ANNUAL REPORT | LCI INDUSTRIES 1010
2022 ANNUAL REPORT | LCI INDUSTRIES UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from _________________ to _________________
Commission File Number 001-13646
LCI INDUSTRIES
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
3501 County Road 6 East
Elkhart,
Indiana
(Address of principal executive offices)
13-3250533
(I.R.S. Employer
Identification Number)
46514
(Zip Code)
(574) 535-1125
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $.01 par value
Trading Symbols(s)
LCII
Name of each exchange on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
1
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period
that the registrant was required to submit such files.) Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer,"
"smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒
Non-accelerated filer ☐
Emerging growth company ☐
Accelerated filer ☐
Smaller reporting company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the
effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.
7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the
registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-
based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to
§240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the voting common equity held by non-affiliates computed by reference to the price at which the
common equity was last sold as of the last business day of the registrant’s most recently completed second fiscal quarter was
$2,019,250,435. The registrant has no non-voting common equity.
The number of shares outstanding of the registrant’s common stock, as of the latest practicable date (February 17, 2023), was
25,179,909 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the 2023 Annual Meeting of Stockholders to be held on May 18, 2023 are incorporated by
reference into Part III of this Annual Report on Form 10-K.
2
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains certain "forward-looking statements" with respect to our financial
condition, results of operations, business strategies, operating efficiencies or synergies, competitive position, growth
opportunities, acquisitions, plans and objectives of management, markets for the Company’s common stock, the impact of legal
proceedings, and other matters. Statements in this Form 10-K 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, 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, financial condition, liquidity, covenant
compliance, retail and wholesale demand, integration of acquisitions, R&D investments, and industry trends, whenever they
occur in this Form 10-K 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-K, the impacts of COVID-19, or other future pandemics, the
Russia-Ukraine war, and heightened tensions between China and Taiwan on the global economy and on the Company's
customers, suppliers, employees, business and cash flows, pricing pressures due to domestic and foreign competition, costs and
availability of, and tariffs on, raw materials (particularly steel and aluminum) and other components, seasonality and cyclicality
in the industries to which we sell our products, availability of credit for financing the retail and wholesale purchase of products
for which we sell our components, inventory levels of retail dealers and manufacturers, availability of transportation for
products for which we sell our components, the financial condition of our customers, the financial condition of retail dealers of
products for which we sell our components, retention and concentration of significant customers, the costs, pace of and
successful integration of acquisitions and other growth initiatives, availability and costs of production facilities and labor, team
member benefits, team member retention, realization and impact of expansion plans, efficiency improvements and cost
reductions, the disruption of business resulting from natural disasters or other unforeseen events, the successful entry into new
markets, the costs of compliance with environmental laws, laws of foreign jurisdictions in which we operate, other operational
and financial risks related to conducting business internationally, and increased governmental regulation and oversight,
information technology performance and security, the ability to protect intellectual property, warranty and product liability
claims or product recalls, interest rates, oil and gasoline prices, and availability, the impact of international, national and
regional economic conditions and consumer confidence on the retail sale of products for which we sell our components, and
other risks and uncertainties discussed more fully under the caption "Risk Factors" in this Annual Report on Form 10-K, and in
our subsequent filings with the Securities and Exchange Commission ("SEC"). 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.
INDUSTRY AND MARKET DATA
Certain market and industry data and forecasts included in this report were obtained from independent market research,
industry publications and surveys, governmental agencies and publicly available information. Industry surveys, publications
and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable,
although they do not guarantee the accuracy or completeness of such information. We believe the data from such third-party
sources to be reliable. However, we have not independently verified any of such data and cannot guarantee its accuracy or
completeness. Similarly, internal market research and industry forecasts, which we believe to be reliable based upon our
management’s knowledge of the market and the industry, have not been verified by any independent sources. While we are not
aware of any misstatements regarding the market or industry data presented herein, our estimates involve risks and uncertainties
and are subject to change based on various factors, including those discussed under the headings "Special Note Regarding
Forward-Looking Statements," "Risk Factors," and "Management's Discussion and Analysis of Financial Condition and Results
of Operations" in this report.
3
LCI INDUSTRIES
TABLE OF CONTENTS
PART I –
PART II –
ITEM 1 - BUSINESS
ITEM 1A - RISK FACTORS
ITEM 1B - UNRESOLVED STAFF COMMENTS
ITEM 2 - PROPERTIES
ITEM 3 - LEGAL PROCEEDINGS
ITEM 4 - MINE SAFETY DISCLOSURES
ITEM 5 - MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
ITEM 6 - [RESERVED]
ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
ITEM 9A - CONTROLS AND PROCEDURES
ITEM 9B - OTHER INFORMATION
ITEM 9C - DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT
INSPECTIONS
ITEM 10 - DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 11 - EXECUTIVE COMPENSATION
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
ITEM 14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES
PART III –
PART IV –
ITEM 15 - EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
ITEM 16 - FORM 10-K SUMMARY
SIGNATURES
4
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73
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79
Item 1. BUSINESS.
Summary
PART I
LCI Industries ("LCII" and collectively with its subsidiaries, the "Company," the "Registrant," "we," "us," or "our"),
through its wholly-owned subsidiary, Lippert Components, Inc. and its subsidiaries (collectively, "Lippert Components," "LCI"
or "Lippert"), supplies, domestically and internationally, a broad array of 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 boats; buses; trailers used to haul boats, livestock, equipment, and other
cargo; trucks; trains; manufactured homes; and modular housing. We also supply engineered components to the related
aftermarkets of these industries, primarily by selling to retail dealers, wholesale distributors, and service centers, as well as
direct to retail customers via the Internet.
Our products include steel chassis and related components; axles and suspension solutions; slide-out mechanisms and
solutions; thermoformed bath, kitchen, and other products; vinyl, aluminum, and frameless windows; manual, electric, and
hydraulic stabilizer and leveling systems; entry, luggage, patio, and ramp doors; furniture and mattresses; electric and manual
entry steps; awnings and awning accessories; towing products; truck accessories; electronic components; appliances; air
conditioners; televisions and sound systems; tankless water heaters; and other accessories.
We have two reportable segments: the original equipment manufacturers segment (the "OEM Segment") and the
aftermarket segment (the "Aftermarket Segment").
We are focused on profitable growth and margin stability in our industries, both organic and through acquisitions. In
order to support this growth, over the past several years we have expanded our geographic market and product lines, and
integrated manufacturing, distribution, and administrative functions. At December 31, 2022, we operated over 130
manufacturing and distribution facilities located throughout North America and Europe, and reported consolidated net sales of
$5.2 billion for the year ended December 31, 2022.
The Company was incorporated under the laws of Delaware on March 20, 1984, and is the successor to Drew National
Corporation, which was incorporated under the laws of Delaware in 1962. Our principal executive and administrative offices
are located at 3501 County Road 6 East, Elkhart, Indiana 46514; telephone number (574) 535-1125; website www.lci1.com; e-
mail LCII@lci1.com. We make available free of charge on our website our Annual Report on Form 10-K, Quarterly Reports on
Form 10-Q, and Current Reports on Form 8-K (and amendments to those reports) filed or furnished with the SEC as soon as
reasonably practicable after such materials are electronically filed or furnished.
Recent Developments
COVID-19 Pandemic
The coronavirus ("COVID-19") pandemic and related impacts have caused significant uncertainty and disruption in
the global economy and financial markets. We continue to monitor the impact of COVID-19 on all aspects of our business. For
risks relating to the COVID-19 pandemic, see Item 1A. "Risk Factors" in Part I of this Report and for details on the impact of
COVID-19 on the Company, see the section under the heading "COVID-19 Pandemic and Recent Events" in Part II, Item 7.
"Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II of this Report.
Sales and Profits
Consolidated net sales for the year ended December 31, 2022 were $5.2 billion, an increase of 16 percent from the
consolidated net sales for the year ended December 31, 2021 of $4.5 billion. The increase in year-over-year net sales was
primarily driven by price realization, market share growth, acquisitions, and an increase in net sales to OEMs in adjacent
industries, partially offset by a decrease in wholesale RV OEM shipments. Net sales from acquisitions completed in 2022 and
2021 contributed approximately $219.0 million to net sales in 2022.
Net income for 2022 was $395.0 million, or $15.48 per diluted share, compared to net income of $287.7 million, or
$11.32 per diluted share, in 2021.
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In Part II, Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations," we
describe in detail the change in our net sales and operating profits during 2022.
Customer Concentrations
Thor Industries, Inc. ("Thor"), a customer of both segments, accounted for 23 percent, 24 percent, and 22 percent of
our consolidated net sales for the years ended December 31, 2022, 2021, and 2020, respectively. Berkshire Hathaway Inc.
(through its subsidiaries Forest River, Inc. and Clayton Homes, Inc.), a customer of both segments, accounted for 20 percent, 20
percent, and 19 percent of our consolidated net sales for the years ended December 31, 2022, 2021, and 2020, respectively. No
other customer accounted for more than 10 percent of consolidated net sales in the years ended December 31, 2022, 2021, and
2020. Accounts receivable from Berkshire Hathaway Inc. accounted for 14 percent of consolidated accounts receivable, net at
December 31, 2021. No other customer accounted for more than 10 percent of consolidated accounts receivable, net at
December 31, 2022 and 2021. International sales and export sales represented approximately eight percent of consolidated net
sales in each of 2022, 2021, and 2020.
Acquisitions
During 2022, we completed four acquisitions:
In November 2022, the Company acquired substantially all of the business assets of Way Interglobal Network LLC
("Way"), a distributor of innovative appliances and electronics to OEMs in the RV industry. The purchase price was
$54.8 million, which includes a holdback payment of $2.0 million due on the first anniversary of the acquisition in November
2023. Net sales for Way were approximately $185 million for the twelve months preceding the acquisition.
In March 2022, the Company acquired substantially all of the business assets of Girard Systems and Girard Products
LLC (collectively "Girard"), a manufacturer and distributor of proprietary awnings and tankless water heaters for OEMs and
aftermarket customers in the RV, specialty vehicle, and related industries. The total fair value of consideration was
approximately $70.7 million. The Company paid $50.0 million in cash consideration at closing, with fixed deferred
consideration of $20.0 million paid in July 2022 and $0.7 million paid to true up net working capital in September 2022. Net
sales for Girard were approximately $57 million for the twelve months preceding the acquisition.
During the twelve months ended December 31, 2022, the Company completed two other acquisitions for an aggregate
of $5.0 million of cash purchase consideration. Net sales for the companies acquired in these acquisitions were approximately
$16 million for the twelve months preceding the acquisitions.
OEM Segment
Through our wholly-owned subsidiaries, we manufacture and distribute a broad array of engineered components for
the leading OEMs in the recreation and transportation product markets, consisting primarily of RVs and adjacent industries,
including boats; buses; trailers used to haul boats, livestock, equipment, and other cargo; trucks; trains; manufactured homes;
and modular housing.
In 2022, the OEM Segment represented 83 percent of our consolidated net sales and 87 percent of consolidated
segment operating profit. Approximately 61 percent of our OEM Segment net sales in 2022 were from products to
manufacturers of travel trailer and fifth-wheel RVs. RVs may be motorized (motorhomes) or towable (travel trailers, fifth-
wheel travel trailers, folding camping trailers, and truck campers).
Raw materials used by our OEM Segment, consisting primarily of steel (coil, sheet, tube, and I-beam), extruded
aluminum, glass, wood, fabric, and foam, are available from a number of sources, both domestic and foreign.
Operations of our OEM Segment consist primarily of fabricating, welding, thermoforming, painting, sewing, and
assembling components into finished products. Our OEM Segment operations are conducted at manufacturing and distribution
facilities throughout North America and Europe, strategically located in proximity to the customers they serve. See Item 2.
"Properties."
Our OEM Segment products are sold primarily to major manufacturers of RVs such as Thor Industries, Inc. (symbol:
THO), Forest River, Inc. (a Berkshire Hathaway company, symbol: BRKA), Winnebago Industries, Inc. (symbol: WGO) and
other RV OEMs, and to manufacturers in other adjacent industries such as Brunswick Corporation (symbol: BC), Polaris Inc.
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(symbol: PII), Blue Bird Corporation (symbol: BLBD), Skyline Champion Corporation (symbol: SKY) and Cavco Industries,
Inc. (symbol: CVCO).
The RV industry is highly competitive, both among manufacturers of RVs and the suppliers of RV components,
generally with low barriers to entry other than compliance with industry standards, codes and safety requirements, and the
initial capital investment required to establish manufacturing operations. We compete with several other component suppliers
on a regional and national basis with respect to a broad array of components for both towable and motorized RVs. Our
operations compete on the basis of product quality and reliability, product innovation, price, customer service, and customer
satisfaction. Although definitive information is not readily available, we believe we are a leading supplier for towable RVs for
the following principal RV products:
● windows,
● doors,
● chassis,
● slide-out mechanisms,
● axles,
● furniture,
● leveling systems,
● awnings,
● electronics, and
● appliances.
OEM Segment net sales to adjacent industries increased 25 percent to $1.4 billion in 2022 from $1.1 billion in 2021,
and was 31 percent and 30 percent of total OEM Segment net sales in 2022 and 2021, respectively. Within adjacent industries,
North American marine OEM net sales totaled $492.7 million in 2022, an increase of $108.2 million compared to 2021.
Our market share for our products in adjacent industries cannot be readily determined; however, we continue to make
investments in acquisitions, people, technology, and equipment, and we are committed to expanding our presence in these
industries.
Detailed narrative information about the results of operations of the OEM Segment is included in Part II, Item 7.
"Management's Discussion and Analysis of Financial Condition and Results of Operations."
Aftermarket Segment
Many of our OEM Segment products are also sold through various aftermarket channels of the recreation and
transportation product markets, primarily to retail dealers, wholesale distributors, and service centers, as well as direct to retail
customers via the Internet. This includes discretionary accessories and replacement service parts. We have teams dedicated to
product, technical, and installation training as well as marketing support for our Aftermarket Segment customers. We also
support multiple call centers to provide responses to customers for both product delivery and technical support. This support is
designed for a rapid response to critical repairs, so customer downtime is minimal. The Aftermarket Segment also includes
biminis, covers, buoys, fenders to the marine industry, towing products, truck accessories, appliances, air conditioners,
televisions, sound systems, tankless water heaters, and the sale of replacement glass and awnings to fulfill insurance claims.
Many of the optional upgrades and non-critical replacements for RVs are purchased outside the normal product selling season,
thereby causing certain Aftermarket Segment sales to be counter-seasonal, but this has been, and may in the future be, different
as a result of the COVID-19 pandemic and the continuing impact of market and supply chain disruptions.
According to Go RVing, estimated RV ownership in the United States as of 2020 had increased to over 11 million
households. This vibrant market is a key driver for aftermarket sales, as we anticipate owners will likely upgrade their units as
well as replace parts and accessories which have been subjected to normal wear and tear.
Aftermarket Segment net sales increased eight percent from $829.1 million in 2021 to $891.3 million in 2022. Sales
from products of CURT Acquisition Holdings, Inc. (with its subsidiaries "CURT"), which we acquired in December 2019,
accounted for approximately half of our Aftermarket Segment net sales in each of 2021 and 2022. CURT is a leading
manufacturer and distributor of branded towing products and truck accessories and sells products to the automotive and truck
aftermarket, as well as the RV, marine, and trailer markets, all of which require towing products, which we believe
compliments the OEM markets we serve. We continue to make investments in people and technology to grow the Aftermarket
Segment, and we are committed to continue these expansion efforts.
Detailed narrative information about the results of operations of the Aftermarket Segment is included in Part II, Item 7.
"Management's Discussion and Analysis of Financial Condition and Results of Operations."
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Sales and Marketing
Our sales activities are related to developing new customer relationships and maintaining existing customer
relationships, primarily through the quality and reliability of our products, innovation, price, customer service, and customer
satisfaction. Our annual marketing and advertising expenditures were $31.4 million, $25.1 million, and $15.6 million, in 2022,
2021, and 2020, respectively, reflecting increased expenditures related to our strategic decision to increase our sales to the
aftermarket and adjacent industries, as well as expand into international markets.
We have several supply agreements or other arrangements with certain of our customers that provide for prices of
various products to be fixed for periods generally not in excess of eighteen months; however, in certain cases we have the right
to renegotiate the prices on sixty-days' notice. We have agreements with certain customers that index their pricing to select
commodities. Both the OEM Segment and the Aftermarket Segment typically ship products on average within one to two
weeks of receipt of orders from their customers and, as a result, neither segment has any significant backlog.
Capacity
At December 31, 2022, we operated over 130 manufacturing and distribution facilities across North America and
Europe. For most products, we have the ability to fill excess demand by shifting production to other facilities, usually at an
increased cost. The ability to adjust capacity in certain product areas through lean manufacturing and automation initiatives,
reallocation of existing resources and/or additional capital expenditures is monitored regularly by management in an effort to
achieve a high level of production efficiency and return on invested capital. We believe we have adequate capacity to meet
projected demand. Capital expenditures for 2022 were $131 million, which included normal replacement expenditures along
with over $40 million in automation investments and approximately $30 million in capacity investments for operational
improvements.
Seasonality
Most industries where we sell products or where our products are used historically have been seasonal and are
generally at the highest levels when the weather is moderate. Accordingly, our sales and profits have generally been the highest
in the second quarter and lowest in the fourth quarter. However, because of fluctuations in dealer inventories, the impact of
international, national, and regional economic conditions, consumer confidence on retail sales of RVs and other products for
which we sell our components, the timing of dealer orders, and the impact of severe weather conditions on the timing of
industry-wide shipments from time to time, current and future seasonal industry trends have been, and may in the future be,
different than in prior years, particularly as a result of the COVID-19 pandemic and related impacts. Additionally, many of the
optional upgrades and non-critical replacements for RVs are purchased outside the normal product selling season, thereby
causing certain Aftermarket Segment sales to be counter-seasonal, but this has been, and may in the future be, different as a
result of the COVID-19 pandemic and the continuing impact of market and supply chain disruptions.
International
Over the past several years, we have been gradually investing in our international business, primarily in Europe.
International and export sales represented approximately eight percent of consolidated net sales in each of 2022, 2021, and
2020. We continue to focus on developing products tailored for international recreation and transportation markets. We
participate in the largest caravan shows in Europe and have been receiving positive feedback on our products. Recently, some
of the product innovations we developed for European markets have been gaining popularity in the United States as well. Our
international business development team works with customers and prospects in Europe and other international markets,
assessing the dynamics of the local marketplace, building relationships with OEMs and helping introduce our existing products
and develop new products for those markets, with the goal of identifying long-term growth opportunities. We target the same
international product markets that we supply to in the United States, including RV, adjacent industries such as marine, cargo
trailers, and high-speed trains, and the related aftermarkets. Our largest domestic customer, Thor, established a presence in the
European caravan market through their 2019 acquisition of Erwin Hymer Group, which has provided additional business
opportunities for us in Europe. We estimate the addressable market for annual net sales of our products outside of North
America to be over $1.5 billion.
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Intellectual Property
We hold approximately 680 United States and foreign patents and have approximately 270 patent applications pending
that relate to various products we sell. We have also granted certain licenses that permit third parties to manufacture and sell
products in consideration for royalty payments.
From time to time, we have received notices or claims we may be infringing certain patent or other intellectual
property rights of others, and we have given notices to, or asserted claims against, others that they may be infringing certain
patent or other intellectual property rights of the Company. We believe our patents are valuable and we vigorously protect our
patents when appropriate.
Research and Development
We strive to be an industry leader in product innovation and are focused on developing new products, as well as
improving existing products. Research and development expenditures are expensed as they are incurred. Research and
development expenses were approximately $26 million, $17 million, and $13 million in 2022, 2021, and 2020, respectively.
Regulatory Matters
We are subject to numerous federal, state and local regulations governing the manufacture and sale of our products in
the United States. Sales and manufacturing operations outside the United States are subject to similar regulations.
Rules promulgated under the Transportation Recall Enhancement, Accountability and Documentation Act require
manufacturers of motor vehicles and certain motor vehicle related equipment to regularly make reports and submit documents
and certain historical data to the National Highway Traffic Safety Administration ("NHTSA") of the United States Department
of Transportation ("DOT") to enhance motor vehicle safety, and to respond to requests for information relating to specific
complaints or incidents.
Trailers produced by the Company for hauling boats, personal watercraft, snowmobiles and equipment must comply
with Federal Motor Vehicle Safety Standards ("FMVSS") promulgated by NHTSA relating to lighting, braking, wheels, tires
and other vehicle systems.
Windows and doors produced by the Company for the RV industry must comply with regulations promulgated by
NHTSA governing safety glass performance, egress ability, door hinge and lock systems, egress window retention hardware,
and baggage door ventilation. Windows produced by the Company for buses also must comply with FMVSS promulgated by
NHTSA.
Upholstered products and mattresses produced by the Company for RVs and buses must comply with FMVSS
promulgated by NHTSA regarding flammability. In addition, upholstered products and mattresses produced by the Company
for RVs must comply with regulations promulgated by the Consumer Product Safety Commission regarding flammability, as
well as standards for toxic chemical levels and labeling requirements promulgated by the California Office of Environmental
Health Hazard Assessment. Plywood, particleboard and fiberboard used in RV products are required to comply with standards
for formaldehyde emission levels promulgated by the California Air Resources Board and adopted by the Recreation Vehicle
Industry Association ("RVIA").
Windows and entry doors produced by the Company for manufactured homes must comply with performance and
construction regulations promulgated by the U.S. Department of Housing and Urban Development ("HUD") and by the
American Architectural Manufacturers Association relating to air and water infiltration, structural integrity, thermal
performance, emergency exit conformance, and hurricane resistance. Certain of the Company’s products must also comply with
the International Code Council standards, such as the IRC (International Residential Code), the IBC (International Building
Code), and the IECC (International Energy Conservation Code) as well as state and local building codes. Thermoformed bath
products manufactured by the Company for manufactured homes must comply with performance and construction regulations
promulgated by HUD.
Our operations are also subject to certain federal, state, and local regulatory requirements relating to the use, storage,
discharge, transport, and disposal of hazardous materials used during the manufacturing processes. If our operating sites, or
adjacent sites owned by third parties, are affected by releases of hazardous materials, we may incur expenditures for future
investigation and remediation of these sites, including in conjunction with voluntary remediation programs or third-party
claims.
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In addition, we could be affected by future laws or regulations imposed in response to concerns over climate change,
the timing and impact of which are difficult to assess.
We believe we are currently operating in compliance, in all material respects, with applicable laws and regulations and
have made reports and submitted information as required. We do not believe the expense of compliance with these laws and
regulations, as currently in effect, will have a material effect on our operations, financial condition or competitive position;
however, there can be no assurance this trend will continue as environmental, health and safety laws, regulations or other
pertinent requirements evolve.
Human Capital
As of December 31, 2022, Lippert had approximately 12,900 full-time team members, including 11,100 in North
America and 1,800 in Europe. Our U.S. team members are not subject to any collective bargaining agreements, although certain
international team members are covered by national labor laws. We believe relations with our team members are good.
At Lippert, we believe that business can and should be a force for good in our world, and we strive to manifest that
vision every day in how we lead our organization. Our mission is to make lives better by developing meaningful relationships
with our customers, co-workers, and community. "Everyone Matters" is the overarching descriptor of our cultural strategy; this
fundamental appreciation of the men and women who make up our organization guides our business.
Culture and Leadership Development
Our Culture and Leadership Development Team focuses on leadership development, personal and professional
development, training, and corporate and community impact. This Team meets regularly with leaders and team members across
the Company to develop action plans and goals focused on both personal and professional development. The Team also
supports our team member engagement survey twice a year to measure and evaluate engagement drivers and helps build
specific action plans in response to the survey results to continually improve our culture and team member engagement.
We believe our future success depends on our continued ability to attract, retain, and motivate qualified team
members. Our retention percentage for team members in North America for the year ended December 31, 2022 was 57 percent,
a decline from the prior year retention of 60 percent. Our retention goal for 2023 is 70 percent, and a newly designed Culture
Index will focus on tracking leading indicators related to retention for each division in the Company.
To highlight one particularly powerful program, 2,911 hours of one-on-one Dream Achiever sessions helped team
members set and accomplish educational, financial, and health-related goals.
Community Involvement
We strive to create meaningful change and inspire a culture of giving by building positive relationships and aligning
Company resources with our team members' time and talents to support the needs of our communities. In 2022, our team
members logged over 150,000 volunteer hours, hosting more than 625 events, with 75 percent of our team members taking part
(an increase of 20 percent from 2021). Through monetary donations, product donations, and company-wide fundraising events,
we donated more than $1.8 million in 2022 to support the needs of our communities. We focus our efforts on children and
families in need, educational programs, community health and wellness, and LCI team members in crisis.
Benefits and Compensation
To attract and motivate team members, we offer competitive compensation and benefits. Our compensation packages
include base salary/wages, and short and long-term incentives. We also offer team members benefits such as life, disability, and
health (medical, dental, and vision) insurance, a 401(k) plan with a company match, paid time off, tuition reimbursement,
military leave, parental bonding leave, and holiday pay. In 2021, we launched a new well-being initiative to provide team
members with resources to improve their physical and emotional health.
Diversity, Inclusion, and Belonging
We are committed to creating and maintaining a workplace in which all team members have an opportunity to
participate and contribute to the success of the business and are valued for their skills, experience, and unique perspectives. This
commitment is embodied in our policies and the way we do business. While diversity is essential in our business practice,
inclusion and belonging are very important as well. Diversity reflects the differences we have in our workforce, inclusion is
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defined as how we as team members include others, and belonging is how we feel as members of our LCI family. We are
committed to fostering an environment where all three are expected.
Our policies provide for equal employment opportunity to all team members and applicants without regard to race,
color, religion, sex, sexual orientation, gender identity, pregnancy, national origin, ancestry, age, genetic information, disability,
citizen status, veteran status, military service, marital status or any other legally protected category as established by federal,
state, or local law. Our equal employment opportunity policy governs all employment decisions, including recruitment, hiring,
job assignment, compensation, training, promotion, discipline, transfer, leave-of-absence, access to benefits, layoff, recall,
termination and other personnel matters.
Health and Safety
We maintain a work environment designed to provide a safe and healthy workplace for all team members. We focus
our efforts on eliminating exposures and reducing recordable incidents, lost workdays, and life changing events. We track and
record multiple leading indicators through our Facility Safety Score ("FSS") that are preventative, proactive, and predictive to
measure individual business unit performance. For 2022, our North American operations produced a FSS of 9.30 on our 10-
point scale. These proactive and preventative measures guide our strategy year-over-year toward our goal of eliminating all life
changing events and reducing workplace injuries. We continue to maintain lagging indicators as part of our FSS, and, in 2022,
saw a decrease of our Total Recordable Incident Rate ("TRIR") of nearly 10% while experiencing significant year-over-year
business growth. We attribute our improvement to leadership, engagement of team members, aggressive incident investigation
with root cause analysis, and focused corrective actions.
Information About our Executive Officers
The following table sets forth our executive officers as of December 31, 2022:
Name
Jason D. Lippert
Brian M. Hall
Andrew J. Namenye
Ryan R. Smith
Jamie M. Schnur
Nick C. Fletcher
Position
President and Chief Executive Officer
Executive Vice President and Chief Financial Officer
Executive Vice President, Chief Legal Officer, and Corporate Secretary
Group President – North America
Group President – Aftermarket
Executive Vice President and Chief Human Resources Officer
Officers are elected annually by the Board of Directors. There are no family relationships between or among any of the
executive officers or directors of the Company. Additional information with respect to the Company's directors is included in
the Company's Proxy Statement for the Annual Meeting of Stockholders to be held on May 18, 2023.
JASON D. LIPPERT (age 50) became Chief Executive Officer of the Company effective May 10, 2013, and has been
Chief Executive Officer of Lippert Components since February 2003. Effective May 23, 2019, Mr. Lippert also became
President of the Company. Mr. Lippert has over 28 years of experience with the Company and has served in a wide range of
leadership positions.
BRIAN M. HALL (age 47) joined the Company in March 2013, served as Corporate Controller from June 2013 until
January 2017, and has served as Chief Financial Officer of the Company since November 2016. Effective March 12, 2020, Mr.
Hall also became an Executive Vice President of the Company. Prior to joining the Company, he spent more than 16 years in
public accounting. Mr. Hall is a Certified Public Accountant.
ANDREW J. NAMENYE (age 42) joined the Company in September 2017 and has been Chief Legal Officer and
Corporate Secretary since November 2017. Effective March 12, 2020, Mr. Namenye also became an Executive Vice President
of the Company. Prior to joining the Company, he held roles in senior level positions at Thor Industries, Inc. and All American
Group, Inc. (f/k/a Coachmen Industries), and practiced law at Barnes & Thornburg LLP.
RYAN R. SMITH (age 39) became Group President – North America of the Company in May 2020. Previously, he
served as Senior Vice President of Sales and Operations of the Company beginning in August of 2018. Mr. Smith has over 16
years of experience with the Company and has served in a wide range of leadership positions with Lippert Components.
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JAMIE M. SCHNUR (age 51) became Group President – Aftermarket of the Company in May 2020. Previously, he
served as Chief Administrative Officer of the Company beginning in May 2013. Mr. Schnur has over 26 years of experience
with the Company and has served in a wide range of leadership positions with Lippert Components.
NICK C. FLETCHER (age 62) joined the Company in February 2013 as Vice President of Human Resources. Since
January 2015, he has been Chief Human Resources Officer. Effective March 12, 2020, Mr. Fletcher also became an Executive
Vice President of the Company. Prior to joining the Company, Mr. Fletcher provided consulting services and held roles in
senior level positions at American Commercial Lines, Continental Tire, Wabash National, Siemens and TRW.
Other Officers
KIP A. EMENHISER (age 49) joined the Company in January 2017 and has been Treasurer since March 2022, Vice
President of Finance since September 2019 and our principal accounting officer since March 2017. Prior to joining the
Company, he held various roles including Senior Vice President of Finance, Chief Accounting Officer, and Vice President and
Corporate Controller at Press Ganey Associates, Inc. Mr. Emenhiser is a Certified Public Accountant.
Item 1A. RISK FACTORS.
The following risk factors should be considered carefully in addition to the other information contained in this Annual
Report on Form 10-K. The risks and uncertainties described below are not the only ones we face, but represent the most
significant risk factors that we believe may adversely affect the RV and other industries we supply our products to, as well as
our business, operations or financial position. The risks and uncertainties discussed in this report are not exclusive and other
risk factors that we may consider immaterial or do not anticipate may emerge as significant risks and uncertainties.
Risk Related to the COVID-19 Pandemic
The coronavirus (COVID-19) pandemic, or other outbreaks of disease or similar public health threats, and their related
impacts, have had, and could have, a material and adverse effect on our business, financial condition, and results of operations,
the nature and extent of which are highly uncertain and unpredictable.
The COVID-19 pandemic, and any other outbreaks of contagious diseases or other adverse public health developments
in the United States or internationally, as well as their related impacts, including on supply chains, labor matters, the global
economy and financial markets, has had, and in the future could again have, a material adverse effect on our business, financial
condition, and results of operations. 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 cost 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 had and could continue to result in disruption and
volatility in the global credit and financial markets, which could increase the cost of capital and adversely impact
access to capital for both the Company and our customers and suppliers.
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.
Increased cybersecurity and privacy risks and risks related to the reliability of technology to support remote operations.
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•
Disruptions or uncertainties related to the COVID-19 pandemic or other outbreaks of disease or similar public health
threats 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.
Industry and Economic Risk Factors
Economic and business factors beyond our control, including cyclicality and seasonality in the industries where we sell
our products, could lead to fluctuations in our operating results.
The RV, recreational boat and other markets where we sell many of our products or where our products are used, have
been characterized by cycles of growth and contraction in consumer demand, often because the purchase of such products is
viewed as a consumer discretionary purchase. A number of factors have in the past, and could continue to, negatively impact
consumer demand, production levels, shipments, sales, and operating results, including credit availability, consumer
confidence, employment rates, prevailing interest rates, inflation, fuel prices, and other economic conditions affecting consumer
demand and discretionary consumer spending, as well as demographic and political changes. For example, during portions of
2022, we saw a reduction in aftermarket volumes resulting from, in part, the negative impacts of inflation and rising interest
rates on consumers' discretionary spending. During the fourth quarter, RV OEMs made larger-than-anticipated adjustments to
production levels by taking a collective month of production down in order to normalize inventories as retail demand slowed,
which had an adverse impact on our results, including severance-related and inventory reserve costs. Further, consumer
purchases of discretionary items historically tend to decline during recessionary periods when disposable income is lower or
during other periods of economic instability or uncertainty, which may lead to declines in sales and slow our long-term growth
expectations.
Additionally, manufacturing operations in most of the industries where we sell our products or where our products are
used historically have been seasonal. However, because of fluctuations in dealer inventories, the impact of international,
national, and regional economic conditions and consumer confidence on retail sales of products which include our components,
the timing of dealer orders, the impact of severe weather conditions on the timing of industry-wide shipments from time to time,
and the impact of the COVID-19 pandemic, current and future seasonal industry trends have been, and may in the future be,
different than in prior years.
Reductions in the availability of wholesale financing limits the inventories carried by retail dealers of RVs and other
products which use our components, which would cause reduced production by our customers, and therefore reduced demand
for our products.
Retail dealers of RVs and other products which use our components generally finance their purchases of inventory
with financing known as floor-plan financing provided by lending institutions. A dealer's ability to obtain financing is
significantly affected by the number of lending institutions offering floor-plan financing, and by an institution’s lending limits,
which are beyond our control. Reduction in the availability of floor-plan financing, or an increase in the cost of such financing,
particularly as a result of recent rising interest rates, have in the past caused, and would in the future again likely cause, many
dealers to reduce inventories, which would result in reduced production by OEMs, and consequently result in reduced demand
for our products. Moreover, dealers which are unable to obtain adequate financing could cease operations. Their remaining
inventories would likely be sold at discounts, disrupting the market. Such sales have historically caused a decline in orders for
new inventory, which reduced demand for our products, and which could reoccur in the future.
Conditions in the credit market could limit the ability of consumers to obtain retail financing for RVs and other
products which use our components, resulting in reduced demand for our products.
Retail consumers who purchase RVs and other products which use our components generally obtain retail financing
from third-party lenders. The availability, terms, and cost of retail financing depend on the lending practices of financial
institutions, governmental policies, and economic and other conditions, all of which are beyond our control. Restrictions on the
availability of consumer financing and increases in the costs of such financing have in the past limited, and could again limit,
particularly due to recent rising interest rates, the ability of consumers to purchase such discretionary products, which would
result in reduced production of such products by our customers, and therefore reduced demand for our products.
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Excess inventories at dealers and manufacturers can cause a decline in the demand for our products.
Dealers and manufacturers could accumulate unsold inventory. High levels of unsold inventory have in the past
caused, and would cause, a reduction in orders, which would likely cause a decline in demand for our products.
Gasoline shortages, or high prices for gasoline, could lead to reduced demand for our products.
Fuel shortages, and substantial increases in the price of fuel, have had an adverse effect on the RV industry as a whole
in the past, and could again in the future. Travel trailer and fifth-wheel RVs, components for which represented approximately
61 percent of our OEM Segment net sales in 2022, are usually towed by light trucks or SUVs. Generally, these vehicles use
more fuel than automobiles, particularly while towing RVs or other trailers. High prices for gasoline, or anticipation of potential
fuel shortages, can affect consumer use and purchase of light trucks and SUVs, which could result in reduced demand for travel
trailer and fifth-wheel RVs, and therefore reduced demand for our products.
Risks Related to our Business, Operations and Strategy
A significant percentage of our sales are concentrated in the RV industry, and declines in industry-wide wholesale
shipments of travel trailer and fifth-wheel RVs could reduce demand for our products and adversely impact our operating
results and financial condition.
In 2022, the OEM Segment represented 83 percent of our consolidated net sales, and 87 percent of consolidated
segment operating profit. Approximately 61 percent of our OEM Segment net sales in 2022 were from products to
manufacturers of travel trailer and fifth-wheel RVs. While we measure our OEM Segment sales against industry-wide
wholesale shipment statistics, the underlying health of the RV industry is determined by retail demand. Retail sales of RVs
historically have been closely tied to general economic conditions, as well as consumer confidence. Declines in industry-wide
wholesale shipments of travel trailer and fifth-wheel RVs could reduce demand for our products and adversely affect our
operating results and financial condition. For example, in 2022 we experienced a nearly 18 percent decrease in wholesale RV
OEM shipments, which negatively impacted our net sales for the year.
The loss of any key customer, or a significant reduction in purchases by such customers, could have an adverse
material impact on our operating results.
Two customers of both the OEM Segment and the Aftermarket Segment accounted for 43 percent of our consolidated
net sales in 2022. The loss of either of these customers or other significant customers, or a substantial reduction in sales to any
such customer, would have an adverse material impact on our operating results and financial condition. In addition, we
generally do not have long-term agreements with our customers and cannot predict that we will maintain our current
relationships with these customers or that we will continue to supply them at current levels.
Volatile raw material costs could adversely impact our financial condition and operating results.
Steel and aluminum represented approximately 45 percent and 15 percent, respectively, of our raw material costs in
2022. The prices of these, and other key raw materials, have historically been volatile and can fluctuate dramatically with
changes in the global demand and supply for such products. For example, during 2022, steel and aluminum costs increased
significantly, which negatively impacted our operating profit.
Because competition and business conditions may limit the amount or timing of increases in raw material costs that
can be passed through to our customers in the form of sales price increases, future increases in raw material costs could
adversely impact our financial condition and operating results. Conversely, as raw material costs decline, we may not be able to
maintain selling prices consistent with higher cost raw materials in our inventory, which could adversely affect our operating
results.
Inadequate or interrupted supply of raw materials or components used to make our products could adversely impact
our financial condition and operating results.
Our business depends on our ability to source raw materials, such as steel, aluminum, glass, wood, fabric and foam,
and certain components such as electric motors, in a timely and cost-efficient manner. Most materials and components are
readily available from a variety of sources. However, a few key components are currently produced by only a small group of
quality suppliers that have the capacity to supply large quantities. If raw materials or components that are used in manufacturing
our products or for which we act as a distributor, particularly those which we import, become unavailable, or if the supply of
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these raw materials and components is interrupted or delayed, our manufacturing and distribution operations could be adversely
affected, which could adversely impact our financial condition and operating results.
In 2022, we imported, or purchased from suppliers who imported, approximately 45 percent of our raw materials and
components. Consequently, we rely on the free flow of goods through open and operational ports and on a consistent basis for a
significant portion of our raw materials and components. Adverse political conditions, such as the heightened tensions between
China and Taiwan, trade embargoes, increased tariffs or import duties, inclement weather, natural disasters, epidemics, public
health crises, war, such as the Russia-Ukraine war, terrorism, or labor disputes at various ports or otherwise adversely
impacting our suppliers create significant risks for our business, particularly if these conditions or disputes result in work
slowdowns, lockouts, strikes, facilities closures, supply chain interruptions, or other disruptions, and could have an adverse
impact on our operating results if we are unable to fulfill customer orders or are required to accumulate excess inventory or find
alternate sources of supply, if available, at higher costs.
The raw materials and components used in the manufacture of Furrion products are provided by a small group of
suppliers that are principally located in China. If those raw materials or components become unavailable or their supply is
interrupted or delayed, we may not be able to identify alternative sources in a timely or cost-effective manner, or at all. Further,
as a result of our acquisition of Furrion, the portion of our raw materials and components that are exported from their country of
origin has increased, which could heighten the risks set forth in the immediately preceding paragraph, including in particular
increased tariffs or import duties.
We import a significant portion of our raw materials and the components we sell, and the effect of foreign exchange
rates could adversely affect our operating results.
We negotiate for the purchase of a significant portion of raw materials and semi-finished components with suppliers
that are not located in the United States, and this amount has increased as a result of our acquisition of Furrion. As such, the
prices we pay in part are dependent upon the rate of exchange for U.S. Dollars versus the currency of the local supplier. A
dramatic weakening of the U.S. Dollar could increase our cost of sales, and such cost increases may not be offset through price
increases for our products, adversely impacting our margins.
Changes in consumer preferences relating to our products, or the inability to develop innovative new products, could
cause reduced sales.
Changes in consumer preferences for RV, manufactured housing and recreational boat models, and for the components
we make for such products, occur over time. Our inability to anticipate changes in consumer preferences for such products, or
delays in responding to such changes, could reduce demand for our products and adversely affect our net sales and operating
results. Similarly, we believe our ability to remain competitive also depends on our ability to develop innovative new products
or enhance features of existing products. Delays in the introduction or market acceptance of new products or product features
could have an adverse effect on our net sales and operating results.
Competitive pressures could reduce demand for our products or impact our sales prices.
The industries in which we are engaged are highly competitive and generally characterized by low barriers to entry,
and we have numerous existing and potential competitors. Competition is based primarily upon product quality and reliability,
product innovation, price, customer service, and customer satisfaction.
Competitive pressures have, from time to time, resulted in a reduction of our profit margins and/or reduction in our
market share. Domestic and foreign competitors may lower prices on products which currently compete with our products, or
develop product improvements, which could reduce demand for our products or cause us to reduce prices for our products.
Sustained increases in these competitive pressures could have an adverse material effect on our results of operations. In
addition, the manufacture by our customers themselves of products supplied by us could reduce demand for our products and
adversely affect our operating results and financial condition.
A tight labor market has, and could in the future, result in difficulty obtaining skilled labor, and available capacity may
initially not be utilized efficiently.
In certain geographic regions in which we have a larger concentration of manufacturing facilities, we are experiencing,
and could again experience, shortages of qualified employees. Competition for skilled workers may increase the cost of our
labor and create employee retention and recruitment challenges, as employees with knowledge and experience have the ability
to change employers relatively easily. If such conditions become extreme, we may not be able to increase production to timely
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satisfy demand, and may incur higher labor and production costs, which could adversely impact our operating results and
financial condition.
We may incur unexpected expenses, or face delays and other obstacles, in connection with expansion plans or
investments we make in our business, which could adversely impact our operating results.
It may take longer than initially anticipated for us to realize expected results from investments in research and
development or acquired businesses, as well as initiatives we have implemented to increase capacity and improve production
efficiencies, automation, customer service and other aspects of our business, or we may incur unexpected expenses in
connection with these matters. Expansion plans may involve the acquisition of existing manufacturing facilities that require
upgrades and improvements or the need to build new manufacturing facilities. Such activities may be delayed or incur
unanticipated costs which could have an adverse effect on our operating results. Similarly, competition for desirable production
facilities, especially during times of increasing production, may increase the cost of acquiring production facilities or limit the
availability of obtaining such facilities. In addition, the start-up of operations in new facilities may incur unanticipated costs and
inefficiencies which may adversely affect our profitability during the ramp up of production in those facilities. Delays in the
construction, re-configuration or relocation of facilities could result in an adverse impact to our operating results or a loss of
market share.
In addition, to the extent our expansion plans involve acquisitions or joint ventures, we may not be able to successfully
identify suitable acquisition or joint venture opportunities or complete any acquisition, combination, joint venture, or other
transaction on acceptable terms. Our identification of suitable acquisition candidates and joint venture opportunities and the
integration of acquired business operations involve risks inherent in assessing the values, strengths, weaknesses, risks, and
profitability of these opportunities, as well as significant financial, management and related resources that would otherwise be
used for the ongoing development of our existing operations and internal expansion.
Epidemic outbreaks, terrorist acts, and political events could disrupt our business and result in lower sales and
otherwise adversely affect our financial performance.
External events, such as epidemic outbreaks, terrorist attacks, or disruptive political events could adversely affect our
business and result in lower sales. In the event that one of our manufacturing or distribution facilities was affected by any such
event, we could be forced to shift production to one of our other facilities, which we may not be able to do effectively or at all,
or to cease operations. Although we maintain insurance for damage to our property and disruption of our business from
casualties, such insurance may not be sufficient to cover all of our potential losses. Any disruption in our manufacturing
capacity could have an adverse impact on our ability to produce sufficient inventory of our products or may require us to incur
additional expenses in order to produce sufficient inventory, and therefore, may adversely affect our net sales and operating
results. Any disruption or delay at our manufacturing or distribution facilities or customer service centers could impair our
ability to meet the demands of our customers, and our customers may cancel orders with us or purchase products from our
competitors, which could adversely affect our business and operating results.
Further, as a result of pandemic outbreaks, including the COVID-19 pandemic, businesses can be shut down, supply
chains can be interrupted, slowed or rendered inoperable and individuals can become ill, quarantined or otherwise unable to
work and/or travel due to health reasons or governmental restrictions, and worldwide economic downturns could occur. Such
outbreaks could result in the operations of our third-party manufacturers and suppliers being disrupted or suspended, or could
interfere with our supply chain, which could have an adverse effect on our business. See also the risk factors "Inadequate or
interrupted supply of raw materials or components used to make our products could adversely impact our financial condition
and operating results" and "The coronavirus (COVID-19) pandemic, or other outbreaks of disease or similar public health
threats, and their related impacts, have had, and could have, a material and adverse effect on our business, financial condition,
and results of operations, the nature and extent of which are highly uncertain and unpredictable."
Natural disasters and unusual weather, including as a result of climate change, could impact our business negatively.
Our facilities may be affected by natural disasters, such as tornadoes, hurricanes, fires, floods, earthquakes, and
unusual weather conditions exacerbated by the effects of climate change. Natural phenomena with unpredictable destructive
force, such as severe snowstorms, droughts, and flooding, may generate liabilities not appropriately covered by our contingency
plans and insurances. As we operate globally, these natural disasters can have a significant negative impact on our supply chain
channels.
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We have entered new markets in an effort to enhance our growth potential, and uncertainties with respect to these new
markets could impact our operating results.
Our ability to expand our market share for our products that are used as components for RVs is limited. We have made
investments in an effort to expand the sale of our products in adjacent industries, such as boats, buses, trucks, and trains, where
we may have less familiarity with OEM or consumer preferences and could encounter difficulties in attracting customers due to
a reduced level of familiarity with our brands. We have also made investments to expand the sale of our products in the
aftermarket of our industries and are continuing to pursue opportunities to increase international sales and export sales of our
products. These investments involve significant resources, put a strain on our administrative, operational, and financial
capabilities and carry a risk of failure. Limited operating experience or limited brand recognition in new markets may limit our
business expansion strategy. Lack of demand for our products in these markets or competitive pressures requiring us to lower
prices for our products could adversely impact our business growth in these markets and our results of operations.
If acquired businesses are not successfully integrated into our operations, our financial condition and operating results
could be adversely impacted.
We have completed several business acquisitions and may continue to engage in acquisitions or similar activities, such
as joint ventures and other business transactions. Our ability to grow through acquisitions will depend, in part, on the
availability of suitable candidates at acceptable prices, terms, and conditions, our ability to compete effectively for acquisition
candidates, and the availability of capital and personnel to complete such acquisitions and run the acquired business effectively.
Such acquisitions, joint ventures and other business transactions involve potential risks, including:
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the failure to successfully integrate personnel, departments and systems, including IT and accounting systems,
technologies, books and records, and procedures;
the need for additional investments post-acquisition that could be greater than anticipated;
the assumption of liabilities of the acquired businesses that could be greater than anticipated;
incorrect estimates made in the accounting for acquisitions, incurrence of non-recurring charges, and write-off of
significant amounts of goodwill or other assets that could adversely affect our operating results;
unforeseen difficulties related to entering geographic regions or industries in which we do not have prior
experience; and
the potential loss of key employees or existing customers or adverse effects on existing business relationships with
suppliers and customers.
Integrating acquired operations is a significant challenge and there is no assurance that we will be able to manage the
integrations successfully. Integrating operations in countries in which we previously did not have locations or experience
operating, such as the offices in Hong Kong and China we obtained in our acquisition of Furrion, could present additional
challenges.
If we are unable to efficiently integrate these businesses, the attention of our management could be diverted from our
existing operations and the ability of the management teams at these business units to meet operational and financial
expectations could be adversely impacted, which could impair our ability to execute our business plans. Failure to successfully
integrate acquired operations or to realize the expected benefits of such acquisitions may have an adverse impact on our results
of operations and financial condition.
As we expand our business internationally, we are subject to new operational and financial risks.
We have been gradually growing sales overseas and plan to continue pursuing international opportunities. Thirteen of
our acquisitions since 2016 are headquartered in Europe or have international operations and customers, including our
acquisition of Furrion that involves operations and locations in Hong Kong and China.
Conducting business outside of the United States is subject to various risks, many of which are beyond our control,
including:
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adverse political and economic conditions;
trade protection measures, including tariffs, trade restrictions, trade agreements, and taxation;
difficulties in managing or overseeing foreign operations and agents;
differences in regulatory environments, including complex data privacy and labor relations laws, as well as
differences in labor practices and market practices;
cultural and linguistic differences;
foreign currency fluctuations;
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limitations on the repatriation of funds because of foreign exchange controls;
different liability standards;
potentially longer payment cycles;
different credit risks;
different technology risks;
the uncertainty surrounding the implementation and effects of Brexit, as well as political and governmental
leadership changes in the U.K. and certain E.U. countries;
political, social and economic instability and uncertainty, including sovereign debt issues; and
intellectual property laws of countries which do not protect our rights in our intellectual property to the same
extent as the laws of the United States.
The occurrence or consequences of any of these factors may have an adverse impact on our operating results and
financial condition, as well as impact our ability to operate in international markets.
The loss of key management could reduce our ability to execute our business strategy and could adversely affect our
business and results of operations.
We are dependent on the knowledge, experience, and skill of our leadership team. The loss of the services of one or
more key managers or the failure to attract or retain qualified managerial, technical, sales and marketing, operations and
customer service staff could impair our ability to conduct and manage our business and execute our business strategy, which
would have an adverse effect on our business, financial condition and results of operations.
In October 2022, Brian M. Hall, our Chief Financial Officer, notified us of his intention to resign to pursue
philanthropic ventures and opportunities as well as to spend more time with his family. Although Mr. Hall intends to remain in
his role at the Company until June 2023 or the appointment of his successor, if earlier, we may not be able to find a suitable
replacement for Mr. Hall in that timeframe. In addition, in December 2022, Nick C. Fletcher, our Executive Vice President and
Chief Human Resources Officer, notified us of his intention to retire, effective March 2023. Leadership transitions can be
inherently difficult to manage, may result in operational inefficiencies, and impact our ability to retain and hire other key
members of management.
If our information technology systems fail to perform adequately or are breached, our operations could be disrupted,
and it could adversely affect our business, reputation and results of operations.
The efficient operation of our business depends on our information technology systems. We rely on our information
technology systems to effectively manage our business data, inventory, supply chain, order entry and fulfillment,
manufacturing, distribution, warranty administration, invoicing, collection of payments, and other business processes. We use
information systems to report and support the audit of our operational and financial results. Additionally, we rely upon
information systems in our sales, marketing, human resources, and communication efforts. The failure of our information
technology systems to perform as we anticipate could disrupt our business and could result in transaction errors, processing
inefficiencies, and the loss of sales and customers, causing our business and results of operations to suffer.
In addition, our information technology systems may be vulnerable to damage, interruption or unauthorized access
from circumstances beyond our control, including fire, natural disasters, security breaches, telecommunications failures,
computer viruses, hackers, phishing attempts, cyber-attacks, ransomware and other malware, payment fraud, and other
manipulation or improper use of our systems. Any such events could result in legal claims or proceedings, liability or penalties
under privacy laws, disruption in operations, and damage to our reputation, which could adversely affect our business. Further,
we have been implementing a new enterprise resource planning ("ERP") system, the full implementation of which is expected
to take several years; however, there may be other challenges and risks as we upgrade and standardize our ERP system on a
company-wide basis.
Cyber-attacks, such as those involving the deployment of malware, are increasing in frequency, sophistication, and
intensity and have become increasingly difficult to detect. We have an information security team that deploys the latest
firewalls and constantly monitors and continually updates our security protections to mitigate these risks, but despite these
ongoing efforts, we cannot assure you that they will be effective or will work as designed. If we fail to maintain or protect our
information systems and data integrity effectively, we could: lose existing customers; have difficulty attracting new customers;
suffer outages or disruptions in our operations or supply chains; have difficulty preventing, detecting, and controlling fraud;
have disputes with customers and suppliers; have regulatory sanctions or penalties imposed; incur increased operating
expenses; incur expenses or lose revenues as a result of a data privacy breach; or suffer other adverse consequences.
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Legal, Regulatory and Compliance Risks
Our business is subject to numerous international, federal, state and local regulations, and increased costs of
compliance, failure in our compliance efforts, or events beyond our control could result in damages, expenses, or liabilities that
could adversely impact our financial condition and operating results.
We are subject to numerous federal, state and local regulations governing the manufacture and sale of our products,
including regulations and standards promulgated by the NHTSA of the DOT, the Consumer Products Safety Commission,
HUD, and consumer safety standards promulgated by state regulatory agencies and industry associations. Sales and
manufacturing operations in foreign countries may be subject to similar regulations. Any major recalls of our products,
voluntary or involuntary, could adversely impact our reputation, net sales, financial condition and operating results. Changes in
laws or regulations, including those related to climate change, that impose additional regulatory requirements on us could
increase our cost of doing business or restrict our actions, causing our results of operations to be adversely affected. Our failure
to comply with present or future regulations and standards could result in fines, penalties, recalls, or injunctions being imposed
on us, administrative penalties, potential civil and criminal liability, suspension of sales or production, or cessation of
operations.
Further, certain other U.S. and foreign laws and regulations affect our activities. Areas of our business affected by such
laws and regulations include, but are not limited to, labor, advertising, consumer protection, quality of services, warranty,
product liability, real estate, intellectual property, tax, import and export duties, tariffs, competition, environmental, and health
and safety. We are also subject to compliance with the U.S. Foreign Corrupt Practices Act ("FCPA"), and other anti-corruption
and anti-bribery laws applicable to our operations. Compliance with these laws and others may be onerous and costly, and may
be inconsistent from jurisdiction to jurisdiction, which further complicates compliance efforts. Violations of these laws and
regulations could lead to significant penalties, including restraints on our export or import privileges, monetary fines, criminal
proceedings and regulatory or other actions that could adversely affect our results of operations. We cannot assure you that our
employees, contractors, vendors or agents will not violate such laws and regulations, or our policies and procedures related to
compliance.
In addition, potentially significant expenditures could be required in order to comply with evolving healthcare, health
and safety laws, regulations, or other pertinent requirements that may be adopted or imposed in the future by governmental
authorities.
Further, foreign, federal, state, and local regulatory and legislative bodies have proposed various legislative and
regulatory measures relating to climate change, regulating greenhouse gas emissions, and energy policies. Such measures could
impose significant costs on us and our suppliers and customers, including increased cost of materials and natural resources,
sources and supply of energy, capital equipment, environmental monitoring and reporting, or other costs to comply with such
regulations. Climate change regulation combined with public sentiment could result in reduced demand for products that use
our components, higher fuel prices, or carbon taxes, all of which could materially adversely affect our business. Due to
uncertainty in the regulatory and legislative processes, as well as the scope of such requirements and initiatives, we cannot
currently determine the effect such legislation and regulation may have on our business, results of operations and financial
condition.
Our risk management policies and procedures may not be fully effective in achieving their purposes.
Our policies, procedures, controls and oversight to monitor and manage our enterprise risks may not be fully effective
in achieving their purpose and may leave exposure to identified or unidentified risks. Past or future misconduct by our
employees, contractors, vendors, or agents could result in violations of law by us, regulatory sanctions and/or serious
reputational harm or financial harm. We cannot assure you that our policies, procedures, and controls will be sufficient to
prevent all forms of misconduct. We review our compensation policies and practices as part of our overall enterprise risk
management program, but it is possible that our compensation policies could incentivize inappropriate risk taking or
misconduct. If such inappropriate risks or misconduct occurs, it could have an adverse effect on our results of operations and/or
our financial condition.
Our operations are subject to certain environmental laws and regulations, and costs of compliance, investigation, or
remediation of environmental conditions could have an adverse effect on our business and results of operations.
Our operations are also subject to certain complex federal, state and local environmental laws and regulations relating
to air, water, and noise pollution and the use, storage, discharge and disposal of hazardous materials used during the
manufacturing processes. Under certain of these laws, namely the Comprehensive Environmental Response, Compensation, and
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Liability Act and its state counterparts, liability for investigation and remediation of hazardous substance contamination at
currently or formerly owned or operated facilities or at third-party waste disposal sites is joint and several. Failure to comply
with these regulations could cause us to become subject to fines and penalties or otherwise have an adverse impact on our
business. One or more of our current or former operating sites, or adjacent sites owned by third-parties, have been affected, and
may in the future be affected, by releases of hazardous materials. As a result, we may incur expenditures for future investigation
and remediation, including in conjunction with voluntary remediation programs or third-party claims. If other potentially
responsible persons are unable or otherwise not obligated to contribute to remediation costs, we could be held responsible for
their portion of the remediation costs, and those costs could be material. The operation of our manufacturing facilities entails
risks, and we cannot assure you that our costs in relation to these environmental matters or compliance with environmental laws
in general will not have an adverse effect on our business and results of operations.
We may not be able to protect our intellectual property and may be subject to infringement claims.
We rely on certain trademarks, patents and other intellectual property rights, including contractual rights with third
parties. Our success depends, in part, on our ability to protect our intellectual property against dilution, infringement, and
competitive pressure by defending our intellectual property rights. We rely on intellectual property laws of the U.S., European
Union, Canada, and other countries, as well as contractual and other legal rights, for the protection of our property rights.
However, we cannot assure that these measures will be successful in any given instance, or that third parties will not infringe
upon our intellectual property rights. We may be forced to take steps to protect our rights, including through litigation, which
could result in a significant expenditure of funds and a diversion of resources. The inability to protect our intellectual property
rights could result in competitors manufacturing and marketing similar products which could adversely affect our market share
and results of operations. Competitors may challenge, invalidate, or avoid the application of our existing or future intellectual
property rights that we receive or license.
From time to time, we receive notices or claims that we may be infringing certain patent or other intellectual property
rights of others. While it is not possible to predict the outcome of patent and other intellectual property litigation, such litigation
could result in our payment of significant monetary damages and/or royalty payments, negatively impact our ability to sell
current or future products, reduce the market value of our products and services, lower our profits, and could otherwise have an
adverse effect on our business, financial condition or results of operations. From time to time, we also face claims of
misappropriation by a third party that believes we or our employees have inappropriately obtained and used trade secrets or
other confidential information of such third parties. Claims that we have misappropriated the trade secrets or other confidential
information of third parties could result in our payment of significant monetary damages, and we could be prevented from
further using such trade secrets or confidential information, limiting our ability to develop our products, any of which may have
an adverse effect on our business, financial condition, results of operations, and prospects.
If we fail to comply with data privacy and security laws and regulations, we could face substantial penalties and our
business, operations, and financial condition could be adversely affected.
We are subject to various data privacy and security laws and regulations. A number of U.S. states have enacted data
privacy and security laws and regulations that govern the collection, use, disclosure, transfer, storage, disposal, and protection
of personal information, such as social security numbers, financial information and other information. For example, several
U.S. territories and all 50 states now have data breach laws that require timely notification to individuals, and at times
regulators, the media or credit reporting agencies, if a company has experienced the unauthorized access or acquisition of
personal information.
Other state laws contain additional disclosure obligations for businesses that collect personal information about
residents and afford those individuals additional rights relating to their personal information that may affect our ability to use
personal information or share it with our business partners. For example, California has laws that give California residents
certain privacy rights in the collection and disclosure of their personal information and requires businesses to make certain
disclosures and take certain other acts in furtherance of those rights, and has recently created a new agency, the California
Privacy Protection Agency, authorized to implement and enforce California’s privacy laws, which could result in increased
privacy and information security regulatory actions. Other U.S. states, such as Virginia, Utah, Connecticut, and Colorado, have
passed consumer privacy laws that become effective in 2023. We will continue to monitor and assess the impact of these state
laws, which may impose substantial penalties for violations, impose significant costs for investigations and compliance, allow
private class-action litigation and carry significant potential liability for our business.
Outside of the U.S., data protection laws also apply to some of our operations. For example, the General Data
Protection Regulation (the “GDPR”) in the United Kingdom (“U.K.”) and the European Union (“E.U.”) imposes, among other
things, strict obligations and restrictions on the collection and use of U.K. and E.U. personal data, a requirement for prompt
notice of data breaches in certain circumstances, a requirement for implementation of certain approved safeguards for transfers
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of personal data to third countries, and possible substantial fines for any violations. Governmental authorities around the world
have enacted similar types of legislative and regulatory requirements concerning data protection, and additional governments
are considering similar legal frameworks.
The interpretation and enforcement of the laws and regulations described above are uncertain and subject to change
and may require substantial costs to monitor and implement compliance with those or any additional requirements. Failure to
comply with U.S. and international data protection laws and regulations could result in government enforcement actions (which
could include substantial civil and/or criminal penalties), private litigation and/or adverse publicity and could negatively affect
our operating results and business.
Additionally, because we accept debit and credit cards for payment, we are subject to the Payment Card Industry Data
Security Standard (the "PCI Standard"), issued by the Payment Card Industry Security Standards Council. The PCI Standard
contains compliance guidelines with regard to our security surrounding the physical and electronic storage, processing, and
transmission of cardholder data. Complying with the PCI Standard and implementing related procedures, technology, and
information security measures requires significant resources and ongoing attention. Costs and potential problems and
interruptions associated with the implementation of new or upgraded systems and technology such as those necessary to
maintain compliance with the PCI Standard or with maintenance or adequate support of existing systems could also disrupt or
reduce the efficiency of our operations. Any material interruptions or failures in our payment-related systems could have an
adverse effect on our business, financial condition and results of operations.
We could incur warranty claims in excess of reserves.
We receive warranty claims from our customers in the ordinary course of our business. Although we maintain reserves
for such claims, which to date have been adequate, there can be no assurance that warranty expense levels will remain at current
levels or that such reserves will continue to be adequate. A significant increase in warranty claims exceeding our current
warranty expense levels could have an adverse effect on our results of operations and financial condition.
In addition to the costs associated with the contractual warranty coverage provided on our products, we also
occasionally incur costs as a result of additional service actions not covered by our warranties, including product recalls and
customer satisfaction actions. Although we estimate and reserve for the cost of these service actions, there can be no assurance
that expense levels will remain at current levels, or such reserves will continue to be adequate.
We may be subject to product liability claims if people or property are harmed by the products we sell.
Some of the products we sell may expose us to product liability claims relating to personal injury, death, or property
damage, and may require product recalls or other actions. Although we maintain liability and product recall insurance, we
cannot be certain that our coverage will be adequate for liabilities actually incurred or that insurance will continue to be
available to us on economically reasonable terms, or at all. In addition, even if a product liability claim is not successful or is
not fully pursued, the negative publicity surrounding a product recall or any assertion that our products caused property damage
or personal injury could damage our brand identity and our reputation with existing and potential consumers and have an
adverse effect on our business, financial condition and results of operations.
Financial, Credit and Liquidity Risks
We could incur asset impairment charges for goodwill, intangible assets, or other long-lived assets.
A portion of our total assets as of December 31, 2022 was comprised of goodwill, intangible assets, and other long-
lived assets. At least annually, we review goodwill and indefinite-lived intangibles for impairment. Long-lived assets,
identifiable intangible assets, and goodwill are also reviewed for impairment whenever events or changes in circumstances
indicate the carrying amount of an asset may not be recoverable from future cash flows. These events or circumstances could
include a significant change in the business climate, legal factors, operating performance indicators, competition, sale or
disposition of a significant portion of the business, or other factors. If the carrying value of a long-lived asset is considered
impaired, an impairment charge is recorded for the amount by which the carrying value of the long-lived asset exceeds its fair
value. Our determination of future cash flows, future recoverability, and fair value of our long-lived assets includes significant
estimates and assumptions. Changes in those estimates or assumptions or lower than anticipated future financial performance
may result in the identification of an impaired asset and a non-cash impairment charge, which could be material. Any such
charge could adversely affect our operating results and financial condition.
21
We may become more leveraged.
Financing for our investments has been provided through a combination of currently available cash and cash
equivalents, term loans, our 1.125 percent convertible senior notes due 2026 (the "Convertible Notes"), and use of our revolving
credit facility. The incurrence of indebtedness may cause us to become more leveraged, which could (1) require us to dedicate a
greater portion of our cash flow to the payment of debt service, (2) make us more vulnerable to a downturn in the economy, (3)
limit our ability to obtain additional financing, or (4) negatively affect our outlook by one or more of our lenders.
Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our business
to pay our substantial debt.
Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness,
including the Convertible Notes, depends on our future performance, which is subject to economic, financial, competitive and
other factors beyond our control. Our business may not continue to generate cash flow from operations in the future sufficient
to service our debt and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to
adopt one or more alternatives, such as selling assets, curtailing spend, restructuring debt, or obtaining additional equity capital
on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets
and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on
desirable terms, which could result in a default on our debt obligations.
We are subject to covenants in our debt agreements that may restrict or limit our operations and acquisitions and our
failure to comply with the covenants in our debt agreements could have an adverse material impact on our business, results of
operations and financial condition.
Our debt agreements contain various covenants, restrictions, and events of default. Among other things, these
provisions require us to maintain certain financial ratios, including a maximum net leverage ratio and a minimum debt service
coverage ratio, and impose certain limits on our ability to incur indebtedness, create liens, and make investments or
acquisitions. 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.
An increase in interest rates, or a phase-out or replacement of LIBOR with a benchmark rate that is higher or more
volatile than LIBOR, could increase our cost of borrowing and could adversely impact our financial condition, results of
operations and cash flows.
Our financial condition, results of operations and cash flows could be significantly affected by changes in interest rates
and actions taken by the Federal Reserve or changes in the London Interbank Offered Rate ("LIBOR") or its replacement.
Future increases in market interest rates would increase our interest expense. Borrowings under our Credit Agreement currently
bear interest at variable rates based on either an Alternate Base Rate or an Adjusted LIBOR plus, in each case, an applicable
margin. On March 5, 2021, the U.K. Financial Conduct Authority (the "FCA") announced that, (a) immediately after December
31, 2021, publication of all seven euro LIBOR settings, the overnight, 1-week, 2-month and 12-month Pound Sterling LIBOR
settings and the 1-week and 2-month US dollar LIBOR settings would permanently cease and (b) immediately after June 30,
2023, publication of the overnight, 12-month US dollar LIBOR settings and the 1-month, 3-month and 6-month US Dollar
LIBOR settings will cease to be provided or, subject to the FCA's consideration of the case, be provided on a synthetic basis
and no longer be representative of the underlying market and economic reality they are intended to measure and that
representativeness will not be restored. While our Credit Agreement provides a hardwired mechanism for determining an
alternative rate of interest when LIBOR is no longer available, any such alternative, successor, or replacement rate may not be
similar to, or produce the same value or economic equivalence of, LIBOR or have the same volume or liquidity as did LIBOR
prior to its discontinuance or unavailability, which may increase our overall interest expense, and we may determine that it
would be advantageous to pursue an amendment to our Credit Agreement to further adjust the alternative rate of interest to be
consistent with current market practice. We will continue to monitor the situation and address the potential reference rate
changes in future debt obligations that we may incur, but the potential effect of the phase-out or replacement of LIBOR on our
cost of capital cannot yet be determined and any increase in the interest we pay and a corresponding increase in our costs of
capital or otherwise could have a material adverse impact on our financial condition, results of operations or cash flows.
22
Although we currently pay regular quarterly dividends on our common stock, we cannot assure you that we will
continue to pay a regular quarterly dividend.
In March 2016, our Board of Directors approved the commencement of a dividend program under which we have paid
regular quarterly cash dividends to holders of our common stock. Our ability to pay dividends, and our Board of Directors'
determination to maintain our current dividend policy, will depend on a number of factors, including:
•
•
•
•
•
the state of our business, competition, and changes in our industry;
changes in the factors, assumptions, and other considerations made by our Board of Directors in reviewing and
revising our dividend policy;
our future results of operations, financial condition, liquidity needs, and capital resources;
limitations in our debt agreements; and
our various expected cash needs, including cash interest and principal payments on our indebtedness, capital
expenditures, the purchase price of acquisitions, and taxes.
Each of the factors listed above could negatively affect our ability to pay dividends in accordance with our dividend
policy or at all. In addition, our Board of Directors may elect to suspend or alter the current dividend policy at any time.
Conversion of the Convertible Notes may dilute the ownership interest of our stockholders or may otherwise depress
the price of our common stock.
The conversion of some or all of the Convertible Notes may dilute the ownership interests of our stockholders. Upon
conversion of the Convertible Notes, we have the option to pay or deliver, as the case may be, cash, shares of our common
stock or a combination of cash and shares of our common stock in respect of the remainder, if any, of our conversion obligation
in excess of the aggregate principal amount of the notes being converted. If we elect to settle the remainder, if any, of our
conversion obligation in excess of the aggregate principal amount of the Convertible Notes being converted in shares of our
common stock or a combination of cash and shares of our common stock, any sales in the public market of our common stock
issuable upon such conversion could adversely affect prevailing market prices of our common stock. In addition, the existence
of the Convertible Notes may encourage short selling by market participants because the conversion of the Convertible Notes
could be used to satisfy short positions, or anticipated conversion of the Convertible Notes into shares of our common stock
could depress the price of our common stock.
The conditional conversion feature of the Convertible Notes, if triggered, may adversely affect our financial condition
and operating results.
In the event the conditional conversion feature of the Convertible Notes is triggered, holders will be entitled to convert
their Convertible Notes at any time during specified periods at their option. If one or more holders elect to convert their
Convertible Notes, we would be required to settle any converted principal amount of such Convertible Notes through the
payment of cash, which could adversely affect our liquidity. In addition, even if holders do not elect to convert their
Convertible Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding
principal of the Convertible Notes as a current rather than long-term liability, which would result in a material reduction of our
net working capital.
Certain provisions in the Indenture governing the Convertible Notes may delay or prevent an otherwise beneficial
takeover attempt of us.
Certain provisions in the Indenture may make it more difficult or expensive for a third party to acquire us. For
example, the Indenture will require us, subject to certain exceptions, to repurchase the Convertible Notes for cash upon the
occurrence of a fundamental change and, in certain circumstances, to increase the conversion rate for a holder that converts its
Convertible Notes in connection with a make-whole fundamental change. A takeover of us may trigger the requirement that we
repurchase the Convertible Notes and/or increase the conversion rate, which could make it more costly for a potential acquirer
to engage in such a takeover. Such additional costs may have the effect of delaying or preventing a takeover of us that would
otherwise be beneficial to investors.
We cannot guarantee that our stock repurchase program will be fully consummated or that it will enhance long-term
stockholder value, and share repurchases could increase the volatility of our stock price and will diminish our cash reserves.
Although our board of directors has authorized a stock repurchase program, the program does not require us to
repurchase any specific dollar amount or to acquire any specific number of shares. We cannot guarantee that the program will
23
be fully consummated or that it will enhance long-term stockholder value. The program could also affect the trading price of
our stock and increase volatility, and any announcement of a termination or change of this program may result in a decrease in
the trading price of our stock. In addition, any purchases made under this program would diminish our cash reserves.
Our stock price may be volatile.
The price of our common stock may fluctuate widely, depending upon a number of factors, many of which are beyond
our control. These factors include:
•
•
•
•
•
•
•
•
•
•
•
•
the perceived prospects of our business and our industries as a whole;
differences between our actual financial and operating results and those expected by investors and analysts;
changes in analysts' recommendations or projections;
changes affecting the availability of financing in the wholesale and consumer lending markets;
actions or announcements by competitors;
changes in laws and regulations affecting our business;
the gain or loss of significant customers;
significant sales of shares by a principal stockholder;
activity under our stock repurchase program;
changes in key personnel;
actions taken by stockholders that may be contrary to our Board of Directors' recommendations; and
changes in general economic or market conditions.
In addition, stock markets generally experience significant price and volume volatility from time to time, which may
adversely affect the market price of our common stock for reasons unrelated to our performance.
Item 1B. UNRESOLVED STAFF COMMENTS.
None.
Item 2. PROPERTIES.
Our manufacturing operations are conducted at facilities that are used for both manufacturing and distribution. Many
of the properties manufacture and warehouse products sold through both the OEM Segment and Aftermarket Segment and are
included in the OEM Segment in the table below. We believe that substantially all of our properties are in generally good
condition and there is sufficient capacity to meet current and projected manufacturing and distribution requirements. In
addition, we maintain administrative facilities used for corporate and administrative functions. Our primary administrative
offices are located in Elkhart, Indiana. Total administrative space company-wide aggregates approximately 480,000 square feet.
At December 31, 2022, our key property holdings are summarized in the following table:
Segment
OEM
Aftermarket
Total
Type
Manufacturing (a)
Other (b)
Manufacturing (a)
Other (b)
North America
Facilities
Europe Facilities
Total Facilities
Owned Facilities
71
20
11
22
124
20
5
—
—
25
91
25
11
22
149
36
5
—
1
42
(a) Includes multi-activity sites which are predominately manufacturing
(b) Includes engineering, administrative, and distribution locations
Item 3. LEGAL PROCEEDINGS.
In the normal course of business, we are subject to proceedings, lawsuits, regulatory agency inquiries, and other
claims. All such matters are subject to uncertainties and outcomes that are not predictable with assurance. While these matters
could materially affect operating results when resolved in future periods, management believes that, after final disposition,
including anticipated insurance recoveries in certain cases, any monetary liability or financial impact to the Company beyond
that provided for in the Consolidated Balance Sheet as of December 31, 2022, would not be material to our financial position or
annual results of operations.
24
Item 4. MINE SAFETY DISCLOSURES.
Not applicable.
25
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND
ISSUER PURCHASES OF EQUITY SECURITIES.
Market and Stockholders
As of February 17, 2023, there were 213 holders of the Company's common stock, in addition to beneficial owners of
shares held in broker and nominee names. Our common stock trades on the New York Stock Exchange under the symbol
"LCII".
The table and related information required for the Equity Compensation Plan is incorporated by reference from the
information contained under the caption "Equity Compensation Plan Information" in our 2023 Proxy Statement.
Dividends
In 2016, we initiated the payment of regular quarterly dividends. Future dividend policy with respect to the common
stock will be determined by the Board of Directors of the Company in light of prevailing financial needs and earnings of the
Company and other relevant factors, including any limitations in our debt agreements, such as maintenance of certain financial
ratios.
See Note 13 - Stockholders' Equity of the Notes to Consolidated Financial Statements (Part II, Item 8 of this Form 10-
K) for further discussion regarding dividends.
Issuer Purchases of Equity Securities
Period
October 2022
November 2022
December 2022
Total
Total Number of
Shares Purchased
Average Price Paid
per Share
—
240,195
13,295
253,490
—
94.93
94.14
94.89
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs (1)
Approximate Dollar
Value of Shares that
May Yet be
Purchased under the
Plans or Programs
(in millions)
— $
240,195 $
253,490 $
200.0
177.2
175.9
(1) On May 19, 2022, we announced that our Board of Directors authorized a stock repurchase program for up to
$200.0 million of our common stock over a three-year period ending on May 19, 2025. The timing of stock
repurchases and the number of shares will depend upon the market conditions and other factors. Share repurchases, if
any, will be made in the open market and in privately negotiated transactions in accordance with applicable securities
laws.
See Note 13 - Stockholders' Equity of the Notes to Consolidated Financial Statements (Part II, Item 8 of this Form 10-
K) for further discussion regarding share repurchases.
Item 6. [RESERVED]
Item 7. 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 our Consolidated Financial Statements and Notes thereto included in Part II, Item 8 of this Report.
This Management's Discussion and Analysis of Financial Condition and Results of Operations generally discusses
2022 and 2021 items and year-over-year comparisons between 2022 and 2021. A detailed discussion of 2020 items and year-
over-year comparisons between 2021 and 2020 that are not included in this Annual Report on Form 10-K can be found in
26
"Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual
Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 25, 2022.
The Company, through its wholly-owned subsidiary, LCI, supplies, domestically and internationally, a broad array of
engineered components for the leading OEMs in the recreation and transportation product markets, consisting primarily of RVs
and adjacent industries including boats; buses; trailers used to haul boats, livestock, equipment and other cargo; trucks; trains;
manufactured homes; and modular housing. We also supply engineered components to the related aftermarkets of these
industries, primarily by selling to retail dealers, wholesale distributors, and service centers, as well as direct to retail customers
via the Internet.
We have two reportable segments, the OEM Segment and the Aftermarket Segment. At December 31, 2022, we
operated over 130 manufacturing and distribution facilities located throughout North America and Europe.
Net sales and operating profit were as follows for the years ended December 31:
(In thousands)
Net sales:
OEM Segment:
RV OEMs:
Travel trailers and fifth-wheels
Motorhomes
Adjacent Industries OEMs
Total OEM Segment net sales
Aftermarket Segment:
Total Aftermarket Segment net sales
Total net sales
Operating profit:
OEM Segment
Aftermarket Segment
Total operating profit
2022
2021
$
$
$
$
2,617,585 $
339,097
1,359,188
4,315,870
2,295,612
258,995
1,089,005
3,643,612
891,273
5,207,143 $
829,085
4,472,697
479,150 $
73,878
553,028 $
304,676
93,734
398,410
Corporate expenses are allocated between the segments based upon net sales.
Net sales and operating profit by segment, as a percent of the total, were as follows for the years ended December 31:
Net sales:
OEM Segment
Aftermarket Segment
Total net sales
Operating Profit:
OEM Segment
Aftermarket Segment
Total segment operating profit
2022
83%
17%
100%
87%
13%
100%
Operating profit margin by segment was as follows for the years ended December 31:
OEM Segment
Aftermarket Segment
2022
11.1%
8.3%
2021
81%
19%
100%
76%
24%
100%
2021
8.4%
11.3%
Operating profit margins for the Aftermarket Segment in 2022 were negatively impacted by a number of factors, as
further described below under “Results of Operations – Year Ended December 31, 2022 Compared to Year Ended December
31, 2021 – Aftermarket Segment.”
27
Our OEM Segment manufactures and distributes a broad array of engineered components for the leading OEMs of
RVs and adjacent industries, including boats; buses; trailers used to haul boats, livestock, equipment and other cargo; trucks;
trains; manufactured homes; and modular housing. Approximately 61 percent of our OEM Segment net sales for the year ended
December 31, 2022 were of components for travel trailer and fifth-wheel RVs, including:
● Steel chassis and related components
● Axles and suspension solutions
● Slide-out mechanisms and solutions
● Thermoformed bath, kitchen, and other products
● Vinyl, aluminum, and frameless windows
● Manual, electric, and hydraulic stabilizer and
leveling systems
● Entry, luggage, patio, and ramp doors
● Furniture and mattresses
● Electric and manual entry steps
● Awnings and awning accessories
● Electronic components
● Appliances
● Air conditioners
● Televisions and sound systems
● Tankless water heaters
● Other accessories
The Aftermarket Segment supplies many of these engineered components to the related aftermarket channels of the
recreation and transportation product markets, primarily to retail dealers, wholesale distributors, and service centers, as well as
direct to retail customers via the Internet. The Aftermarket Segment also includes biminis, covers, buoys, fenders to the marine
industry, towing products, truck accessories, appliances, air conditioners, televisions, sound systems, tankless water heaters, and
the sale of replacement glass and awnings to fulfill insurance claims.
Diversification Strategy
We are executing a strategic initiative to diversify the markets we serve away from the historical concentration within
the North American RV OEM industry. Approximately 46 percent of net sales for the year ended December 31, 2022 were
generated outside of the North American RV OEM market compared to 47 percent in 2021. The percentage of net sales
generated outside of the North American RV OEM market in 2022 decreased compared to the 2021 percentage due to
continued content growth in the North American RV OEM market during 2022, which more than offset our diversification
efforts.
COVID-19 Pandemic
The COVID-19 pandemic has caused significant uncertainty and disruption in the global economy and financial
markets since early 2020. With RV retail demand at record levels throughout 2021, the industry faced challenges with supply
chain constraints, rising material and freight costs, and increases in direct labor costs due to higher production volumes and a
tightened labor market, especially in Northern Indiana. These trends continued through the first nine months of 2022, and, with
regard to supply chain constraints and freight costs, have also been impacted by the conflict between Russia and Ukraine (the
"Russia-Ukraine War"), as well as heightened tensions between China and Taiwan. To address these challenges, we have
continued to strategically manage working capital, including carrying elevated levels of certain inventory items to avoid future
shortages. As we adjust inventory levels, we also closely monitor our liquidity, and may need to seek additional financing,
though such additional financing may not be available on terms favorable to us, or at all. See "Liquidity and Capital Resources"
below for further discussion. We continue to focus on our culture and leadership development programs to focus on team
member retention. We continue to closely monitor the impact of COVID-19, the Russia-Ukraine War, and relations between
China and Taiwan on all aspects of our business. The extent to which COVID-19, the Russia-Ukraine War, and/or relations
between China and Taiwan may impact our liquidity, financial condition, and results of operations in the future remains
uncertain.
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).
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
28
season in September in the following calendar year. Between October and March, industry-wide wholesale shipments of travel
trailer and fifth-wheel RVs have historically exceeded retail sales as dealers build inventories to support anticipated sales.
Between April and September, the spring and summer selling seasons, retail sales of travel trailer and fifth-wheel RVs have
historically exceeded industry-wide wholesale shipments. Due to the COVID-19 pandemic, the 2021 and 2020 Open Houses
were canceled, but an Open House was held in September 2022. The seasonality of the RV industry has been impacted by the
COVID-19 pandemic, and the timing of a return to historical seasonality is not possible to predict at this time.
According to the RVIA, industry-wide wholesale shipments from the United States of travel trailer and fifth-wheel
RVs, the Company's primary RV market, decreased 21 percent to 421,700 units in 2022, compared to 2021, primarily due to
decreased retail demand. Retail demand for travel trailer and fifth-wheel RVs decreased 23 percent in 2022 compared to 2021.
Retail demand has declined from recent elevated levels, partially driven by elevated fuel prices and rising interest rates
impacting retail consumers. Retail demand is typically revised upward in subsequent months, primarily due to delayed RV
registrations.
While we measure our 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:
Year ended December 31, 2022
Year ended December 31, 2021
Year ended December 31, 2020
Wholesale
Retail
Units
421,700
531,400
380,100
Change
(21)%
40%
9%
Units
387,300
502,700
456,100
Change
(23)%
10%
15%
Estimated Unit
Impact on
Dealer
Inventories
34,400
28,700
(76,000)
According to the RVIA, industry-wide wholesale shipments of motorhome RVs in 2022 increased four percent to
58,400 units compared to 2021. Retail demand for motorhome RVs decreased 13 percent in 2022, compared to a four percent
increase in retail demand in 2021. Retail demand has declined from recent elevated levels, partially driven by elevated fuel
prices and rising interest rates impacting retail consumers.
Our current estimate for full-year 2023 industry-wide wholesale shipments from the United States of travel trailer,
fifth-wheel, and motorhome RVs are approximately 330,000 to 350,000 units. This estimate suggests a decrease of 33 to 29
percent compared to actual wholesale shipments in 2022. This projected decline is being driven by current dealer inventory
levels, as well as elevated gas prices and rising interest rates impacting retail consumers.
Adjacent Industries
Our portfolio of products used in RVs can also be used in other applications, including boats; buses; trailers used to
haul boats, livestock, equipment, and other cargo; trucks; 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. We believe there are significant opportunities in these Adjacent Industries.
The estimated potential content per unit we may supply to the Adjacent Industries varies by OEM product and differs
from RVs. As a means to understand the potential of each of these markets, management reviews the number of retail units
sold. The following are key target markets for Adjacent Industries component sales:
•
•
•
Enclosed trailers. According to Statistical Surveys, approximately 188,700, 234,600, and 233,300 enclosed trailers
were sold in 2022, 2021, and 2020, respectively.
Traditional power boats. Statistical Surveys also reported approximately 188,300, 211,400, and 233,800 traditional
power boats were sold in 2022, 2021, and 2020, respectively. Traditional power boats include bass, deck, jet, pontoon,
ski-wake, and other boats. Included in this total, Statistical Surveys reported approximately 62,100, 66,000, and 69,000
pontoon boats were sold in 2022, 2021, and 2020, respectively.
School buses. According to School Bus Fleet, there were approximately 40,600, 30,600, and 36,000 school buses sold
in 2022, 2021, and 2020, respectively.
• Manufactured housing. According to the Institute for Building Technology and Safety, there were approximately
112.900, 105,800, and 94,400 manufactured home wholesale shipments in 2022, 2021, and 2020, respectively.
29
We currently expect production in the marine and manufactured housing markets to remain at or near current run rates
heading into early 2023. We currently expect economic uncertainty to negatively impact consumer discretionary purchases such
as trailers and boats, as well as manufactured homes as we progress further into 2023; however, we currently anticipate that
production of buses and trains should remain at or near current run rates into 2023.
Aftermarket Segment
Many of our OEM Segment products are also sold through various aftermarket channels of the recreation and
transportation product markets, primarily to retail dealers, wholesale distributors, and service centers, as well as direct to retail
customers via the Internet. This includes discretionary accessories and replacement service parts. We have teams dedicated to
product, technical, and installation training as well as marketing support for our Aftermarket Segment customers. We also
support multiple call centers to provide responses to customers for product, delivery, and technical support. This support is
designed for a rapid response to critical repairs, so customer downtime is minimal. The Aftermarket Segment also includes
biminis, covers, buoys, fenders to the marine industry, towing products, truck accessories, appliances, air conditioners,
televisions, sound systems, tankless water heaters, and the sale of replacement glass and awnings to fulfill insurance claims.
Many of the optional upgrades and non-critical replacements for RVs are purchased outside the normal product selling season,
thereby causing certain Aftermarket Segment sales to be counter-seasonal, but this has been, and may in the future be, different
as a result of the COVID-19 pandemic and the continuing impact of market and supply chain disruptions.
According to Go RVing, estimated RV ownership in the United States as of 2020 had increased to over 11 million
households. This vibrant market is a key driver for aftermarket sales, as we anticipate owners will likely upgrade their units as
well as replace parts and accessories which have been subjected to normal wear and tear.
In December 2019, we acquired CURT, a leading manufacturer and distributor of branded towing products and truck
accessories for the aftermarket. Our CURT products are sold to the automotive and truck aftermarket, as well as the RV,
marine, and trailer markets, all of which require towing products, which we believe compliments the OEM markets we serve.
Sales from CURT products accounted for approximately half of our Aftermarket Segment net sales in each of 2022 and 2021.
CURT sold 0.9 million hitches in 2022 and 1.2 million in 2021. Additionally, with the acquisition of Kasper Ranch Hand
Equipment, LLC in April 2021, we continued to expand our product offering to include custom bumpers, grill guards, and steps
for the automotive aftermarket.
We currently expect to see a slight increase in aftermarket volume in 2023 as distribution stocking levels return to
normal and the new vehicle chip shortage ameliorates. We expect these gains will be tempered by the impact of inflation and
rising interest rates on consumers' discretionary spending.
RESULTS OF OPERATIONS
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021
Consolidated Summary
•
•
•
•
•
Consolidated net sales for 2022 were $5.2 billion, 16 percent higher than consolidated net sales for 2021 of $4.5
billion. The increase was primarily driven by price realization, market share growth, acquisitions, and an increase
in net sales to OEMs in Adjacent Industries, partially offset by a nearly 18 percent decrease in wholesale RV
OEM shipments. Net sales from acquisitions completed in 2021 and 2022, primarily Furrion and Girard,
contributed approximately $219.0 million in 2022.
Net income for 2022 increased 37.3 percent to $395.0 million, or $15.48 per diluted share, compared to net
income of $287.7 million, or $11.32 per diluted share, for 2021.
Consolidated operating profit during 2022 was $553.0 million compared to $398.4 million in 2021. Operating
profit margin was 10.6 percent in 2022 compared to 8.9 percent in 2021. The increase was primarily a result of
increased selling prices which are indexed to select commodities and pricing changes to targeted products,
partially offset by increased raw material and freight costs.
The cost of aluminum and steel used in certain of the Company's manufactured components increased in 2022
compared to 2021. 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 $75.6 million in 2022 was primarily driven by
increases in personnel costs of $25.0 million, incremental costs from recent acquisitions of $21.9 million,
30
increases in information systems costs of $12.0 million, incremental amortization of intangible assets from
acquired businesses of $11.1 million, and increases in transportation costs of $9.3 million, due to higher volumes
and rising freight costs in 2022 compared to 2021.
The effective tax rate of 24.8 percent for the full-year 2022 was higher than the prior year, primarily due to
discrete tax adjustments as discussed below under "Provision for Income Taxes."
In 2022, we returned $126.8 million to shareholders through $102.7 million of dividends and $24.1 million in
share repurchases.
•
•
OEM Segment
Net sales of the OEM Segment in 2022 increased 18 percent, or $0.7 billion, compared to 2021. Net sales of
components to OEMs were to the following markets for the years ended December 31:
(In thousands)
RV OEMs:
Travel trailers and fifth-wheels
Motorhomes
Adjacent Industries OEMs
Total OEM Segment net sales
2022
2021
Change
$
$
2,617,585 $
339,097
1,359,188
4,315,870 $
2,295,612
258,995
1,089,005
3,643,612
14%
31%
25%
18%
According to the RVIA, industry-wide wholesale shipments for the years ended December 31 were:
Travel trailer and fifth-wheel RVs
Motorhomes
2022
2021
421,700
58,400
531,400
56,200
Change
(21)%
4%
The trend in our average product content per RV produced is an indicator of our overall market share of components
for new RVs. Our average product content per type of RV, calculated based upon our net sales of components to domestic RV
OEMs for the different types of RVs produced for the twelve months ended December 31, divided by the industry-wide
wholesale shipments of the different product mix of RVs for the same period, was:
Content per:
Travel trailer and fifth-wheel RV
Motorhome
2022
2021
$
$
6,090 $
4,099 $
4,197
2,857
Change
45%
43%
Our average product content per type of RV excludes international sales and sales to the Aftermarket Segment and
Adjacent Industries. Content per RV is impacted by market share gains, acquisitions, new product introductions, and changes in
selling prices for our products, as well as changes in the types of RVs produced industry-wide.
Our increase in net sales to RV OEMs of travel trailers, fifth-wheel, and motorhome components during 2022 was
primarily driven by selling price increases, market share gains, and acquisitions, partially offset by a nearly 18 percent decrease
in wholesale RV OEM shipments.
Our increase in net sales to OEMs in Adjacent Industries during 2022 was primarily driven by selling price increases,
market share gains, and wholesale production growth. We continue to believe there are significant opportunities in Adjacent
Industries.
Operating profit of the OEM Segment was $479.2 million in 2022, an increase of $174.5 million compared to 2021.
The operating profit margin of the OEM Segment increased to 11.1 percent in 2022 compared to 8.4 percent in 2021 and was
positively impacted by:
•
•
Selling prices contractually tied to indices of select commodities increased, resulting in an increase in operating profit
of $282.6 million compared to 2021.
Pricing changes to targeted products, resulting in an increase in operating profit of $198.9 million compared to 2021.
Partially offset by:
•
Increases in material commodity costs, which negatively impacted operating profit by $226.3 million, primarily related
to increased steel and aluminum costs.
31
•
•
•
•
•
•
Absorption of fixed cost structure while supporting temporary slowdown in RV volumes in the second half of 2022,
which negatively impacted operating profit by $38.2 million.
Increased warranty costs driven by increased retail dealer service work, product mix, and recent periods of elevated
sales, which negatively impacted operating profit by $17.6 million.
Sales mix increase of lower margin products from recent acquisitions and related integration costs, which negatively
impacted operating profit by $14.2 million.
Higher production facility costs resulting from previous investments to expand capacity, which reduced operating
profit by $14.1 million.
Inventory cost and reserve related charges of $10.8 million.
Additional amortization related to intangible assets from acquisitions completed in the last twelve months, which
reduced operating profit by $9.7 million.
Amortization expense on intangible assets for the OEM Segment was $41.3 million in 2022, compared to $32.9
million in 2021. Depreciation expense on fixed assets for the OEM Segment was $58.2 million in 2022, compared to $50.8
million in 2021.
Aftermarket Segment
Net sales of the Aftermarket Segment in 2022 increased 8 percent, or $62.2 million, compared to 2021. Net sales of
components in the Aftermarket Segment were as follows for the years ended December 31:
(In thousands)
Total Aftermarket Segment net sales
2022
2021
$
891,273 $
829,085
Change
8%
Our net sales to the Aftermarket Segment increased during 2022 primarily due to net sales from acquisitions completed
in 2022 and 2021, which contributed approximately $63.4 million.
Operating profit of the Aftermarket Segment was $73.9 million in 2022, a decrease of $19.9 million compared to 2021.
The operating profit margin of the Aftermarket Segment was 8.3 percent in 2022, compared to 11.3 percent in 2021, and was
negatively impacted by:
•
•
•
•
•
•
•
Increases in material commodity costs and production supplies, which negatively impacted operating profit by $78.6
million, primarily related to increased steel and aluminum costs.
The impact of fixed costs on reduced organic volumes, which decreased operating profit by $19.5 million related to
fixed selling, general, and administrative costs and $7.8 million related to fixed overhead costs.
Investments in marketing costs and administrative structure of $12.0 million.
Increases in production labor costs due to production volumes and a tight labor market, which reduced operating profit
by $10.7 million.
Increases in transportation costs, primarily for third-party freight, which reduced operating profit by $7.3 million.
Higher production facility costs in the current period resulting from investments to expand capacity over the past year,
which reduced operating profit by $4.5 million in the current period.
Inventory cost and reserve related charges of $3.9 million.
Partially offset by:
•
•
Pricing changes to targeted products, resulting in an increase in operating profit of $109.0 million compared to 2021.
Sales mix increase of higher margin products from the acquisition of Furrion, which positively impacted operating
profit by $9.4 million.
Amortization expense on intangible assets for the Aftermarket Segment was $15.1 million in 2022, compared to $14.7
million in 2021. Depreciation expense on fixed assets for the Aftermarket Segment was $14.7 million in 2022, compared to
$13.9 million in 2021.
Provision for Income Taxes
The effective income tax rate for 2022 was 24.8 percent compared to 24.7 percent in 2021. The effective tax rate of
24.8 percent for the full-year 2022 was higher than the prior year, primarily due to a decrease in the excess tax benefit related to
the vesting of equity-based compensation awards, a decrease in the cash surrender value of life insurance, and a discrete tax
32
expense for an acquisition-related tax election, partially offset by a decrease in non-deductible executive compensation
expenses. We estimate the 2023 effective income tax rate to be approximately 24 to 26 percent.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
We maintain a level of liquidity sufficient to allow us to meet our cash needs in the short term. Over the long term, we
manage our cash and capital structure to maximize shareholder return, maintain our financial condition, and maintain flexibility
for our future strategic investments. We continuously assess our capital requirements, working capital needs, debt and leverage
levels, debt and lease maturity schedules, capital expenditure requirements, dividends, future investments or acquisitions, and
potential share repurchases. We believe our operating cash flows, credit facilities, as well as any potential future borrowings,
will be sufficient to fund our future payments and long-term initiatives.
As of December 31, 2022, we had $47.5 million in cash and cash equivalents, and $306.5 million of availability under
our revolving credit facility. We also have the ability to request an increase to the revolving and/or incremental term loan
facilities by up to an additional $400.0 million in the aggregate upon approval of the lenders providing any such increase and
the satisfaction of certain other conditions. See Note 9 of the Notes to Consolidated Financial Statements for a description of
our credit facilities.
We believe the availability under the revolving credit facility under the Credit Agreement (as defined in Note 9 of the
Notes to Consolidated Financial Statements), along with our cash flows from operations, are adequate to finance our anticipated
cash requirements for the next twelve months.
The Consolidated Statements of Cash Flows reflect the following for the years ended December 31:
(In thousands)
Net cash flows provided by (used in) operating activities
Net cash flows used in investing activities
Net cash flows (used in) provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
Net (decrease) increase in cash and cash equivalents
2022
2021
$
$
602,514 $
(241,790)
(374,871)
(1,250)
(15,397) $
(111,573)
(281,218)
404,563
(697)
11,075
Discussion - Year Ended December 31, 2022 Compared to Year Ended December 31, 2021
Cash Flows from Operations
Net cash flows provided by operating activities were $602.5 million in 2022, compared to cash used in operating
activities of $111.6 million in 2021. This change was primarily due to changes in net assets and liabilities, net of acquisitions of
businesses, which generated $603.4 million more cash than in 2021. During 2021, in an effort to address challenges with supply
chain constraints, rising material costs, and a tightened labor market, we strategically managed working capital, including
intentionally building up levels of certain inventory items and expanding production capacity, resulting in the use of cash in
2021. As a result of declining sales volumes and actions taken in the second half of 2022, decreases in inventory of $117.4
million and in receivables related to decreased wholesale RV demand of $115.7 million were the primary providers of cash
generated from net assets in 2022. The increase was also assisted by a $110.7 million increase in net income, adjusted for
depreciation and amortization, stock-based compensation expense, deferred taxes, and other non-cash items.
Over the long term, based on our historical collection and payment patterns, as well as inventory turnover, and also
giving consideration to emerging trends and changes to the sales mix, we expect working capital to increase or decrease
equivalent to approximately 10 to 15 percent of the increase or decrease, respectively, in net sales. However, there are many
factors that can impact this relationship, especially in the short term.
Depreciation and amortization was $129.2 million and $112.3 million in 2022 and 2021, respectively, and is expected
to be approximately $130 to $140 million in 2023. Non-cash stock-based compensation expense was $23.7 million and $27.2
million in 2022 and 2021, respectively, and is expected to be approximately $25 to $30 million in 2023.
33
Cash Flows from Investing Activities
Cash flows used in investing activities of $241.8 million in 2022 were primarily comprised of $130.6 million for
capital expenditures and $108.5 million for the acquisition of businesses. Cash flows used in investing activities of $281.2
million in 2021 were primarily comprised of $194.1 million for the acquisition of businesses and $98.5 million for capital
expenditures. This increase in capital expenditures in 2022 was primarily due to increased investments in growth and
automation projects of $30.3 million.
Our capital expenditures are primarily for replacement and growth. Over the long term, based on our historical capital
expenditures, the replacement portion has averaged approximately one to two percent of net sales, while the growth portion has
averaged approximately two to three percent of net sales. However, there are many factors that can impact the actual spending
compared to these historical averages. We estimate 2023 capital expenditures of $80 to $100 million, including investments in
automation and lean projects, which we expect to fund with cash flows from operations or periodic borrowings under the
revolving credit facility as needed.
The 2022 capital expenditures and acquisitions were funded by cash generated from operations and borrowings under
our Credit Agreement. Capital expenditures and acquisitions in 2023 are expected to be funded primarily from cash generated
from operations, as well as periodic borrowings under our revolving credit facility.
Cash Flows from Financing Activities
Cash flows used in financing activities in 2022 were primarily comprised of:
$105.3 million in net payments under our revolving credit facility;
•
payments of quarterly dividends of $102.7 million;
•
$73.0 million in repayments under our shelf loan, term loan, and other borrowings;
•
$60.2 million in payments of contingent consideration and holdbacks related to acquisitions;
•
$24.1 million in repurchases of common stock; and
•
cash outflows of $11.0 million related to vesting of stock-based awards, net of shares tendered for payment of
•
taxes.
Cash flows provided by financing activities in 2021 were primarily comprised of:
•
proceeds from the issuance of the convertible notes and warrants, net of debt issuance costs and call option
contracts of $396.6 million;
$124.2 million in borrowings under the term loan; and
$22.0 million in net borrowings under our revolving credit facility.
payments of quarterly dividends of $87.2 million;
$22.8 million in payments of contingent consideration and holdbacks related to acquisitions;
$21.5 million in repayments under the term loan and other borrowings; and
cash outflows of $8.3 million related to vesting of stock-based awards, net of shares tendered for payment of
taxes.
The Credit Agreement includes both financial and non-financial covenants. The covenants dictate that we shall not
permit our net leverage ratio to exceed certain limits, shall maintain a minimum debt service coverage ratio, and must meet
certain other financial requirements. At December 31, 2022, we were in compliance with all such requirements, and we expect
to remain in compliance for the next twelve months.
We have paid regular quarterly dividends since 2016. Future dividend policy with respect to our common stock will be
determined by our Board of Directors in light of our prevailing financial needs, earnings, and other relevant factors, including
any limitations in our debt agreements, such as maintenance of certain financial ratios. In May 2022, our Board of Directors
authorized a stock repurchase program for the purchase of up to $200.0 million of our common stock over a three-year period
ending on May 19, 2025. Under this stock repurchase program, we purchased 253,490 shares at a weighted average price of
$94.89 per share, totaling $24.1 million, during the year ended December 31, 2022. No shares were repurchased during the year
ended December 31, 2021. See Note 13 of the Notes to Consolidated Financial Statements for additional information related to
our dividend and share repurchase programs.
34
•
•
Partially offset by:
•
•
•
•
Future Cash Requirements
The following table summarizes our material estimated future cash requirements under our contractual obligations for
indebtedness and operating leases at December 31, 2022, in total and disaggregated into current (payable in 2023) and long-
term (payable after 2023) obligations.
(In thousands)
Total indebtedness (a)
Interest on indebtedness (a)
Operating leases (b)
Total
Total
Current
Long-Term
$
1,128,026
$
23,406
$
1,104,620
84,484
341,924
22,481
47,469
62,003
294,455
$
1,554,434
$
93,356
$
1,461,078
a.
b.
See Note 9 of the Notes to Consolidated Financial Statements for additional information regarding the maturities of
debt principal. Interest payments on our indebtedness are calculated using the outstanding balances and interest rates
in effect on December 31, 2022.
See Note 11 of the Notes to Consolidated Financial Statements for additional information regarding the maturity of
our lease obligations under operating leases. Our finance leases were not material at December 31, 2022.
Retirement and Other Benefit Plans
We consider various factors when making funding decisions, such as regulatory requirements, actuarially determined
minimum contribution requirements, and contributions required to avoid benefit restrictions for defined benefit pension plans.
For the year ended December 31, 2022, we contributed $1.6 million to our Dutch pension plans assumed with the acquisition of
Polyplastic Group B.V. and made discretionary matching contributions of $12.9 million to our defined contribution 401(k)
profit sharing plan. We anticipate making minimum required contributions of approximately $0.7 million to our Dutch pension
plans in 2023 following curtailment of the plans at the end of 2022. We also expect to make matching contributions to our
defined contribution 401(k) profit sharing plan in 2023 at a level similar to 2022; however, these contributions are discretionary
and subject to change. See Note 8 of the Notes to Consolidated Financial Statements for further information related to our
retirement and other benefit plans.
Holdback Payments
With certain business acquisitions, we hold back purchase consideration for the purposes of working capital
adjustments, indemnity claims, and other items, as defined in each respective purchase agreement. At December 31, 2022, we
had current holdback payments accrued of $33.5 million related to certain acquisitions completed in 2022 and 2021. The
ultimate cash settlement amounts of these holdback accruals are subject to change based on various factors defined in the
respective purchase agreements. See Note 4 of the Notes to Consolidated Financial Statements for further information related to
these holdback payments.
CORPORATE GOVERNANCE
We are in compliance with the corporate governance requirements of the SEC and the New York Stock Exchange. Our
governance documents and committee charters and key practices have been posted to our website (www.lci1.com) and are
updated periodically. The website also contains, or provides direct links to, all SEC filings, press releases and investor
presentations. We have also established a Whistleblower Policy, which includes a toll-free hotline (800-461-9330) 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 our website (www.lci1.com).
CONTINGENCIES
Additional information required by this item is included under Item 3 of Part I of this Annual Report on Form 10-K.
CRITICAL ACCOUNTING ESTIMATES
Our Consolidated Financial Statements have been prepared in conformity with accounting principles generally
accepted in the United States of America, which requires certain estimates and assumptions to be made that affect the amounts
and disclosures reported in those financial statements and the related accompanying notes. Actual results could differ from
these estimates and assumptions. While our significant accounting policies are more fully described in Note 2 of the Notes to
35
Consolidated Financial Statements, the following discussion addresses our most critical accounting estimates, which are those
that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our
financial condition and results of operations. Management has discussed the development and selection of its critical accounting
estimates with the Audit Committee of the Company’s Board of Directors and the Audit Committee has reviewed the disclosure
presented below relating to the critical accounting estimates.
Warranty
We provide warranty terms based upon the type of product sold. We estimate the warranty accrual based upon various
factors, including historical warranty costs, warranty claim lag, and sales. The accounting for warranty accruals requires us to
make assumptions and judgments, and to the extent actual results differ from original estimates, adjustments to recorded
accruals may be required. In 2022, we experienced an increase in claims paid year-over-year, which grew at a higher rate than
the growth in net sales. We believe the unfavorable trend in relation to net sales is the result of retail dealers seeking service
work as retail sales of RVs slowed in the second half of 2022, and as a result of higher warranty claims on new appliance
product offerings from recent acquisitions. Despite these unfavorable trends, warranty claim lag time has continued to decline
as we focus on addressing warranty claims promptly, which favorably impacts our warranty reserves. For further information
on our warranty accrual, including a roll-forward of changes in the accrual, see Note 7 of the Notes to Consolidated Financial
Statements.
Fair Value of Intangible Assets of Acquired Businesses
We value the intangible assets associated with the acquisitions of businesses on the respective acquisition dates.
Depending upon the type of intangible asset acquired, we use different valuation techniques in determining the fair value. Those
techniques include comparable market prices, long-term sales, profitability and cash flow forecasts, assumptions regarding
future industry-specific economic and market conditions and a market participant’s weighted average cost of capital, as well as
other techniques as circumstances require. By their nature, these assumptions require judgment, and if management had chosen
different assumptions, the fair value of intangible assets of acquired businesses would have been different. For further
information on acquired intangible assets, see Note 4 of the Notes to Consolidated Financial Statements.
New Accounting Pronouncements
Information required by this item is included in Note 2 of the Notes to Consolidated Financial Statements.
INFLATION
The prices of key raw materials, consisting primarily of steel and aluminum, and components used by us which are
made from these raw materials, are influenced by demand and other factors specific to these commodities, as well as by
inflationary pressures. We experienced elevated prices of these commodities in 2022, and we expect commodity prices to
remain elevated in 2023. Prices of these commodities have historically been volatile, and over the past few months prices have
continued to fluctuate. Please see "Results of Operations" above for additional information regarding the impact of raw material
costs on our results of operations for the year ended December 31, 2022.
As a result of the competitive labor market and strong demand for our products, we experienced increased labor costs
in 2022 attributable to higher wages and increased overtime and additional shifts for our team members, and we expect labor
costs to normalize in 2023. Please see "Results of Operations" above for additional information regarding the impact of labor
costs on our results of operations for the year ended December 31, 2022.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are exposed to market risk related to changes in short-term interest rates on our variable rate debt, as further
described in Note 9 to the Notes to Consolidated Financial Statements. At December 31, 2022, we had $664.1 million of
borrowings outstanding on our variable rate revolving credit facility and incremental term loan. Assuming consistent borrowing
levels and an increase of 100 basis points in the interest rate for borrowings of a similar nature subsequent to December 31,
2022, future cash flows would be reduced by approximately $6.6 million per annum.
We are also exposed to changes in the prices of raw materials, specifically steel and aluminum. We have, 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
36
generally offset by the changes in fair value of the underlying exposures. We had no outstanding derivative instruments on
commodities at December 31, 2022 and 2021.
We have 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 Part II, Item 7. "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
37
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
LCI Industries:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of LCI Industries and subsidiaries (the Company) as of
December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, stockholders’ equity, and
cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively, the
consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of
December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the
years in the three-year period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles.
Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2022 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission.
The Company acquired Girard Systems, Inc. and Girard Products, LLC during 2022, and management excluded from its
assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022, Girard
Systems, Inc. and Girard Products, LLC's internal control over financial reporting associated with assets of $83.2 million and
revenue of $43.1 million included in the consolidated financial statements of the Company as of and for the year ended
December 31, 2022. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the
internal control over financial reporting of Girard Systems, Inc. and Girard Products, LLC.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included
in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to
express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over
financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with
the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material
respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement
of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the
risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based
on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
38
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or
disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or
complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate
opinions on the critical audit matter or on the accounts or disclosures to which they relate.
Estimation of certain product warranty accruals
As discussed in Note 7 to the consolidated financial statements, the Company’s product warranty accrual as of
December 31, 2022 was $54.5 million. The Company provides warranty terms based upon the type of product sold and
estimates the amount of warranty accrual based upon various factors and information, including historical warranty
costs, warranty claim lag, and sales.
We identified the evaluation of certain product warranty accruals as a critical audit matter. Complex auditor judgment
was required to evaluate the Company's models and the weighting of the models used to determine certain product
warranty accruals, which required the use of actuarial professionals with specialized skills and knowledge.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design
and tested the operating effectiveness of certain internal controls related to certain product warranty accruals, including
controls related to the Company's models. We assessed the data used by the Company in developing the estimate by
comparing it to relevant claims and sales documentation. In addition, we involved actuarial professionals with
specialized skills and knowledge, who assisted in evaluating the Company's models by comparing certain of the
Company's product warranty accruals to a range of those product warranty accruals determined using independently
developed models.
/s/ KPMG LLP
We have served as the Company’s auditor since 1980.
Chicago, Illinois
February 24, 2023
39
LCI INDUSTRIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating profit
Interest expense, net
Income before income taxes
Provision for income taxes
Net income
Net income per common share:
Basic
Diluted
Weighted average common shares outstanding:
Basic
Diluted
Year Ended December 31,
2021
2022
2020
$ 5,207,143
3,933,854
1,273,289
720,261
553,028
27,573
525,455
130,481
394,974
$
$ 4,472,697
3,429,662
1,043,035
644,625
398,410
16,366
382,044
94,305
287,739
$
$ 2,796,166
2,090,076
706,090
483,156
222,934
13,453
209,481
51,041
158,440
$
$
$
15.57
15.48
$
$
11.39
11.32
$
$
6.30
6.27
25,372
25,514
25,257
25,427
25,134
25,255
The accompanying notes are an integral part of these Consolidated Financial Statements.
40
LCI INDUSTRIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
Net income
Other comprehensive income (loss):
Year Ended December 31,
2021
2020
2022
$
394,974
$
287,739
$
158,440
Net foreign currency translation adjustment
Actuarial gain (loss) on pension plans
Unrealized gain on fair value of derivative instruments
Total comprehensive income
(20,920)
28,125
—
402,179
$
(9,697)
2,107
—
280,149
$
4,531
(207)
1,642
164,406
$
The accompanying notes are an integral part of these Consolidated Financial Statements.
41
LCI INDUSTRIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amount)
ASSETS
Current assets
Cash and cash equivalents
Accounts receivable, net of allowances of $5,904 and $6,446 at
December 31, 2022 and 2021, respectively
Inventories, net
Prepaid expenses and other current assets
Total current assets
Fixed assets, net
Goodwill
Other intangible assets, net
Operating lease right-of-use assets
Other long-term assets
Total assets
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term indebtedness
Accounts payable, trade
Current portion of operating lease obligations
Accrued expenses and other current liabilities
Total current liabilities
Long-term indebtedness
Operating lease obligations
Deferred taxes
Other long-term liabilities
Total liabilities
Stockholders' equity
Common stock, par value $.01 per share
Paid-in capital
Retained earnings
Accumulated other comprehensive income (loss)
Stockholders' equity before treasury stock
Treasury stock, at cost
Total stockholders' equity
December 31,
2022
2021
$
47,499
$
62,896
$
$
214,262
1,029,705
99,310
1,390,776
482,185
567,063
503,320
247,007
56,561
3,246,912
23,086
143,529
35,447
219,238
421,300
1,095,888
222,478
30,580
95,658
1,865,904
285
234,956
1,221,279
6,704
1,463,224
(82,216)
1,381,008
$
$
319,782
1,095,907
88,300
1,566,885
426,455
543,180
519,957
164,618
66,999
3,288,094
71,003
282,183
30,592
243,438
627,216
1,231,959
143,436
43,184
149,424
2,195,219
284
220,459
930,795
(501)
1,151,037
(58,162)
1,092,875
Total liabilities and stockholders' equity
$
3,246,912
$
3,288,094
The accompanying notes are an integral part of these Consolidated Financial Statements.
42
LCI INDUSTRIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
2021
2020
2022
$
394,974
$
287,739
$
158,440
(In thousands)
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to cash flows provided by (used
in) operating activities:
Depreciation and amortization
Stock-based compensation expense
Deferred taxes
Other non-cash items
Changes in assets and liabilities, net of acquisitions of businesses:
Accounts receivable, net
Inventories, net
Prepaid expenses and other assets
Accounts payable, trade
Accrued expenses and other liabilities
Net cash flows provided by (used in) operating activities
Cash flows from investing activities:
Capital expenditures
Acquisitions of businesses
Other investing activities
Net cash flows used in investing activities
Cash flows from financing activities:
Vesting of stock-based awards, net of shares tendered for payment of
taxes
Proceeds from revolving credit facility
Repayments under revolving credit facility
Proceeds from term loan borrowings
Repayments under shelf loan, term loan, and other borrowings
Proceeds from issuance of convertible notes
Purchases of convertible note hedge contracts
Proceeds from issuance of warrants concurrent with note hedge
contracts
Payment of debt issuance costs
Payment of dividends
Payment of contingent consideration and holdbacks related to
acquisitions
Repurchases of common stock
Other financing activities
129,212
23,695
(9,277)
3,496
115,706
117,419
14,990
(161,121)
(26,580)
602,514
(130,641)
(108,470)
(2,679)
(241,790)
(10,961)
1,128,400
(1,233,740)
—
(73,031)
—
—
—
—
(102,726)
(60,228)
(24,054)
1,469
112,320
27,161
(3,279)
7,456
(58,843)
(516,692)
(13,306)
68,879
(23,008)
(111,573)
(98,534)
(194,107)
11,423
(281,218)
(8,324)
1,303,193
(1,281,147)
124,199
(21,457)
460,000
(100,142)
48,484
(12,214)
(87,171)
(22,830)
—
1,972
Net cash flows (used in) provided by financing activities
(374,871)
404,563
Effect of exchange rate changes on cash and cash equivalents
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents cash at end of period
(1,250)
(15,397)
62,896
47,499
$
(697)
11,075
51,821
62,896
$
$
The accompanying notes are an integral part of these Consolidated Financial Statements.
43
97,980
18,502
(1,504)
2,229
(45,028)
(86,898)
(29,158)
67,679
49,158
231,400
(57,346)
(182,130)
7,175
(232,301)
(4,853)
543,991
(430,390)
—
(22,444)
—
—
—
—
(70,401)
(1,633)
—
(222)
14,048
3,315
16,462
35,359
51,821
LCI INDUSTRIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
Year Ended December 31,
2022
2021
2020
(In thousands)
Supplemental disclosure of cash flow information:
Cash paid during the period for interest
$
25,052
$
Cash paid during the period for income taxes, net of refunds
Purchase of property and equipment in accrued expenses
170,012
1,730
$
15,429
94,075
3,602
16,910
33,247
2,739
The accompanying notes are an integral part of these Consolidated Financial Statements.
44
LCI INDUSTRIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except shares and per
share amounts)
Balance - January 1, 2020
Net income
Issuance of 109,621 shares of common
stock pursuant to stock-based awards, net
of shares tendered for payment of taxes
Stock-based compensation expense
Other comprehensive income
Cash dividends ($2.80 per share)
Dividend equivalents on stock-based
awards
Balance - December 31, 2020
Net income
Issuance of 117,540 shares of common
stock pursuant to stock-based awards, net
of shares tendered for payment of taxes
Stock-based compensation expense
Purchase of convertible note hedge
contracts, net of tax
Issuance of warrants
Other comprehensive loss
Cash dividends ($3.45 per share)
Dividend equivalents on stock-based
awards
Balance - December 31, 2021
Net income
Issuance of 159,125 shares of common
stock pursuant to stock-based awards, net
of shares tendered for payment of taxes
Stock-based compensation expense
Repurchase of 253,490 shares of
common stock
Other comprehensive income
Cash dividends ($4.05 per share)
Dividend equivalents on stock-based
awards
Common
Stock
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
$
281 $ 212,485 $ 644,945 $
158,440
—
—
1,123 $
—
Total
Stockholders'
Equity
Treasury
Stock
(58,162) $
1
—
—
—
(4,854)
18,502
—
—
—
—
—
(70,401)
—
282
—
1,274
227,407
—
(1,274)
731,710
287,739
2
—
—
—
—
—
(8,326)
27,161
—
—
(75,750)
48,484
—
—
—
—
—
(87,171)
—
—
5,966
—
—
7,089
—
—
—
—
—
(7,590)
—
—
—
—
—
—
—
(58,162)
—
—
—
—
—
—
—
800,672
158,440
(4,853)
18,502
5,966
(70,401)
—
908,326
287,739
(8,324)
27,161
(75,750)
48,484
(7,590)
(87,171)
—
284
—
1,483
220,459
—
(1,483)
930,795
394,974
—
(501)
—
—
(58,162)
—
—
1,092,875
394,974
1
—
—
—
—
(10,962)
23,695
—
—
—
—
—
—
—
(102,726)
—
1,764
(1,764)
—
—
—
—
(10,961)
23,695
—
(24,054)
(24,054)
7,205
—
—
—
—
—
7,205
(102,726)
—
Balance - December 31, 2022
$
285 $ 234,956 $ 1,221,279 $
6,704 $
(82,216) $
1,381,008
The accompanying notes are an integral part of these Consolidated Financial Statements.
45
LCI INDUSTRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
BASIS OF PRESENTATION
The Consolidated Financial Statements include the accounts of LCI Industries and its wholly-owned subsidiaries
("LCII" and collectively with its subsidiaries, the "Company," "we," "us," or "our"). LCII has no unconsolidated subsidiaries.
LCII, through its wholly-owned subsidiary, Lippert Components, Inc. and its subsidiaries (collectively, "Lippert Components,"
"LCI," or "Lippert"), supplies, domestically and internationally, a broad array of 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 boats; buses; trailers used to haul boats, livestock, equipment, and other
cargo; trucks; trains; manufactured homes; and modular housing. The Company also supplies engineered components to the
related aftermarkets of these industries, primarily by selling to retail dealers, wholesale distributors, and service centers, as well
as direct to retail customers via the Internet. At December 31, 2022, the Company operated over 130 manufacturing and
distribution facilities located throughout North America and Europe.
Most industries where the Company sells products or where its products are used historically have been seasonal and
are generally at the highest levels when the weather is moderate. Accordingly, the Company's sales and profits have generally
been the highest in the second quarter and lowest in the fourth quarter. However, current and future seasonal industry trends
have been, and may in the future be, different than in prior years due to various factors, including fluctuations in dealer
inventories and the timing of dealer orders, 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 impact of
severe weather conditions on the timing of industry-wide shipments from time to time, as well as the coronavirus
("COVID-19") pandemic and related impacts. Additionally, many of the optional upgrades and non-critical replacements for
RVs are purchased outside the normal product selling season, thereby causing certain Aftermarket Segment sales to be counter-
seasonal, but this has been, and may in the future be, different as a result of the COVID-19 pandemic and the continuing impact
of market and supply chain disruptions.
The Company is not aware of any significant events which occurred subsequent to the balance sheet date but prior to
the filing of this report that would have a material impact on the Consolidated Financial Statements. All significant
intercompany balances and transactions have been eliminated. Certain prior year balances have been reclassified to conform to
the current year presentation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United
States of America requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities,
net sales and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates
its estimates, including, but not limited to, those related to product returns, sales and purchase rebates, accounts receivable,
inventories, goodwill and other intangible assets, net assets of acquired businesses, income taxes, warranty and product recall
obligations, self-insurance obligations, operating lease right-of-use assets and obligations, asset retirement obligations, long-
lived assets, pension and post-retirement benefits, stock-based compensation, segment allocations, contingent consideration,
environmental liabilities, contingencies, and litigation. The Company bases its estimates on historical experience, other
available information, and various other assumptions believed to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and liabilities not readily apparent from other
resources. Actual results and events could differ significantly from management estimates.
Risks and Uncertainties
The COVID-19 pandemic and the conflict between Russia and Ukraine (the "Russia-Ukraine War") have caused
significant uncertainty and disruption in the global economy and financial markets. Management continues to closely monitor
the impact of COVID-19 and the Russia-Ukraine War, as well as heightened tensions between China and Taiwan, on all aspects
of the business. The extent to which COVID-19, the Russia-Ukraine War, and/or relations between China and Taiwan may
impact the Company's liquidity, financial condition, and results of operations in the future remains uncertain.
46
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less at the time of purchase to
be cash equivalents.
Accounts Receivable
Accounts receivable are stated at historical carrying value, net of write-offs and allowances. The Company establishes
allowances based upon historical experience, current conditions, and reasonable forecasts. Uncollectible accounts receivable are
written off when a settlement is reached or when the Company has determined the balance will not be collected.
Inventories
Inventories are stated at the lower of cost (using the first-in, first-out (FIFO) method) or net realizable value. Cost
includes material, labor, and overhead.
Fixed Assets
Fixed assets which are owned are stated at cost less accumulated depreciation and are depreciated on a straight-line
basis over the estimated useful lives of the properties and equipment. Leasehold improvements and leased equipment are
amortized over the shorter of the lives of the leases or the underlying assets. Maintenance and repair costs that do not improve
service potential or extend economic life are expensed as incurred.
Leases
The Company leases certain manufacturing and distribution facilities, administrative office space, semi-tractors,
trailers, forklifts, and other equipment through operating leases with unrelated third parties. At contract inception, the Company
determines whether a contract is or contains a lease and whether the lease should be classified as an operating or finance lease.
The Company recognizes operating lease right-of-use assets and operating lease liabilities based on the present value of the
future minimum lease payments over the lease term at the commencement date. The Company uses its incremental borrowing
rate based on information available at lease inception in determining the present value of the lease payments. The Company
applies a portfolio approach for determining the incremental borrowing rate based on applicable lease terms and the current
economic environment. Many of the Company's leases include renewal options, which are included in the lease term when it is
reasonably certain the option will be exercised. Leases with an initial term of 12 months or less are recognized in lease expense
on a straight-line basis over the lease term and not recorded on the Consolidated Balance Sheets.
Certain of the Company's lease arrangements contain lease components (such as minimum rent payments) and non-
lease components (such as common-area or other maintenance costs and taxes). The Company generally accounts for each
component separately based on the estimated standalone price of each component. Some of the Company's lease arrangements
include rental payments that are adjusted periodically for an index rate. These leases are initially measured using the projected
payments in effect at the inception of the lease. Certain of the Company's leased semi-tractors, trailers, and forklifts include
variable costs for usage or mileage. Such variable costs are expensed as incurred and included in variable lease costs.
Finance leases and lease arrangements under which the Company is the lessor are not material to the Company's
consolidated financial statements. The Company's lease agreements typically do not contain any significant residual value
guarantees or restrictive covenants.
Warranty
The Company provides warranty terms based upon the type of product sold. The Company estimates the warranty
accrual based upon various factors, including historical warranty costs, warranty claim lag, and sales. The accounting for
warranty accruals requires the Company to make assumptions and judgments, and to the extent actual results differ from
original estimates, adjustments to recorded accruals may be required. See Note 7 - Accrued Expenses and Other Current
Liabilities for further detail.
47
Income Taxes
Deferred tax assets and liabilities are determined based on the temporary differences between the financial reporting
and tax basis of assets and liabilities, applying enacted statutory tax rates in effect for the year in which the differences are
expected to reverse. In assessing the realizability of deferred tax assets, management considers whether it is more likely than
not that some portion or all the deferred tax assets will not be realized.
The Company accounts for uncertainty in tax positions by recognizing in its financial statements the impact of a tax
position only if that position is more likely than not of being sustained on audit, based on the technical merits of the position.
Further, the Company assesses the tax benefits of the tax positions in its financial statements based on experience with similar
tax positions, information obtained during the examination process and the advice of experts. The Company recognizes
previously unrecognized tax benefits upon the earlier of the expiration of the period to assess tax in the applicable taxing
jurisdiction or when the matter is constructively settled and upon changes in statutes or regulations and new case law or rulings.
The Company classifies interest and penalties related to income taxes as a component of income tax expense in its Consolidated
Statements of Income.
Goodwill
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. In 2022 and 2021, the Company assessed qualitative factors of its reporting units to determine whether it was more likely
than not the fair value of the reporting unit was less than its carrying amount, including goodwill. The qualitative impairment
test consists of an assessment of qualitative factors, including general economic and industry conditions, market share, and
input costs.
Other Intangible Assets
Intangible assets with estimable useful lives are amortized over their respective estimated useful lives to their
estimated residual values and reviewed for impairment. Intangible assets are amortized using either an accelerated or straight-
line method, whichever best reflects the pattern in which the estimated future economic benefits of the asset will be consumed.
The useful lives of intangible assets are determined after considering the expected cash flows and other specific facts and
circumstances related to each intangible asset. Intangible assets with indefinite lives are not amortized, but instead are tested for
impairment annually in November, or more frequently if certain circumstances indicate a possible impairment may exist.
Impairment of Long-Lived Assets
Long-lived assets, other than goodwill, are tested for impairment when changes in circumstances indicate their
carrying value may not be recoverable. A determination of impairment, if any, is made based on the undiscounted value of
estimated future cash flows, salvage value or expected net sales proceeds, depending on the circumstances. Impairment is
measured as the excess of the carrying value over the estimated fair value of such assets.
Foreign Currency Translation
The financial statements of the Company's international subsidiaries generally are measured using the local currency as
the functional currency. The translation from the applicable foreign currency to U.S. Dollars is performed for balance sheet
accounts using exchange rates in effect at the balance sheet date and for revenue and expense accounts using the weighted
average exchange rate for the period. The resulting translation adjustments are recorded in accumulated other comprehensive
income as a component of stockholders' equity. The Company reflects net foreign exchange transaction gains and losses
resulting from the conversion of the transaction currency to functional currency as a component of foreign currency exchange
gains or losses in selling, general and administrative expenses in the Consolidated Statements of Income.
Stock-Based Compensation
All stock-based compensation awards are expensed over their vesting period, based on fair value. For awards having a
service-only vesting condition, the Company recognizes stock-based compensation expense on a straight-line basis over the
requisite service periods. For awards with a performance vesting condition, which are subject to certain pre-established
48
performance targets, the Company recognizes stock-based compensation expense on a graded-vesting basis to the extent it is
probable the performance targets will be met. The fair values of deferred stock units, restricted stock units, restricted stock, and
stock awards are based on the market price of the Company's common stock, all on the date the stock-based awards are granted.
Revenue Recognition
The Company recognizes revenue when performance obligations under the terms of contracts with customers are
satisfied, which occurs with the transfer of control of the Company’s products. Revenue is measured as the amount of
consideration the Company expects to receive in exchange for transferring its products to its customers. Sales, value added, and
other taxes collected concurrent with revenue-producing activities are excluded from revenue.
For the vast majority of product sales, the Company transfers control and recognizes revenue when it ships the product
from its facility to its customer. The amount of consideration the Company receives, and the revenue recognized varies with
sales discounts, volume rebate programs, and indexed material pricing. When the Company offers customers retrospective
volume rebates, it estimates the expected rebates based on an analysis of historical experience. The Company adjusts its
estimate of revenue related to volume rebates at the earlier of when the most likely amount of consideration expected to be
received changes or when the consideration becomes fixed. Volume rebates are generally settled on a quarterly basis. When the
Company offers customers prompt pay sales discounts or agrees to variable pricing based on material indices, it estimates the
expected discounts or pricing adjustments based on an analysis of historical experience. The Company adjusts its estimate of
revenue related to sales discounts and indexed material pricing to the expected value of the consideration to which the Company
will be entitled. The Company includes the variable consideration in the transaction price to the extent that it is probable that a
significant reversal of cumulative revenue will not occur when the volume, discount or indexed material price uncertainties are
resolved.
See Note 15 - Segment Reporting for the Company's disclosures of disaggregated revenue.
Shipping and Handling Costs
The Company recognizes shipping and handling costs as fulfillment costs when control over products has transferred
to the customer, and records the expense within selling, general and administrative expenses. Such costs aggregated
$230.4 million, $203.8 million, and $104.4 million in the years ended December 31, 2022, 2021, and 2020, respectively.
Legal Costs
The Company expenses all legal costs associated with litigation as incurred. Legal expenses are included in selling,
general and administrative expenses in the Consolidated Statements of Income.
Fair Value Measurements
Fair value is determined using a hierarchy that has three levels based on the reliability of the inputs used to determine
fair value. Level 1 refers to fair values determined based on quoted prices in active markets for identical assets. Level 2 refers to
fair values estimated using significant other observable inputs, and Level 3 includes fair values estimated using significant
unobservable inputs.
Recent Accounting Pronouncements
There are no recent accounting pronouncements that have been issued and not yet adopted that are expected to have a
material impact on our Consolidated Financial Statements.
49
3.
EARNINGS PER SHARE
The following reconciliation details the denominator used in the computation of basic and diluted earnings per share
for the years ended December 31:
(In thousands)
Weighted average shares outstanding for basic earnings per share
Common stock equivalents pertaining to stock-based awards
Weighted average shares outstanding for diluted earnings per share
2022
2021
2020
25,372
142
25,514
25,257
170
25,427
25,134
121
25,255
Equity instruments excluded from diluted net earnings per share
calculation as the effect would have been anti-dilutive
102
119
111
For the Company's 1.125 percent convertible senior notes due 2026 (the "Convertible Notes") issued in May 2021, the
dilutive effect is calculated using the if-converted method. The Company is required, pursuant to the indenture governing the
Convertible Notes, dated May 13, 2021, by and between the Company and U.S. Bank National Association, as trustee (the
"Indenture"), to settle the principal amount of the Convertible Notes in cash and may elect to settle the remaining conversion
obligation (i.e., the stock price in excess of the conversion price) in cash, shares of the Company's common stock, or a
combination thereof. Under the if-converted method, the Company includes the number of shares required to satisfy the
conversion obligation, assuming all the Convertible Notes are converted. The average closing price of the Company's common
stock for the year ended December 31, 2022 is used as the basis for determining the dilutive effect on earnings per share. The
average price of the Company's common stock for the year ended December 31, 2022 was less than the conversion price of
$165.65, and, therefore, all associated shares were antidilutive.
In conjunction with the issuance of the Convertible Notes, the Company, in privately negotiated transactions with
certain commercial banks ("the Counterparties"), sold warrants to purchase 2.8 million shares of the Company's common stock
(the "Warrants"). The Warrants have a strike price of $259.84 per share, subject to customary anti-dilution adjustments. For
calculating the dilutive effect of the Warrants, the Company uses the treasury stock method. With this method, the Company
assumes exercise of the Warrants at the beginning of the period, or at time of issuance if later, and issuance of shares of
common stock upon exercise. Proceeds from the exercise of the Warrants are assumed to be used to repurchase shares of the
Company's common stock at the average market price during the period. The incremental shares, representing the number of
shares assumed to be received upon the exercise of the Warrants less the number of shares repurchased, are included in diluted
shares. For periods where the Warrants' strike price of $259.84 per share is greater than the average share price of the
Company's common stock for the period, the Warrants would be antidilutive. For the year ended December 31, 2022, the
average share price was below the Warrant strike price, and therefore 2.8 million shares were considered antidilutive.
In connection with the issuance of the Convertible Notes, the Company entered into privately negotiated call option
contracts on the Company's common stock (the "Convertible Note Hedge Transactions") with the Counterparties. The Company
paid an aggregate amount of $100.1 million to the Counterparties pursuant to the Convertible Note Hedge Transactions. The
Convertible Note Hedge Transactions cover, subject to anti-dilution adjustments substantially similar to those in the
Convertible Notes, approximately 2.8 million shares of the Company's common stock, the same number of shares initially
underlying the Convertible Notes, at a strike price of approximately $165.65, subject to customary anti-dilution adjustments.
The Convertible Note Hedge Transactions will expire upon the maturity of the Convertible Notes, subject to earlier exercise or
termination. Exercise of the Convertible Note Hedge Transactions would reduce the number of shares of the Company's
common stock outstanding, and therefore would be antidilutive.
50
4.
ACQUISITIONS, GOODWILL AND OTHER INTANGIBLE ASSETS
Acquisitions in 2022
Way
In November 2022, the Company acquired substantially all of the business assets of Way Interglobal Network LLC
("Way"), a distributor of innovative appliances and electronics to OEMs in the RV industry. The purchase price was
$54.8 million, which includes a holdback payment of 2.0 million due on the first anniversary of the acquisition in November
2023. The holdback payment is recorded in the Consolidated Balance Sheet in accrued expenses and other current liabilities at
December 31, 2022. The results of the acquired business have been included in the Consolidated Statements of Income since
the acquisition date, primarily in the Company's OEM Segment. As the operations of this acquisition are not considered to have
a material impact on the Company's financial statements, pro forma results of operations and other disclosures are not
presented.
The Company is in the process of determining the fair value of the assets acquired and liabilities assumed for the
opening balance sheet, including net working capital, deferred taxes, and the fair value of intangible assets. The current
estimates for intangible assets are based on a preliminary valuation and these estimates are subject to change when the valuation
is finalized within the measurement period (not to exceed 12 months from the acquisition date). The acquisition of this business
was preliminarily recorded as of the acquisition date as follows (in thousands):
Cash consideration
Fixed deferred consideration
Total fair value of consideration given
Identifiable intangible assets
Other assets acquired and liabilities assumed, net
Total fair value of net assets acquired
Goodwill (tax deductible)
$
$
$
$
$
52,761
2,000
54,761
13,000
36,783
49,783
4,978
The consideration given was greater than the fair value of the net assets acquired, resulting in goodwill.
Girard
In March 2022, the Company acquired substantially all of the business assets of Girard Systems and Girard Products
LLC (collectively "Girard"), a manufacturer and distributor of proprietary awnings and tankless water heaters for OEMs and
aftermarket customers in the RV, specialty vehicle, and related industries. The total fair value of consideration was
approximately $70.7 million. The Company paid $50.0 million in cash consideration at closing, with fixed deferred
consideration of $20.0 million paid in July 2022 and $0.7 million paid to true up net working capital in September 2022. The
results of the acquired business have been included in the Consolidated Statements of Income since the acquisition date, in both
the Company's OEM and Aftermarket Segments. As the operations of this acquisition are not considered to have a material
51
impact on the Company's financial statements, pro forma results of operations and other disclosures are not presented. The
acquisition of this business was recorded as of the acquisition date as follows (in thousands):
Cash consideration
Fixed deferred consideration
Total fair value of consideration given
Customer relationships
Identifiable intangible assets
Other assets acquired and liabilities assumed, net
Total fair value of net assets acquired
Goodwill (tax deductible)
$
$
$
$
$
50,664
20,000
70,664
35,700
7,820
14,442
57,962
12,702
The customer relationships intangible asset is being amortized over its estimated useful life of 20 years. The
consideration given was greater than the fair value of the net assets acquired, resulting in goodwill.
Other Acquisitions in 2022
During the twelve months ended December 31, 2022, the Company completed two other acquisitions for $5.0 million
of cash purchase consideration. The preliminary purchase price allocations resulted in $0.8 million of goodwill (tax deductible).
As these acquisitions are not considered to have a material impact on the Company's financial statements, pro forma results of
operations and other disclosures are not presented.
Acquisitions in 2021
Exertis
In October 2021, the Company acquired certain business assets of Stampede Presentation Products, Inc. d/b/a Exertis
("Exertis"), a global distribution company, in exchange for $39.7 million. The acquisition qualifies as a business combination
for accounting purposes and supports the acquisition of Furrion Holdings Limited ("Furrion") by allowing the Company to
provide logistics and warehousing to serve Furrion's North American customer base. The results of the acquired business have
been included in the Consolidated Statements of Income since the acquisition date, primarily in the Company's OEM Segment.
As the operations of this acquisition are not considered to have a material impact on the Company's financial statements, pro
forma results of operations and other disclosures are not presented.
The Company had a pre-existing relationship with Exertis where Exertis had a prepaid asset and the Company had an
equal and offsetting deferred revenue liability of $24.8 million, which was effectively settled immediately prior to the business
combination. No gain or loss was recognized in the effective settlement of the deferred revenue liability.
During the year ended December 31, 2022, the Company adjusted the preliminary purchase price allocation reported at
December 31, 2021 to account for updates to 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.
Furrion
In September 2021, the Company acquired 100 percent of the share capital of Furrion, a leading distributor of a large
range of appliances and other products to OEMs and aftermarket customers in the RV, specialty vehicle, utility trailer, horse
trailer, marine, transit bus, and school bus industries. The total fair value of consideration, net of cash acquired, was
approximately $146.7 million. The Company paid $50.5 million in cash consideration at closing, net of cash acquired, with
fixed payments of $31.3 million due on each of the first and second anniversaries of the acquisition in September 2022 and
September 2023. The Company paid the first anniversary payment in September 2022, and the remaining deferred acquisition
52
fixed payment is recorded at its discounted present value in the Consolidated Balance Sheet in accrued expenses and other
current liabilities at December 31, 2022.
In 2019, the Company and Furrion agreed to terminate an exclusive distribution and supply agreement 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 the date of
the Furrion acquisition in September 2021, the Company had a receivable balance of $35.0 million (the "Receivable from
Furrion") and Furrion had a corresponding payable balance. In direct connection with the acquisition negotiations, the
receivable and payable balances were effectively settled in the acquisition and the receivable balance is included within the
approximate $146.7 million of consideration transferred. No gain or loss was recognized in the effective settlement of the
Receivable from Furrion.
The results of the acquired business have been included in the Consolidated Statements of Income since the acquisition
date, in both the Company's OEM and Aftermarket Segments. As this acquisition 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 year ended December 31, 2022, the Company adjusted and finalized the preliminary purchase price
allocation reported at December 31, 2021 to account for updates to net working capital, intangible assets, fixed asset balances,
and deferred tax 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 acquisition of this business was
preliminarily recorded as of the acquisition date, and subsequently adjusted and finalized, as follows (in thousands):
Cash consideration, net of cash acquired
Effective settlement of Receivable from Furrion
Discounted value of fixed deferred consideration
Total fair value of consideration given
Customer relationships
Other identifiable intangible assets
Other assets acquired and liabilities assumed, net
Total fair value of net assets acquired
Goodwill (tax deductible)
Preliminary at
December 31,
2021
Measurement
Period
Adjustments
As Adjusted at
December 31,
2022
$
$
$
$
$
50,534
34,956
61,191
146,681
66,300
43,900
(9,518)
100,682
45,999
$
$
$
$
$
—
—
—
—
$
50,534
34,956
61,191
$
146,681
(10,600)
$
(1,200)
(1,483)
55,700
42,700
(11,001)
(13,283)
$
87,399
13,283
$
59,282
The Company incurred costs during the year ended December 31, 2021 related specifically to this acquisition of
$2.3 million, which are included in selling, general and administrative expenses in the Consolidated Statements of Income.
Schaudt
In April 2021, the Company acquired 100 percent of the equity interests of Schaudt GmbH Elektrotechnik &
Apparatebau ("Schaudt"), a leading supplier of electronic controls and energy management systems for the European caravan
industry located in Markdorf, Germany. The purchase price was approximately $29.4 million. The results of the acquired
business have been included in the Consolidated Statements of Income since the acquisition date, primarily in the Company's
OEM Segment. As the operations of this acquisition are 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 year ended December 31, 2022, the Company adjusted and finalized the preliminary purchase price
allocation reported at December 31, 2021 to account for updates to net working capital and fixed asset balances. These
53
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.
Ranch Hand
In April 2021, the Company acquired 100 percent of the equity interests of Kaspar Ranch Hand Equipment, LLC
("Ranch Hand"), a manufacturer of custom bumpers, grill guards, and steps for the automotive aftermarket headquartered in
Shiner, Texas. The purchase price was approximately $56.9 million, plus contingent consideration up to $3.0 million. The
results of the acquired business have been included in the Consolidated Statements of Income since the acquisition date,
primarily in the Company's Aftermarket Segment.
Other Acquisitions in 2021
During the year ended December 31, 2021, the Company completed two other acquisitions totaling $17.8 million of
cash purchase consideration, plus holdback payments of $2.1 million to be paid over the two years following the closings of the
respective acquisitions and contingent consideration of up to $2.0 million. Holdback payments of $1.0 million and $0.6 million
were paid during the years ended December 31, 2022 and 2021, respectively, related to these acquisitions. The purchase price
allocations resulted in $8.6 million of goodwill (tax deductible) and $7.8 million of acquired identifiable intangible assets.
Acquisitions in 2020
Veada
In December 2020, the Company acquired 100 percent of the outstanding capital stock of Veada Industries, Inc.
("Veada"), a manufacturer and distributor of boat seating and marine accessories based in New Paris, Indiana. The purchase
price was $69.0 million, net of cash acquired, which included initial holdback payments of $12.2 million to be paid over the
two years following the closing of the acquisition. During the years ended December 31, 2022 and 2021, holdback payments of
$1.8 million and $9.9 million, respectively, were paid and during the year ended December 31, 2021, holdback payment
requirements were reduced by $0.5 million related to net working capital true-ups. The results of the acquired business have
been included in the Consolidated Statements of Income since the acquisition date, primarily in the Company's OEM Segment.
Challenger
In November 2020, the Company acquired substantially all of the business assets of Challenger Door, LLC
("Challenger"), a leading manufacturer and distributor of branded doors for the RV industry and products for specialty and
cargo trailers, based in Nappanee, Indiana. The purchase price was $35.0 million, which included holdback payments of up to
$4.5 million to be paid over the two years following the closing of the acquisition. These holdback payment requirements were
reduced by $4.3 million during the year ended December 31, 2021, due to net working capital true-ups and other
indemnification claims. During the year ended December 31, 2022, the holdback payment requirement was increased by
$0.9 million due to negotiations related to indemnification claims, and the final holdback payment of $1.1 million was paid.
The results of the acquired business have been included in the Consolidated Statements of Income since the acquisition date,
primarily in the Company's OEM Segment.
Polyplastic
In January 2020, the Company acquired 100 percent of the equity interests of Polyplastic Group B.V. (with its
subsidiaries "Polyplastic"), a premier window supplier to the caravanning industry, headquartered in Rotterdam, Netherlands.
The purchase price was $95.8 million, 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 in the Consolidated Statements of Income since
the acquisition date, primarily in the Company's OEM Segment.
54
Goodwill
Changes in the carrying amount of goodwill by reportable segment were as follows:
(In thousands)
Net balance – December 31, 2020
Acquisitions – 2021
Measurement period adjustments
Foreign currency translation
Net balance – December 31, 2021
Acquisitions – 2022
Measurement period adjustments
Foreign currency translation
Net balance – December 31, 2022
OEM
Segment
Aftermarket
Segment
Total
$
$
305,953
70,836
9,519
(6,845)
379,463
16,302
10,917
(6,946)
399,736
$
$
148,775
14,938
(23)
27
163,717
2,202
2,370
(962)
167,327
$
$
454,728
85,774
9,496
(6,818)
543,180
18,504
13,287
(7,908)
567,063
The Company performed its annual goodwill impairment procedures for all of its reporting units as of November 30,
2022, 2021, and 2020, and concluded no goodwill impairment existed at any of those times. The Company plans to update its
assessment as of November 30, 2023, or sooner if events occur or circumstances change that could more likely than not reduce
the fair value of a reporting unit below its carrying value. The goodwill balance as of each of December 31, 2022, 2021, and
2020 included $50.5 million of accumulated impairment, which occurred prior to December 31, 2020.
Other Intangible Assets
Other intangible assets, by segment, at December 31 were as follows:
(In thousands)
OEM Segment
Aftermarket Segment
Other intangible assets
2022
2021
$
$
314,828
188,492
503,320
Other intangible assets consisted of the following at December 31, 2022:
(In thousands)
Customer relationships
Patents
Trade names (finite life)
Trade names (indefinite life)
Non-compete agreements
Other
Gross
Cost
520,273
121,167
$
Accumulated
Amortization
163,562
$
62,841
97,810
7,600
11,584
609
21,380
—
7,698
242
$
$
$
330,930
189,027
519,957
Net
Balance
356,711
58,326
76,430
7,600
3,886
367
Estimated
Useful
Life in Years
20
20
6 to
3 to
3 to
20
Indefinite
3 to
2 to
6
12
Other intangible assets
$
759,043
$
255,723
$
503,320
The Company performed its annual impairment test for indefinite lived intangible assets as of November 30, 2022,
2021, and 2020, and concluded no impairment existed at any of those times.
55
Other intangible assets consisted of the following at December 31, 2021:
(In thousands)
Customer relationships
Patents
Trade names (finite life)
Trade names (indefinite life)
Non-compete agreements
Other
Purchased research and development
Other intangible assets
Gross
Cost
487,853
116,725
93,994
7,600
11,464
309
4,687
722,632
$
$
Accumulated
Amortization
127,048
$
53,479
16,497
—
5,439
212
—
202,675
$
Net
Balance
360,805
63,246
77,497
7,600
6,025
97
4,687
519,957
$
$
Estimated
Useful
Life in Years
17
6 to
20
3 to
3 to
20
Indefinite
6
3 to
2 to
12
Indefinite
Amortization expense related to other intangible assets was as follows for the years ended December 31:
(In thousands)
Cost of sales
Selling, general and administrative expense
Amortization expense
2022
2021
2020
$
$
10,155
46,218
56,373
$
$
5,783
41,782
47,565
$
$
5,101
32,772
37,873
Estimated amortization expense for other intangible assets for the next five years is as follows:
(In thousands)
Cost of sales
Selling, general and administrative
expense
Amortization expense
$
$
5.
INVENTORIES
2023
2024
2025
2026
2027
9,834 $
9,486 $
8,507 $
7,280
$
6,137
46,383
56,217 $
44,867
54,353 $
41,536
50,043 $
39,682
46,962
$
38,726
44,863
Inventories consisted of the following at December 31:
(In thousands)
Raw materials
Work in process
Finished goods
Inventories, net
2022
2021
$
$
600,601
44,850
384,254
833,992
48,250
213,665
$
1,029,705
$
1,095,907
At December 31, 2022 and 2021, the Company has recorded inventory obsolescence reserves of $55.9 million and
$35.7 million, respectively.
56
6.
FIXED ASSETS
Fixed assets consisted of the following at December 31:
(In thousands)
Land
Buildings and improvements
Leasehold improvements
Machinery and equipment
Furniture and fixtures
Construction in progress
Fixed assets, at cost
Less accumulated depreciation and amortization
Fixed assets, net
Estimated
Useful Life
in Years
10 to 40
3 to 20
3 to 15
3 to 15
2022
2021
20,627
222,598
32,573
481,817
103,430
84,210
945,255
(463,070)
482,185
$
$
20,494
212,882
29,976
435,135
108,940
35,035
842,462
(416,007)
426,455
$
$
Depreciation and amortization of fixed assets was as follows for the years ended December 31:
(In thousands)
Cost of sales
Selling, general and administrative expenses
Total
2022
2021
2020
$
$
56,039
16,800
72,839
$
$
48,962
15,793
64,755
$
$
45,388
14,719
60,107
7.
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consisted of the following at December 31:
(In thousands)
Employee compensation and benefits
Deferred acquisition payments and contingent consideration*
Current portion of accrued warranty
Other
Accrued expenses and other current liabilities
2022
2021
77,804
34,013
35,148
72,273
219,238
$
$
85,760
39,307
33,874
84,497
243,438
$
$
*
Includes current portion of contingent consideration (Note 12) and deferred consideration and holdback payments
related to acquisitions (Note 4).
Estimated costs related to product warranties are accrued at the time products are sold. In estimating its future warranty
obligations, the Company considers various factors, including the Company's historical warranty costs, warranty claim lag, and
sales. The following table provides a reconciliation of the activity related to the Company's accrued warranty, including both
the current and long-term portions, for the years ended December 31:
(In thousands)
Balance at beginning of period
Provision for warranty expense
Warranty liability from acquired businesses
Warranty costs paid
Balance at end of period
Less long-term portion
Current portion of accrued warranty at end of period
2022
2021
2020
$
$
52,114
46,363
—
(43,949)
54,528
(19,380)
35,148
$
$
47,091
28,223
7,890
(31,090)
52,114
(18,240)
33,874
$
$
47,167
19,037
2,915
(22,028)
47,091
(14,640)
32,451
57
Warranty costs paid for the years ended December 31, 2022 and 2021 included $0.3 million and $3.5 million,
respectively, of payments related to a specific warranty issue known at the time of acquisition of CURT in December 2019.
These payments will be reimbursed to the Company by the sellers of CURT under the terms of the stock purchase agreement.
8.
RETIREMENT AND OTHER BENEFIT PLANS
Defined Contribution Plan
The Company maintains a discretionary defined contribution 401(k) profit sharing plan covering all eligible
employees. The Company contributed $12.9 million, $11.6 million, and $9.0 million to this plan during the years ended
December 31, 2022, 2021, and 2020, respectively.
Deferred Compensation Plan
The Company has an Executive Non-Qualified Deferred Compensation Plan (the "Plan"). Pursuant to the Plan, certain
management employees are eligible to defer all or a portion of their regular salary and incentive compensation. Participants
deferred $5.4 million, $3.1 million, and $2.9 million during the years ended December 31, 2022, 2021, and 2020, respectively.
The amounts deferred under this Plan are credited with earnings or losses based upon changes in values of the notional
investments elected by the Plan participants. Each Plan participant is fully vested in their deferred compensation and earnings
credited to his or her account as all contributions to the Plan are made by the participant. The Company is responsible for
certain costs of Plan administration, which are not significant, and will not make any contributions to the Plan. Pursuant to the
Plan, payments to the Plan participants are made from the general unrestricted assets of the Company, and the Company's
obligations pursuant to the Plan are unfunded and unsecured. Participants withdrew $2.4 million, $2.0 million, and $0.2 million
from the Plan during the years ended December 31, 2022, 2021, and 2020, respectively. At December 31, 2022 and 2021,
deferred compensation of $34.0 million and $42.6 million, respectively, was recorded in other long-term liabilities, and
deferred compensation of $4.6 million and $1.1 million, respectively, was recorded in accrued expenses and other current
liabilities. The Company invests approximately 100 percent of the amounts deferred by the Plan participants in life insurance
contracts, matching the investments elected by the Plan participants. Deferred compensation assets and liabilities are recorded
at contract value. At December 31, 2022 and 2021, life insurance contract assets of $37.6 million and $47.8 million,
respectively, were recorded in other assets.
Dutch Pension Plans
The acquisition of Polyplastic in January 2020 included the assumption of two partially-funded defined benefit
pension plans (the "Dutch pension plans") based in the Netherlands. The Dutch pension plans, which are qualified defined
benefit pension plans, provided benefits based on years of service and average pay. The benefits earned by the employees were
immediately vested. The Company funded the future obligations of the Dutch pension plans by purchasing non-participating
annuities from a large multi-national insurance company that cover the vested pension benefit obligation of the participant, but
do not cover future indexations or cost of living adjustments that were provided in plan benefits. Each year the Company made
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 assets with the assistance of an actuary using unobservable inputs (Level 3),
which is determined as the present value of the accrued benefits guaranteed by the insurer.
During 2022, there was a curtailment of the Dutch pension plans for the Company's Dutch employees whose pension
benefit was based on years of service and average pay. These employees have been moved into defined contribution plans. This
event resulted in curtailment gain amortization of 2.0 million for the year ended December 31, 2022. However, the
unconditional indexation for all participants remains applicable and the Company remains liable for funding. No further
contribution is required to fund the future accrual in the Dutch pension plans after December 31, 2022.
58
The following table summarizes the change in the projected benefit obligation and the fair value of plan assets for the
Dutch pension plans for the years ended December 31:
(In thousands)
Projected Benefit Obligation
2022
2021
Projected benefit obligation at beginning of period
$
85,593
$
96,712
Interest cost
Net service cost
Curtailment
Employee contributions
Benefits paid
Actuarial gain, net
Unrealized gain on foreign exchange
Projected benefit obligation at end of period
Fair Value of Plan Assets
1,403
2,836
(2,030)
666
(975)
(69,445)
(5,862)
12,186
652
4,352
—
626
(1,097)
(8,390)
(7,262)
85,593
Fair value of plan assets at beginning of period
$
52,296
$
61,936
Increase (decrease) in plan asset value
Employer contributions
Employee contributions
Benefits and administrative expenses paid
Actuarial loss, net
Unrealized loss on foreign exchange
Fair value of plan assets at end of period
910
1,626
666
(1,349)
(43,180)
(3,583)
7,386
Underfunded status of the plans at end of the period
Accumulated benefit obligation
$
$
4,800
12,186
$
$
(5,768)
1,419
626
(1,377)
—
(4,540)
52,296
33,297
85,593
The following actuarial assumptions were used to determine the actuarial present value of the projected benefit
obligation and the net periodic pension costs for the Dutch pension plans at December 31:
Discount rate
Expected return on plan assets
Wage inflation
2022
2021
3.75 %
3.75 %
2.00 %
1.30 %
1.30 %
2.00 %
The discount rate used to determine the projected benefit obligation at December 31, 2022 was increased from 1.30
percent to 3.75 percent, consistent with a general increase in interest rates in Europe for AA-rated long-term Euro company
bonds.
Additionally, the Company assumed expected indexation that conforms to the industry-wide pension fund PG, as
agreed upon in the Dutch pension plans, which ranged from 0.5 percent in 2022 to 2.0 percent in 2034 and thereafter for the
year ended December 31, 2021, and 7.0 percent in 2023 and from 0.45 percent in 2024 to 2.0 percent in 2035 and thereafter for
the year ended December 31, 2022.
59
Amounts recognized for the Dutch pension plans in the Consolidated Balance Sheets consisted of the following at
December 31:
(In thousands)
Deferred taxes
Other long-term liabilities
Accumulated other comprehensive income
2022
2021
$
$
1,200
4,800
28,125
8,594
33,297
2,107
The components of net periodic pension cost for the Dutch pension plans included the following for the years ended
December 31:
(In thousands)
Net service cost
Interest cost
Expected return on plan assets
Amortization of actuarial gain
Amortization of curtailment
Administrative charges
Net periodic pension cost
2022
2021
2020
$
2,836
1,403
(910)
(262)
(2,030)
374
$
4,352
$
652
(424)
—
—
280
$
1,411
$
4,860
$
3,357
1,007
(626)
—
—
276
4,014
Plan assets at December 31, 2022 consisted of insurance contracts. Under Dutch pension law, the pension insurer is
legally required to pay the funded benefits to the participants. The insurer cannot unilaterally return the obligation to the
employer and the employer has no risks related to the assets. As the surrender value of the contract is less than the guarantee
value provided by the insurer, the guarantee value is used as the fair value of the plan assets. This value is the net present value
of the accrued benefits against the same assumptions as applied in the valuation of the liability. As such, the expected return is
equal to the discount rate.
The Company's 2023 remaining balance sheet liability for future indexations is expected to be $0.7 million. The
estimate of future annual contributions is based on current funding and the unconditional indexation requirements, and the
Company believes these contributions will be sufficient to fund the Dutch pension plans.
Expected benefit payments to eligible participants under the Dutch pension plans for the next ten years are as follows
(in thousands):
2023
2024
2025
2026
2027
2028 - 2032
$
63
76
93
116
153
1,148
60
9.
LONG-TERM INDEBTEDNESS
Long-term debt consisted of the following at December 31:
(In thousands)
Convertible Notes
Term Loan
Revolving Credit Loan
Shelf-Loan Facility
Other
Unamortized deferred financing fees
Less current portion
Long-term indebtedness
Credit Agreement
2022
460,000
375,000
289,067
—
3,959
(9,052)
1,118,974
(23,086)
1,095,888
$
$
2021
460,000
395,000
403,953
50,000
5,997
(11,988)
1,302,962
(71,003)
1,231,959
$
$
The Company and certain of its subsidiaries are party to a credit agreement dated December 14, 2018 with JPMorgan
Chase, N.A., as a lender and administrative agent, and other bank lenders (as amended, the "Credit Agreement"). The Credit
Agreement provides for a $600.0 million revolving credit facility (of which $50.0 million is available for the issuance of letters
of credit (the "LC Facility") and up to $250.0 million is available in approved foreign currencies). The Credit Agreement also
provided for term loans (the "Term Loan") to the Company in an aggregate original principal amount of $400.0 million. The
maturity date of the Credit Agreement is December 7, 2026. The Term Loan is required to be repaid in an amount equal to 1.25
percent of the original principal amount of the Term Loan for the first eight quarterly periods commencing with the quarter
ended December 31, 2021, 1.875 percent of the original principal amount of the Term Loan for the next eight quarterly periods,
and then 2.50 percent of the original principal amount of the Term Loan of each additional payment until the maturity date. The
Credit Agreement also permits the Company to request an increase to the revolving and/or term loan facilities by up to an
additional $400.0 million in the aggregate upon the approval of the lenders providing any such increase and the satisfaction of
certain other conditions.
Borrowings under the Credit Agreement in U.S. dollars are designated from time to time by the Company as (i) base
rate loans which bear interest at a base rate plus additional interest ranging from 0.0 percent to 0.625 percent (0.0 percent was
applicable at December 31, 2022) depending on the Company’s total net leverage ratio or (ii) term benchmark loans which bear
interest at LIBOR (or a relevant benchmark replacement rate) for an interest period selected by the Company plus additional
interest ranging from 0.875 percent to 1.625 percent (0.875 percent was applicable at December 31, 2022) depending on the
Company’s total net leverage ratio. Foreign currency borrowings other than Pounds Sterling have the same additional interest
margins applicable to term benchmark loans based on the Company's total net leverage ratio. At December 31, 2022 and 2021,
the Company had $4.4 million and $27.8 million, respectively, in issued, but undrawn, standby letters of credit under the LC
Facility. Availability under the Company’s revolving credit facility was $306.5 million at December 31, 2022. A commitment
fee ranging from 0.150 percent to 0.225 percent (0.150 percent was applicable at December 31, 2022) depending on the
Company's total net leverage ratio accrues on the actual daily amount that the revolving commitment exceeds the revolving
credit exposure.
Shelf-Loan Facility
The Company and certain of its subsidiaries had a $150.0 million shelf-loan facility (the "Shelf-Loan Facility") with
PGIM, Inc. (formerly Prudential Investment Management, Inc.) and its affiliates ("Prudential"). On March 29, 2019, the
Company issued $50.0 million of Series B Senior Notes (the "Series B Notes") to certain affiliates of Prudential for a term of
three years, at a fixed interest rate of 3.80 percent per annum, payable quarterly in arrears. The Series B Notes were paid in full
in March 2022, and the Shelf-Loan Facility expired on November 11, 2022.
Convertible Notes
On May 13, 2021, the Company issued $460.0 million in aggregate principal amount of 1.125 percent Convertible
Notes due 2026 in a private placement to certain qualified institutional buyers, resulting in net proceeds to the Company of
61
approximately $447.8 million after deducting the initial purchasers' discounts and offering expenses payable by the Company.
The Convertible Notes bear interest at a coupon rate of 1.125 percent per annum, payable semiannually in arrears on May 15
and November 15 of each year, beginning on November 15, 2021. The Convertible Notes will mature on May 15, 2026, unless
earlier converted, redeemed, or repurchased, in accordance with their terms.
As of December 31, 2022, the conversion rate of the Convertible Notes was 6.1133 shares of the Company's common
stock per $1,000 principal amount of the Convertible Notes. The conversion rate of the Convertible Notes is subject to further
adjustment upon the occurrence of certain specified events. In addition, upon the occurrence of a make-whole fundamental
change (as defined in the Indenture) or upon a notice of redemption, the Company will, in certain circumstances, increase the
conversion rate for a holder that elects to convert its Convertible Notes in connection with such make-whole fundamental
change or notice of redemption, as the case may be.
Prior to the close of business on the business day immediately preceding January 15, 2026, the Convertible Notes are
convertible at the option of the holders only under the following circumstances: (1) during any calendar quarter commencing
after the calendar quarter ending on June 30, 2021 (and only during such calendar quarter), if the last reported sale price (as
defined in the Indenture) per share of the Company's common stock for at least 20 trading days (whether or not consecutive)
during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding
calendar quarter is greater than or equal to 130 percent of the conversion price for the Convertible Notes on each applicable
trading day; (2) during the five business day period after any ten consecutive trading day period (the "measurement period") in
which the trading price (as defined in the Indenture) per $1,000 principal amount of the Convertible Notes for each trading day
of the measurement period was less than 98 percent of the product of the last reported sale price of the Company's common
stock and the conversion rate on each such trading day; (3) if the Company calls such Convertible Notes for redemption, at any
time prior to the close of business on the scheduled trading day immediately preceding the redemption date, but only with
respect to the Convertible Notes called (or deemed called) for redemption; or (4) upon the occurrence of certain specified
corporate events described in the Indenture. On or after January 15, 2026, until the close of business on the second scheduled
trading day immediately preceding the maturity date, holders may convert all or any portion of their Convertible Notes at any
time, regardless of the foregoing circumstances. Upon conversion the Company will pay cash up to the aggregate principal
amount of the Convertible Notes to be converted and pay or deliver, as the case may be, cash, shares of the Company's common
stock, or a combination of cash and shares of the Company's common stock, at the Company's election, in respect of the
remainder, if any, of the Company's conversion obligation in excess of the aggregate principal amount of the Convertible Notes
being converted.
The Company may not redeem the Convertible Notes prior to May 20, 2024. On or after May 20, 2024, the Company
may redeem for cash all or any portion of the Convertible Notes, at the Company's option, if the last reported sale price of the
Company's common stock has been at least 130 percent of the conversion price then in effect for at least 20 trading days
(whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period)
ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption
at a redemption price equal to 100 percent of the principal amount of the Convertible Notes to be redeemed, plus accrued and
unpaid interest to, but excluding, the redemption date. Upon the occurrence of a fundamental change (as defined in the
Indenture), subject to certain conditions, holders of the Convertible Notes may require the Company to repurchase for cash all
or any portion of their Convertible Notes in principal amounts of $1,000 or an integral multiple thereof at a repurchase price
equal to 100 percent of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest on
such Convertible Notes to, but not including, the fundamental change repurchase date (as defined in the Indenture).
The Convertible Notes are senior unsecured obligations and rank senior in right of payment to all of the Company's
indebtedness that is expressly subordinated in right of payment to the Convertible Notes, equal in right of payment with all the
Company's liabilities that are not so subordinated, effectively junior to any of the Company's secured indebtedness to the extent
of the value of the assets securing such indebtedness, and structurally junior to all indebtedness and other liabilities (including
trade payables) of our subsidiaries. The Indenture contains customary terms and covenants, including that upon certain events
of default occurring and continuing, either the named trustee or the holders of at least 25 percent of the aggregate principal
amount of the outstanding Convertible Notes may declare 100 percent of the principal of, and accrued and unpaid interest, if
any, on all the outstanding Convertible Notes to be due and payable.
The Convertible Notes are not registered securities nor listed on any securities exchange but may be actively traded by
qualified institutional buyers. The fair value of the Convertible Notes of $388.7 million at December 31, 2022 was estimated
using Level 1 inputs, as it is based on quoted prices for these instruments in active markets.
62
General
At December 31, 2022, the fair value of the Company's long-term debt under the Credit Agreement approximates the
carrying value, as estimated using quoted market prices and discounted future cash flows based on similar borrowing
arrangements.
Pursuant to the Credit Agreement, the Company shall not permit its net leverage ratio to exceed certain limits, shall
maintain a minimum debt service coverage ratio, and must meet certain other financial requirements. At each of
December 31, 2022 and 2021, the Company was in compliance with all such requirements and expects to remain in such
compliance for the next twelve months.
The Credit Agreement includes a maximum net leverage ratio covenant which limits the amount of consolidated
outstanding indebtedness that the Company may incur on a trailing twelve-month EBITDA. This limitation did not impact the
Company's ability to incur additional indebtedness under its revolving credit facility at December 31, 2022. The Company
believes the availability of $306.5 million under the revolving credit facility under the Credit Agreement, along with its cash
flows from operations, are adequate to finance the Company's anticipated cash requirements for the next twelve months.
10.
INCOME TAXES
The components of earnings before income taxes consisted of the following for the years ended December 31:
(In thousands)
United States
Foreign
Total earnings before income taxes
2022
2021
2020
$
$
550,030
(24,575)
525,455
$
$
378,460
3,584
382,044
$
$
216,234
(6,753)
209,481
The provision for income taxes in the Consolidated Statements of Income was as follows for the years ended
December 31:
(In thousands)
Current:
Federal
State and local
Foreign
Total current provision
Deferred:
Federal
State and local
Foreign
Total deferred provision
Provision for income taxes
2022
2021
2020
$
$
114,744
22,998
2,016
139,758
(3,786)
(285)
(5,206)
(9,277)
130,481
$
$
78,604
17,044
1,936
97,584
2,192
(517)
(4,954)
(3,279)
94,305
$
$
42,541
9,165
839
52,545
2,342
(671)
(3,175)
(1,504)
51,041
The Company had cash and cash equivalents of approximately $47.5 million and $62.9 million at December 31, 2022
and 2021, respectively, of which approximately 49 percent and 71 percent was held by subsidiaries in foreign countries. The
Company historically reinvested all unremitted earnings of its foreign subsidiaries and affiliates, and therefore had not
recognized any U.S. deferred tax liability on those earnings. However, the Tax Cuts and Jobs Act change in the U.S. taxation of
foreign income led the Company to reassess its position as it relates to permanent reinvestment, and it has now determined that
it will only assert permanent reinvestment in its Canadian subsidiaries. The Company examined the potential liabilities related
to investments in foreign subsidiaries and concluded that there is no material deferred tax liabilities that should be recorded.
63
The provision for income taxes differs from the amount computed by applying the federal statutory rate of 21 percent
for 2022, 2021, and 2020 to income before income taxes for the following reasons for the years ended December 31:
(In thousands)
Income tax at federal statutory rate
State income tax, net of federal income tax impact
Section 162(m) permanent addback
Federal tax credits
Share-based payment compensation excess tax benefit
Other
Provision for income taxes
2022
2021
2020
$
$
110,345
17,944
3,784
(1,638)
(509)
555
130,481
$
$
80,229
13,056
6,153
(1,230)
(1,191)
(2,712)
94,305
$
$
43,991
6,710
3,015
(1,307)
(190)
(1,178)
51,041
At December 31, 2022, the Company had domestic federal income taxes receivable of $16.6 million, domestic state
income taxes receivable of $5.4 million, and foreign taxes receivable of $1.2 million recorded. At December 31, 2021, the
Company had domestic federal income taxes payable of $8.5 million, domestic state income taxes payable of $1.6 million, and
foreign taxes receivable of $1.6 million recorded.
Deferred Income Tax Assets and Liabilities and Valuation Allowances
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax
liabilities were as follows at December 31:
(In thousands)
Deferred tax assets:
Stock-based compensation
Pension
Deferred compensation
Warranty
Convertible debt bond hedge
Inventory
Research and experimental costs
Other
Lease obligation asset
Net operating loss, interest, and tax credit carryforwards
Total deferred tax assets before valuation allowance
Less valuation allowance
Total deferred tax assets net of valuation allowance
Deferred tax liabilities:
Lease obligation liability
Fixed assets
Intangible assets
Total deferred tax liabilities
$
2022
2021
$
2,268
1,271
15,091
11,517
17,237
20,758
4,986
6,630
63,146
12,924
155,828
(8,750)
147,078
(60,487)
(45,634)
(67,640)
(173,761)
2,632
8,594
15,923
10,790
21,699
16,502
—
5,792
41,066
10,132
133,130
(1,054)
132,076
(38,770)
(45,562)
(87,035)
(171,367)
Net deferred tax liabilities
$
(26,683)
$
(39,291)
At December 31, 2022 and 2021, the Company had net foreign deferred tax liabilities of $19.2 million and
$26.2 million, respectively, primarily related to intangible assets, foreign pension obligations, and net operating loss
carryforwards net of any related valuation allowances included in other long-term liabilities on the Consolidated Balance
Sheets.
As of December 31, 2022, the Company had deferred tax assets recorded related to foreign net operating losses and tax
credit carryforwards of $12.7 million, net. This includes $1.9 million related to U.K. entities, $3.1 million related to Italian
entities, and $7.7 million related to Furrion Ltd. The net operating losses and tax credit carryforwards have indefinite lives.
64
The foreign valuation allowance for U.K. deferred tax assets as of each of December 31, 2022 and 2021 was $0.9
million. These valuation allowances were related to net operating losses and tax credit carryforwards related to the U.K.
entities. During 2022, the Company finalized purchase accounting for its Hong Kong-based entity that it acquired in the Furrion
acquisition in 2021. As a result of this purchase accounting, the Company placed a full valuation allowance on the $7.7 million
of deferred tax assets in Hong Kong. Based upon historical results and estimated future results, it is the judgment of
management that these tax carryforward attributes related to the U.K. and Hong Kong entities are not likely to be realized. The
Company has concluded it is more likely than not that it will realize the benefit of all other existing deferred tax assets, net of
the valuation allowances mentioned above.
Unrecognized Tax Benefits
The following table reconciles the total amounts of unrecognized tax benefits, at December 31:
2021
2022
(In thousands)
Balance at beginning of period
Changes in tax positions of prior years
Additions based on tax positions related to the current year
Decreases due to settlements of liabilities
Closure of tax years
Balance at end of period
$
$
20,462
—
5,758
(904)
(1,940)
23,376
$
$
8,921
(69)
12,826
—
(1,216)
20,462
$
$
2020
8,214
—
1,720
—
(1,013)
8,921
In addition, the total amount of accrued interest and penalties related to taxes, recognized as a liability, was
$5.1 million, $0.8 million, and $0.7 million at December 31, 2022, 2021, and 2020, respectively. The increase in 2022
compared to the prior year is a result of additional interest and penalties that were recorded as part of purchase accounting.
The total amount of unrecognized tax benefits, net of federal income tax benefits, of $27.5 million, $20.5 million, and
$8.8 million at December 31, 2022, 2021, and 2020, respectively, would, if recognized, increase the Company’s earnings, and
lower the Company's annual effective tax rate in the year of recognition.
The year over year increase in 2022 in the total amount of unrecognized tax benefits was to reflect a reserve recorded
as part of a prior year acquisition which was still within the one-year purchase accounting window.
The Company is subject to taxation in the United States and various states and foreign jurisdictions. In the normal
course of business, the Company is subject to examinations by taxing authorities in these jurisdictions. For U.S. state income
tax purposes, tax years 2021, 2020, and 2019 remain subject to examination. During 2022, the Company settled an examination
with the U.S. Internal Revenue Service for the tax years 2020, 2019, and 2018.
The Company has assessed its risks associated with all tax return positions and believes its tax reserve estimates reflect
its best estimate of the deductions and positions it will be able to sustain, or it may be willing to concede as part of a settlement.
At this time, the Company does not anticipate any material change in its tax reserves in the next twelve months. The Company
will continue to monitor the progress and conclusion of all audits and will adjust its estimated liability as necessary.
11.
LEASES
The components of lease cost were as follows for the years ended December 31:
(In thousands)
Operating lease cost
Short-term lease cost
Variable lease cost
Total lease cost
2022
2021
2020
$
55,414
$
43,794
$
33,046
7,737
3,046
4,689
3,269
2,272
2,266
$
66,197
$
51,752
$
37,584
At December 31, 2022, the Company's operating leases had a weighted-average remaining lease term of 9.7 years and
a weighted-average discount rate of 5.6 percent.
65
Cash Flows
Right-of-use assets of $132.7 million and $96.7 million were recognized as non-cash asset additions that resulted from
new operating lease obligations during the years ended December 31, 2022, and 2021, respectively, which included $42.2
million and $12.5 million of right-of-use assets from acquisitions, respectively. Cash paid for amounts included in the present
value of operating lease obligations and included in cash flows from operations was $47.9 million and $35.7 million for the
years ended December 31, 2022 and 2021, respectively.
Future minimum lease payments under operating leases as of December 31, 2022 were as follows:
(In thousands)
Year Ending December 31,
2023
2024
2025
2026
2027
Thereafter
Total future minimum lease payments
Less interest
$
47,469
41,733
37,719
30,326
26,196
158,481
341,924
(83,999)
Present value of operating lease liabilities
$
257,925
12.
COMMITMENTS AND CONTINGENCIES
Holdback Payments and Contingent Consideration
From time to time, the Company finances a portion of its business combinations with deferred acquisition payments
("holdback payments") and/or contingent earnout provisions. Holdback payments are accrued at their discounted present value.
As required, the liability for contingent consideration is measured at fair value quarterly, considering actual sales of the
acquired products, updated sales projections, and the updated market participant weighted average cost of capital. Depending
upon the weighted average costs of capital and future sales of the products which are subject to contingent consideration, the
Company could record adjustments in future periods. See Note 4 - Acquisitions, Goodwill and Other Intangible Assets for
details of holdback payments. Contingent consideration balances were not material at December 31, 2022 and 2021.
Product Recalls
From time to time, the Company cooperates with and assists its customers on their product recalls and inquiries, and
occasionally receives inquiries directly from the National Highway Traffic Safety Administration regarding reported incidents
involving the Company's products. As a result, the Company has incurred expenses associated with product recalls from time to
time and may incur expenditures for future investigations or product recalls.
Environmental
The Company's operations are subject to certain Federal, state and local regulatory requirements relating to the use,
storage, discharge, and disposal of hazardous materials used during the manufacturing processes. Although the Company
believes its operations have been consistent with prevailing industry standards and are in substantial compliance with applicable
environmental laws and regulations, one or more of the Company's current or former operating sites, or adjacent sites owned by
third-parties, have been affected, and may in the future be affected, by releases of hazardous materials. As a result, the
Company may incur expenditures for future investigation and remediation of these sites, including in conjunction with
voluntary remediation programs or third-party claims.
66
Litigation
In the normal course of business, the Company is subject to proceedings, lawsuits, regulatory agency inquiries, and
other claims. All such matters are subject to uncertainties and outcomes that are not predictable with assurance. While these
matters could materially affect operating results when resolved in future periods, management believes that, after final
disposition, including anticipated insurance recoveries in certain cases, any monetary liability or financial impact to the
Company beyond that provided in the Consolidated Balance Sheet as of December 31, 2022, would not be material to the
Company's financial position or annual results of operations.
13.
STOCKHOLDERS' EQUITY
The following table summarizes information about shares of the Company's common stock at December 31:
(In thousands)
Common stock authorized
Common stock issued
Treasury stock
Common stock outstanding
Dividends
2022
2021
75,000
28,519
3,341
25,178
75,000
28,360
3,087
25,273
The table below summarizes the regular quarterly dividends declared and paid during the years ended December 31:
(In thousands, except per share data)
Per Share
Record Date
Payment Date
Total Paid
First Quarter 2020
Second Quarter 2020
Third Quarter 2020
Fourth Quarter 2020
Total 2020
First Quarter 2021
Second Quarter 2021
Third Quarter 2021
Fourth Quarter 2021
Total 2021
First Quarter 2022
Second Quarter 2022
Third Quarter 2022
Fourth Quarter 2022
Total 2022
Stock-Based Awards
$
$
$
$
$
$
0.65
0.65
0.75
0.75
2.80
0.75
0.90
0.90
0.90
3.45
0.90
1.05
1.05
1.05
4.05
03/06/20
06/05/20
09/04/20
12/04/20
03/12/21
06/04/21
09/03/21
12/03/21
03/11/22
06/03/22
09/02/22
12/02/22
03/20/20
06/19/20
09/18/20
12/18/20
03/26/21
06/18/21
09/17/21
12/17/21
03/25/22
06/17/22
09/16/22
12/16/22
$
$
$
$
$
16,321
16,349
18,865
18,866
70,401
18,939
22,739
22,747
22,746
87,171
22,870
26,702
26,701
26,453
$
102,726
On May 24, 2018, the Company's stockholders approved the LCI Industries 2018 Omnibus Incentive Plan (the "2018
Plan"), which provides that the number of shares of common stock that may be the subject of awards and issued under the 2018
Plan is 1,500,000, plus shares subject to any awards outstanding as of May 24, 2018 under the LCI Industries Equity Award and
Incentive Plan, as Amended and Restated, that subsequently expire, are forfeited or canceled, are settled for cash, are not issued
in shares, or are tendered or withheld to pay the exercise price or satisfy any tax withholding obligations related to the award.
Executive officers and other employees of the Company and its subsidiaries and affiliates, and independent directors,
consultants, and others who provide substantial services to the Company and its subsidiaries and affiliates, are eligible to be
granted awards under the 2018 Plan. Under the 2018 Plan, the Compensation Committee of LCII's Board of Directors is
authorized to grant stock options, stock appreciation rights, restricted stock awards, stock unit awards, other stock-based
awards, and cash incentive awards.
67
The number of shares available for future awards under the 2018 Plan was 1,032,403, 1,195,993, and 1,300,115 at
December 31, 2022, 2021, and 2020, respectively.
Stock-based compensation resulted in charges to operations as follows for the years ended December 31:
(In thousands)
Deferred and restricted stock units
Stock awards
Stock-based compensation expense
2022
2021
2020
$
$
15,594
8,101
23,695
$
$
16,487
10,674
27,161
$
$
14,329
4,173
18,502
Stock-based compensation expense is recorded in the Consolidated Statements of Income in the same line as cash
compensation to those employees is recorded, primarily in selling, general and administrative expenses.
Deferred and Restricted Stock Units
The 2018 Plan provides for the grant or issuance of stock units, including those that have deferral periods, such as
deferred stock units ("DSUs"), and those with time-based vesting provisions, such as restricted stock units ("RSUs"), to
directors, employees and other eligible persons. Recipients of DSUs and RSUs are entitled to receive shares at the end of a
specified vesting or deferral period. Holders of DSUs and RSUs receive dividend equivalents based on dividends granted to
holders of the common stock, which dividend equivalents are payable in additional DSUs and RSUs, and are subject to the
same vesting criteria as the original grant.
DSUs vest (i) ratably over the service period, (ii) at a specified future date, or (iii) for certain officers, based on
achievement of specified performance conditions. RSUs vest (i) ratably over the service period or (ii) at a specified future date.
As a result of the Company's executive succession, the vesting of certain RSUs was accelerated pursuant to contractual
obligations with certain employees whose employment terminated. In addition, DSUs are issued in lieu of certain cash
compensation. Transactions in DSUs and RSUs under the 2018 Plan are summarized as follows:
Outstanding at December 31, 2019
Issued
Granted
Dividend equivalents
Forfeited
Vested
Outstanding at December 31, 2020
Issued
Granted
Dividend equivalents
Forfeited
Vested
Outstanding at December 31, 2021
Issued
Granted
Dividend equivalents
Forfeited
Vested
Outstanding at December 31, 2022
Number of
Shares
346,148
5,703
150,319
10,042
(21,856)
(155,269)
335,087
4,653
109,767
7,233
(6,696)
(164,333)
285,711
5,427
162,719
10,871
(15,012)
(171,942)
277,774
$
Weighted
Average Price
87.54
$
97.42
97.70
95.08
91.79
87.69
90.04
137.62
142.37
134.78
114.66
87.64
110.41
101.87
119.84
103.27
121.99
96.21
120.92
$
$
As of December 31, 2022, there was $18.4 million of total unrecognized compensation cost related to DSUs and
RSUs, which is expected to be recognized over a weighted average remaining period of 1.3 years.
68
Performance Stock Units
The 2018 Plan provides for performance stock units ("PSUs") that vest at a specific future date based on achievement
of specified performance conditions. Transactions in PSUs under the 2018 Plan are summarized as follows:
Outstanding at December 31, 2019
Granted
Dividend equivalents
Forfeited
Vested
Outstanding at December 31, 2020
Granted
Dividend equivalents
Forfeited
Vested
Outstanding at December 31, 2021
Granted
Dividend equivalents
Forfeited
Vested
Outstanding at December 31, 2022
Number of
Shares
Stock Price
129,128
66,029
3,303
(73,581)
(5,152)
119,727
40,102
3,778
(1,053)
(12,593)
149,961
91,988
6,210
(4,840)
(80,938)
162,381
$
$
$
$
96.21
98.98
96.54
107.91
100.46
89.92
143.54
134.82
96.55
95.03
104.01
110.83
103.29
78.11
82.40
120.12
As of December 31, 2022, there was $7.7 million of total unrecognized compensation cost related to PSUs, which is
expected to be recognized over a weighted average remaining period of 0.9 years.
Accumulated Other Comprehensive Income (Loss)
The components of accumulated other comprehensive income (loss), net of income taxes, are as follows:
(In thousands)
Accumulated other comprehensive income (loss) at December 31,
2020
Net foreign currency translation adjustment
Actuarial gain on pension plans
Net current-period other comprehensive income (loss)
Accumulated other comprehensive income (loss) at December 31,
2021
Net foreign currency translation adjustment
Actuarial gain on pension plans
Net current-period other comprehensive income (loss)
Accumulated other comprehensive income (loss) at December 31,
2022
Foreign
currency items
Pension items
Total
$
$
7,296
(9,697)
—
(9,697)
(2,401)
(20,920)
—
(20,920)
$
(207)
—
2,107
2,107
1,900
—
28,125
28,125
7,089
(9,697)
2,107
(7,590)
(501)
(20,920)
28,125
7,205
$
(23,321)
$
30,025
$
6,704
In both years ended December 31, 2022 and 2021, the Company recorded an immaterial amount in taxes related to
other comprehensive income (loss).
69
Stock Repurchase Program
On May 19, 2022, the Company's Board of Directors authorized a stock repurchase program granting the Company
authority to repurchase up to $200.0 million of the Company's common stock over a three-year period, ending on May 19,
2025. The timing of stock repurchases and the number of shares will depend upon the market conditions and other factors.
Share repurchases, if any, will be made in the open market and in privately negotiated transactions in accordance with
applicable securities laws. The stock repurchase program may be modified, suspended, or terminated at any time by the Board
of Directors. In 2022, the Company purchased 253,490 shares at a weighted average price of $94.89 per share, totaling $24.1
million.
14.
FAIR VALUE MEASUREMENTS
Recurring
The following table presents the Company's assets measured at fair value on a recurring basis at December 31:
(In thousands)
Assets
2022
2021
Total
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Pension plan assets (Note 8)
$ 7,386 $
— $
— $ 7,386 $ 52,296 $
— $
— $ 52,296
Financial Instruments
The carrying values of cash and cash equivalents, accounts receivable, derivative instruments, and accounts payable
approximate their fair value due to the short-term nature of these instruments.
15.
SEGMENT REPORTING
The Company has two reportable segments, the OEM Segment and the Aftermarket Segment. Intersegment sales are
insignificant.
The OEM Segment, which accounted for 83 percent, 81 percent, and 78 percent of consolidated net sales for each of
the years ended December 31, 2022, 2021, and 2020, respectively, manufactures and distributes a broad array of engineered
components for the leading OEMs in the recreation and industrial product markets, consisting of RVs and adjacent industries,
including boats; buses; trailers used to haul boats, livestock, equipment, and other cargo; trucks; trains; manufactured homes;
and modular housing. Approximately 61 percent, 63 percent, and 61 percent of the Company's OEM Segment net sales in 2022,
2021, and 2020, respectively, were of components for travel trailer and fifth-wheel RVs.
The Aftermarket Segment, which accounted for 17 percent, 19 percent, and 22 percent of consolidated net sales for
each of the years ended December 31, 2022, 2021, and 2020, respectively, supplies engineered components to the related
aftermarket channels of the recreation and transportation product markets, primarily to retail dealers, wholesale distributors, and
service centers, as well as direct to retail customers via the Internet. The Aftermarket Segment also includes biminis, covers,
buoys, fenders to the marine industry, towing products, truck accessories, appliances, air conditioners, televisions, sound
systems, tankless water heaters, and the sale of replacement glass and awnings to fulfill insurance claims.
Decisions concerning the allocation of the Company's resources are made by the Company's Chief Operating Decision
Maker ("CODM"), with oversight by the Board of Directors. The CODM evaluates the performance of each segment based
upon segment operating profit or loss, generally defined as income or loss before interest and income taxes. Decisions
concerning the allocation of resources are also based on each segment's utilization of assets. Management of debt is a corporate
function. The accounting policies of the OEM and Aftermarket Segments are the same as those described in Note 2 of the Notes
to Consolidated Financial Statements.
70
The following tables present the Company's revenues disaggregated by segment and geography based on the billing
address of the Company's customers for the years ended December 31:
(In thousands)
OEM Segment:
RV OEMs:
U.S. (a)
2022
Int'l (b)
Total
Travel trailers and fifth-wheels
$
2,561,683
$
55,902
$
2,617,585
Motorhomes
Adjacent Industries OEMs
Total OEM Segment net sales
Aftermarket Segment:
238,613
1,184,459
3,984,755
100,484
174,729
331,115
339,097
1,359,188
4,315,870
Total Aftermarket Segment net sales
824,895
66,378
891,273
Total net sales
$
4,809,650
$
397,493
$
5,207,143
(In thousands)
OEM Segment:
RV OEMs:
Travel trailers and fifth-wheels
Motorhomes
Adjacent Industries OEMs
Total OEM Segment net sales
Aftermarket Segment:
Total Aftermarket Segment net sales
Total net sales
(In thousands)
OEM Segment:
RV OEMs:
U.S. (a)
2021
Int'l (b)
Total
$
$
2,229,839
160,615
939,067
3,329,521
65,773
98,380
149,938
314,091
$
2,295,612
258,995
1,089,005
3,643,612
768,793
4,098,314
$
$
60,292
374,383
829,085
4,472,697
$
U.S. (a)
2020
Int'l (b)
Total
Travel trailers and fifth-wheels
$
1,288,209
$
Motorhomes
Adjacent Industries OEMs
Total OEM Segment net sales
Aftermarket Segment:
100,950
563,082
1,952,241
33,358
57,146
125,166
215,670
$
1,321,567
158,096
688,248
2,167,911
Total Aftermarket Segment net sales
607,112
21,143
628,255
Total net sales
$
2,559,353
$
236,813
$
2,796,166
(a) Net sales to customers in the United States of America
(b) Net sales to customers domiciled in countries outside of the United States of America
Long-lived assets, including net fixed assets, operating lease right-of-use assets, goodwill, and other net intangible
assets, domiciled in countries outside of the United States of America were $408.8 million and $454.5 million as of
December 31, 2022 and 2021, respectively.
71
Corporate expenses are allocated between the segments based upon net sales. Accretion related to contingent
consideration and other non-segment items are included in the segment to which they relate. Information relating to segments
follows for the years ended December 31:
(In thousands)
2022
Net sales to external customers (a)
Operating profit (b)
Expenditures for long-lived assets (c)
Depreciation and amortization
2021
Net sales to external customers (a)
Operating profit (b)
Expenditures for long-lived assets (c)
Depreciation and amortization
2020
Net sales to external customers (a)
Operating profit (b)
Expenditures for long-lived assets (c)
Depreciation and amortization
OEM
Segments
Aftermarket
Total
$
$
$
4,315,870 $
479,150
173,732
99,419
891,273 $
73,878
33,245
29,793
5,207,143
553,028
206,977
129,212
3,643,612 $
304,676
208,297
83,723
829,085 $
93,734
166,824
28,597
4,472,697
398,410
375,121
112,320
2,167,911 $
156,092
284,109
74,088
628,255 $
66,842
15,150
23,892
2,796,166
222,934
299,259
97,980
(a) Thor Industries, Inc., a customer of both segments, accounted for 23 percent, 24 percent, and 22 percent of the Company's
consolidated net sales for the years ended December 31, 2022, 2021, and 2020, respectively. Berkshire Hathaway Inc. (through its
subsidiaries Forest River, Inc. and Clayton Homes, Inc.), a customer of both segments, accounted for 20 percent, 20 percent, and
19 percent of the Company's consolidated net sales for the years ended December 31, 2022, 2021, and 2020, respectively. No other
customer accounted for more than 10 percent of consolidated net sales in the years ended December 31, 2022, 2021, and 2020.
Accounts receivable from Berkshire Hathaway Inc. accounted for 14 percent of consolidated accounts receivable, net at
December 31, 2021. No other customer accounted for more than 10 percent of consolidated accounts receivable, net at
December 31, 2022 and 2021.
(b) Certain general and administrative expenses are allocated between the segments based upon net sales or operating profit,
depending upon the nature of the expense.
(c) Expenditures for long-lived assets include capital expenditures, as well as fixed assets, goodwill and other intangible assets
purchased as part of the acquisition of businesses. The Company purchased $78.7 million, $271.9 million, and $230.4 million of
long-lived assets, as part of the acquisitions of businesses in the years ended December 31, 2022, 2021, and 2020, respectively.
Net sales by OEM Segment product were as follows for the years ended December 31:
(In thousands)
OEM Segment:
2022
2021
2020
Chassis, chassis parts, and slide-out mechanisms
$
1,563,168
$
1,320,718
$
Windows and doors
Furniture and mattresses
Axles and suspension solutions
Other
Total OEM Segment net sales
Total Aftermarket Segment net sales
Total net sales
1,085,302
1,014,332
790,664
306,843
569,893
4,315,870
891,273
5,207,143
$
701,876
248,144
358,542
3,643,612
829,085
4,472,697
$
72
815,706
620,372
351,107
145,989
234,737
2,167,911
628,255
2,796,166
$
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
None.
Item 9A. CONTROLS AND PROCEDURES.
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in
our reports under the Securities Exchange Act of 1934, as amended (the "Exchange Act") 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 our management, including our Chief Executive Officer and Chief 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. We continually evaluate our disclosure controls and procedures to determine if changes are appropriate based upon
changes in our operations or the business environment in which we operate.
As of the end of the period covered by this Form 10-K, we performed an evaluation, under the supervision and with
the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the
effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our Chief
Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of
December 31, 2022.
(a)
Management's Annual Report on Internal Control over Financial Reporting.
We are responsible for the preparation and integrity of the Consolidated Financial Statements appearing in this Annual
Report on Form 10-K. We are also responsible for establishing and maintaining adequate internal control over financial
reporting for the Company. We maintain a system of internal control that is designed to provide reasonable assurance as to the
fair and reliable preparation and presentation of the Consolidated Financial Statements, as well as to safeguard assets from
unauthorized use or disposition. We continually evaluate our system of internal control over financial reporting to determine if
changes are appropriate based upon changes in our operations or the business environment in which we operate.
Our control environment is the foundation for our system of internal control over financial reporting and is embodied
in our Guidelines for Business Conduct. It sets the tone of our organization and includes factors such as integrity and ethical
values. Our internal control over financial reporting is supported by formal policies and procedures which are reviewed,
modified and improved as changes occur in business conditions and operations.
We conducted an evaluation of the effectiveness of our internal control over financial reporting based on the
framework in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). This evaluation included review of the documentation of controls, evaluation of the design
effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation. Although there
are inherent limitations in the effectiveness of any system of internal control over financial reporting, based on our evaluation,
we have concluded that our internal control over financial reporting was effective as of December 31, 2022.
During 2022, the Company completed the Girard Systems, Inc. and Girard Products, LLC acquisition, which
contributed $43.1 million of net sales for the year ended December 31, 2022. Total assets from this acquisition as of
December 31, 2022 were $83.2 million. As the Girard Systems, Inc. and Girard Products, LLC acquisition occurred in the year
ended December 31, 2022, the scope of the Company's evaluation of the effectiveness of internal control over financial
reporting does not include Girard Systems, Inc. and Girard Products, LLC. This exclusion is in accordance with the SEC’s
general guidance that an assessment of a recently acquired business may be omitted from the Company's scope in the year of
acquisition.
KPMG LLP, an independent registered public accounting firm, has audited the Consolidated Financial Statements
included in this Annual Report on Form 10-K and, as part of their audit, has issued their report on the effectiveness of our
internal control over financial reporting, included elsewhere in this Form 10-K.
73
(b)
Report of the Independent Registered Public Accounting Firm.
The report is included in Item 8. "Financial Statements and Supplementary Data."
(c)
Changes in Internal Control over Financial Reporting.
There were no changes in our internal control over financial reporting during the quarter ended December 31, 2022,
that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. OTHER INFORMATION.
None.
Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
Not Applicable.
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Information with respect to our directors, executive officers and corporate governance is incorporated by reference
from the information contained in our Proxy Statement for the Annual Meeting of Stockholders to be held on May 18, 2023 (the
"2023 Proxy Statement") and from the information contained under "Information About our Executive Officers" in Part I, Item
1, "Business," in this Report.
Information regarding Section 16 reporting compliance is incorporated by reference from the information contained in
our 2023 Proxy Statement.
We have adopted Governance Principles, Guidelines for Business Conduct, a Whistleblower Policy, and a Code of
Ethics for Senior Financial Officers ("Code of Ethics"), each of which, as well as the Charters and Key Practices, as applicable,
of our Audit Committee, Risk Committee, Compensation Committee, Corporate Nominating, Governance and Sustainability
Committee, and Strategy and Acquisition Committee, are available on our website at www.lci1.com/investors. A copy of any of
these documents will be furnished, without charge, upon written request to Secretary, LCI Industries, 3501 County Road 6 East,
Elkhart, Indiana 46514.
If we make any substantive amendment to the Code of Ethics or the Guidelines for Business Conduct, or grant a
waiver to a director or executive officer from a provision of the Code of Ethics or the Guidelines for Business Conduct, we will
disclose the nature of such amendment or waiver on our website or in a Current Report on Form 8-K. There have been no
waivers to directors or executive officers of any provisions of the Code of Ethics or the Guidelines for Business Conduct.
Item 11. EXECUTIVE COMPENSATION.
The information required by this item is incorporated by reference from the information contained in our 2023 Proxy
Statement.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS.
The information required by this item is incorporated by reference from the information contained in our 2023 Proxy
Statement.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
The information required by this item with respect to transactions with related persons and director independence is
incorporated by reference from the information contained in our 2023 Proxy Statement.
74
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Our independent registered public accounting firm is KPMG LLP, Chicago, Illinois, Auditor Firm ID: 185.
The information required by this item concerning principal accountant fees and services is incorporated by reference
from the information contained in our 2023 Proxy Statement.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a)
Documents Filed:
PART IV
(1)
(2)
Financial Statements.
Exhibits. See Item 15 (b) - "List of Exhibits" incorporated herein by reference.
(b)
Exhibits - List of Exhibits.
Exhibit
Number
2.1
3.1
3.2
4.1
4.2
4.3
10.1†
10.2†
10.3†
10.4
10.5
10.6
Description
EXHIBIT INDEX
Stock Purchase Agreement, dated as of November 21, 2019, by and among Lippert Components,
Inc., Curt Acquisition Holdings, LLC and Curt Acquisition Holdings, Inc. (incorporated by
reference to Exhibit 2.1 included in the Registrant's Form 8-K filed November 22, 2019).
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).
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).
Description of Registrant's Securities Registered under Section 12 of the Securities Exchange Act
of 1934, as amended (incorporated by reference to Exhibit 4.1 included in the Registrant's Form
10-K for the year ended December 31, 2019).
Indenture, dated May 13, 2021, by and between LCI Industries and U.S. Bank National
Association (incorporated by reference to Exhibit 4.1 included in the Registrant's Form 8-K filed
on May 14, 2021).
Form of 1.125% Convertible Senior Note due 2026 (included in Exhibit 4.2).
Form of Indemnification Agreement between Registrant and its officers and independent directors
(incorporated by reference to Exhibit 10.1 included in the Registrant's Form 8-K filed on May 26,
2015).
Executive Non-Qualified Deferred Compensation Plan, as amended (incorporated by reference to
Exhibit 10.231 included in the Registrant's Form 10-K for the year ended December 31, 2015).
Form of Executive Employment Agreement (incorporated by reference to Exhibit 10.1 included
in the Registrant's Form 8-K filed March 4, 2015).
Fourth Amended and Restated Company Guarantee Agreement dated as of April 27, 2016, made
by Drew Industries Incorporated, with and in favor of JPMorgan Chase Bank, N.A. as
Administrative Agent (incorporated by reference to Exhibit 10.4 included in the Registrant's Form
8-K filed May 3, 2016).
Fourth Amended and Restated Subsidiary Guarantee Agreement dated as of April 27, 2016, made
by certain subsidiaries of Drew Industries Incorporated and Lippert Components, Inc., with and in
favor of JPMorgan Chase Bank, N.A. as Administrative Agent (incorporated by reference to
Exhibit 10.5 included in the Registrant's Form 8-K filed May 3, 2016).
Fourth Amended and Restated Subordination Agreement dated as of April 27, 2016, made by
Drew Industries Incorporated and certain subsidiaries of Drew Industries Incorporated, with and
in favor of JPMorgan Chase Bank, N.A. as Administrative Agent (incorporated by reference to
Exhibit 10.6 included in the Registrant's Form 8-K filed May 3, 2016).
75
Exhibit
Number
10.7†
10.8†
10.9†
10.10†
10.11†
10.12†
10.13†
10.14
10.15†
10.16†
10.17†
10.18†
10.19†
10.20
10.21†
10.22
Description
Grantor Trust Agreement, effective January 15, 2017, by and between LCI Industries and Wells
Fargo Bank, National Association (incorporated by reference to Exhibit 10.318 included in the
Registrant's Form 10-K for the year ended December 31, 2016).
Second Amended and Restated Executive Non-Qualified Deferred Compensation Plan
(incorporated by reference to Exhibit 10.2 included in the Registrant's Form 8-K filed on March
22, 2017).
LCI Industries 2018 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 included
in the Registrant’s Form 8-K filed May 29, 2018).
Form of Restricted Stock Unit Award Agreement (Non-Employee Directors) under the LCI
Industries 2018 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.5 included in
the Registrant’s Form 8-K filed May 29, 2018).
Form of Deferred Stock Unit Master Agreement (Non-Employee Directors) under the LCI
Industries 2018 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.6 included in
the Registrant’s Form 8-K filed May 29, 2018).
Form of Agreement for Common Stock in Lieu of Cash Compensation for Non-Employee
Directors (incorporated by reference to Exhibit 10.7 included in the Registrant’s Form 8-K filed
May 29, 2018).
Separation and General Release Agreement, dated as of November 16, 2018, by and between
Lippert Components, Inc. and Scott T. Mereness (incorporated by reference to Exhibit 10.1
included in the Registrant’s Form 8-K filed November 19, 2018).
Fourth Amended and Restated Credit Agreement dated December 14, 2018 among LCI
Industries, Lippert Components, Inc., LCI Industries B.V., LCI Industries C.V., JPMorgan Chase
Bank, N.A., individually and as Administrative Agent, Wells Fargo Bank, N.A., individually and
as Syndication Agent, Bank of America, N.A., individually and as Documentation Agent, and a
syndicate of other lenders (incorporated by reference to Exhibit 10.1 included in the Registrant’s
Form 8-K filed December 19, 2018).
Form of 2019 Performance Stock Unit Award Agreement under the LCI Industries 2018 Omnibus
Incentive Plan (incorporated by reference to Exhibit 10.1 included in the Registrant’s Form 8-K
filed March 12, 2019).
Form of Restricted Stock Unit Award Agreement (Executives) under the LCI Industries 2018
Omnibus Incentive Plan (Revised February 2019) (incorporated by reference to Exhibit 10.2
included in the Registrant’s Form 8-K filed March 12, 2019).
Form of Extension Agreement with certain officers (incorporated by reference to Exhibit 10.3
included in the Registrant’s Form 8-K filed March 12, 2019).
Form of Restricted Stock Unit Award Agreement (Non-Employee Directors) under the LCI
Industries 2018 Omnibus Incentive Plan (Revised February 2019) (incorporated by reference to
Exhibit 10.2 included in the Registrant’s Form 10-Q/A filed June 21, 2019).
Form of Deferred Stock Unit Master Agreement (Non-Employee Directors) under the LCI
Industries 2018 Omnibus Incentive Plan (Revised February 2019) (incorporated by reference to
Exhibit 10.3 included in the Registrant’s Form 10-Q/A filed June 21, 2019).
Incremental Joinder and Amendment No. 1, dated as of December 19, 2019, among LCI
Industries, Lippert Components, Inc., LCI Industries B.V., LCI Industries C.V., LCI Industries
Pte. Ltd., the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent
(incorporated by reference to Exhibit 10.1 included in the Registrant’s Form 8-K filed December
19, 2019).
Form of Performance Stock Unit Award Agreement under the LCI Industries 2018 Omnibus
Incentive Plan (incorporated by reference to Exhibit 10.2 to the Registrant's Form 10-Q filed
May 7, 2020).
Amendment No. 2 to Fourth Amended and Restated Credit Agreement, dated as of May 7, 2021,
by and among LCI Industries, Lippert Components, Inc., LCI Industries B.V., LCI Industries Pte.
Ltd., each other Subsidiary of the Company listed on the signature pages thereto, the lenders party
thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to
Exhibit 10.1 included in the Registrant's Form 8-K filed on May 10, 2021).
76
Exhibit
Number
10.23
10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31
10.32
10.33
10.34
10.35
10.36
10.37
10.38
10.39
Description
Purchase Agreement, dated May 10, 2021, by and among LCI Industries, Wells Fargo Securities,
LLC, BofA Securities, Inc. and J.P. Morgan Securities LLC (incorporated by reference to Exhibit
10.1 included in the Registrant’s Form 8-K filed on May 14, 2021).
Base Convertible Note Hedge Confirmation, dated May 10, 2021, between LCI Industries and
Bank of America, N.A. (incorporated by reference to Exhibit 10.2 included in the Registrant’s
Form 8-K filed on May 14, 2021).
Base Convertible Note Hedge Confirmation, dated May 10, 2021, between LCI Industries and
Bank of Montreal (incorporated by reference to Exhibit 10.3 included in the Registrant’s Form 8-
K filed on May 14, 2021).
Base Convertible Note Hedge Confirmation, dated May 10, 2021, between LCI Industries and
JPMorgan Chase Bank, National Association (incorporated by reference to Exhibit 10.4 included
in the Registrant’s Form 8-K filed on May 14, 2021).
Base Convertible Note Hedge Confirmation, dated May 10, 2021, between LCI Industries and
Wells Fargo Bank, National Association (incorporated by reference to Exhibit 10.5 included in
the Registrant’s Form 8-K filed on May 14, 2021).
Additional Convertible Note Hedge Confirmation, dated May 12, 2021, between LCI Industries
and Bank of America, N.A. (incorporated by reference to Exhibit 10.6 included in the
Registrant’s Form 8-K filed on May 14, 2021).
Additional Convertible Note Hedge Confirmation, dated May 12, 2021, between LCI Industries
and Bank of Montreal (incorporated by reference to Exhibit 10.7 included in the Registrant’s
Form 8-K filed on May 14, 2021).
Additional Convertible Note Hedge Confirmation, dated May 12, 2021, between LCI Industries
and JPMorgan Chase Bank, National Association (incorporated by reference to Exhibit 10.8
included in the Registrant’s Form 8-K filed on May 14, 2021).
Additional Convertible Note Hedge Confirmation, dated May 12, 2021, between LCI Industries
and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 10.9 included
in the Registrant’s Form 8-K filed on May 14, 2021).
Base Warrant Confirmation, dated May 10, 2021, between LCI Industries and Bank of America,
N.A. (incorporated by reference to Exhibit 10.10 included in the Registrant’s Form 8-K filed on
May 14, 2021).
Base Warrant Confirmation, dated May 10, 2021, between LCI Industries and Bank of Montreal
(incorporated by reference to Exhibit 10.11 included in the Registrant’s Form 8-K filed on May
14, 2021).
Base Warrant Confirmation, dated May 10, 2021, between LCI Industries and JPMorgan Chase
Bank, National Association (incorporated by reference to Exhibit 10.12 included in the
Registrant’s Form 8-K filed on May 14, 2021).
Base Warrant Confirmation, dated May 10, 2021, between LCI Industries and Wells Fargo Bank,
National Association (incorporated by reference to Exhibit 10.13 included in the Registrant’s
Form 8-K filed on May 14, 2021).
Additional Warrant Confirmation, dated May 12, 2021, between LCI Industries and Bank of
America, N.A. (incorporated by reference to Exhibit 10.14 included in the Registrant’s Form 8-K
filed on May 14, 2021).
Additional Warrant Confirmation, dated May 12, 2021, between LCI Industries and Bank of
Montreal (incorporated by reference to Exhibit 10.15 included in the Registrant’s Form 8-K filed
on May 14, 2021).
Additional Warrant Confirmation, dated May 12, 2021, between LCI Industries and JPMorgan
Chase Bank, National Association (incorporated by reference to Exhibit 10.16 included in the
Registrant’s Form 8-K filed on May 14, 2021).
Additional Warrant Confirmation, dated May 12, 2021, between LCI Industries and Wells Fargo
Bank, National Association (incorporated by reference to Exhibit 10.17 included in the
Registrant’s Form 8-K filed on May 14, 2021).
77
Exhibit
Number
10.40
10.41
10.42†
10.43†
10.44†
21*
23*
24*
31.1*
31.2*
32.1*
32.2*
101*
104*
Description
Amendment No. 3 to Fourth Amended and Restated Credit Agreement, dated as of September 7,
2021, by and among LCI Industries, Lippert Components, Inc., LCI Industries B.V., LCI
Industries Pte. Ltd., each other Subsidiary of the Company listed on the signature pages thereto,
the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated
by reference to Exhibit 10.1 included in the Registrant's Form 10-Q filed November 2, 2021).
Amendment No. 4 to Fourth Amended and Restated Credit Agreement, dated as of December 7,
2021, by and among LCI Industries, Lippert Components, Inc., LCI Industries B.V., LCI
Industries Pte. Ltd., each other Subsidiary of the Company listed on the signature pages thereto,
the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated
by reference to Exhibit 10.1 included in the Registrant's Form 8-K filed on December 9, 2021).
Form of Restricted Stock Unit Award Agreement (Executives) under the LCI Industries 2018
Omnibus Incentive Plan (Revised 2022) (incorporated by reference to Exhibit 10.1 included in the
Registrant’s Form 10-Q filed August 2, 2022).
Form of Performance Stock Unit Award Agreement under the LCI Industries 2018 Omnibus
Incentive Plan (Revised 2022) (incorporated by reference to Exhibit 10.2 included in the
Registrant’s Form 10-Q filed August 2, 2022).
Form of Executive Employment Agreement (Revised 2022) (incorporated by reference to Exhibit
10.3 included in the Registrant’s Form 10-Q filed August 2, 2022).
Subsidiaries of the Registrant.
Consent of Independent Registered Public Accounting Firm.
Powers of Attorney (included on the signature page of this Report).
Certification of Chief Executive Officer required by Rule 13a-14(a).
Certification of Chief Financial Officer required by Rule 13a-14(a).
Certification of Chief Executive Officer required by Rule 13a-14(b) and Section 1350 of Chapter
63 of Title 18 of the United States Code.
Certification of Chief Financial Officer required by Rule 13a-14(b) and Section 1350 of Chapter
63 of Title 18 of the United States Code.
The following financial information from the Registrant’s Annual Report on Form 10-K for the
year ended December 31, 2022, formatted in Inline XBRL: (i) Consolidated Statements of
Income; (ii) Consolidated Statements of Comprehensive Income; (iii) Consolidated Balance
Sheets; (iv) Consolidated Statements of Cash Flows; (v) Consolidated Statements of
Stockholders’ Equity; and (vi) Notes to Consolidated Financial Statements.
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
* Filed herewith
† Denotes a management contract or compensation plan or arrangement
Item 16. FORM 10-K SUMMARY.
None.
78
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant
has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: February 24, 2023
LCI INDUSTRIES
By:
/s/ Jason D. Lippert
Jason D. Lippert
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Each person whose signature appears below hereby authorizes Jason D. Lippert and Brian M. Hall, or either of them,
to file one or more amendments to the Annual Report on Form 10-K which amendments may make such changes in such
Report as either of them deems appropriate, and each such person hereby appoints Jason D. Lippert and Brian M. Hall, or either
of them, as attorneys-in-fact to execute in the name and on behalf of each such person individually, and in each capacity stated
below, such amendments to such Report.
Date
February 24, 2023
February 24, 2023
February 24, 2023
February 24, 2023
February 24, 2023
February 24, 2023
February 24, 2023
February 24, 2023
February 24, 2023
February 24, 2023
February 24, 2023
February 24, 2023
February 24, 2023
Signature
Title
Chief Executive Officer and Director
(principal executive officer)
Chief Financial Officer
(principal financial officer)
VP of Finance and Treasurer
(principal accounting officer)
Chairman of the Board of Directors
Director
Director
Director
Director
Director
Director
Director
Director
Director
By: /s/ Jason D. Lippert
(Jason D. Lippert)
By: /s/ Brian M. Hall
(Brian M. Hall)
By: /s/ Kip A. Emenhiser
(Kip A. Emenhiser)
By: /s/ Tracy D. Graham
(Tracy D. Graham)
By: /s/ Frank J. Crespo
(Frank J. Crespo)
By: /s/ Brendan J. Deely
(Brendan J. Deely)
By: /s/ James F. Gero
(James F. Gero)
By: /s/ Virginia L. Henkels
(Virginia L. Henkels)
By: /s/ Stephanie K. Mains
(Stephanie K. Mains)
By: /s/ Linda K. Myers
(Linda K. Myers)
By: /s/ Kieran M. O’Sullivan
(Kieran M. O’Sullivan)
By: /s/ David A. Reed
(David A. Reed)
By: /s/ John A. Sirpilla
(John A. Sirpilla)
79
Active Subsidiaries of Registrant
EXHIBIT 21
Name
Curt Manufacturing, Ltd
Zieman Manufacturing Company
Curt Manufacturing, LLC
Lippert Components, Inc.
Lippert Components International Sales, Inc.
Lippert Components Manufacturing, Inc.
LCI Transit Corp.
Taylor Made Group, LLC
LCI Industries GmbH
Schaudt GmbH Elektrotechnik & Apparatebau
LCI Idaho Realty, LLC
LCI Idaho Realty II, LLC
Lippert Components India Private Limited
LCI Service Corp.
KM Realty, LLC
KM Realty II, LLC
LCM Realty, LLC
LCM Realty II, LLC
LCM Realty IV, LLC
LCM Realty VI, LLC
LCM Realty VII, LLC
LCM Realty IX, LLC
LCM Realty X, LLC
LCM Realty XI, LLC
LCM Realty XII, LLC
Veada Industries, Inc.
Taylor Made Glass & Systems Limited
Ke-Star S.r.l.
LCI Italy S.r.l.
Innovative Design Solutions, Inc.
Delta Glass B.V.
LCI Industries B.V.
Polyplastic B.V.
Polyplastic Group B.V.
Lippert Components Canada Distribution, Ltd.
LCI Canada Group, Inc.
LCI Industries Pte. Ltd.
Kaspar Ranch Hand Equipment, LLC
Kinro Texas, Inc.
Ciesse Med Suarl
LCI Industries UK, Ltd.
State of Organization
British Columbia, Canada
California
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Germany
Germany
Idaho
Idaho
India
Indiana
Indiana
Indiana
Indiana
Indiana
Indiana
Indiana
Indiana
Indiana
Indiana
Indiana
Indiana
Indiana
Ireland
Italy
Italy
Michigan
Netherlands
Netherlands
Netherlands
Netherlands
Ontario, Canada
Quebec, Canada
Singapore
Texas
Texas
Tunisia
United Kingdom
Active Subsidiaries of Registrant
EXHIBIT 21
Name
State of Organization
Lewmar Ltd.
Lewmar Marine Ltd.
Trend Marine Products Limited
Furrion Holdings Limited
Furrion LLC
Furrion Limited
Furrion Property Holding Limited
Furrion Innovation (Shenzhen) Co. Ltd.
Furrion Innovation (Dongguan) Co. Ltd.
United Kingdom
United Kingdom
United Kingdom
Hong Kong
Delaware
Hong Kong
Hong Kong
China
China
EXHIBIT 23
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the registration statements (Nos. 333-225177, 333-91174,
333-141276, 333-152873, 333-161242, 333-181272, and 333-201336) on Form S-8 of our report dated
February 24, 2023, with respect to the consolidated financial statements of LCI Industries and the
effectiveness of internal control over financial reporting.
Our report dated February 24, 2023 on the effectiveness of internal control over financial reporting as of
December 31, 2022 contains an explanatory paragraph that states the Company acquired Girard Systems,
Inc. and Girard Products, LLC during 2022, and management excluded from its assessment of the
effectiveness of the Company’s internal control over financial reporting as of December 31, 2022, Girard
Systems, Inc. and Girard Products, LLC's internal control over financial reporting associated with assets of
$83.2 million and revenue of $43.1 million included in the consolidated financial statements of the
Company as of and for the year ended December 31, 2022. Our audit of internal control over financial
reporting of the Company also excluded an evaluation of the internal control over financial reporting of
Girard Systems, Inc. and Girard Products, LLC.
/s/ KPMG LLP
Chicago, Illinois
February 24, 2023
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO 13a-14(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934
EXHIBIT 31.1
I, Jason D. Lippert, Chief Executive Officer, certify that:
1.
I have reviewed this annual report on Form 10-K of LCI Industries;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period
in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal control over financial reporting.
Date: February 24, 2023
By /s/ Jason D. Lippert
Jason D. Lippert, Chief Executive Officer
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO 13a-14(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934
EXHIBIT 31.2
I, Brian M. Hall, Chief Financial Officer, certify that:
1.
I have reviewed this annual report on Form 10-K of LCI Industries;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period
in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal control over financial reporting.
Date: February 24, 2023
By /s/ Brian M. Hall
Brian M. Hall, Chief Financial Officer
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO 18 U.S.C.
SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
EXHIBIT 32.1
In connection with the annual report on Form 10-K of LCI Industries (the “Company”) for the period ended
December 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Jason D. Lippert,
Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act
of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition
and results of operations of the Company.
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by
the Company and furnished to the Securities and Exchange Commission or its staff upon request.
By /s/ Jason D. Lippert
Chief Executive Officer
Principal Executive Officer
February 24, 2023
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO 18 U.S.C.
SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
EXHIBIT 32.2
In connection with the annual report on Form 10-K of LCI Industries (the “Company”) for the period ended
December 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Brian M. Hall,
Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act
of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition
and results of operations of the Company.
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by
the Company and furnished to the Securities and Exchange Commission or its staff upon request.
By /s/ Brian M. Hall
Chief Financial Officer
Principal Financial Officer
February 24, 2023
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All rights reserved. No part of this publication may be reproduced, distributed, transmitted or used in any
form or by any means, including photocopying, recording or other electronic or mechanical methods,
without the prior written permission of Lippert Components, Inc.
2023018157-RA