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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q/A
Amendment No. 1

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

For the quarterly period ended: March 31, 2019

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
LCII-20190331_G1.JPG
LCI INDUSTRIES
(Exact name of registrant as specified in its charter)

Delaware 13-3250533
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3501 County Road 6 East 46514
Elkhart, Indiana (Zip Code)
(Address of principal executive offices)
(574) 535-1125
(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report) N/A

Securities registered pursuant to Section 12(b) of the Act:

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

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  

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  

1


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          Accelerated filer
Non-accelerated filer           Smaller reporting company
Emerging growth 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

The number of shares outstanding of the registrant’s common stock, as of the latest practicable date (April 30, 2019) was 25,014,667 shares of common stock.

EXPLANATORY NOTE

This Amendment No. 1 on Form 10-Q/A (the Amendment) amends the Quarterly Report on Form 10-Q of LCI Industries for the period ended March 31, 2019 (the Original Filing), that was originally filed with the U.S. Securities and Exchange Commission on May 7, 2019.

The Amendment is being filed solely to correct Exhibit 31.1 and Exhibit 32.2 to revise paragraph one of each such exhibit to refer to the appropriate periodic report quarterly report on Form 10-Q/A.

Other than the correction to the exhibits referenced above, the updating of signature dates, and changes to reference this filing as an amendment, no other changes have been made to the Original Filing. The Amendment speaks as of the filing date of the Original Filing, does not reflect events that have occurred subsequent to the filing date of the Original Filing, and does not modify or update in any way disclosures made in the Original Filing.

2



LCI INDUSTRIES

TABLE OF CONTENTS

    Page
PART I  
 
     
   
     
 
4
   
 
5
 
6
7
   
 
8
   
 
9
   
 
22
   
 
30
   
 
30
   
PART II
   
 
31
   
 
31
31
   
 
32
   
33
 
EXHIBIT 10.1 - 2019 ANNUAL INCENTIVE PROGRAM
EXHIBIT 10.2 - FORM OF RESTRICTED STOCK UNIT AWARD AGREEMENT
EXHIBIT 10.3 - FORM OF DEFERRED STOCK UNIT MASTER AGREEMENT
EXHIBIT 31.1 - SECTION 302 CEO CERTIFICATION
   
EXHIBIT 31.2 - SECTION 302 CFO CERTIFICATION  
   
EXHIBIT 32.1 - SECTION 906 CEO CERTIFICATION  
   
EXHIBIT 32.2 - SECTION 906 CFO CERTIFICATION  


3



PART I – FINANCIAL INFORMATION
ITEM 1 – FINANCIAL STATEMENTS

LCI INDUSTRIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

  Three Months Ended 
March 31,
  2019 2018
(In thousands, except per share amounts)    
Net sales $ 592,172  $ 650,492 
Cost of sales 459,578  509,759 
Gross profit 132,594  140,733 
Selling, general and administrative expenses 84,839  80,913 
Operating profit 47,755  59,820 
Interest expense, net 2,507  1,101 
Income before income taxes 45,248  58,719 
Provision for income taxes 10,882  11,383 
Net income $ 34,366  $ 47,336 
Net income per common share:    
Basic $ 1.38  $ 1.88 
Diluted $ 1.38  $ 1.86 
Weighted average common shares outstanding:    
Basic 24,914  25,149 
Diluted 24,929  25,465 


The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
4


LCI INDUSTRIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

  Three Months Ended 
March 31,
  2019 2018
(In thousands)    
Net income $ 34,366  $ 47,336 
Other comprehensive (loss) income:
Net foreign currency translation adjustment (1,175) 1,110 
Unrealized loss on fair value of derivative instruments (153) — 
Total comprehensive income $ 33,038  $ 48,446 


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

5


LCI INDUSTRIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

  March 31, December 31,
  2019 2018
(In thousands, except per share amount)    
ASSETS    
Current assets    
Cash and cash equivalents $ 14,317  $ 14,928 
Accounts receivable, net of allowances of $2,451 and $1,895 at March 31, 2019
and December 31, 2018, respectively
179,417  121,812 
Inventories, net 324,522  340,615 
Prepaid expenses and other current assets 34,840  49,296 
Total current assets 553,096  526,651 
Fixed assets, net 335,049  322,876 
Goodwill 178,336  180,168 
Other intangible assets, net 171,267  176,342 
Operating lease right-of-use assets 65,373  — 
Deferred taxes 8,393  10,948 
Other assets 31,037  26,908 
Total assets $ 1,342,551  $ 1,243,893 
LIABILITIES AND STOCKHOLDERS’ EQUITY    
Current liabilities    
Accounts payable, trade $ 89,805  $ 78,354 
Current portion of operating lease obligations 14,801  — 
Accrued expenses and other current liabilities 110,605  99,228 
Total current liabilities 215,211  177,582 
Long-term indebtedness 286,311  293,528 
Operating lease obligations 53,455  — 
Other long-term liabilities 65,895  66,528 
Total liabilities 620,872  537,638 
Stockholders’ equity
Common stock, par value $.01 per share 281  280 
Paid-in capital 200,934  203,246 
Retained earnings 582,559  563,496 
Accumulated other comprehensive loss (3,933) (2,605)
Stockholders’ equity before treasury stock 779,841  764,417 
Treasury stock, at cost (58,162) (58,162)
Total stockholders’ equity 721,679  706,255 
Total liabilities and stockholders’ equity $ 1,342,551  $ 1,243,893 


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


6


LCI INDUSTRIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
  Three Months Ended 
March 31,
  2019 2018
(In thousands)    
Cash flows from operating activities:    
Net income $ 34,366  $ 47,336 
Adjustments to reconcile net income to cash flows provided by (used in) operating activities:    
Depreciation and amortization 18,449  15,275 
Stock-based compensation expense 3,733  5,543 
Other non-cash items 611  (1,127)
Changes in assets and liabilities, net of acquisitions of businesses:
Accounts receivable, net (57,753) (71,073)
Inventories, net 16,052  (17,232)
Prepaid expenses and other assets 10,268  (3,185)
Accounts payable, trade 11,581  8,114 
Accrued expenses and other liabilities 15,278  11,246 
Net cash flows provided by (used in) operating activities 52,585  (5,103)
Cash flows from investing activities:    
Capital expenditures (24,442) (26,004)
Acquisitions of businesses, net of cash acquired —  (138,570)
Proceeds from note receivable —  155 
Other investing activities 61  (35)
Net cash flows used in investing activities (24,381) (164,454)
Cash flows from financing activities:    
Vesting of stock-based awards, net of shares tendered for payment of taxes (6,348) (14,085)
Proceeds from revolving credit facility borrowings 175,660  474,000 
Repayments under revolving credit facility borrowings (182,720) (297,000)
Payment of dividends (14,999) (13,858)
Other financing activities (157) (556)
Net cash flows (used in) provided by financing activities (28,564) 148,501 
Effect of exchange rate changes on cash and cash equivalents (251) — 
Net decrease in cash and cash equivalents (611) (21,056)
Cash and cash equivalents at beginning of period 14,928  26,049 
Cash and cash equivalents at end of period $ 14,317  $ 4,993 
Supplemental disclosure of cash flow information:    
Cash paid during the period for interest $ 2,394  $ 1,012 
Cash paid during the period for income taxes, net of refunds $ 59  $ (11)
Purchase of property and equipment in accrued expenses $ 1,202  $ 3,711 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
7


LCI INDUSTRIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(Unaudited)

(In thousands, except shares and per share amounts) Common
Stock
Paid-in
Capital
Retained
Earnings
Accumulated Other Comprehensive Income (Loss) Treasury
Stock
Total
Stockholders’
Equity
Balance - December 31, 2017 $ 277  $ 203,990  $ 475,506  $ 2,439  $ (29,467) $ 652,745 
Net income —  —  47,336  —  —  47,336 
Issuance of 223,768 shares of common stock pursuant to stock-based awards, net of shares tendered for payment of taxes (14,087) —  —  —  (14,085)
Stock-based compensation expense —  5,543  —  —  —  5,543 
Other comprehensive income —  —  —  1,110  —  1,110 
Cash dividends ($0.55 per share) —  —  (13,858) —  —  (13,858)
Dividend equivalents on stock-based awards —  319  (319) —  —  — 
Balance - March 31, 2018 $ 279  $ 195,765  $ 508,665  $ 3,549  $ (29,467) $ 678,791 


Balance - December 31, 2018 $ 280  $ 203,246  $ 563,496  $ (2,605) $ (58,162) $ 706,255 
Net income —  —  34,366  —  —  34,366 
Issuance of 137,040 shares of common stock pursuant to stock-based awards, net of shares tendered for payment of taxes (6,349) —  —  —  (6,348)
Stock-based compensation expense —  3,733  —  —  —  3,733 
Other comprehensive loss —  —  —  (1,328) —  (1,328)
Cash dividends ($0.60 per share) —  —  (14,999) —  —  (14,999)
Dividend equivalents on stock-based awards —  304  (304) —  —  — 
Balance - Balance at March 31, 2019 $ 281  $ 200,934  $ 582,559  $ (3,933) $ (58,162) $ 721,679 

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

8


LCI INDUSTRIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. BASIS OF PRESENTATION

The Condensed Consolidated Financial Statements include the accounts of LCI Industries and its wholly-owned subsidiaries (“LCII” and collectively with its subsidiaries, the “Company”). LCII has no unconsolidated subsidiaries. LCII, through its wholly-owned subsidiary, Lippert Components, Inc. and its subsidiaries (collectively, “Lippert Components” or “LCI”), supplies, domestically and internationally, a broad array of engineered components for the leading original equipment manufacturers (“OEMs”) in the recreation and industrial product markets, consisting of recreational vehicles (“RVs”) and adjacent industries including buses; trailers used to haul boats, livestock, equipment and other cargo; trucks; boats; trains; manufactured homes; and modular housing. The Company also supplies engineered components to the related aftermarkets of these industries, primarily by selling to retail dealers, wholesale distributors and service centers. At March 31, 2019, the Company operated over 65 manufacturing and distribution facilities located throughout the United States and in Canada, Ireland, Italy and the United Kingdom.

Most industries where the Company sells products or where its products are used historically have been seasonal and are generally at the highest levels when the weather is moderate. Accordingly, the Company’s sales and profits have generally been the highest in the second quarter and lowest in the fourth quarter. However, because of fluctuations in dealer inventories, the impact of international, national and regional economic conditions and consumer confidence on retail sales of RVs and other products for which the Company sells its components, the timing of dealer orders, and the impact of severe weather conditions on the timing of industry-wide shipments from time to time, current and future seasonal industry trends may be different than in prior years. Additionally, sales of certain engineered components to the aftermarket channels of these industries tend to be counter-seasonal.

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

In the opinion of management, the information furnished in this Form 10-Q reflects all adjustments necessary for a fair statement of the financial position and results of operations for the interim periods presented. The Condensed Consolidated Financial Statements have been prepared in accordance with the instructions to Form 10-Q, and therefore do not include some information necessary to conform to annual reporting requirements. Results for interim periods should not be considered indicative of results for the full year.

Use of Estimates

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

9

LCI INDUSTRIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Condensed Consolidated Financial Statements presented herein have been prepared by the Company in accordance with the accounting policies described in its December 31, 2018 Annual Report on Form 10-K and should be read in conjunction with the Notes to Consolidated Financial Statements which appear in that report. All significant intercompany balances and transactions have been eliminated.

Recent Accounting Pronouncements

Recently issued accounting pronouncements not yet adopted

In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-04, Simplifying the Test for Goodwill Impairment, which amends Accounting Standards Codification (“ASC”) 350, Intangibles - Goodwill and Other. This ASU simplifies how an entity is required to test goodwill for impairment by eliminating step 2 from the goodwill impairment test. Step 2 measures goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. This ASU is effective for interim and annual reporting periods, beginning after December 15, 2019, and early adoption is permitted. The Company will adopt this guidance in the first quarter of 2020 and does not expect the adoption of this ASU to have a material impact on the Company’s consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which changes the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. This ASU is effective for interim and annual reporting periods, beginning after December 15, 2019, and early adoption is permitted. The Company will adopt this guidance in the first quarter of 2020 and is currently assessing the impact of this ASU on its consolidated financial statements.

Recently adopted accounting pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires, in most instances, a lessee to recognize on its balance sheet a liability to make lease payments (the lease liability) and also a right-of-use asset representing its right to use the underlying asset for the lease term. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. The Company adopted Topic 842 on January 1, 2019, using the cumulative-effect adjustment transition method, which applies the new standard at the effective date without adjusting the comparative periods presented. The Company elected the package of practical expedients permitted under the transition guidance, which allowed the carryforward of historical lease classification, the assessment of whether a contract is or contains a lease, and initial direct costs for any leases that existed prior to adoption of the new standard. The Company also elected to keep leases with an initial term of 12 months or less off its Condensed Consolidated Balance Sheet and recognize the associated lease payments in its Condensed Consolidated Statements of Income on a straight-line basis over the lease term.

The adoption of Topic 842 resulted in the recognition of right-of-use assets of $66.4 million and operating lease obligations of $69.0 million at January 1, 2019. The adoption did not result in a cumulative effect adjustment to beginning retained earnings and is not expected to materially impact the Company’s Consolidated Statements of Income or Cash Flows. See Note 8 of the Notes to Condensed Consolidated Financial Statements for expanded disclosures required under Topic 842.

3. ACQUISITIONS, GOODWILL AND OTHER INTANGIBLE ASSETS

Smoker Craft Furniture

In November 2018, the Company acquired the business and certain assets of the furniture manufacturing operation of Smoker Craft Inc., a leading pontoon, aluminum fishing, and fiberglass boat manufacturer located in New Paris, Indiana. The purchase price was $28.1 million paid at closing. The results of the acquired business have been included primarily in the Company’s OEM Segment and in the Consolidated Statements of Income since the acquisition date. The Company is validating account balances and finalizing the valuation for the acquisition.

10

LCI INDUSTRIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The acquisition of this business was preliminarily recorded on the acquisition date as follows (in thousands):
Cash consideration $ 28,091 
Customer relationship and other identifiable intangible assets $ 16,730 
Net tangible assets 1,357 
Total fair value of net assets acquired $ 18,087 
Goodwill (tax deductible) $ 10,004 

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

ST.LA. S.r.l.

In June 2018, the Company acquired 100 percent of the equity interests of ST.LA. S.r.l., a manufacturer of bed lifts and other RV components for the European caravan market, headquartered in Pontedera, Italy. The purchase price was $14.8 million, net of cash acquired, paid at closing, and is subject to potential post-closing adjustments related to net working capital. The results of the acquired business have been included primarily in the Company’s OEM Segment and in the Consolidated Statements of Income since the acquisition date. The Company is validating account balances and finalizing the valuation for the acquisition. The acquisition of this business was preliminarily recorded on the acquisition date as follows (in thousands):
Cash consideration, net of cash acquired $ 14,845 
Customer relationships and other identifiable intangible assets $ 7,000 
Net tangible assets 351 
Total fair value of net assets acquired $ 7,351 
Goodwill (not tax deductible) $ 7,494 

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

Goodwill

Goodwill by reportable segment was as follows:
(In thousands) OEM Segment Aftermarket Segment Total
Net balance – December 31, 2018 $ 160,257  $ 19,911  $ 180,168 
Other (1,732) (100) (1,832)
Net balance – March 31, 2019 $ 158,525  $ 19,811  $ 178,336 

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.

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

11

LCI INDUSTRIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Other Intangible Assets

Other intangible assets consisted of the following at March 31, 2019:
(In thousands) Gross
Cost
Accumulated
Amortization
Net
Balance
Estimated Useful
Life in Years
Customer relationships $ 192,853  $ 58,682  $ 134,171  6 to 16
Patents 58,730  41,350  17,380  3 to 19
Trade names (finite life) 10,832  5,847  4,985  3 to 15
Trade names (indefinite life) 7,600  —  7,600  Indefinite
Non-compete agreements 6,864  4,580  2,284  3 to 6
Other 309  149  160  2 to 12
Purchased research and development 4,687  —  4,687  Indefinite
Other intangible assets $ 281,875  $ 110,608  $ 171,267       

Other intangible assets consisted of the following at December 31, 2018:
(In thousands) Gross
Cost
Accumulated
Amortization
Net
Balance
Estimated Useful
Life in Years
Customer relationships $ 191,919  $ 54,889  $ 137,030  6 to 16
Patents 58,787  40,079  18,708  3 to 19
Trade names (finite life) 10,885  5,507  5,378  3 to 15
Trade names (indefinite life) 7,600  —  7,600  Indefinite
Non-compete agreements 6,919  4,148  2,771  3 to 6
Other 309  141  168  2 to 12
Purchased research and development 4,687  —  4,687  Indefinite
Other intangible assets $ 281,106  $ 104,764  $ 176,342       

4. INVENTORIES

Inventories, valued at the lower of cost (first-in, first-out (FIFO) method) or market, consisted of the following at:
  March 31, December 31,
(In thousands) 2019 2018
Raw materials $ 270,119  $ 284,467 
Work in process 11,597  12,291 
Finished goods 42,806  43,857 
Inventories, net $ 324,522  $ 340,615 

5. FIXED ASSETS

Fixed assets consisted of the following at:
  March 31, December 31,
(In thousands) 2019 2018
Fixed assets, at cost $ 584,039  $ 559,234 
Less accumulated depreciation and amortization 248,990  236,358 
Fixed assets, net $ 335,049  $ 322,876 

12

LCI INDUSTRIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
6. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of the following at:
  March 31, December 31,
(In thousands) 2019 2018
Employee compensation and benefits $ 31,298  $ 33,835 
Current portion of accrued warranty 34,862  32,180 
Other 44,445  33,213 
Accrued expenses and other current liabilities $ 110,605  $ 99,228 

Estimated costs related to product warranties are accrued at the time products are sold. In estimating its future warranty obligations, the Company considers various factors, including the Company’s (i) historical warranty costs, (ii) current trends, (iii) product mix, and (iv) sales. The following table provides a reconciliation of the activity related to the Company’s accrued warranty, including both the current and long-term portions, for the three months ended March 31, 2019:
(In thousands)
Balance at beginning of period $ 46,530 
Provision for warranty expense 9,616 
Warranty costs paid (6,734)
Balance at end of period 49,412 
Less long-term portion 14,550 
Current portion of accrued warranty at end of period $ 34,862 

7. LONG-TERM INDEBTEDNESS

Long-term indebtedness consisted of the following at:
  March 31, December 31,
(In thousands) 2019 2018
Revolving Credit Facility $ 233,000  $ 240,060 
Shelf-Loan Facility 50,000  50,000 
Other 4,083  4,425 
Unamortized deferred financing fees (339) (361)
286,744  294,124 
Less current portion (433) (596)
Long-term indebtedness $ 286,311  $ 293,528 

On December 14, 2018, the Company refinanced its credit agreement with JPMorgan Chase, N.A., Wells Fargo Bank, N.A., Bank of America, N.A., and other bank lenders (the “Amended Credit Agreement”). The Amended Credit Agreement amended and restated an existing credit agreement dated April 27, 2016 and now expires on December 14, 2023.

The Amended Credit Agreement increased the revolving credit facility from $325.0 million to $600.0 million, and permits the Company to borrow up to $250.0 million in approved foreign currencies, including Australian dollars, Canadian dollars, pounds sterling and euros. The maximum borrowings under the credit facility may be further increased by $300.0 million in additional revolving loans or incremental term loans, subject to the consent of the lenders providing such incremental facilities and certain other conditions. Interest on borrowings under the revolving credit facility is designated from time to time by the Company as either (i) the Alternate Base Rate (defined in the Amended Credit Agreement as the greatest of (a) the Prime Rate of JPMorgan Chase Bank, N.A., (b) the federal funds effective rate plus 0.5 percent and (c) the Adjusted LIBO Rate (as defined in the Amended Credit Agreement) for a one month interest period plus 1.0 percent), plus additional interest ranging from 0.0 percent to 0.625 percent (0.0 percent at March 31, 2019) depending on the Company’s total net leverage ratio, or (ii) the Adjusted LIBO Rate for a period equal to one, two, three, six or twelve months (with the consent of each lender) as selected by the Company, plus additional interest ranging from 0.875 percent to 1.625 percent (0.875 percent at March 31, 2019) depending on the Company’s total net leverage ratio. At March 31, 2019, the Company had $2.6 million in issued, but undrawn,
13

LCI INDUSTRIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
standby letters of credit under the revolving credit facility. Availability under the Company’s revolving credit facility was $364.4 million at March 31, 2019.

On February 24, 2014, the Company entered into a $150.0 million shelf-loan facility (as amended, the “Shelf-Loan Facility”) with PGIM, Inc. (formerly Prudential Investment Management, Inc.) and its affiliates (“Prudential”). On March 20, 2015, the Company issued $50.0 million of Senior Promissory Notes (“Series A Notes”) to Prudential for a term of five years, at a fixed interest rate of 3.35 percent per annum, payable quarterly in arrears. On March 29, 2019, the Company issued $50.0 million of Series B Senior Notes (the “Series B Notes”) to certain affiliates of Prudential for a term of three years, at a fixed interest rate of 3.80 percent per annum, payable quarterly in arrears, of which the entire amount was outstanding at March 31, 2019. The net proceeds of the Series B Notes were used to repay the Series A Notes. At March 31, 2019, the fair value of the Company’s long-term debt approximates the carrying value, as estimated using quoted market prices and discounted future cash flows based on similar borrowing arrangements.

The Shelf-Loan Facility provides for Prudential to consider purchasing, at the Company’s request, in one or a series of transactions, Senior Promissory Notes of the Company in the aggregate principal amount of up to $150.0 million (excluding the Company’s Series B Notes already outstanding). Prudential has no obligation to purchase the Senior Promissory Notes. Interest payable on the Senior Promissory Notes will be at rates determined by Prudential within five business days after the Company issues a request to Prudential.

Borrowings under both the Amended Credit Agreement and the Shelf-Loan Facility are secured on a pari-passu basis by first priority liens on the capital stock or other equity interests of the Company’s direct and indirect subsidiaries (including up to 65 percent of the equity interest of certain “controlled foreign corporations”).

Pursuant to the Amended Credit Agreement and Shelf-Loan Facility, the Company shall not permit its net leverage ratio to exceed certain limits, shall maintain minimum debt service coverage ratio and must meet certain other financial requirements. At March 31, 2019, the Company was in compliance with all such requirements, and expects to remain in compliance for the next twelve months.

Availability under the Amended Credit Agreement and the Shelf-Loan Facility is subject to a maximum net leverage ratio covenant which limits the amount of consolidated outstanding indebtedness on a trailing twelve-month EBITDA, as defined. This limitation did not impact the Company’s borrowing availability at March 31, 2019. The remaining availability under these facilities was $514.4 million at March 31, 2019. The Company believes the availability under the Amended Credit Agreement and Shelf-Loan Facility is adequate to finance the Company’s anticipated cash requirements for the next twelve months.

8. LEASES

The Company leases certain manufacturing and warehouse facilities, administrative office space, semi-tractors, trailers, forklifts, and other equipment through operating leases with unrelated third parties. The operating leases have remaining terms of up to 12 years and some leases include options to purchase, terminate or extend for one or more years. The options are included in the lease term when it is reasonably certain that the option will be exercised. Leases with an initial term of 12 months or less are recognized in lease expense on a straight-line basis over the lease term and not recorded on the Condensed Consolidated Balance Sheet.

The Company uses its incremental borrowing rate based on information available at lease inception in determining the present value of the lease payments. The Company applies a portfolio approach for determining the incremental borrowing rate based on applicable lease terms and the current economic environment.

Certain of the Company’s lease arrangements contain lease components (such as minimum rent payments) and non-lease components (such as common-area or other maintenance costs and taxes). The Company generally accounts for each component separately based on the estimated standalone price of each component. Some of the Company’s lease arrangements include rental payments that are adjusted periodically for an index rate. These leases are initially measured using the projected payments in effect at the inception of the lease. Certain of the Company’s leased semi-tractors, trailers and forklifts include variable costs for usage or mileage. Such variable costs are expensed as incurred and included in the variable lease cost item noted in the table below. The Company’s lease agreements do not contain any significant residual value guarantees or restrictive covenants.

14

LCI INDUSTRIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The components of lease cost for the three months ended March 31, 2019 were as follows:
(in thousands)
Operating lease cost $4,909 
Short-term lease cost 798 
Variable lease cost 406 
Total lease cost $6,113 

Future minimum lease payments under operating leases as of March 31, 2019 were as follows:
(in thousands)
Year Ending December 31,
2019 (excluding the three months ended March 31, 2019) $ 18,002 
2020 14,632 
2021 11,597 
2022 8,354 
2023 6,428 
Thereafter 23,855 
Total future minimum lease payments (a)
82,868 
Less: Interest (14,612) 
Present value of operating lease liabilities $ 68,256 

(a) Refer to the Company’s Annual Report on Form 10-K for disclosure of future minimum lease payments at December 31, 2018 under ASC Topic 840, the accounting standard applicable to leases prior to the adoption of Topic 842.

At March 31, 2019, the Company’s operating leases had a weighted-average remaining lease term of 6.7 years and a weighted-average discount rate of 5.7 percent.

Cash Flows

The initial right-of-use assets of $66.4 million were recognized as non-cash asset additions upon adoption of Topic 842. Additional right-of use assets of $3.1 million were recognized as non-cash asset additions that resulted from new operating lease obligations during the three months ended March 31, 2019. Cash paid for amounts included in the present value of operating lease obligations and included in cash flows from operations was $5.0 million for the three months ended March 31, 2019.

Finance Leases

        The Company has various leases classified as finance leases, which are included in fixed assets, net and long-term indebtedness on the Condensed Consolidated Balance Sheets. These leases are not material to the Condensed Consolidated Financial Statements as of March 31, 2019.

Lessor

        The Company has various lease arrangements to lease office space and other real estate under which the Company is the lessor. These leases are classified as operating leases and income associated with these leases is not materialThe operating leases have remaining terms of up to 12 years and some leases include options to purchase, terminate or extend for one or more years.The operating leases have remaining terms of up to 12 years and some leases include options to purchase, terminate or extend for one or more years..

15

LCI INDUSTRIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
9. COMMITMENTS AND CONTINGENCIES

Contingent Consideration

In connection with several business acquisitions, if certain sales targets for the acquired products are achieved, the Company would pay additional cash consideration. The Company has recorded a liability for the fair value of this contingent consideration at March 31, 2019, based on the present value of the expected future cash flows using a market participant’s weighted average cost of capital of 12.1 percent.

As required, the liability for this contingent consideration is measured at fair value quarterly, considering actual sales of the acquired products, updated sales projections and the updated market participant weighted average cost of capital. Depending upon the weighted average costs of capital and future sales of the products which are subject to contingent consideration, the Company could record adjustments in future periods. The following table provides a reconciliation of the Company’s contingent consideration liability for the three months ended March 31, 2019:

(In thousands)
Balance at beginning of period $ 7,302 
Payments (1)
Accretion (a)
201 
Net foreign currency translation adjustment (82)
Balance at end of the period (b)
7,420 
Less current portion in accrued expenses and other current liabilities (39)
Total long-term portion in other long-term liabilities $ 7,381 

(a) Recorded in selling, general and administrative expenses in the Condensed Consolidated Statements of Income.
(b) Amounts represent the fair value of estimated remaining payments. The total estimated remaining undiscounted payments as of March 31, 2019 were $9.1 million. The liability for contingent consideration expires at various dates through September 2029. Certain of the contingent consideration arrangements are subject to a maximum payment amount, while the remaining arrangements have no maximum contingent consideration.

Furrion Distribution and Supply Agreement

In July 2015, the Company entered into a six-year exclusive distribution and supply agreement with Furrion Limited (“Furrion”), a Hong Kong based firm that designs, engineers and supplies premium electronics. This agreement provides the Company with the rights to distribute Furrion’s complete line of products to OEMs and aftermarket customers in the RV, specialty vehicle, utility trailer, horse trailer, marine, transit bus and school bus industries throughout the United States and Canada. Furrion currently supplies a premium line of televisions, sound systems, navigation systems, wireless backup cameras, solar prep units, power solutions and kitchen appliances, primarily to the RV industry.

In connection with this agreement, the Company entered into minimum purchase obligations (“MPOs”), which Furrion and the Company agreed to review after the first year on an annual basis and adjust as necessary based upon current economic and industry conditions, the development and customer acceptance of new Furrion products, competition and other factors which impact demand for Furrion products.

Subject to agreed upon revisions to the MPOs, Furrion has the right to either terminate the distribution agreement with six months’ notice or remove exclusivity from the Company if the Company misses an MPO in any given year by more than ten percent, after taking into account excess purchases from the previous year. If exclusivity is withdrawn, the Company at its election may terminate the distribution agreement with six months’ notice. Upon termination of the agreement, Furrion has agreed to purchase from the Company any non-obsolete stocks of Furrion products at the cost paid by the Company.

Product Recalls

From time to time, the Company cooperates with and assists its customers on their product recalls and inquiries, and occasionally receives inquiries directly from the National Highway Traffic Safety Administration regarding reported incidents
16

LCI INDUSTRIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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.

Litigation

In the normal course of business, the Company is subject to proceedings, lawsuits, regulatory agency inquiries and other claims. All such matters are subject to uncertainties and outcomes that are not predictable with assurance. While these matters could materially affect operating results when resolved in future periods, management believes that, after final disposition, including anticipated insurance recoveries in certain cases, any monetary liability or financial impact to the Company beyond that provided in the Condensed Consolidated Balance Sheet as of March 31, 2019, would not be material to the Company’s financial position or annual results of operations.

10. STOCKHOLDERS’ EQUITY

The following table summarizes information about shares of the Company’s common stock at:
  March 31, December 31,
(In thousands) 2019 2018
Common stock authorized 75,000  75,000 
Common stock issued 28,085  27,948 
Treasury stock 3,087  3,087 

The following reconciliation details the denominator used in the computation of basic and diluted earnings per share at March 31, 2019:
(In thousands)
Weighted average shares outstanding for basic earnings per share 24,914 
Common stock equivalents pertaining to stock-based awards 15 
Weighted average shares outstanding for diluted earnings per share 24,929 
Equity instruments excluded from diluted net earnings per share calculation as the effect would have been anti-dilutive
122 

17

LCI INDUSTRIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The table below summarizes the regular quarterly dividends declared and paid during the periods ended March 31, 2019 and December 31, 2018:
(In thousands, except per share data) Per Share Record Date Payment Date Total Paid
First Quarter 2018 $ 0.55  03/16/18 03/29/18 $ 13,858 
Second Quarter 2018 0.60  06/04/18 06/15/18 15,127 
Third Quarter 2018 0.60  08/31/18 09/14/18 15,129 
Fourth Quarter 2018 0.60  11/26/18 12/07/18 15,156 
Total 2018 $ 2.35  $ 59,270 
First Quarter 2019 $ 0.60  03/08/19 03/22/19 $ 14,999 

Deferred and Restricted Stock Units

The LCI Industries 2018 Omnibus Incentive Plan (“the 2018 Plan”) provides for the grant or issuance of stock units, including those that have deferral periods, such as deferred stock units (“DSUs”), those with time-based vesting provisions, such as restricted stock units (“RSUs”), to directors, employees and other eligible persons. Recipients of DSUs and RSUs are entitled to receive shares at the end of a specified vesting or deferral period. Holders of DSUs and RSUs receive dividend equivalents based on dividends granted to holders of the common stock, which dividend equivalents are payable in additional DSUs and RSUs, and are subject to the same vesting criteria as the original grant.

DSUs vest (i) ratably over the service period, (ii) at a specified future date, or (iii) for certain officers, based on achievement of specified performance conditions. RSUs vest (i) ratably over the service period or (ii) at a specified future date. In addition, DSUs are issued in lieu of certain cash compensation. Transactions in DSUs and RSUs under the LCI Industries Equity Award and Incentive Plan, as Amended and Restated (“the 2011 Plan”) or the 2018 Plan, as applicable, are summarized as follows:
Number of Shares Weighted Average Price
Outstanding at December 31, 2018 264,406  $ 83.84 
Granted 232,287  80.40 
Dividend equivalents 3,046  73.70 
Forfeited (3,615) 93.74 
Vested (111,548) 81.32 
Outstanding at March 31, 2019 384,576  $ 81.42 

Stock Awards and Performance Stock Units

The 2011 Plan provides for stock awards and the 2018 Plan provides for performance stock units (“PSUs”) that vest at a specific future date based on achievement of specified performance conditions. Transactions in performance-based stock awards and PSUs under the 2011 Plan or the 2018 Plan, as applicable, are summarized as follows:
Number of Shares Stock Price
Outstanding at December 31, 2018 187,368  $ 91.39 
Granted 48,995  78.11 
Dividend equivalents 1,090  73.70 
Forfeited (8,459) 106.10 
Vested (102,434) 77.93 
Outstanding at March 31, 2019 126,560  $ 96.21 

18

LCI INDUSTRIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
11. FAIR VALUE MEASUREMENTS

Recurring

The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis at:
  March 31, 2019 December 31, 2018
(In thousands) Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3
Assets                
Derivative assets
$ 80  $ —  $ 80  $ —  $ —  $ —  $ —  $ — 
Liabilities
Contingent consideration $ 7,420  $ —  $ —  7,420  $ 7,302  $ —  $ —  $ 7,302 
Derivative liabilities 1,125  —  1,125  —  1,108  —  1,108  — 

Contingent Consideration Related to Acquisitions

Liabilities for contingent consideration related to acquisitions were estimated at fair value using management’s projections for long-term sales forecasts, including assumptions regarding market share gains and future industry-specific economic and market conditions, and a market participant’s weighted average cost of capital. Over the next six years, the Company’s long-term sales growth forecasts for products subject to contingent consideration arrangements average approximately 13 percent per year. For further information on the inputs used in determining the fair value, and a roll-forward of the contingent consideration liability, see Note 9 of the Notes to Condensed Consolidated Financial Statements.

Changes in either of the inputs in isolation would result in a change in the fair value measurement. A change in the assumptions used for sales forecasts would result in a directionally similar change in the fair value liability, while a change in the weighted average cost of capital would result in a directionally opposite change in the fair value liability. If there is an increase in the fair value liability, the Company would record a charge to selling, general and administrative expenses, and if there is a decrease in the fair value liability, the Company would record a benefit in selling, general and administrative expenses.

Derivative Instruments

The Company’s objectives in using commodity derivatives are to add stability to expense and to manage its exposure to certain commodity price movements. To accomplish this objective, the Company uses commodity swaps as part of its commodity risk management strategy. Commodity swaps designated as cash flow hedges involve fixing the price on a fixed volume of a commodity on specified dates. The commodity swaps are typically cash settled for their fair value at or close to their settlement dates.

At March 31, 2019, the Company had six commodity swap derivative instruments for a total of 52.6 million pounds of steel used to hedge its commodity price risk on a portion of the exposure to movements associated with steel costs at an average steel price of $0.37 per pound. These derivatives expire at various dates through April 2020. At December 31, 2018, the Company had five commodity swap derivative instruments for a total of 34.4 million pounds of steel at an average steel price of $0.39 per pound. These derivatives are designated and qualify as cash flow hedges of commodity price risk; therefore, the gain or loss on the derivative is recorded in accumulated other comprehensive income (loss) and subsequently reclassified in the period during which the hedged transactions affects earnings within the same income statement line item as the earnings effect of the hedged transaction. These derivative instruments were valued at fair value using a market approach based on the quoted market prices of similar instruments at the end of the reporting period. At March 31, 2019, the $0.1 million corresponding asset was recorded in prepaid expenses and other current assets, the $1.1 million corresponding liability was recorded in accrued expenses and other current liabilities ($1.1 million) as reflected in the Condensed Consolidated Balance Sheets. At December 31, 2018, the $1.1 million corresponding liability was recorded in accrued expenses and other current liabilities ($0.9 million) and other long-term liabilities ($0.2 million) as reflected in the Consolidated Balance Sheets.

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LCI INDUSTRIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
12. SEGMENT REPORTING

The Company has two reportable segments, the OEM Segment and the Aftermarket Segment. Intersegment sales are insignificant.

The OEM Segment, which accounted for 90 percent and 92 percent of consolidated net sales for the three months ended March 31, 2019 and 2018, respectively, manufactures or distributes a broad array of engineered components for the leading OEMs in the recreation and industrial product markets, consisting of RVs and adjacent industries, including buses; trailers used to haul boats, livestock, equipment and other cargo; trucks; pontoon boats; trains; manufactured homes; and modular housing. Approximately 60 percent of the Company’s OEM Segment net sales for the three months ended March 31, 2019 were of components for travel trailer and fifth-wheel RVs.

The Aftermarket Segment, which accounted for ten percent and eight percent of consolidated net sales for the three months ended March 31, 2019 and 2018, respectively, supplies engineered components to the related aftermarket channels of the recreation and industrial product markets, primarily to retail dealers, wholesale distributors and service centers. The Aftermarket Segment also includes the sale of replacement glass and awnings to fulfill insurance claims.

Decisions concerning the allocation of the Company’s resources are made by the Company’s chief operating decision maker (“CODM”), with oversight by the Board of Directors. The CODM evaluates the performance of each segment based upon segment operating profit or loss, generally defined as income or loss before interest and income taxes. Decisions concerning the allocation of resources are also based on each segment’s utilization of assets. Management of debt is a corporate function. The accounting policies of the OEM and Aftermarket Segments are the same as those described in Note 2 of the Notes to Consolidated Financial Statements of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

The following table presents the Company’s revenues disaggregated by segment and geography based on the billing address of the Company’s customers:
Three Months Ended March 31, 2019 Three Months Ended March 31, 2018
(In thousands) U.S. (a) Int’l (b) Total U.S. (a) Int’l (b) Total
OEM Segment:
RV OEMs:
Travel trailers and fifth-wheels $ 313,367  $ 3,504  $ 316,871  $ 403,742  $ 1,215  $ 404,957 
Motorhomes 31,921  13,079  45,000  43,406  9,509  52,915 
Adjacent Industries OEMs 156,736  13,173  169,909  133,408  8,899  142,307 
Total OEM Segment net sales 502,024  29,756  531,780  580,556  19,623  600,179 
Aftermarket Segment:
Total Aftermarket Segment net sales 56,532  3,860  60,392  47,346  2,967  50,313 
Total net sales $ 558,556  $ 33,616  $ 592,172  $ 627,902  $ 22,590  $ 650,492 

(a) Net sales to customers in the United States of America
(b) Net sales to customers in countries domiciled outside of the United States of America

The following table presents the Company’s operating profit by segment:
  Three Months Ended 
March 31,
(In thousands) 2019 2018
Operating profit:
OEM Segment $ 40,408  $ 53,940 
Aftermarket Segment 7,347  5,880 
Total operating profit $ 47,755  $ 59,820 

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LCI INDUSTRIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents the Company’s revenue disaggregated by product:
Three Months Ended 
March 31,
(In thousands) 2019 2018
OEM Segment:
Chassis, chassis parts and slide-out mechanisms $ 204,383  $ 252,702 
Windows and doors 151,919  149,520 
Furniture and mattresses 91,357  105,518 
Axles and suspension solutions 32,235  33,605 
Other 51,886  58,834 
Total OEM Segment net sales 531,780  600,179 
Total Aftermarket Segment net sales 60,392  50,313 
Total net sales $ 592,172  $ 650,492 


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ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Company’s Condensed Consolidated Financial Statements and Notes thereto included in Item 1 of Part 1 of this Report, as well as the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

LCI Industries (“LCII”, and collectively with its subsidiaries, the “Company”), through its wholly-owned subsidiary, Lippert Components, Inc. and its subsidiaries (collectively, “Lippert Components” or “LCI”), supplies, domestically and internationally, a broad array of engineered components for the leading original equipment manufacturers (“OEMs”) in the recreation and industrial product markets, consisting of recreational vehicles (“RVs”) and adjacent industries, including buses; trailers used to haul boats, livestock, equipment and other cargo; trucks; boats; trains; manufactured homes; and modular housing. The Company also supplies engineered components to the related aftermarkets of these industries, primarily by selling to retail dealers, wholesale distributors and service centers.

The Company has two reportable segments, the OEM Segment and the Aftermarket Segment. Intersegment sales are insignificant. At March 31, 2019, the Company operated over 65 manufacturing and distribution facilities located throughout the United States and in Canada, Ireland, Italy and the United Kingdom. See Note 12 of the Notes to the Condensed Consolidated Financial Statements for further information regarding the Company’s segments.

The Company’s OEM Segment manufactures or distributes a broad array of engineered components for the leading OEMs of leisure and mobile transportation industries. Approximately 62 percent of the Company’s OEM Segment net sales for the twelve months ended March 31, 2019 were of components for travel trailer and fifth-wheel RVs, including:
● Steel chassis and related components ● Furniture and mattresses
● Axles and suspension solutions ● Electric and manual entry steps
● Slide-out mechanisms and solutions ● Awnings and awning accessories
● Thermoformed bath, kitchen and other products ● Electronic components
● Vinyl, aluminum and frameless windows ● Appliances
● Manual, electric and hydraulic stabilizer and 
   leveling systems
● Televisions, sound systems, navigation 
   systems and backup cameras
● Entry, luggage, patio and ramp doors ● Other accessories

The Aftermarket Segment supplies many of these engineered components to the related aftermarket channels of the recreation and industrial product markets, primarily to retail dealers, wholesale distributors and service centers. The Aftermarket Segment also includes the sale of replacement glass and awnings to fulfill insurance claims.

Most industries where the Company sells products or where its products are used historically have been seasonal and are generally at the highest levels when the weather is moderate. Accordingly, the Company’s sales and profits have generally been the highest in the second quarter and lowest in the fourth quarter. However, because of fluctuations in dealer inventories, the impact of international, national and regional economic conditions and consumer confidence on retail sales of RVs and other products for which the Company sells its components, the timing of dealer orders, and the impact of severe weather conditions on the timing of industry-wide shipments from time to time, current and future seasonal industry trends may be different than in prior years. Additionally, sales of engineered components to the aftermarket channels of these industries tend to be counter-seasonal.

INDUSTRY BACKGROUND

OEM Segment

Recreational Vehicle Industry

An RV is a vehicle designed as temporary living quarters for recreational, camping, travel or seasonal use. RVs may be motorized (motorhomes) or towable (travel trailers, fifth-wheel travel trailers, folding camping trailers and truck campers).
The annual sales cycle for the RV industry generally starts in October after the “Open House” in Elkhart, Indiana where many of the largest RV OEMs display product to RV retail dealers, and ends after the conclusion of the summer selling
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ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
season in September in the following calendar year. Between October and March, industry-wide wholesale shipments of travel trailer and fifth-wheel RVs have historically exceeded retail sales as dealers build inventories to support anticipated sales. Between April and September, the spring and summer selling seasons, retail sales of travel trailer and fifth-wheel RVs have historically exceeded industry-wide wholesale shipments. Despite a recent disruption in wholesale shipments as dealers normalize their inventory levels, the Company expects to return to the normal wholesale cycle in late 2019.
According to the Recreation Vehicle Industry Association (“RVIA”), industry-wide wholesale shipments of travel trailer and fifth-wheel RVs, the Company’s primary RV market, decreased 28 percent to 84,700 units in the first three months of 2019, as compared to the same period of 2018. The decrease was a result of an estimated 2,100 unit, or three percent, decrease in retail sales in the first three months of 2019, as compared to the same period of 2018, and a normalization of retail inventories as evidenced by RV dealers seasonally increasing inventory levels by an estimated 5,200 units for the first three months of 2019, compared to an increase in inventory levels of 35,300 units in the same period of 2018. In addition, retail demand is typically revised upward in subsequent months, primarily due to delayed RV registrations.

While the Company measures its OEM Segment RV sales against industry-wide wholesale shipment statistics, the underlying health of the RV industry is determined by retail demand. A comparison of the number of units and the year-over-year percentage change in industry-wide wholesale shipments and retail sales of travel trailers and fifth-wheel RVs, as reported by Statistical Surveys, Inc., as well as the resulting estimated change in dealer inventories, for both the United States and Canada, is as follows:
          Estimated
  Wholesale Retail Unit Impact on
  Units Change Units Change Dealer Inventories
Quarter ended March 31, 2019 84,700  (28)%   79,500  (3)%   5,200 
Quarter ended December 31, 2018 90,300  (17)%   66,500  (2)%   23,800 
Quarter ended September 30, 2018 92,300  (11)%   123,400  2%    (31,100)
Quarter ended June 30, 2018 115,500  0%   149,200  7%    (33,700)
Twelve months ended March 31, 2019 382,800  (14)%   418,600  2%    (35,800)
Quarter ended March 31, 2018 116,900  15%    81,600  12%    35,300 
Quarter ended December 31, 2017 108,200  20%    68,100  17%    40,100 
Quarter ended September 30, 2017 103,900  26%    120,600  11%    (16,700)
Quarter ended June 30, 2017 115,900  17%    139,300  13%    (23,400)
Twelve months ended March 31, 2018 444,900  19%    409,600  13%    35,300 

According to the RVIA, industry-wide wholesale shipments of motorhome RVs in the first three months of 2019 decreased 27 percent to 12,700 units compared to the same period of 2018. Additionally, retail demand for motorhome RVs decreased 20 percent in the first three months of 2019, following a two percent decrease in retail demand in full year 2018.
The RVIA has projected a modest decrease in industry-wide wholesale shipments of travel trailer and fifth-wheel RVs for 2019. Several RV OEMs, however, are introducing new product lines and additional features. Retail sales of RVs historically have been closely tied to general economic conditions, as well as consumer confidence, which was above historical averages in 2018. Additionally, retail sales of travel trailer and fifth-wheel RVs have increased in 106 of the last 111 months on a year-over-year basis. Industry resources report strong attendance and high consumer interest at RV shows around the United States and Canada in early 2019.
Over the long term, the Company expects RV industry sales to be aided by positive demographics and the continued popularity of the “RV Lifestyle”. The number of consumers between the ages of 55 and 70 are projected to total 56 million by 2020, 27 percent higher than in 2010, according to U.S. Census figures, and one in ten vehicle-owning households between the ages of 50 and 64 own at least one RV. The RVIA reported much of the success of the RV industry has been driven by the Baby Boomer generation. The size of that generation is beginning to wane, and younger generations, Generation X and Millennials, are becoming more relevant to future industry growth. Generation X and Millennials are more diverse, requiring new and creative marketing approaches to attract them to the RV industry. The RVIA has an advertising campaign promoting
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ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
the “RV Lifestyle” targeted at both parents aged 30 - 49 with children at home, as well as couples aged 50 - 64 with no children at home. In addition, the RV OEMs have developed more entry level units, specifically targeting younger families, in both towables and motorhomes. The popularity of traveling in RVs to NASCAR and other sporting events, more family-oriented domestic vacations, and using RVs as second homes, are trends that could continue to motivate consumer demand for RVs. RVIA studies indicate RV vacations cost significantly less than other forms of vacation travel, even when factoring in fuel prices and the cost of RV ownership. More details can be found at www.RVIA.org.

Adjacent Industries

The Company’s portfolio of products used in RVs can also be used in other applications, including buses; trailers used to haul boats, livestock, equipment and other cargo; trucks; boats; trains; manufactured homes; and modular housing (collectively, “Adjacent Industries”). In many cases, OEM customers of the Adjacent Industries are affiliated with RV OEMs through related subsidiaries. The Company believes there are significant opportunities in these Adjacent Industries and, as a result, three of the last four business acquisitions completed by the Company through the date of this report were focused in Adjacent Industries.

The estimated potential content per unit the Company may supply to the Adjacent Industries varies by OEM product and differs from RVs. As a means to understand the potential of each of these markets, management reviews the number of retail units sold. The following are key target markets for Adjacent Industries component sales:

Enclosed trailers. According to Statistical Surveys, approximately 214,000 and 216,000 enclosed trailers were sold in 2018 and 2017, respectively.
Pontoon boats. Statistical Surveys also reported approximately 55,000 and 52,400 pontoon boats were sold in 2018 and 2017, respectively.
School buses. According to School Bus Fleet, there were approximately 44,400 school buses sold in each of 2018 and 2017.
Manufactured housing. According to the Institute for Building Technology and Safety, there were approximately 96,600 and 92,900 manufactured home wholesale shipments in 2018 and 2017, respectively.

Aftermarket Segment

Many of the Company’s OEM Segment products are also sold through various aftermarket channels, including dealerships, warehouse distributors and service centers, as well as direct to retail customers. The Company has teams dedicated to product training and marketing support for its Aftermarket Segment customers. The Company also supports two call centers to provide quick responses to customers for both product delivery and technical support. This support is designed for a rapid response to critical repairs, so customer downtime is minimized. The Aftermarket Segment also includes the sale of replacement glass and awnings to fulfill insurance claims. Many of the optional upgrades and non-critical replacements are purchased outside the normal product selling seasons, thereby causing Aftermarket Segment sales to be counter-seasonal.

According to the RVIA, estimated RV ownership in the United States has increased to over nine million units. Additionally, as a result of a vibrant secondary market, one third of current owners purchased their RV new while the remaining two-thirds purchased a previously owned RV. This vibrant secondary market is a key driver for aftermarket sales, as the Company anticipates owners of previously owned RVs will likely upgrade their units as well as replace parts and accessories which have been subjected to normal wear and tear.

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ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
RESULTS OF OPERATIONS

Consolidated Highlights

Consolidated net sales in the first quarter of 2019 were $592.2 million, nine percent lower than consolidated net sales for the first quarter of 2018 of $650.5 million. Acquisitions completed by the Company over the twelve months ended March 31, 2019, added $31 million in net sales in the first quarter of 2019. Despite the short-term correction in industry wholesale shipments as dealers normalize their inventory levels, content per RV unit has increased, positively impacting net sales growth in the first quarter of 2019. Further, the Company organically increased sales to Aftermarket Segment and Adjacent Industries.
Net income for the first quarter of 2019 was $34.4 million, or $1.38 per diluted share, compared to net income of $47.3 million, or $1.86 per diluted share, for the first quarter of 2018.
Consolidated operating profit during the first quarter of 2019 was $47.8 million compared to $59.8 million in the first quarter of 2018. Operating profit margin was eight percent in the first quarter of 2019 compared to nine percent in the first quarter of 2018, primarily due to fixed costs being spread over a smaller sales base and cost pressures on raw materials.
The cost of aluminum and steel used in certain of the Company’s manufactured components continued to be elevated in the first quarter of 2019, primarily driven by tariffs on these commodities. Raw material costs continue to fluctuate and are expected to remain volatile.
The Company seeks to continuously manage its labor cost, particularly indirect labor, while supporting the growth of the business. Lean manufacturing teams continue working to reduce cost and implement processes to better utilize manufacturing capacity. The Company has also reduced direct labor attrition, which improves efficiency and reduces other costs associated with workforce turnover.
The effective tax rate for the three months ended March 31, 2019 was higher than the comparable prior year period, primarily due to a year-over-year reduction in the excess tax benefits related to the vesting or exercise of equity-based compensation awards, as discussed below under “Income Taxes.”
In March 2019, the Company paid a quarterly dividend of $0.60 per share, aggregating to $15.0 million.

OEM Segment - First Quarter

Net sales of the OEM Segment in the first quarter of 2019 decreased 11 percent, or $68.4 million, compared to the same period of 2018. Net sales of components to OEMs were to the following markets for the three months ended March 31:
(In thousands) 2019 2018 Change
RV OEMs:  
Travel trailers and fifth-wheels $ 316,871  $ 404,957  (22) %
Motorhomes 45,000  52,915  (15) %
Adjacent Industries OEMs 169,909  142,307  19  %
Total OEM Segment net sales $ 531,780  $ 600,179  (11) %

According to the RVIA, industry-wide wholesale unit shipments for the three months ended March 31 were:
  2019 2018 Change
Travel trailer and fifth-wheel RVs 84,700  116,900  (28) %
Motorhomes 12,700  17,500  (27) %

The trend in the Company’s average product content per RV produced is an indicator of the Company’s overall market share of components for new RVs. The Company’s average product content per type of RV, calculated based upon the Company’s net sales of components to domestic RV OEMs for the different types of RVs produced for the twelve months ended March 31, divided by the industry-wide wholesale shipments of the different product mix of RVs for the same period, was:
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ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Content per: 2019 2018 Change
Travel trailer and fifth-wheel RV $ 3,504  $ 3,317  %
Motorhome $ 2,500  $ 2,328  %

The Company’s average product content per type of RV excludes international sales and sales to the Aftermarket Segment and Adjacent Industries. Content per RV is impacted by market share gains, acquisitions, new product introductions and changes in selling prices for the Company’s products, as well as changes in the types of RVs produced industry-wide.

The Company’s net sales growth in content components for travel trailer and fifth-wheel RVs during the first quarter of 2019 outperformed industry-wide wholesale shipments of travel trailer and fifth-wheel RVs during the same period, primarily due to market share gains as a result of price increases, new product introductions and customer penetration.

The Company’s net sales growth in content components for motorhomes during the first quarter of 2019 outperformed industry-wide wholesale shipments of motorhomes during the same period, primarily due to acquisitions completed in 2018. Over the past few years, the Company has been expanding its product line of components for motorhomes in order to increase its customer base and market penetration.

The Company’s net sales to Adjacent Industries OEMs increased during the first quarter of 2019 primarily due to acquisitions completed in 2018 and market share gains. The Company continues to believe there are significant opportunities in Adjacent Industries.

Operating profit of the OEM Segment was $40.4 million in the first quarter of 2019, a decrease of $13.5 million compared to the same period of 2018. The operating profit margin of the OEM Segment in the first quarter of 2019 was negatively impacted by:
Fixed costs being spread over an RV OEM sales base that decreased by $96.0 million.
The Company made significant investments over the past couple of years in manufacturing capacity, in both facilities and personnel. In addition to these investments, the Company has made improvements in marketing, human resources, engineering, customer service and other critical departments. The Company also added the teams from acquired businesses, as well as amortization costs of intangible assets related to those businesses.
Higher material costs for certain raw materials. Steel, aluminum and foam costs continued to be at elevated levels in the first quarter of 2019 primarily driven by tariffs on steel and aluminum. Material costs are subject to global supply and demand forces and are expected to remain volatile.
Higher labor costs. While the Company seeks to continuously manage its labor cost, it has added staff to support the growth of the business. Additionally, competition for skilled workers has continued to tighten the labor market which has increased the cost of labor.
Partially offset by:
Pricing changes of targeted products.
Increased sales to Adjacent Industries OEMs.
Investments over the past several years to increase capacity and improve operating efficiencies. Further, the Company has implemented efficiency improvements, including lean manufacturing initiatives, increased use of automation and employee retention initiatives. The Company has reduced direct labor attrition which improves efficiency and reduces other costs associated with workforce turnover.

Aftermarket Segment - First Quarter

Net sales of the Aftermarket Segment in the first quarter of 2019 increased 20 percent, or $10.1 million, compared to the same period of 2018. Net sales of components in the Aftermarket Segment were as follows for the three months ended March 31:
(In thousands) 2019 2018 Change
Total Aftermarket Segment net sales $ 60,392  $ 50,313  20  %

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ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
The Company’s net sales to the Aftermarket Segment increased during the first quarter of 2019 primarily due to the Company’s focus on building out well qualified, customer-focused teams and infrastructure to service this market and acquisitions.

Operating profit of the Aftermarket Segment was $7.3 million in the first quarter of 2019, an increase of $1.5 million compared to the same period of 2018, primarily due to an increase in net sales. Operating profit margin of the Aftermarket Segments was 12.2 percent in the first quarter of 2019, compared to 11.7 percent in the same period of 2018.

Income Taxes
The effective tax rates for the three months ended March 31, 2019 and 2018 were 24.0 percent and 19.4 percent, respectively. The effective tax rate for the three months ended March 31, 2019 differed from the Federal statutory rate primarily due to state taxes, foreign taxes and non-deductible expenses, partially offset by, the recognition of excess tax benefits as a component of the provision for income taxes attributable to the adoption of Accounting Standards Update 2016-09, and Federal and Indiana research and development credits. The increase in effective tax rate for the three months ended March 31, 2019 as compared to the same period in 2018 was due primarily to a reduction in the excess tax benefits from $3.3 million to $0.3 million related to the vesting of equity-based compensation awards.

LIQUIDITY AND CAPITAL RESOURCES

The Condensed Consolidated Statements of Cash Flows reflect the following for the three months ended March 31:
(In thousands) 2019 2018
Net cash flows provided by (used in) operating activities $ 52,585  $ (5,103)
Net cash flows used in investing activities (24,381) (164,454)
Net cash flows (used in) provided by financing activities (28,564) 148,501 
Net decrease in cash and cash equivalents $ (611) $ (21,056)

Cash Flows from Operations
Net cash flows provided by operating activities were $52.6 million in the first three months of 2019, compared to $5.1 million used in the first three months of 2018. Net assets and liabilities in the first three months of 2019 generated $67.6 million more cash than the same period in the prior year. This was partially offset by a $9.9 million decrease in net income, adjusted for non-cash items. Reduced inventory levels were the primary source of cash in net assets as the Company worked through elevated year-end inventory levels.
Over the long term, based on the Company’s historical collection and payment patterns, as well as inventory turnover, and also giving consideration to emerging trends and changes to the sales mix, the Company expects working capital to increase or decrease equivalent to approximately 10 to 15 percent of the increase or decrease, respectively, in net sales. However, there are many factors that can impact this relationship, especially in the short term.
Depreciation and amortization was $18.4 million in the first three months of 2019, and is expected to be approximately $73 million to $78 million for the fiscal year 2019. Non-cash stock-based compensation in the first three months of 2019 was $3.7 million. Non-cash stock-based compensation is expected to be approximately $15 million to $17 million for the fiscal year 2019.

Cash Flows from Investing Activities
Cash flows from investing activities of $24.4 million in the first three months of 2019 were primarily comprised of $24.4 million for capital expenditures. Cash flows from investing activities of $164.5 million in the first three months of 2018 were primarily comprised of $26.0 million for capital expenditures and $138.6 million for the acquisition of businesses.
The Company’s capital expenditures are primarily for replacement and growth. Over the long term, based on the Company’s historical capital expenditures, the replacement portion has averaged approximately 2 percent of net sales, while the growth portion has averaged approximately 7 to 10 percent of the annual increase in net sales. However, there are many factors that can impact the actual spending compared to these historical averages.
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ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Capital expenditures in the first three months of 2019 were funded by cash from operations. Capital expenditures and acquisitions in the fiscal year 2019 are expected to be funded primarily from cash generated from operations, as well as periodic borrowings under the Company’s revolving credit facility.

Cash Flows from Financing Activities
Cash flows from financing activities in the first three months of 2019 were primarily comprised of a payment of quarterly dividends of $0.60 per share of the Company’s common stock, representing an aggregate of $15.0 million, paid to stockholders of record as of March 8, 2019 and net $7.1 million in repayments under the Company’s line of credit. In addition, the Company had $6.3 million of shares tendered for payment of taxes.
Cash flows from financing activities in the first three months of 2018 were primarily comprised of a payment of quarterly dividends of $0.55 per share of the Company’s common stock, representing an aggregate of $13.9 million, paid to stockholders of record as of March 16, 2018. The increase in debt was due to borrowings under the Company’s line of credit. In addition, the Company had $14.1 million of shares tendered for payment of taxes
In connection with certain business acquisitions, if established sales targets for the acquired business are achieved, the Company will pay additional cash consideration. The Company has recorded a $7.4 million liability for the aggregate fair value of these expected contingent consideration liabilities at March 31, 2019. For further information, see Note 9 of the Notes to the Condensed Consolidated Financial Statements.
Credit Facilities
See Note 7 in the Notes to Condensed Consolidated Financial Statements for a description of our credit facilities.
The Company believes the availability under the line of credit and Shelf-Loan Facility (as defined in Note 7 in the Notes to Condensed Consolidated Financial Statements) is adequate to finance the Company’s anticipated cash requirements for the next twelve months.

CORPORATE GOVERNANCE

The Company is in compliance with the corporate governance requirements of the SEC and the New York Stock Exchange. The Company’s governance documents and committee charters and key practices have been posted to the “Investors” section of the Company’s website (www.lci1.com) and are updated periodically. The website also contains, or provides direct links to, all SEC filings, press releases and investor presentations. The Company has also established a Whistleblower Policy, which includes a toll-free hotline (877-373-9123) to report complaints about the Company’s accounting, internal controls, auditing matters or other concerns. The Whistleblower Policy and procedure for complaints can be found on the Company’s website (www.lci1.com).

CONTINGENCIES

Information required by this item is included in Note 9 of the Notes to the Condensed Consolidated Financial Statements under Item 1 of Part I of this Quarterly Report on Form 10-Q.

INFLATION

The prices of key raw materials, consisting primarily of steel and aluminum, and components used by the Company which are made from these raw materials, are influenced by demand and other factors specific to these commodities, rather than being directly affected by inflationary pressures. Prices of these commodities have historically been volatile, and over the past few months prices have continued to fluctuate. The Company did not experience any significant increases in its labor costs in the first three months of 2019 related to inflation.

NEW ACCOUNTING PRONOUNCEMENTS

Information required by this item is included in Note 2 of the Notes to the Condensed Consolidated Financial Statements.

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LCI INDUSTRIES
ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
USE OF ESTIMATES

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

FORWARD-LOOKING STATEMENTS

This Form 10-Q contains certain “forward-looking statements” with respect to the Company’s financial condition, results of operations, business strategies, operating efficiencies or synergies, competitive position, growth opportunities, acquisitions, plans and objectives of management, markets for the Company’s common stock, the impact of legal proceedings, and other matters. Statements in this Form 10-Q that are not historical facts are “forward-looking statements” for the purpose of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) and Section 27A of the Securities Act of 1933, as amended, and involve a number of risks and uncertainties.

Forward-looking statements, including, without limitation, those relating to the Company’s future business prospects, net sales, expenses and income (loss), cash flow, and financial condition, whenever they occur in this Form 10-Q are necessarily estimates reflecting the best judgment of the Company’s senior management at the time such statements were made. There are a number of factors, many of which are beyond the Company’s control, which could cause actual results and events to differ materially from those described in the forward-looking statements. These factors include, in addition to other matters described in this Form 10-Q, pricing pressures due to domestic and foreign competition, costs and availability of raw materials (particularly steel and aluminum) and other components, seasonality and cyclicality in the industries to which the Company sells its products, availability of credit for financing the retail and wholesale purchase of products for which the Company sells its components, inventory levels of retail dealers and manufacturers, availability of transportation for products for which the Company sells its components, the financial condition of the Company’s customers, the financial condition of retail dealers of products for which the Company sells its components, retention and concentration of significant customers, the costs, pace of and successful integration of acquisitions and other growth initiatives, availability and costs of production facilities and labor, employee benefits, employee retention, realization and impact of expansion plans, efficiency improvements and cost reductions, the disruption of business resulting from natural disasters or other unforeseen events, the successful entry into new markets, the costs of compliance with environmental laws, laws of foreign jurisdictions in which we operate, other operational and financial risks related to conducting business internationally, increased governmental regulation and oversight, information technology performance and security, the ability to protect intellectual property, warranty and product liability claims or product recalls, interest rates, oil and gasoline prices and availability, the impact of international, national and regional economic conditions and consumer confidence on the retail sale of products for which the Company sells its components, and other risks and uncertainties discussed more fully under the caption “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, and in the Company’s subsequent filings with the Securities and Exchange Commission. Readers of this report are cautioned not to place undue reliance on these forward-looking statements, since there can be no assurance that these forward-looking statements will prove to be accurate. The Company disclaims any obligation or undertaking to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made, except as required by law.

29


LCI INDUSTRIES
ITEM 3 – QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk related to changes in short-term interest rates on our variable rate debt. Depending on the interest rate option selected as fully described in Note 7 of the Notes to Condensed Consolidated Financial Statements, interest is charged based on an indexed rate plus an applicable margin. Assuming a hypothetical increase of 0.25 percent in the indexed interest rate (which approximates a ten percent increase of the weighted-average interest rate on our borrowings as of March 31, 2019), our results of operations would not be materially affected.
The Company is also exposed to changes in the prices of raw materials, specifically steel and aluminum. The Company has, from time to time, entered into derivative instruments for the purpose of managing a portion of the exposures associated with fluctuations in steel and aluminum prices. While these derivative instruments are subject to fluctuations in value, these fluctuations are generally offset by the changes in fair value of the underlying exposures. See Note 11 of the Notes to Condensed Consolidated Financial Statements for a more detailed discussion of derivative instruments.
The Company has historically been able to obtain sales price increases to partially offset the majority of raw material cost increases. However, there can be no assurance future cost increases, if any, can be partially or fully passed on to customers, or that the timing of such sales price increases will match raw material cost increases.
Additional information required by this item is included under the caption “Inflation” in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of this Report.

ITEM 4 – CONTROLS AND PROCEDURES
a.Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure, in accordance with the definition of “disclosure controls and procedures” in Rule 13a-15 under the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, cannot provide absolute assurance of achieving the desired control objectives. Management included in its evaluation the cost-benefit relationship of possible controls and procedures. The Company continually evaluates its disclosure controls and procedures to determine if changes are appropriate based upon changes in the Company’s operations or the business environment in which it operates.
As of the end of the period covered by this Form 10-Q, the Company performed an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s principal executive officer and the Company’s principal financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on the foregoing, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2019.
b.Changes in Internal Control over Financial Reporting
During the quarter ended March 31, 2019, the Company implemented controls to support the adoption ASU 2016-02, Leases (Topic 842). There were no other changes in the Company’s internal control over financial reporting during the quarter ended March 31, 2019, which have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
The Company began implementation of a new enterprise resource planning (“ERP”) system in late 2013. To date, 27 locations have been put on this ERP system. The roll-out plan is continually evaluated in the context of priorities for the business and may change as needs of the business dictate. The Company anticipates enhancements to controls due to both the installation of the new ERP system and business process changes resulting therefrom.
30


LCI INDUSTRIES

PART II – OTHER INFORMATION

ITEM 1 – LEGAL PROCEEDINGS
In the normal course of business, the Company is subject to proceedings, lawsuits, regulatory agency inquiries and other claims. All such matters are subject to uncertainties and outcomes that are not predictable with assurance. While these matters could materially affect operating results when resolved in future periods, it is management’s opinion that after final disposition, including anticipated insurance recoveries in certain cases, any monetary liability or financial impact to the Company beyond that provided in the Condensed Consolidated Balance Sheet as of March 31, 2019, would not be material to the Company’s financial position or annual results of operations.

ITEM 1A – RISK FACTORS
There have been no material changes to the matters discussed in Part I, Item 1A – Risk Factors in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission on February 27, 2019.

ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
There has been no activity with respect to the Company’s stock repurchase program during the three months ended March 31, 2019. At March 31, 2019, the Company has $121.3 million remaining in the current share repurchase authorization. Please refer to our Annual Report on Form 10-K as filed with the Securities and Exchange Commission on February 27, 2019 for further information on the program.
31


ITEM 6 – EXHIBITS

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

1
3.1
LCI Industries Restated Certificate of Incorporation, as amended effective December 30, 2016 (incorporated by reference to Exhibit 3.1 included in the Registrant’s Form 10-K for the year ended December 31, 2016).
2
3.2
Amended and Restated Bylaws of LCI Industries, as amended May 25, 2017 (incorporated by reference to Exhibit 3.2 included in the Registrant’s Form 8-K filed on May 31, 2017).
3
LCI Industries 2019 Annual Incentive Program (filed herewith).
4
Form of Restricted Stock Unit Award Agreement (Non-Employee Directors) under the LCI Industries 2018 Omnibus Incentive Plan (Revised February 2019) (filed herewith).
5
Form of Deferred Stock Unit Master Agreement (Non-Employee Directors) under the LCI Industries 2018 Omnibus Incentive Plan (Revised February 2019) (filed herewith).
6
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 on March 12, 2019).
7
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 on March 12, 2019).
8
Form of Extension Agreement with certain executive officers (incorporated by reference to Exhibit 10.3 included in the Registrant’s Form 8-K filed on March 12, 2019).
9
Form of Series B Note of Lippert Components, Inc. issued pursuant to the Fourth Amended and Restated Note Purchase and Private Shelf Agreement (incorporated by reference to Exhibit 10.1 included in the Registrant’s Form 8-K filed on April 2, 2019).
10
Certification of Chief Executive Officer required by Rule 13a-14(a). Exhibit 31.1 is filed herewith.
11
Certification of Chief Financial Officer required by Rule 13a-14(a). Exhibit 31.2 is filed herewith.
12
Certification of Chief Executive Officer required by Rule 13a-14(b) and Section 1350 Chapter 63 of Title 18 of the United States Code. Exhibit 32.1 is filed herewith.
13
Certification of Chief Financial Officer required by Rule 13a-14(b) and Section 1350 Chapter 63 of Title 18 of the United States Code. Exhibit 32.2 is filed herewith.
14 101
Interactive Data Files.

32


LCI INDUSTRIES

SIGNATURES

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

LCI INDUSTRIES
Registrant
By /s/ Brian M. Hall
Brian M. Hall
Chief Financial Officer
June 21, 2019

33

LCI Industries
2019 Annual Incentive Program
Establishment and Effective Date
The 2019 Annual Incentive Program (the “Program”) is hereby established to provide for the grant of Annual Cash Incentive Awards under the LCI Industries 2018 Omnibus Incentive Plan (the “Plan”). The Program shall be deemed effective as of January 1, 2019. The Program shall operate on the basis of a program year that begins on January 1, 2019 and ends on December 31, 2019 (“Program Year”). Payout will be based on Program Year performance results, except as otherwise provided herein.

Purpose
The purpose of the Program is to provide annual incentive compensation to:

Recognize the performance of key employees in achieving LCI Industries’ (“LCII”) and its key subsidiaries’ (collectively referred to as the “Company”) financial and operating objectives; and
Focus key executives on assisting the Company in achieving objectives key to its success.

Payouts for Program participants will be determined based on the Program provisions and the results of Company performance measurements, subject to adjustment (to the extent that any such adjustment is consistent with the terms and conditions of the Program and/or the Plan) by the Compensation Committee of LCII’s Board of Directors (the “Committee”).

Eligibility
Eligibility for Program participation will be limited to employees who are employed in executive positions that have ultimate responsibility for the financial and operating performance of the Company. However, employees who participate in another short-term Company incentive plan (other than a plan that compensates the employee on a commission basis) are not eligible to participate in this Program with respect to the portion of the Program Year that is also covered under such other plan. Names of approved Program participants are identified in the Program Appendix.

Any employee who first becomes eligible and is added to the Program after the start of the Program Year will be eligible to participate with respect to that Program Year, but prorated to reflect the period of the Program Year for which the employee was employed in an eligible classification.

Except as provided in the Employment Termination section below, employees must be actively employed through December 31, 2019 to be eligible for a payout under the Program with respect to the Program Year. Except as provided herein, those who are not actively employed through December 31, 2019 for reasons other than disability, approved leave of absence, or death will not be eligible to receive a payout under the Program. An employee does not earn a right to a Program payment (whether on a pro rata basis or otherwise) based upon length of service or mere completion of service during the Program Year. Rather, a payout is earned based upon the achievement by the Company of pre-determined performance goals measured over the course of the entire Program Year as a result of the efforts of eligible employees who contribute toward achievement of such goals. An employee’s participation in the Program, and the opportunity to earn a payout in accordance with the terms and conditions of the Program, does not represent an unequivocal promise on the part of the Company to pay incentive compensation other than to the extent that applicable performance goals have been satisfied, the employee satisfies the eligibility conditions specified herein, and the Committee has authorized a payout to the employee after completion of the Program Year.

Employment Termination



Termination of employment at any time during the Program Year will disqualify the participant from receiving a payout under the Program, except as provided below:

If the participant’s employment is terminated at any time during the Program Year (1) by the Company without cause, or (2) by the participant for good reason, the participant will receive a payout of any award that has otherwise been earned and approved by the Committee, but prorated to reflect the period of the Program Year for which the participant was employed.

Absence from active employment during the Program Year on account of disability or approved unpaid leave of absence will not disqualify the participant from receiving a payout of any award that has otherwise been earned and approved by the Committee.

Similarly, if termination of employment occurs during the Program Year due to death, the participant will receive a payout of any award that has otherwise been earned and approved by the Committee.

The word “cause” means participant’s (a) willful and continued failure to follow the Company’s reasonable direction or to perform any duties reasonably required of participant (other than any such failure resulting from his disability or from termination by participant for good reason, if applicable), after written demand for substantial performance is delivered to participant specifying in reasonable detail the manner in which participant has not performed, and participant has not remedied such failure within 30 days after notice thereof, (b) material violation of, or failure to act upon or report known or suspected violations of, the Company’s Guidelines for Business Conduct, as amended from time to time, (c) conviction of, or a plea of nolo contendere with respect to, any felony, (d) commission of any criminal, fraudulent, or dishonest act in connection with participant’s employment, (e) material breach of participant’s employment agreement which, if capable of remedy, continues for a period of 30 days without remedy thereof by participant after notice thereof, or two or more such breaches in any two month period, or (f) one or more instances of willful misconduct or gross negligence that, individually or in the aggregate, is materially detrimental to the Company’s interests.

The word “good reason” shall have the meaning set forth in the participant’s employment agreement with Lippert Components, Inc.

The word “disability” means the participant’s active service has been terminated as a result of physical or mental disability that renders the participant incapable of performing the essential functions of the participant’s job, with or without reasonable accommodation, and which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, as determined in good faith by the Company.

In all cases, eligibility for any earned payout is based upon the employee’s being employed during the Program Year in an eligible classification.

Any approved Program payout to or on behalf of a participant who was terminated by the Company without cause during the Program Year or who terminated employment during the Program Year for good reason or on account of disability or death, or who is absent from active service on account of disability or an approved unpaid leave of absence, will be paid at the same time as payment is made to active employees whose employment with the Company has continued. In the event of a participant’s death, any approved Program payout will be distributed at such time in a lump sum to the participant’s estate. In order to receive any approved Program payout following termination by the Company without cause or by the participant for good reason, or on account of disability, the participant must timely sign and not revoke a separation agreement and release of claims in a form acceptable to and determined by the Company in its sole discretion.

Program Performance Measures
The Program design includes financial measures that are approved by the Committee. Measurement of performance levels will be monitored throughout the Program Year. Following the end of the Program Year, results will be presented to the Committee for approval.




The following provides a general description of each of the financial performance measures for the Program Year. Measures reflect operations of the Company and will apply to the Program participants as indicated in the Program Appendix.

Financial Measures
For the purposes of the Program:

Revenue shall mean the Company’s 2019 consolidated net sales, as adjusted by the Committee for events that are unusual in nature or infrequently occurring, including without limitation a change in control, acquisitions, divestitures, restructuring activities, or asset write-downs, or for changes in applicable tax laws or accounting principles.

Adjusted EBIT shall mean the Company’s 2019 consolidated net income before interest and taxes, as adjusted by the Committee for events that are unusual in nature or infrequently occurring, including without limitation a change in control, acquisitions, divestitures, restructuring activities, or asset write-downs, or for changes in applicable tax laws or accounting principles.

Program Payouts
Following the close of the Program Year and after the audited financial results are available, the Committee will determine and certify the extent to which the performance measures have been satisfied and will authorize Program payouts. Payouts, less tax withholdings and other required or authorized deductions, will be paid no later than March 15, 2020.

Any Program payout is subject to any recoupment or clawback policy that may be adopted by the Company from time to time and to any requirement of applicable law, regulation, or listing standard that requires the Company to recoup or claw back compensation paid pursuant to the Program.

Relationship to Other Company Plans
Employees who participate in another short-term incentive plan (other than a plan that compensates the employee on a commission basis) are not eligible to participate in this Program until the time their participation in the other short-term incentive plan terminates.

Rights of Participants and Forfeiture
Nothing in this Program shall:

Confer upon any employee any right with respect to continuation of employment with the Company;

Interfere in any way with the right of the Company to terminate his/her employment at any time; or

Confer upon any employee or any other person any claim or right to any distribution under the Program except to the extent that a payment has been earned based upon the achievement of the measures applicable to the employee, the employee otherwise satisfies the eligibility requirements of the Program, and the Committee has authorized the payment of a payout to the employee.

No right or interest of any employee in the Program shall, prior to actual payment or distribution to the employee, be assignable or transferable in whole or in part, either voluntarily or by operation of law or otherwise, or be subject to payment of debts of any employee by execution, levy, garnishment, attachment, pledge, bankruptcy, or in any other manner.

Notwithstanding any provision of this Program to the contrary, no Program payout shall be made to any participant if he or she has engaged in any “detrimental activity” (as hereinafter defined) at any time prior to or during the six months after the Program payout has been delivered to him or her. In such event, the



entire Program payout may be rescinded by the Company within one (1) year after the Company becomes aware of such detrimental activity, and the Company shall notify the participant in writing of any such rescission within such one-year period. Within ten (10) days after receiving such notice of rescission, the participant shall pay to the Company the entire amount of the Program payout previously paid to him or her, in such manner and on such terms and conditions as may be required by the Company.

The word “detrimental activity” means (i) the unauthorized rendering of services for any organization or engaging, directly or indirectly, in any business which is competitive with the business of the Company; (ii) the disclosure to any person or entity outside the Company, or use in other than the Company’s business, without prior written authorization from the Company, of any “confidential information,” as hereinafter defined or material relating to the business of the Company; (iii) activity that results in termination of the participant’s employment by the Company for cause; or (iv) any other conduct or act reasonably determined by the Company to be injurious, detrimental, or prejudicial to any interest of the Company.

The words “confidential information” include any business, financial, and other sensitive, confidential, proprietary, and trade secret information which is of unique value to the Company. Examples of confidential information include: inventions, improvements, and designs; new product or marketing plans; business strategies and plans; merger and acquisition targets; financial and pricing information; computer programs, source codes, models, and databases; analytical models; human resources strategies; customer lists and information; supplier and vendor lists; and other information which is not generally available to the public.

Administration
The Committee is responsible for the establishment of the Program, and the Committee (or the LCII Board of Directors) has the right to amend or terminate the Program at any time, as it deems appropriate. Further, the Committee is authorized to: (1) interpret and apply the Program’s terms and conditions; (2) determine who will participate in the Program and the level of participation; (3) approve the performance measures under the Program; and (4) approve payments for participants covered by the Program. The Committee will report to the Board substantive actions taken.

This Program shall not be terminated, voluntarily or involuntarily, by the liquidation or dissolution of LCII or by the merger or consolidation of LCII with or into another corporation. Any successor to LCII will be deemed to be the Company under this Program.

If any provision of this Program, or any portion thereof, shall be held to be illegal, invalid, or unenforceable, the remainder of the Program or such provision shall not thereby be affected and shall be given full force and effect, without regard to the invalid portion.


LCI INDUSTRIES
2018 OMNIBUS INCENTIVE PLAN

Restricted Stock Unit Award Agreement

        LCI Industries (the “Company”), pursuant to its 2018 Omnibus Incentive Plan (the “Plan”), hereby grants an award of Restricted Stock Units to you, the Participant named below. The terms and conditions of this Award are set forth in this Restricted Stock Unit Award Agreement (the “Agreement”), consisting of this cover page and the Terms and Conditions on the following pages, and in the Plan document, a copy of which has been provided to you. Any capitalized term that is used but not defined in this Agreement shall have the meaning assigned to it in the Plan as it currently exists or as it is amended in the future.

Name of Participant:[_______________________]
Number of Restricted Stock Units: [_______] Grant Date:__________, 20__
Vesting Schedule Date:

By signing below or otherwise evidencing your acceptance of this Agreement in a manner approved by the Company, you agree to all of the terms and conditions contained in this Agreement and in the Plan document. You acknowledge that you have received and reviewed these documents. With respect to this Award, if there is any conflict between the provisions of this Agreement and any other agreement between you and the Company, the provisions of this Agreement will govern.

PARTICIPANT: LCI INDUSTRIES:
BY:
TITLE:






LCI INDUSTRIES
2018 Omnibus Incentive Plan
Restricted Stock Unit Award Agreement

Terms and Conditions

1. Grant of Restricted Stock Units. The Company hereby confirms the grant to you, as of the Grant Date and subject to the terms and conditions of this Agreement and the Plan, of the number of Restricted Stock Units specified on the cover page of this Agreement (the “Units”). Each Unit represents the right to receive one Share of the Company’s common stock. Prior to their settlement or forfeiture in accordance with the terms of this Agreement, the Units granted to you will be credited to an account in your name maintained by the Company. This account shall be unfunded and maintained for book-keeping purposes only, with the Units simply representing an unfunded and unsecured contingent obligation of the Company.

2. Restrictions Applicable to Units. Neither this Award nor the Units subject to this Award may be sold, assigned, transferred, exchanged or encumbered, voluntarily or involuntarily, other than a transfer upon your death in accordance with your will, by the laws of descent and distribution or pursuant to a beneficiary designation submitted in accordance with Section 6(d) of the Plan. Following any such transfer, this Award shall continue to be subject to the same terms and conditions that were applicable to this Award immediately prior to its transfer. Any attempted transfer in violation of this Section 2 shall be void and without effect. The Units and your right to receive Shares in settlement of the Units under this Agreement shall be subject to forfeiture as provided in Section 5 until satisfaction of the vesting conditions set forth in Section 4.

3. No Shareholder Rights. The Units subject to this Award do not entitle you to any rights of a holder of the Company’s common stock. You will not have any of the rights of a shareholder of the Company in connection with the grant of Units subject to this Agreement unless and until Shares are issued to you upon settlement of the Units as provided in Section 6.

4. Vesting of Units. For purposes of this Agreement, “Vesting Date” means any date, including the Scheduled Vesting Date specified on the cover page of this Agreement, on which Units subject to this Agreement vest as provided in this Section 4. Notwithstanding the vesting and subsequent settlement of this Award, it shall remain subject to the provisions of Section 8 of this Agreement.

(a) Scheduled Vesting. If you remain a Service Provider continuously from the Grant Date specified on the cover page of this Agreement, then the Units will vest in full on the Scheduled Vesting Date; provided, however, if, prior to the Scheduled Vesting Date, you complete your current term as a director in good standing and do not run for re-election by the shareholders to the Board for a subsequent term, this Award shall vest in full on the Scheduled Vesting Date.

(b) Accelerated or Continued Vesting. The vesting of outstanding Units will be accelerated or continued under the circumstances provided below:

(1) Death or Disability. If your Service terminates prior to the Scheduled Vesting Date due to your death or Disability, then all of the unvested Units shall vest as of such termination date.

(2) Change in Control. If a Change in Control occurs while you continue to be a Service Provider and prior to the Scheduled Vesting Date, the following provisions shall apply:




(i) If, within twelve (12) months after a Change in Control (A) described in paragraphs (1) or (2) of Section 2(g) of the Plan or (B) that constitutes a Corporate Transaction as defined in paragraph (3) of Section 2(g) of the Plan and in connection with which the surviving or successor entity (or its Parent) has continued, assumed or replaced this Award, your Service terminates, then all unvested Units shall immediately vest in full as of such termination date.

(ii) If this Award is not continued, assumed or replaced in connection with a Change in Control that constitutes a Corporate Transaction, then all unvested Units shall vest in full immediately prior to the effective time of the Corporate Transaction.

(iii) For purposes of this Section 4(b)(2), this Award will be considered assumed or replaced under the circumstances specified in Section 12(b)(1) of the Plan.

5. Effect of Termination of Service. Except as otherwise provided in accordance with Section 4 above, if you cease to be a Service Provider, you will forfeit all unvested Units.

6. Settlement of Units. Subject to Section 8 below, after any Units vest pursuant to Section 4, the Company shall, as soon as practicable (but no later than the 15th day of the third calendar month following the Vesting Date), cause to be issued and delivered to you (or to your personal representative or your designated beneficiary or estate in the event of your death, as applicable) one Share in payment and settlement of each vested Unit. Delivery of the Shares shall be effected by the issuance of a stock certificate to you, by an appropriate entry in the stock register maintained by the Company’s transfer agent with a notice of issuance provided to you, or by the electronic delivery of the Shares to a brokerage account, and shall be subject to compliance with all applicable legal requirements as provided in Section 17(c) of the Plan, and shall be in complete satisfaction and settlement of such vested Units. The Company will pay any original issue or transfer taxes with respect to the issue and transfer of Shares to you pursuant to this Agreement, and all fees and expenses incurred by it in connection therewith. If the Units that vest include a fractional Unit, the Company shall round the number of vested Units to the nearest whole Unit prior to issuance of Shares as provided herein.

7. Dividend Equivalents. If the Company pays cash dividends on its Shares while any Units subject to this Agreement are outstanding, then on each dividend payment date a dividend equivalent dollar amount equal to the number of Units credited to your account pursuant to this Agreement as of the dividend record date times the dollar amount of the cash dividend per Share shall be deemed reinvested in additional Units as of the dividend payment date and such additional Units shall be credited to your account. The number of additional Units so credited shall be determined based on the Fair Market Value of a Share on the applicable dividend payment date. Any additional Units so credited will be subject to the same terms and conditions, including the timing of vesting and settlement, applicable to the underlying Units to which the dividend equivalents relate.

8. Forfeiture of Award and Compensation Recovery.

(a) Notwithstanding any provision of this Agreement to the contrary, you understand that if any of the following occur: (i) a material violation by you of, or your failure to act upon or report known or suspected violations of, the Company’s Guidelines for Business Conduct, as amended from time to time, (ii) your conviction of, or a plea of nolo contendere with respect to, any felony, (iii) your commission of any criminal, fraudulent, or dishonest act in connection with your service as a director, (iv) your material breach of this Agreement which, if capable of remedy, continues for a period of thirty



(30) days without remedy thereof after your receipt of notice thereof or two or more such breaches occur in any two month period, (v) one or more instances of your willful misconduct or gross negligence that, individually or in the aggregate, is materially detrimental to the Company’s interests, (vi) a breach any of the covenants or provisions set forth in Section 8(b), 8(c) or 8(d) below unless compliance with the applicable portion of such covenants has been waived in writing by the Board in its discretion, or (vii) a breach of any other agreement between you and the Company, then, in the discretion of the Board: (A) any unsettled portion of this Award granted pursuant to this Agreement may be reduced, cancelled or forfeited, and (B) any settled portion of this Award granted pursuant to this Agreement may be rescinded and recovered within one (1) year after the Company becomes aware of such activity, conduct or event. The Company shall notify you in writing of any such reduction, cancellation, forfeiture, rescission or recovery. Immediately after receiving such notice, you shall forfeit the Award as well as the right to receive Shares that have not yet been issued pursuant to Section 6 to the extent indicated therein. If the written notice mandates the rescission or recovery of any settled portion of this Award, then within ten (10) days of the date of such notice, you are required to (y) return to the Company the number of Shares that you received upon settlement of this Award which have not been sold and (z) pay to the Company in cash an amount equal to the Fair Market Value of such Shares as of the settlement date of the underlying RSUs (with respect to Shares received hereunder that you previously sold). The Company also shall be entitled to set-off against the amount of any such gain any amount owed to you by the Company.

(b) You have or will be given access to and provided trade secrets, confidential and proprietary information, and other non-public information and data of or about the Company (and any entity that directly, or indirectly through one or more intermediaries, is owned or controlled by, owns or controls, or is under common ownership or control with, the Company; for this purpose, “control” of an entity means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of the entity, whether through the ownership of voting securities, by contract or otherwise (its “Affiliates”)) and its business (“Confidential Information”) in the course of your Service which is of unique value to the Company. Examples of Confidential Information include, without limitation: confidential business or manufacturing processes; research and development information; inventions, improvements and designs; new product or marketing plans; business strategies and plans; merger and acquisition targets; financial and pricing information; computer programs, source codes, models and databases; analytical models; human resources strategies; customer lists and information; information received from or about third parties that the Company is obligated to keep confidential; supplier and vendor lists; and other information which is not generally available to the public. You agree not to disclose, publish or use Confidential Information, either during or after your Service is terminated, except (i) as necessary to perform your duties during your term of Service, (ii) as the Company may consent in writing, (iii) as required by law or judicial process, provided you (unless prohibited by applicable law) promptly notify the Company in writing of any subpoena or other judicial request for disclosure involving Confidential Information or trade secrets, and reasonably cooperate with any effort by the Company to obtain a protective order preserving the confidentiality of the Confidential Information or trade secrets, or (iv) in connection with reporting possible violations of law or regulations to any governmental agency or from making other disclosures protected under any applicable whistleblower laws. The confidentiality obligations set forth herein shall continue indefinitely, for so long as the Confidential Information remains confidential (and you understand that you will not be relieved of your obligations if the Confidential Information loses its confidential nature because of a breach of any of your obligations to the Company or its Affiliates). If this Agreement is enforced by a court applying the law of a jurisdiction where a time frame is required for a non-disclosure provision to be enforceable with respect to information that does not rise to the level of a trade secret, then your obligations with respect to such information will be in effect during your term of Service and for three (3) years thereafter. You further agree to return any and all Confidential Information, whether in hard or electronic format, regardless of the location on which such information may reside, no later than three (3) business days following the termination of your Service. Notwithstanding anything to the contrary herein or in any policy of the



Company, you may not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made (A) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney if such disclosure is made solely for the purpose of reporting or investigating a suspected violation of law or for pursuing an anti-retaliation lawsuit; or (B) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal and you do not disclose the trade secret except pursuant to a court order. In the event a disclosure is made, and you file a lawsuit against the Company alleging that the Company retaliated against you because of your disclosure, you may disclose the relevant trade secret or confidential information to your attorney and may use the same in the court proceeding only if (x) you ensure that any court filing that includes the trade secret or confidential information at issue is made under seal; and (y) you do not otherwise disclose the trade secret or confidential information except as required by court order.

(c) Non-Disparagement. During your term of Service and afterward, you shall not, directly or indirectly, criticize, make any negative comments about or otherwise disparage the Company, its Affiliates or any persons or entities associated with any of them, whether orally, in writing, electronically or otherwise, directly or by implication, to any person or entity, including Company customers or agents; provided, however, that nothing in this Section 8(c) is intended to prohibit you from (i) making any disclosures or statements in good faith in the normal course of performing your duties or responsibilities for the Company during your Service; (ii) making any disclosures as may be required or compelled by law or legal process; or (iii) making any disclosures or providing any information to a governmental agency or entity, including without limitation in connection with a complaint by you against the Company or the investigation of any complaint against the Company.

(d) No Injurious, Detrimental or Prejudicial Conduct. Except as otherwise permitted in Section 8(c), during your term of Service or afterward, you shall not, directly or indirectly, engage in any conduct or inaction, or omit to take any action, which conduct, action or inaction is reasonably determined by the Board to be injurious, detrimental or prejudicial to the business or reputation of the Company or its Affiliates or any interest of the Company and its Affiliates, including, but not limited to, a violation of any material Company or Affiliate policy or a violation of any federal or state securities laws, rules or regulations or of any rule or other requirement of any securities exchanges on which the Company’s Shares may, at the time, be listed.

(e) Remedies. The parties expressly agree that the forfeiture and repayment obligations contained in this Section 8 are in addition to, and not in lieu of, any and all other legal and/or equitable remedies, including without limitation, injunctive relief, that may be available to the Company in connection with your breach of this Section 8, and the Company reserves it rights to pursue all such remedies. You acknowledge and agree that your breach of this Section 8 will cause irreparable injury to the Company and that money damages will not be adequate relief for such injury and, accordingly, you agree that the Company shall be entitled to obtain equitable relief, including, but not limited to, temporary restraining orders, preliminary injunctions and/or permanent injunctions, without having to post any bond or other security, to restrain or enjoin such breach, in addition to all other remedies which may be available to the Company.

9. Notices. Every notice or other communication relating to this Agreement shall be in writing and shall be mailed to or delivered (including electronically) to the party for whom it is intended at such address as may from time to time be designated by it in a notice mailed or delivered to the other party as herein provided. Unless and until some other address is so designated, all notices or communications by you to the Company shall be mailed or delivered to the Company, to the attention of its Vice President- Chief Legal Officer at the Company’s offices located at 4100 Edison Lakes Pkwy, Suite 210, Mishawaka, IN 46545, legal@lci1.com. All notices or communications by the Company to you may be given to you



personally or may be mailed or, if you are still a Service Provider, emailed to you at the address indicated in the Company’s records as your most recent mailing or email address.

10. Additional Provisions.

(a) Standing. The Company’s Affiliates are intended third-party beneficiaries of this Agreement and this Agreement may be enforced by the Company and/or its Affiliates, either singularly or jointly.

(b) No Right to Continued Service. This Agreement does not give you a right to continued Service with the Company or any Affiliate, and the Company or any such Affiliate may terminate your Service at any time and otherwise deal with you without regard to the effect it may have upon you under this Agreement.

(c) Governing Plan Document. This Agreement and the Award are subject to all the provisions of the Plan, and to all interpretations, rules and regulations which may, from time to time, be adopted and promulgated by the Committee pursuant to the Plan. If there is any conflict between the provisions of this Agreement and the Plan, the provisions of the Plan will govern.

(d) Governing Law; Venue; Waiver of Jury Trial. To the extent not pre-empted by federal law, this Agreement, the parties’ performance hereunder, and the relationship between them shall be governed by, construed, and enforced in accordance with the laws of the State of Delaware, without giving effect to the choice of law principles thereof. Each party hereto agrees that any legal action arising out of or relating to this Agreement shall be commenced and maintained exclusively before any state or federal court having appropriate subject matter jurisdiction located in St. Joseph County, Indiana. Further, each party hereto irrevocably consents and submits to the personal jurisdiction and venue of such courts located in St. Joseph County, Indiana, and waives any right to challenge or otherwise object to personal jurisdiction or venue (including, without limitation, any objection based on inconvenient forum grounds) in any action commenced or maintained in such courts located in St. Joseph County, Indiana; provided, however, the foregoing shall not affect any applicable right a party may have to remove a legal action to federal court. EACH PARTY HERETO VOLUNTARILY AND IRREVOCABLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT.

(e) Severability. The provisions of this Agreement shall be severable and if any provision of this Agreement is found by any court to be unenforceable, in whole or in part, the remainder of this Agreement shall nevertheless be enforceable and binding on the parties. You also agree that any trier of fact may modify any invalid, overbroad or unenforceable provision of this Agreement so that such provision, as modified, is valid and enforceable under applicable law.

        (f) Independent Covenants. To the extent you are or become subject to any other agreements with the Company or any Affiliate that contain restrictive covenants, the restrictive covenants set forth in Section 8 of this Agreement are independent of, supplement and do not supersede such other agreements.

(g) Binding Effect. This Agreement will be binding in all respects on your heirs, representatives, successors and assigns, and on the successors and assigns of the Company.




(h) Section 409A of the Code. The award of Units as provided in this Agreement and any issuance of Shares or payment pursuant to this Agreement are intended to be exempt from Section 409A of the Code under the short-term deferral exception specified in Treas. Reg. § 1.409A-l(b)(4).

(i) Electronic Delivery and Acceptance. The Company may deliver any documents related to this Award by electronic means and request your acceptance of this Agreement by electronic means. You hereby consent to receive all applicable documentation by electronic delivery and to participate in the Plan through an on-line (and/or voice activated) system established and maintained by the Company or the Company’s third-party stock plan administrator.

By signing the cover page of this Agreement or otherwise accepting this Agreement in a manner approved by the Company, you agree to all the terms and conditions described above and in the Plan document.




LCI INDUSTRIES
2018 Omnibus Incentive Plan

Deferred Stock Unit Master Agreement

This is a Deferred Stock Unit Master Agreement (the “Agreement”), effective as of December 31, 2019, between LCI Industries, a Delaware corporation (the “Company”), and you, [ ]. Any capitalized term used but not defined in this Agreement shall have the meaning set forth in the Plan (defined below) as it currently exists or as it is amended in the future.

Background

        A. The Company maintains the LCI Industries 2018 Omnibus Incentive Plan (the “Plan”). Under the Plan, the Board has the authority to determine Awards and administer the Plan with respect to Awards involving Non-Employee Directors.

        B. As a Non-Employee Director of the Company, you are entitled to receive (i) an annual cash retainer for service on the Board, (ii) other fees relating to your service as a chairperson of the Board or any committee of the Board, as applicable, and (iii) meeting fees for attendance at any Board or committee meeting in excess of 25 meetings during a year (as such retainer and fees payable to a Non-Employee Director of the Company may be changed from time to time, collectively, the “Director Fees”).

        C. Per your election form (“Election Form”) which is incorporated into and made a part of this Agreement, you have elected to receive _____% of each Director Fee payment made during 2020 in the form of Deferred Stock Units (“DSUs”) each of which represents the right to receive one Share of the Company’s Stock (or, in certain circumstances, the cash value thereof). The number of DSUs to be credited to your account on each Grant Date (as defined below) will be determined by dividing (i) 115% of that portion of the Director Fees that otherwise would have been paid with respect to the calendar quarter in which the Grant Date occurs, but for your election in the Election Form by (ii) the Fair Market Value of a Share on the applicable Grant Date.

D. Each award of DSUs (“DSU Award”) granted during 2020 will be evidenced by a Grant Notification in the form attached hereto as Exhibit A, and each such Grant Notification when issued by the Company will be incorporated into and made a part of this Agreement. The terms and conditions of each quarterly DSU Award are set forth in this Agreement, including the applicable Grant Notification, as well as in the Plan document previously provided to you.

Terms and Conditions of DSU Awards

1. Grant. Subject to Sections 7 and 8 below, on the last day of each calendar quarter during 2020 (each, a “Grant Date”), you will be granted the number of DSUs specified in the applicable Grant Notification which will be equal to the result of dividing (i) 115% of that portion of the Director Fees that otherwise would have been paid with respect to the calendar quarter in which the Grant Date occurs, but for your election in the Election Form by (ii) the Fair Market Value of a Share on the applicable Grant Date. Each DSU will represent the right to receive one



Share of the Company’s common stock (or, in certain circumstances, the cash value thereof). The DSUs granted to you will be credited to an account in your name maintained by the Company. This account shall be unfunded and maintained for book-keeping purposes only, with the DSUs simply representing an unfunded and unsecured obligation of the Company.

2. Restrictions on Units. Prior to settlement of the DSUs in accordance with Section 5, the DSUs subject to this Agreement may not be sold, assigned, transferred, exchanged or encumbered other than by will or the laws of descent and distribution. Any attempted transfer in violation of this Section 2 shall be of no effect.

3. No Shareholder Rights. The DSUs subject to this Agreement do not entitle you to any rights of a shareholder of the Company’s common stock, except as otherwise set forth herein. You will not have any of the rights of a shareholder of the Company in connection with the grant of DSUs subject to this Agreement unless and until Shares are issued to you upon settlement of the Units as provided in Section 5.

4. Vesting of DSUs. The DSUs subject to this Agreement are 100% vested as of their respective Grant Dates.

5. Settlement of Units. Subject to Section 8, the Company shall cause to be issued and delivered to you, or to your designated beneficiary or estate in the event of your death, one Share in payment and settlement of each DSU subject to this Agreement on the date(s) specified in your Election Form. Delivery of Shares in settlement of a DSU Award subject to this Agreement shall be effected by an appropriate entry in the stock register maintained by the Company’s transfer agent with a notice of issuance provided to you, or by the electronic delivery of the Shares to a brokerage account you designate, and shall be subject to compliance with all applicable legal requirements, including compliance with the requirements of applicable federal and state securities laws.

6. Dividend Equivalents. If a cash dividend is declared and paid by the Company with respect to its common stock, you will be credited as of the applicable dividend payment date with an additional number of DSUs (the “Dividend DSUs”) equal to (i) the total cash dividend you would have received if your then outstanding DSUs (including any previously credited Dividend DSUs) had been actual Shares, divided by (ii) the Fair Market Value of a Share as of the applicable dividend payment date (with the quotient rounded down to the nearest whole number). Once credited to your account, Dividend DSUs will be considered DSUs for all purposes of this Agreement.

7. Termination of Service and Future Awards. Upon termination of your Service, you will no longer be entitled to receive any additional DSU Awards pursuant to this Agreement. Director Fees payable after the termination of your Service, if any, shall be payable in cash only.

8. Change in Control. Upon a Change in Control within the meaning of Section 2(g)(3) of the Plan and after giving effect to the last sentence thereof, your outstanding DSU Awards will be settled in cash. The cash amount paid for each outstanding DSU shall be an amount in cash equal to the Fair Market Value of one Share immediately prior to the occurrence of the Change in Control.

9. Changes in Capitalization. If an “equity restructuring” (as defined in Section 12 of the Plan) occurs that causes the per share value of the Shares to change, the Board shall make



such equitable adjustments to any DSU subject to this Agreement as are contemplated by Section 12 of the Plan in order to avoid dilution or enlargement of your rights hereunder. The Board may make such equitable adjustments to any DSU subject to this Agreement as and to the extent provided in Section 12 of the Plan in connection with other changes in the Company’s capitalization contemplated by Section 12 of the Plan.

10. Forfeiture of DSU Awards and Compensation Recovery. Notwithstanding any provision of this Agreement to the contrary, you understand that if any of the following occur: (i) a material violation by you of, or your failure to act upon or report known or suspected violations of, the Company’s Guidelines for Business Conduct, as amended from time to time, (ii) your conviction of, or a plea of nolo contendere with respect to, any felony, (iii) your commission of any criminal, fraudulent, or dishonest act in connection with your service as a director, (iv) your material breach of this Agreement which, if capable of remedy, continues for a period of thirty (30) days without remedy thereof after your receipt of notice thereof or two or more such breaches occur in any two month period, (v) one or more instances of your willful misconduct or gross negligence that, individually or in the aggregate, is materially detrimental to the Company’s interests, (vi) a breach any of the covenants or provisions set forth in Section 10(a), 10(b) or 10(c) below unless compliance with the applicable portion of such covenants has been waived in writing by the Board in its discretion, or (vii) a breach of any other agreement between you and the Company, then, in the discretion of the Board: (A) any unsettled portion of a DSU Award granted pursuant to this Agreement may be reduced, cancelled or forfeited, and (B) any settled portion of a DSU Award granted pursuant to this Agreement may be rescinded and recovered within one (1) year after the Company becomes aware of such activity, conduct or event. The Company shall notify you in writing of any such reduction, cancellation, forfeiture, rescission or recovery. Immediately after receiving such notice, you shall forfeit the applicable DSU Award(s) as well as the right to receive Shares that have not yet been issued pursuant to Section 5 to the extent indicated therein. If the written notice mandates the rescission or recovery of any settled portion of a DSU Award, then within ten (10) days of the date of such notice, you are required to (y) return to the Company the number of Shares that you received upon settlement of a DSU Award issued pursuant to this Agreement which have not been sold and (z) pay to the Company in cash an amount equal to the Fair Market Value of such Shares as of the respective settlement date(s) of the underlying DSUs (with respect to Shares received hereunder that you previously sold). The Company also shall be entitled to set-off against the amount of any such gain any amount owed to you by the Company.

(a) Non-Disclosure and Return of Confidential Information. You have or will be given access to and provided trade secrets, confidential and proprietary information, and other non-public information and data of or about the Company (and any entity that directly, or indirectly through one or more intermediaries, is owned or controlled by, owns or controls, or is under common ownership or control with, the Company; for this purpose, “control” of an entity means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of the entity, whether through the ownership of voting securities, by contract or otherwise (its “Affiliates”)) and its business (“Confidential Information”) in the course of your Service which is of unique value to the Company. Examples of Confidential Information include, without limitation: confidential business or manufacturing processes; research and development information; inventions, improvements and designs; new product or marketing plans; business strategies and plans; merger and acquisition targets; financial and pricing information; computer programs, source codes, models and databases; analytical models; human resources strategies; customer lists and information; information received from or about third parties that the Company is obligated to keep confidential; supplier and vendor lists; and other information which is not generally



available to the public. You agree not to disclose, publish or use Confidential Information, either during or after your Service is terminated, except (i) as necessary to perform your duties during your term of Service, (ii) as the Company may consent in writing, (iii) as required by law or judicial process, provided you (unless prohibited by applicable law) promptly notify the Company in writing of any subpoena or other judicial request for disclosure involving Confidential Information or trade secrets, and reasonably cooperate with any effort by the Company to obtain a protective order preserving the confidentiality of the Confidential Information or trade secrets, or (iv) in connection with reporting possible violations of law or regulations to any governmental agency or from making other disclosures protected under any applicable whistleblower laws. The confidentiality obligations set forth herein shall continue indefinitely, for so long as the Confidential Information remains confidential (and you understand that you will not be relieved of your obligations if the Confidential Information loses its confidential nature because of a breach of any of your obligations to the Company or its Affiliates). If this Agreement is enforced by a court applying the law of a jurisdiction where a time frame is required for a non-disclosure provision to be enforceable with respect to information that does not rise to the level of a trade secret, then your obligations with respect to such information will be in effect during your term of Service and for three (3) years thereafter. You further agree to return any and all Confidential Information, whether in hard or electronic format, regardless of the location on which such information may reside, no later than three (3) business days following the termination of your Service. Notwithstanding anything to the contrary herein or in any policy of the Company, you may not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made (A) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney if such disclosure is made solely for the purpose of reporting or investigating a suspected violation of law or for pursuing an anti-retaliation lawsuit; or (B) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal and you do not disclose the trade secret except pursuant to a court order. In the event a disclosure is made, and you file a lawsuit against the Company alleging that the Company retaliated against you because of your disclosure, you may disclose the relevant trade secret or confidential information to your attorney and may use the same in the court proceeding only if (x) you ensure that any court filing that includes the trade secret or confidential information at issue is made under seal; and (y) you do not otherwise disclose the trade secret or confidential information except as required by court order.

(b) Non-Disparagement. During your term of Service and afterward, you shall not, directly or indirectly, criticize, make any negative comments about or otherwise disparage the Company, its Affiliates or any persons or entities associated with any of them, whether orally, in writing, electronically or otherwise, directly or by implication, to any person or entity, including Company customers or agents; provided, however, that nothing in this Section 10(b) is intended to prohibit you from (i) making any disclosures or statements in good faith in the normal course of performing your duties or responsibilities for the Company during your Service; (ii) making any disclosures as may be required or compelled by law or legal process; or (iii) making any disclosures or providing any information to a governmental agency or entity, including without limitation in connection with a complaint by you against the Company or the investigation of any complaint against the Company.

(c) No Injurious, Detrimental or Prejudicial Conduct. Except as otherwise permitted in Section 10(b), during your term of Service or afterward, you shall not, directly or indirectly, engage in any conduct or inaction, or omit to take any action, which conduct, action or inaction is reasonably determined by the Board to be injurious, detrimental or prejudicial to



the business or reputation of the Company or its Affiliates or any interest of the Company and its Affiliates, including, but not limited to, a violation of any material Company or Affiliate policy or a violation of any federal or state securities laws, rules or regulations or of any rule or other requirement of any securities exchanges on which the Company’s Shares may, at the time, be listed.

(d) Remedies. The parties expressly agree that the forfeiture and repayment obligations contained in this Section 10 are in addition to, and not in lieu of, any and all other legal and/or equitable remedies, including without limitation, injunctive relief, that may be available to the Company in connection with your breach of this Section 10, and the Company reserves it rights to pursue all such remedies. You acknowledge and agree that your breach of this Section 10 will cause irreparable injury to the Company and that money damages will not be adequate relief for such injury and, accordingly, you agree that the Company shall be entitled to obtain equitable relief, including, but not limited to, temporary restraining orders, preliminary injunctions and/or permanent injunctions, without having to post any bond or other security, to restrain or enjoin such breach, in addition to all other remedies which may be available to the Company.

11. Interpretation of This Agreement. All decisions and interpretations made by the Board with regard to any question arising hereunder or under the Plan shall be binding and conclusive upon you and the Company. If there is any inconsistency between the provisions of this Agreement and the Plan, the provisions of the Plan shall govern.

12. Discontinuance of Service. Neither this Agreement nor any DSU Award subject to this Agreement shall confer on you any right with respect to continued Service with the Company or any of its Affiliates, nor interfere in any way with any rights to terminate such Service.

13. DSU Awards Subject to Plan. The DSU Awards evidenced by this Agreement (including any Grant Notifications issued hereunder) are granted pursuant to the Plan, the terms of which are hereby made a part of this Agreement. This Agreement (including any Grant Notifications issued hereunder) shall in all respects be interpreted in accordance with the terms of the Plan. If any terms of this Agreement or any Grant Notification issued hereunder conflict with the terms of the Plan, the terms of the Plan shall control, except as the Plan specifically provides otherwise. This Agreement (including any Grant Notifications issued hereunder) and the Plan constitute the entire agreement of the parties with respect to the DSU Awards and supersede all prior oral or written negotiations, commitments, representations and agreements with respect thereto.

14. Obligation to Reserve Sufficient Shares. The Company shall at all times during the term of this Agreement and the DSU Awards issued hereunder reserve and keep available a sufficient number of Shares to satisfy this Agreement.

15. Binding Effect. This Agreement shall be binding in all respects on your heirs, representatives, successors and assigns, and on the successors and assigns of the Company. The Company’s Affiliates are intended third-party beneficiaries of this Agreement and this Agreement may be enforced by the Company and/or its Affiliates, either singularly or jointly.

16. Governing Law; Venue; Waiver of Jury Trial. To the extent not pre-empted by federal law, this Agreement, the parties’ performance hereunder, and the relationship between them shall be governed by, construed, and enforced in accordance with the laws of the State of



Delaware, without giving effect to the choice of law principles thereof. Each party hereto agrees that any legal action arising out of or relating to this Agreement shall be commenced and maintained exclusively before any state or federal court having appropriate subject matter jurisdiction located in St. Joseph County, Indiana. Further, each party hereto irrevocably consents and submits to the personal jurisdiction and venue of such courts located in St. Joseph County, Indiana, and waives any right to challenge or otherwise object to personal jurisdiction or venue (including, without limitation, any objection based on inconvenient forum grounds) in any action commenced or maintained in such courts located in St. Joseph County, Indiana; provided, however, the foregoing shall not affect any applicable right a party may have to remove a legal action to federal court. EACH PARTY HERETO VOLUNTARILY AND IRREVOCABLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT.

17. Amendment and Compliance with Code Section 409A and Fair Construction. Notwithstanding anything in the Plan or this Agreement to the contrary, you, the Company and the Board intend that all provisions of the Plan, this Agreement and the Election Form, in form and in operation, including but not limited to, the definitions of terms, elections to defer, and distributions, shall be made in accordance with and shall comply with Section 409A of the Code, and all other present and future Internal Revenue Service (“IRS”) guidance. The Company will amend the terms of the Plan, this Agreement and the Election Form, retroactively if necessary, to the extent required to comply with Section 409A of the Code and any relevant IRS guidance. No provision of the Plan, this Agreement and the Election Form shall be followed to the extent that following such provision would result in a violation of Section 409A of the Code or the relevant IRS guidance, and no election made by you hereunder, and no change made by you to a previous election, shall be accepted by the Company if it determines that acceptance of such election or change could violate any of the requirements of Section 409A of the Code or the IRS guidance.

18. Tax Consequences. The Company and the Board make no representations concerning the tax consequences of participation in the Plan under Code Section 409A or any other federal, state or local tax law. Tax consequences will depend, in part, upon the application of relevant tax law, including Code Section 409A, to the relevant facts and circumstances. You agree that you have consulted an independent tax advisor regarding the tax consequences of this deferral.

19. Independent Covenants. To the extent you are or become subject to any other agreements with the Company or any Affiliate that contain restrictive covenants, the restrictive covenants set forth in Section 10 of this Agreement are independent of, supplement and do not supersede such other agreements.




By signing below or otherwise evidencing your acceptance of this Agreement in a manner approved by the Company as of the date specified at the beginning of this Agreement, you agree to all of the terms and conditions contained in this Agreement and in the Plan document. You acknowledge that you have received and reviewed these documents and that they set forth the entire agreement between you and the Company regarding this Deferred Stock Unit Master Agreement.


PARTICIPANT LCI INDUSTRIES
By
Its




Exhibit A
LCI INDUSTRIES
2018 Omnibus Incentive Plan
Deferred Stock Unit Master Agreement

Grant Notification

        LCI Industries (the “Company”), pursuant to its 2018 Omnibus Incentive Plan (the “Plan”) and a Deferred Stock Unit Master Agreement dated December 31, 2019 (the “Master Agreement”) between the Company and you, the Participant named below, hereby grants to you an award of Deferred Stock Units (“Units”), each such Unit representing the right to receive one share of the Company’s common stock (or, in certain circumstances, the cash value thereof). The terms and conditions of this Unit Award are set forth in this Grant Notification, the Master Agreement, and the Plan document, and these documents set forth the entire agreement between you and the Company regarding the grant to you of the number of Units shown in the table below.

Name of Participant:
Number of Units: Grant Date:
Vesting Schedule:
Vesting Date Percentage of Units that Vest
[Grant Date] 100%   



LCI INDUSTRIES
By
Its




EXHIBIT 31.1
 
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO 13a-14(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934
 
I, Jason D. Lippert, Chief Executive Officer, certify that:

1.I have reviewed this quarterly report on Form 10-Q/A 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: June 21, 2019
By /s/ Jason D. Lippert
Jason D. Lippert, Chief Executive Officer



EXHIBIT 31.2
 
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO 13a-14(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934
 
I, Brian M. Hall, Chief Financial Officer, certify that:

1.I have reviewed this quarterly report on Form 10-Q/A 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: June 21, 2019
By /s/ Brian M. Hall
Brian M. Hall, Chief Financial Officer



EXHIBIT 32.1
 
 
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
 
 
 
In connection with the quarterly report on Form 10-Q/A of LCI Industries (the “Company”) for the period ended March 31, 2019, 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
June 21, 2019
 



EXHIBIT 32.2
 
 
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
 
 
 
In connection with the quarterly report on Form 10-Q/A of LCI Industries (the “Company”) for the period ended March 31, 2019, 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
June 21, 2019