LCI Industries Stock

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

The company’s products include steel chassis and related components; axles and suspension solutions; slide-out mechanisms and solutions; thermoformed bath, kitchen, and other products; vinyl, aluminum, and frameless windows; manual, electric, and hydraulic stabilizer and leveling systems; entry, luggage, patio, and ramp doors; furniture and mattresses; electric and manual entry steps; awnings and awning accessories; towing products; truck accessories; electronic components; appliances; air conditioners; televisions and sound systems; tankless water heaters; and other accessories.

Segments

The company operates through two segments: the original equipment manufacturers segment (the OEM) and the aftermarket segment (the Aftermarket).

OEM

This segment manufactures and distributes a broad array of engineered components for the leading OEMs in the recreation, transportation products, and housing markets, consisting primarily of RVs and adjacent industries, including boats; buses; trailers used to haul boats, livestock, equipment, and other cargo; trucks; trains; manufactured homes; and modular housing.

In 2023, the OEM Segment represented 77 percent of the company’s consolidated net sales and 14 percent of consolidated segment operating profit. Approximately 47 percent of the company’s OEM Segment net sales in 2023 were from products to manufacturers of travel trailer and fifth-wheel RVs. RVs may be motorized (motorhomes) or towable (travel trailers, fifth-wheel travel trailers, folding camping trailers, and truck campers).

Raw materials used by the company’s OEM segment, consisting primarily of steel (coil, sheet, tube, and I-beam), extruded aluminum, glass, wood, fabric, and foam, are available from a number of sources, both domestic and foreign.

Operations of the company’s OEM segment consist primarily of fabricating, welding, thermoforming, painting, sewing, and assembling components into finished products. The company’s OEM segment operations are conducted at manufacturing and distribution facilities throughout North America and Europe, strategically located in proximity to the customers they serve.

The company’s OEM segment products are sold primarily to major manufacturers of RVs, such as Thor Industries, Inc. (symbol: THO), Forest River, Inc. (a Berkshire Hathaway company, symbol: BRKA), Winnebago Industries, Inc. (symbol: WGO) and other RV OEMs, and to manufacturers in other adjacent industries such as Brunswick Corporation (symbol: BC), Polaris Inc. (symbol: PII), Blue Bird Corporation (symbol: BLBD), Skyline Champion Corporation (symbol: SKY) and Cavco Industries, Inc. (symbol: CVCO). The company is a leading supplier for towable RVs for various principal RV products, such as windows, furniture, doors, leveling systems, chassis, awnings, slide-out mechanisms, anti-lock braking systems (ABS), axles, and electronics, and appliances.

Aftermarket

This segment’s products are also sold through various aftermarket channels of the recreation and transportation markets, primarily to retail dealers, wholesale distributors, and service centers, as well as direct to retail customers via the Internet. This includes discretionary accessories and replacement service parts. The company has teams dedicated to product, technical, and installation training, as well as marketing support for its Aftermarket Segment customers. The company also supports multiple call centers to provide responses to customers for both product delivery and technical support. This support is designed for a rapid response to critical repairs, so customer downtime is minimal. The Aftermarket Segment also includes biminis, covers, buoys, fenders to the marine industry, towing products, truck accessories, appliances, air conditioners, televisions, sound systems, tankless water heaters, and the sale of replacement glass and awnings to fulfill insurance claims. Many of the optional upgrades and non-critical replacement parts for RVs are purchased outside the normal product selling season, thereby causing certain Aftermarket Segment sales to be counter-seasonal.

Sales from products of CURT Manufacturing LLC (CURT), which the company acquired in 2019, accounted for approximately half of the company’s Aftermarket segment net sales in 2023. CURT is a leading manufacturer and distributor of branded towing products and truck accessories and sells products to the automotive and truck aftermarket, as well as the RV, marine, and trailer markets, all of which require towing products, which it complements the OEM markets the company serves.

Customer Concentrations

Thor Industries, Inc. (Thor), a customer of both segments, accounted for 16 percent of the company’s consolidated net sales for the years ended December 31, 2023. Berkshire Hathaway Inc. (through its subsidiaries Forest River, Inc. and Clayton Homes, Inc.), a customer of both segments, accounted for 15 percent of the company’s consolidated net sales for the year ended December 31, 2023.

Sales and Marketing

The company’s sales activities are related to developing new customer relationships and maintaining existing customer relationships, primarily through the quality and reliability of its products, innovation, price, customer service, and customer satisfaction. The company has several supply agreements or other arrangements with certain of its customers.

Seasonality

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, 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 have been, and may in the future be, different than in prior years. Additionally, many of the optional upgrades and non-critical replacement parts for RVs are purchased outside the normal product selling season, thereby causing certain Aftermarket Segment sales to be counter-seasonal.

International

The company continues to focus on developing products tailored for international recreation and transportation markets. The company participates in the largest caravan shows in Europe and have been receiving positive feedback on its products. Recently, some of the product innovations it developed for European markets have been gaining popularity in the United States as well. The company’s international business development team works with customers and prospects in Europe and other international markets, assessing the dynamics of the local marketplace, building relationships with OEMs and helping introduce its existing products and develop new products for those markets, with the goal of identifying long-term growth opportunities. The company targets the same international product markets that it supplies to in the United States, including RV, adjacent industries such as marine, cargo trailers, and high-speed trains, and the related aftermarkets. The company’s largest domestic customer, Thor, has a presence in the European caravan market, which provides additional business opportunities for it in Europe.

Intellectual Property

The company holds approximately 710 United States and foreign patents and have approximately 210 patent applications pending that relate to various products it sells. The company has also granted certain licenses that permit third parties to manufacture and sell products in consideration for royalty payments.

Research and Development

The company’s research and development expenses were approximately $20 million in 2023.

Regulatory Matters

Trailers produced by the company for hauling boats, personal watercraft, snowmobiles and equipment must comply with Federal Motor Vehicle Safety Standards (FMVSS) promulgated by NHTSA relating to lighting, braking, wheels, tires and other vehicle systems.

Windows and doors produced by the company for the RV industry must comply with regulations promulgated by NHTSA governing safety glass performance, egress ability, door hinge and lock systems, egress window retention hardware, and baggage door ventilation. Windows produced by the company for buses also must comply with FMVSS promulgated by NHTSA.

Upholstered products and mattresses produced by the company for RVs and buses must comply with FMVSS promulgated by NHTSA regarding flammability. In addition, upholstered products and mattresses produced by the company for RVs must comply with regulations promulgated by the Consumer Product Safety Commission regarding flammability, as well as standards for toxic chemical levels and labeling requirements promulgated by the California Office of Environmental Health Hazard Assessment. Plywood, particleboard and fiberboard used in RV products are required to comply with standards for formaldehyde emission levels promulgated by the California Air Resources Board and adopted by the Recreation Vehicle Industry Association (RVIA).

Windows and entry doors produced by the company for manufactured homes must comply with performance and construction regulations promulgated by the U.S. Department of Housing and Urban Development (HUD) and by the American Architectural Manufacturers Association relating to air and water infiltration, structural integrity, thermal performance, emergency exit conformance, and hurricane resistance. Certain of the company’s products must also comply with the International Code Council standards, such as the IRC (International Residential Code), the IBC (International Building Code), and the IECC (International Energy Conservation Code), as well as state and local building codes. Thermoformed bath products manufactured by the company for manufactured homes must comply with performance and construction regulations promulgated by HUD.

History

The company was founded in 1956. It was incorporated under the laws of Delaware in 1984. It was formerly known as Drew Industries Incorporated and changed its name to LCI Industries in 2016.