Company Quick10K Filing
LCI Industries
Price93.91 EPS5
Shares25 P/E17
MCap2,362 P/FCF11
Net Debt245 EBIT183
TEV2,607 TEV/EBIT14
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-06-30 Filed 2020-08-04
10-Q 2020-03-31 Filed 2020-05-07
10-K 2019-12-31 Filed 2020-02-27
10-Q 2019-09-30 Filed 2019-11-05
10-Q 2019-06-30 Filed 2019-08-06
10-Q 2019-03-31 Filed 2019-05-07
10-K 2018-12-31 Filed 2019-02-27
10-Q 2018-09-30 Filed 2018-11-07
10-Q 2018-06-30 Filed 2018-08-07
10-Q 2018-03-31 Filed 2018-05-10
10-K 2017-12-31 Filed 2018-02-28
10-Q 2017-09-30 Filed 2017-11-07
10-Q 2017-06-30 Filed 2017-08-08
10-Q 2017-03-31 Filed 2017-05-09
10-K 2016-12-31 Filed 2017-02-28
10-Q 2016-09-30 Filed 2016-11-08
10-Q 2016-06-30 Filed 2016-08-09
10-Q 2016-03-31 Filed 2016-05-10
10-K 2015-12-31 Filed 2016-02-29
10-Q 2015-09-30 Filed 2015-11-09
10-Q 2015-06-30 Filed 2015-08-07
10-Q 2015-03-31 Filed 2015-05-11
10-K 2014-12-31 Filed 2015-03-02
10-Q 2014-09-30 Filed 2014-11-07
10-Q 2014-06-30 Filed 2014-08-08
10-Q 2014-03-31 Filed 2014-05-09
10-K 2013-12-31 Filed 2014-02-28
10-Q 2013-09-30 Filed 2013-11-08
10-Q 2013-06-30 Filed 2013-08-08
10-Q 2013-03-31 Filed 2013-05-09
10-K 2012-12-31 Filed 2013-03-12
10-Q 2012-09-30 Filed 2012-11-09
10-Q 2012-06-30 Filed 2012-08-09
10-Q 2012-03-31 Filed 2012-05-09
10-K 2011-12-31 Filed 2012-03-14
10-Q 2011-09-30 Filed 2011-11-08
10-Q 2011-06-30 Filed 2011-08-08
10-Q 2011-03-31 Filed 2011-05-09
10-K 2010-12-31 Filed 2011-03-11
10-Q 2010-09-30 Filed 2010-11-09
10-Q 2010-06-30 Filed 2010-08-06
10-Q 2010-03-31 Filed 2010-05-10
10-K 2009-12-31 Filed 2010-03-11
8-K 2020-08-25 Other Events, Exhibits
8-K 2020-08-11 Earnings, Regulation FD, Exhibits
8-K 2020-08-04 Earnings, Exhibits
8-K 2020-08-04 Regulation FD, Exhibits
8-K 2020-07-21 Other Events, Exhibits
8-K 2020-07-14 Other Events, Exhibits
8-K 2020-06-01
8-K 2020-05-21
8-K 2020-05-21
8-K 2020-05-12
8-K 2020-05-05
8-K 2020-05-05
8-K 2020-04-30
8-K 2020-04-23
8-K 2020-04-21
8-K 2020-04-08
8-K 2020-03-25
8-K 2020-02-25
8-K 2020-02-24
8-K 2020-02-11
8-K 2020-02-11
8-K 2020-01-28
8-K 2020-01-07
8-K 2019-12-19
8-K 2019-12-02
8-K 2019-11-25
8-K 2019-11-22
8-K 2019-11-21
8-K 2019-11-18
8-K 2019-11-14
8-K 2019-11-14
8-K 2019-11-11
8-K 2019-11-05
8-K 2019-11-05
8-K 2019-10-22
8-K 2019-10-21
8-K 2019-10-08
8-K 2019-10-01
8-K 2019-09-12
8-K 2019-08-30
8-K 2019-08-27
8-K 2019-08-27
8-K 2019-08-23
8-K 2019-08-06
8-K 2019-08-06
8-K 2019-08-01
8-K 2019-07-23
8-K 2019-06-28
8-K 2019-06-11
8-K 2019-05-28
8-K 2019-05-23
8-K 2019-05-23
8-K 2019-05-13
8-K 2019-05-07
8-K 2019-05-07
8-K 2019-04-23
8-K 2019-03-29
8-K 2019-03-15
8-K 2019-03-07
8-K 2019-02-26
8-K 2019-02-07
8-K 2019-02-07
8-K 2019-01-24
8-K 2019-01-22
8-K 2018-12-14
8-K 2018-11-30
8-K 2018-11-16
8-K 2018-11-15
8-K 2018-11-06
8-K 2018-11-01
8-K 2018-11-01
8-K 2018-10-18
8-K 2018-08-30
8-K 2018-08-16
8-K 2018-08-02
8-K 2018-08-02
8-K 2018-07-19
8-K 2018-06-04
8-K 2018-05-24
8-K 2018-05-24
8-K 2018-05-10
8-K 2018-05-04
8-K 2018-05-04
8-K 2018-04-20
8-K 2018-03-08
8-K 2018-03-06
8-K 2018-02-27
8-K 2018-02-20
8-K 2018-02-16
8-K 2018-02-08
8-K 2018-02-08
8-K 2018-02-08
8-K 2018-01-26
8-K 2018-01-25
8-K 2018-01-17

LCII 10Q Quarterly Report

Part I - Financial Information
Item 1 - Financial Statements
Item 2 - Management's Discussion and Analysis Of
Item 3 - Quantitative and Qualitative
Item 4 - Controls and Procedures
Part II - Other Information
Item 1 - Legal Proceedings
Item 1A - Risk Factors
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds
Item 6 - Exhibits
EX-31.1 lcii-06302020xex311.htm
EX-31.2 lcii-06302020xex312.htm
EX-32.1 lcii-06302020xex321.htm
EX-32.2 lcii-06302020xex322.htm

LCI Industries Earnings 2020-06-30

Balance SheetIncome StatementCash Flow
1.51.20.90.60.30.02012201420172020
Assets, Equity
0.70.60.40.30.10.02012201420172020
Rev, G Profit, Net Income
0.20.10.0-0.0-0.1-0.22012201420172020
Ops, Inv, Fin

lcii-20200630
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended: June 30, 2020

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-20200630_g1.jpg
LCI INDUSTRIES
(Exact name of registrant as specified in its charter)

Delaware13-3250533
(State or other jurisdiction of(I.R.S. Employer
incorporation or organization)Identification Number)
3501 County Road 6 East46514
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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $.01 par valueLCIINew 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 (July 31, 2020) was 25,153,541 shares of common stock.

2




LCI INDUSTRIES

TABLE OF CONTENTS

Page
PART I  
  
 
  
 
  
 
 
  
 
  
 
  
 
  
 
  
 
  
PART II
  
 
  
 
  
 
  
 
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 
June 30,
Six Months Ended 
June 30,
 2020201920202019
(In thousands, except per share amounts)    
Net sales$525,765  $629,068  $1,185,435  $1,221,240  
Cost of sales397,023  480,415  898,088  939,993  
Gross profit128,742  148,653  287,347  281,247  
Selling, general and administrative expenses107,960  82,996  222,299  167,835  
Operating profit20,782  65,657  65,048  113,412  
Interest expense, net3,698  2,099  8,895  4,606  
Income before income taxes17,084  63,558  56,153  108,806  
Provision for income taxes3,898  16,031  14,753  26,913  
Net income$13,186  $47,527  $41,400  $81,893  
Net income per common share:    
Basic$0.52  $1.90  $1.65  $3.28  
Diluted$0.52  $1.89  $1.64  $3.28  
Weighted average common shares outstanding:    
Basic25,150  25,024  25,108  24,963  
Diluted25,219  25,091  25,177  25,005  

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 
June 30,
Six Months Ended 
June 30,
 2020201920202019
(In thousands)    
Net income$13,186  $47,527  $41,400  $81,893  
Other comprehensive income (loss):
Net foreign currency translation adjustment1,239  (1,495) (3,501) (2,669) 
Actuarial gain on Dutch pension plans6,299    6,299    
Unrealized gain (loss) on fair value of derivative instruments442  (1,888) 1,642  (2,042) 
Total comprehensive income$21,166  $44,144  $45,840  $77,182  

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
5


LCI INDUSTRIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

 June 30,December 31,
 20202019
(In thousands, except per share amount)  
ASSETS  
Current assets  
Cash and cash equivalents$62,272  $35,359  
Accounts receivable, net of allowances of $5,503 and $3,144 at June 30, 2020 and December 31, 2019, respectively
269,562  199,976  
Inventories, net328,986  393,607  
Prepaid expenses and other current assets36,471  41,849  
Total current assets697,291  670,791  
Fixed assets, net364,957  366,309  
Goodwill418,839  351,114  
Other intangible assets, net370,715  341,426  
Operating lease right-of-use assets98,947  98,774  
Other assets67,525  34,181  
Total assets$2,018,274  $1,862,595  
LIABILITIES AND STOCKHOLDERS’ EQUITY  
Current liabilities  
Current maturities of long-term indebtedness$20,882  $17,883  
Accounts payable, trade124,399  99,262  
Current portion of operating lease obligations23,651  21,693  
Accrued expenses and other current liabilities140,939  132,420  
Total current liabilities309,871  271,258  
Long-term indebtedness681,242  612,906  
Operating lease obligations78,932  79,848  
Deferred taxes42,792  35,740  
Other long-term liabilities88,807  62,171  
Total liabilities1,201,644  1,061,923  
Stockholders’ equity
Common stock, par value $.01 per share
282  281  
Paid-in capital215,864  212,485  
Retained earnings653,083  644,945  
Accumulated other comprehensive income5,563  1,123  
Stockholders’ equity before treasury stock874,792  858,834  
Treasury stock, at cost(58,162) (58,162) 
Total stockholders’ equity816,630  800,672  
Total liabilities and stockholders’ equity$2,018,274  $1,862,595  

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
6


LCI INDUSTRIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Six Months Ended 
June 30,
 20202019
(In thousands)  
Cash flows from operating activities:  
Net income$41,400  $81,893  
Adjustments to reconcile net income to cash flows provided by operating activities:  
Depreciation and amortization48,799  37,115  
Stock-based compensation expense7,404  7,848  
Other non-cash items546  705  
Changes in assets and liabilities, net of acquisitions of businesses:
Accounts receivable, net(62,611) (22,345) 
Inventories, net63,404  39,944  
Prepaid expenses and other assets(27,679) 11,444  
Accounts payable, trade20,917  11,567  
Accrued expenses and other liabilities9,921  11,944  
Net cash flows provided by operating activities102,101  180,115  
Cash flows from investing activities:  
Capital expenditures(14,549) (35,786) 
Acquisitions of businesses, net of cash acquired(94,713) (8,530) 
Other investing activities4,096  251  
Net cash flows used in investing activities(105,166) (44,065) 
Cash flows from financing activities:  
Vesting of stock-based awards, net of shares tendered for payment of taxes(4,616) (7,144) 
Proceeds from revolving credit facility borrowings276,542  305,288  
Repayments under revolving credit facility borrowings(197,330) (354,981) 
Repayments under term loan and other borrowings(9,554)   
Payment of dividends(32,670) (31,266) 
Other financing activities(279) (397) 
Net cash flows provided by (used in) financing activities32,093  (88,500) 
Effect of exchange rate changes on cash and cash equivalents(2,115) (1,818) 
Net increase in cash and cash equivalents26,913  45,732  
Cash and cash equivalents at beginning of period35,359  14,928  
Cash and cash equivalents at end of period$62,272  $60,660  
Supplemental disclosure of cash flow information:  
Cash paid during the period for interest$9,593  $3,948  
Cash (received) paid during the period for income taxes, net of refunds$(611) $13,890  
Purchase of property and equipment in accrued expenses$2,624  $298  

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


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


(In thousands, except shares and per share amounts)Common
Stock
Paid-in
Capital
Retained
Earnings
Accumulated Other Comprehensive Income (Loss)Treasury
Stock
Total
Stockholders’
Equity
Balance - December 31, 2018$280  $203,246  $563,496  $(2,605) $(58,162) $706,255  
Net income—  —  34,366  —  —  34,366  
Issuance of 137,040 shares of common stock pursuant to stock-based awards, net of shares tendered for payment of taxes
1  (6,349) —  —  —  (6,348) 
Stock-based compensation expense—  3,733  —  —  —  3,733  
Other comprehensive loss—  —  —  (1,328) —  (1,328) 
Cash dividends ($0.60 per share)
—  —  (14,999) —  —  (14,999) 
Dividend equivalents on stock-based awards—  304  (304) —  —    
Balance - March 31, 2019281  200,934  582,559  (3,933) (58,162) 721,679  
Net income—  —  47,527  —  —  47,527  
Issuance of 27,965 shares of common stock pursuant to stock-based awards, net of shares tendered for payment of taxes
—  (795) —  —  —  (795) 
Stock-based compensation expense—  4,115  —  —  —  4,115  
Other comprehensive loss—  —  —  (3,383) —  (3,383) 
Cash dividends ($0.65 per share)
—  —  (16,267) —  —  (16,267) 
Dividend equivalents on stock-based awards—  318  (318) —  —    
Balance - June 30, 2019$281  $204,572  $613,501  $(7,316) $(58,162) $752,876  


The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
8


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


(In thousands, except shares and per share amounts)Common
Stock
Paid-in
Capital
Retained
Earnings
Accumulated Other Comprehensive Income (Loss)Treasury
Stock
Total
Stockholders’
Equity
Balance - December 31, 2019$281  $212,485  $644,945  $1,123  $(58,162) $800,672  
Net income—  —  28,214  —  —  28,214  
Issuance of 87,833 shares of common stock pursuant to stock-based awards, net of shares tendered for payment of taxes
1  (4,518) —  —  —  (4,517) 
Stock-based compensation expense—  3,295  —  —  —  3,295  
Other comprehensive loss—  —  —  (3,540) —  (3,540) 
Cash dividends ($0.65 per share)
—  —  (16,321) —  —  (16,321) 
Dividend equivalents on stock-based awards—  297  (297) —  —    
Balance - March 31, 2020282  211,559  656,541  (2,417) (58,162) 807,803  
Net income—  —  13,186  —  —  13,186  
Issuance of 16,251 shares of common stock pursuant to stock-based awards, net of shares tendered for payment of taxes
—  (99) —  —  —  (99) 
Stock-based compensation expense—  4,109  —  —  —  4,109  
Other comprehensive income—  —  —  7,980  —  7,980  
Cash dividends ($0.65 per share)
—  —  (16,349) —  —  (16,349) 
Dividend equivalents on stock-based awards—  295  (295) —  —    
Balance - June 30, 2020$282  $215,864  $653,083  $5,563  $(58,162) $816,630  


The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
9




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

Most industries where the Company sells products or where its products are used historically have been seasonal and are generally at the highest levels when the weather is moderate. Accordingly, the Company’s sales and profits have generally been the highest in the second quarter and lowest in the fourth quarter. However, 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 may be different than in prior years, particularly as a result of the COVID-19 pandemic and related impacts. Additionally, sales of certain engineered components to the aftermarket channels of these industries tend to be counter-seasonal, but may be different in 2020 and future years as a result of the COVID-19 pandemic and related impacts.

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

In the opinion of management, the information furnished in this Form 10-Q reflects all adjustments necessary for a fair statement of the financial position and results of operations for the interim periods presented. The Condensed Consolidated Financial Statements 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, pension and post-retirement benefits, stock-based compensation, segment allocations, contingent consideration, environmental liabilities, contingencies, and litigation. The Company bases its estimates on historical experience, other available information, and various other assumptions believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities not readily apparent from other resources. Actual results and events could differ significantly from management estimates.

10

LCI INDUSTRIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Impact of COVID-19

On March 11, 2020, the World Health Organization declared the outbreak of coronavirus ("COVID-19") a pandemic, and on March 13, 2020, the United States declared a national emergency related to COVID-19. The pandemic has caused significant uncertainty and disruption in the global economy and financial markets.

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

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

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Condensed Consolidated Financial Statements presented herein have been prepared by the Company in accordance with the accounting policies described in its December 31, 2019 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 December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes, eliminates certain exceptions within Accounting Standards Codification ("ASC") 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. The new standard is effective for fiscal years beginning after December 15, 2021. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company is evaluating the effect of adopting this new accounting guidance.

Recently adopted accounting pronouncements

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which amends ASC 350, Intangibles - Goodwill and Other. This ASU simplifies how an entity is required to test goodwill for impairment by eliminating step 2 from the goodwill impairment test. Step 2 measures goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill.
11

LCI INDUSTRIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The Company adopted this ASU effective January 1, 2020. The adoption did not have a material impact on its 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 requires the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable forecasts. This ASU replaced the previous incurred loss model and is applicable to the measurement of credit losses on financial assets, including trade receivables. The Company adopted this ASU effective January 1, 2020 using the modified retrospective transition method. The adoption did not have a material impact on the Company's consolidated financial statements.

3. ACQUISITIONS, GOODWILL AND OTHER INTANGIBLE ASSETS

Acquisitions Completed During the Six Months Ended June 30, 2020

Polyplastic

In January 2020, the Company acquired 100 percent of the equity interests of Polyplastic Group B.V. (with its subsidiaries “Polyplastic”), a premier window supplier to the caravanning industry, headquartered in Rotterdam, Netherlands. The purchase price was $95.8 million, net of cash acquired, plus contingent consideration up to $7.7 million, based on future sales by this operation. The results of the acquired business have been included in the Condensed Consolidated Statements of Income since the acquisition date, primarily in the Company’s OEM Segment. As the acquisition of Polyplastic is not considered to have a material impact on the Company's financial statements, pro forma results of operations and other disclosures are not presented. The Company is validating account balances and finalizing the valuation for customer relationships and other identifiable intangible assets, net tangible assets, and the unfunded pension benefit obligation. The acquisition of this business was preliminarily recorded as of the acquisition date as follows (in thousands):
Cash consideration, net of cash acquired$95,766  
Contingent consideration2,796  
Total fair value of consideration given$98,562  
Customer relationship and other identifiable intangible assets$53,674  
Net tangible assets, excluding pension obligation15,867  
Unfunded pension benefit obligation(28,665) 
Total fair value of net assets acquired$40,876  
Goodwill (not tax deductible)$57,686  

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

12

LCI INDUSTRIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The customer relationship intangible asset is being amortized over its estimated useful life of 15 years. The fair value of this asset was determined using a discounted cash flow model, which is a level 3 input in the fair value hierarchy. The consideration given was greater than the fair value of the net assets acquired, resulting in goodwill, because the Company anticipates the attainment of synergies and an increase in the markets for the acquired products.

Acquisitions with Measurement Period Adjustments During the Six Months Ended June 30, 2020

CURT

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

During the six months ended June 30, 2020, the Company adjusted the preliminary purchase price allocation reported at December 31, 2019 to account for updates to assumptions and estimates related to the fair value of intangible assets and inventories, and to adjust the purchase price for final net working capital balances. These measurement period adjustments would not have resulted in a material impact on the prior period results if the adjustments had been recognized as of the acquisition date. The purchase price allocation is subject to adjustment as additional information is obtained within the measurement period (not to exceed 12 months from the acquisition date). The acquisition of this business was recorded, as updated, on the acquisition date as follows (in thousands):
Preliminary at December 31, 2019
Measurement Period Adjustments
As Adjusted at June 30, 2020
Cash consideration, net of cash acquired$337,640  $(1,053) $336,587  
Assets Acquired
Accounts receivable$28,611  $—  $28,611  
Inventories88,765  (6,648) 82,117  
Fixed assets24,036  —  24,036  
Customer relationship112,000  (7,800) 104,200  
Tradename and other identifiable intangible assets37,705  (300) 37,405  
Operating lease right-of-use assets27,925  —  27,925  
Other tangible assets4,060  (1,550) 2,510  
Liabilities Assumed
Accounts payable(18,577) —  (18,577) 
Current portion of operating lease obligations(5,360) —