LCI Industries: Form 10-Q for the period ended Mar 31, 2026

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 I of this report, as well as the Company's Annual Report on Form 10-K for the year ended December 31, 2025.

LCI Industries ("LCII" and collectively with its subsidiaries, the "Company," the "Registrant," "we," "us," or "our"), through its wholly-owned subsidiary, Lippert Components, Inc. and its subsidiaries (collectively, "Lippert Components," "LCI," or "Lippert"), is a global leader in supplying engineered components to the outdoor recreation, transportation, marine, and housing industries. In addition to serving original equipment manufacturers ("OEMs"), we also cater to aftermarket needs, selling through retail dealers, wholesale distributors, and service centers, as well as direct-to-consumer sales through online platforms.

Our diverse portfolio of innovative and high-quality products includes:

• Chassis and Suspension Solutions: Steel chassis, axles, anti-lock braking systems ("ABS"), and suspension systems
• Furniture Solutions: Furniture for RV, marine and other markets, and mattresses
• Window and Glass Solutions: Vinyl, aluminum, and frameless windows, and windshields
• Appliance and Kitchen Solutions: Air conditioners, tankless water heaters, appliances, electronic components, televisions, and thermoformed bath and kitchen products
• Towing and Truck Accessories: Hitches, pin boxes, grill guards, towing electrical, and towing and truck accessories
• Doors, Steps, and Awnings: Entry, luggage, patio, and ramp doors, electric and manual entry steps, and awnings
• Leveling, Stabilization, and Slide-outs: Stabilizer/leveling systems (manual, electric, and hydraulic), and slide-out solutions

At March 31, 2026, we operated over 100 manufacturing facilities located throughout North America and Europe, supporting key industries such as recreational vehicles ("RVs"), transportation, marine, and housing. Our core manufacturing competencies include:

We operate in two primary segments: OEM and Aftermarket. Together, these segments leverage our manufacturing competencies, leadership expertise, customer relationships, and market insights to drive efficiencies and innovation that enable us to maintain a leading position in the RV market while continuing to expand in adjacent industries and aftermarket channels. Intersegment sales are insignificant. See Note 12 of the Notes to Condensed Consolidated Financial Statements for further information regarding our segments.

OEM Segment: Our OEM Segment services leading OEMs in RV, transportation, marine, and housing markets. Our strategically located manufacturing and distribution facilities across North America and Europe provide efficient service to OEMs. Key markets served by our OEM Segment include RVs and Adjacent Industries.

Aftermarket Segment: Our Aftermarket Segment enhances the product lifecycle for the RV, transportation, marine, and automotive markets by offering discretionary accessories, replacement parts, and upgrades. This approach drives additional revenue, deepens customer engagement, and leverages our OEM expertise. Products are sold through retail dealers, wholesale distributors, and service centers, as well as direct-to-consumer sales through online platforms.

Diversification Strategy: Over the past several years, we have diversified our portfolio beyond the RV OEM market into transportation, marine, housing, and aftermarket sectors. We have also diversified geographically through our international operations. Leveraging our manufacturing competencies in other industries can accelerate profitable growth and help to mitigate seasonal and cyclical market risk. For example, within our Aftermarket Segment, many of the optional upgrades and non-critical replacement parts for RVs are purchased outside the normal product selling season, thereby causing certain sales within this segment to be counter-seasonal.

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

Negative conditions in the general economy in the United States or abroad, including conditions resulting from financial and credit market fluctuations, elevated inflation and interest rates, changes in economic policy, trade uncertainty, including changes in tariffs, sanctions, international treaties, and other trade restrictions, geopolitical tensions, armed conflicts, natural disasters, or global public health crises, have negatively impacted, and could continue to negatively impact, the Company’s business, liquidity, financial condition, and results of operations.

INDUSTRY BACKGROUND

OEM Segment - North American Recreational Vehicle Industry: RVs are designed as temporary living quarters for recreational, camping, travel, or seasonal use. They can be either motorized, such as motorhomes, or towable, including travel trailers, fifth-wheel trailers, folding camping trailers, and truck campers. The RV industry generally follows a predictable annual sales cycle that starts after the annual fall "Open House" in Elkhart, Indiana:

• October - March: Dealers build inventory, leading wholesale shipments to historically outpace retail sales.
• April - September: Retail sales typically exceed wholesale shipments, driven by spring and summer demand.

In the first three months of 2026 compared to the same period in 2025, Recreation Vehicle Industry Association ("RVIA") data shows United States wholesale shipments of travel trailer and fifth-wheel RVs, the Company's primary market, decreased 15 percent to 73,400 units. Retail demand for travel trailer and fifth-wheel RVs decreased 17 percent to 52,200 units in the first three months of 2026 compared to the same period in 2025. Retail registration data is often revised upward in subsequent months due to reporting delays.

While we track our OEM Segment RV sales against wholesale shipment statistics, the health of the RV industry is ultimately determined by retail demand. The table below highlights trends in wholesale shipments, retail sales, and dealer inventory adjustments for travel trailers and fifth-wheel RVs, as reported by Statistical Surveys, Inc. ("Statistical Surveys").

25

(Continued)

In the first three months of 2026 compared to the same period in 2025, RVIA data showed wholesale shipments of motorhome RVs increased 15 percent to 10,700 units. Retail demand for motorhome RVs decreased 24 percent to 6,800 units in the first three months of 2026 compared to the same period of 2025. Retail demand has declined from post-pandemic elevated levels, primarily driven by inflation and higher interest rates impacting retail consumer discretionary spending.

OEM Segment - Adjacent Industries: Our expertise in RV components extends to adjacent industries, including transportation, marine, and housing. These adjacent industries offer significant growth opportunities, including by helping us leverage our established relationships with OEMs that often operate in multiple sectors. While the potential content per unit we may supply to adjacent industries varies across these markets, and is different than RVs, they represent meaningful diversification opportunities.

Aftermarket Segment: Our Aftermarket Segment enhances the product lifecycle for the RV, transportation, marine, and automotive markets by offering discretionary accessories, replacement parts, and upgrades through various channels, including retail dealers, wholesale distributors, and service centers, as well as direct-to-consumer sales through online platforms. These products support recreation and transportation markets, addressing both routine maintenance needs and customer-driven enhancements.

We also provide comprehensive customer support through multiple customer care centers, offering rapid responses to inquiries related to technical support, product delivery, and critical repair, designed to minimize consumer downtime. Dedicated teams deliver product, technical, and installation training, as well as marketing assistance, to enhance customer engagement and satisfaction.

Aftermarket offerings span a diverse product portfolio, including:

• Marine Products: Biminis, covers, buoys, and fenders.
• Recreation and Transportation Accessories: Towing products, truck accessories, replacement glass, and awnings.
• Core Systems: Appliances, air conditioners, televisions, sound systems, and tankless water heaters.

Aftermarket sales are influenced by seasonal trends, with many non-critical upgrades and replacement parts purchased outside peak selling periods, creating certain counter-seasonal demand.

The U.S. RV ownership base, which reached a record 8.1 million households in 2025 according to the RVIA, drives robust demand for aftermarket products. Owners seek to enhance and maintain their units, replacing components that experience normal wear and tear. This vibrant and growing market represents a key driver of our Aftermarket Segment’s performance.

RESULTS OF OPERATIONS

Consolidated Highlights

• Consolidated net sales in the first quarter of 2026 were $1.1 billion, an increase of 4.3 percent, from $1.0 billion in the same period of 2025. The increase was primarily due to sales price increases to cover higher material costs, sales from acquired businesses, North American RV sales driven by recent innovations, and an increased mix of higher content fifth-wheel units, partially offset by lower North American RV wholesale shipments. Net sales from acquisitions completed in the twelve months ended March 31, 2026 contributed approximately $46.8 million in the first quarter of 2026.
• Net income for the first quarter of 2026 was $62.9 million, or $2.53 per diluted share, compared to net income of $49.4 million, or $1.94 per diluted share, for the same period of 2025.
• Consolidated operating profit during the first quarter of 2026 was $95.2 million, compared to $81.3 million in the same period of 2025. Operating profit margin was 8.7 percent in the first quarter of 2026 compared to 7.8 percent in the same period of 2025. The increase was primarily due to reduced costs as a result of materials sourcing strategies and the benefits of other cost improvement actions, such as the footprint optimizations.
• In the first quarter of 2026, we paid a quarterly dividend of $1.15 per share, aggregating to $27.9 million.

OEM Segment - First Quarter

Net sales of the OEM Segment in the first quarter of 2026 increased by $29.3 million, compared to the same period of 2025. Net sales of components to OEMs were to the following markets for the three months ended March 31:

(In thousands)

According to the RVIA, industry-wide wholesale shipments for the three months ended March 31 were:

The trend in our average product content per RV produced is an indicator of our continued engagement with our RV OEM customers. Our average product content per type of RV, calculated based upon our net sales of components to domestic RV OEMs for the different types of RVs produced for the twelve months ended March 31, divided by the industry-wide wholesale shipments of the different product mix of RVs for the same period, was:

Our average product content per type of RV excludes international sales and sales to the Aftermarket Segment and Adjacent Industries. Content per RV is impacted by changes in selling prices for our products, product innovations, changes in unit mix, and acquisitions. For the twelve months ended March 31, 2026, travel trailer and fifth-wheel RV content increased 12.8 percent year-over year due to sales price increases to cover higher material costs, an increase in RV mix toward higher content fifth-wheel units, and recent innovations, partially offset by shipments exceeding units produced.

Our decrease in net sales to RV OEMs during the first quarter of 2026 was primarily due to a decrease in North American travel trailer and fifth-wheel shipments, partially offset by sales price increases to cover higher material costs, an increase in RV sales mix toward higher content fifth-wheel units, an increase in North American motorhome RV unit shipments, and recent innovations.

Our increase in net sales to OEMs in Adjacent Industries during the first quarter of 2026 was primarily due to sales from acquired businesses and higher sales to North American marine OEMs.

Operating profit of the OEM Segment was $76.5 million in the first quarter of 2026, an increase of $14.5 million compared to the same period of 2025. The operating profit margin of the OEM Segment increased to 9.0 percent in the first quarter of 2026, compared to 7.5 percent for the same period of 2025, and was positively impacted by:

• Increases in selling prices for targeted products to cover increased material costs, which positively impacted operating profit by $31.6 million compared to the same period in 2025.
• Increases in selling prices contractually tied to indices of select commodities, which positively impacted operating profit by $16.7 million compared to the same period in 2025.
• Cost improvement actions, such as footprint optimizations, increased operating profit by $6.7 million compared to the same period in 2025.
• Reduced costs as a result of materials sourcing strategies, which increased operating profit by $6.4 million compared to the same period in 2025.
• A favorable shift in sales mix, which positively impacted operating profit by $4.3 million compared to the same period in 2025.

Partially offset by:

• Higher material costs related to tariffs and higher steel and aluminum costs, partially offset by a reduction in in-bound freight costs, which negatively impacted operating profit by $38.4 million compared to the same period in 2025.
• The impact of fixed costs spread over decreased production volumes, which decreased operating profit by $9.3 million related to fixed production overhead costs and $4.2 million related to fixed selling, general, and administrative costs.

Amortization expense on intangible assets for the OEM Segment was $9.4 million in the first quarter of 2026, compared to $9.1 million in the same period of 2025. Depreciation expense on fixed assets for the OEM Segment was $11.3 million in the first quarter of 2026, compared to $12.3 million in the same period of 2025.

Aftermarket Segment - First Quarter

Net sales of the Aftermarket Segment in the first quarter of 2026 increased by $15.7 million, compared to the same period of 2025. Net sales of components in the Aftermarket Segment were as follows for the three months ended March 31:

(In thousands)

Our net sales of the Aftermarket Segment for the first quarter of 2026 increased compared to the same period in 2025, primarily driven by price increases to cover higher material costs and acquisitions, partially offset by volume decreases in the automotive and marine aftermarkets.

Operating profit of the Aftermarket Segment was $18.7 million in the first quarter of 2026, a decrease of $0.7 million compared to the same period of 2025. The operating profit margin of the Aftermarket Segment was 7.8 percent in the first quarter of 2026, compared to 8.7 percent in the same period in 2025, and was negatively impacted by:

• Higher material costs related to tariffs and higher steel costs, partially offset by a reduction in in-bound freight costs, which negatively impacted operating profit by $11.2 million compared to the same period in 2025.
• Investments in capacity and distribution to support continued growth in the Aftermarket Segment, which negatively impacted operating profit by $5.6 million compared to the same period in 2025.

Partially offset by:

• Increases in selling prices for targeted products primarily to cover increased material costs, which positively impacted operating profit by $11.6 million compared to the same period in 2025.
• Reduced costs as a result of materials sourcing strategies, which increased operating profit by $1.8 million compared to the same period in 2025.
• A favorable shift in sales mix, which positively impacted operating profit by $1.5 million compared to the same period in 2025.

Amortization expense on intangible assets for the Aftermarket Segment was $4.0 million in the first quarter of 2026, compared to $3.8 million in the same period of 2025. Depreciation expense on fixed assets for the Aftermarket Segment was $5.1 million in the first quarter of 2026, compared to $4.3 million in the same period of 2025.

Interest Expense

Interest expense, net was $9.9 million for the three months ended March 31, 2026, compared to $6.0 million in the same period of 2025. The increase in net interest expense was primarily due to interest on the 2030 Convertible Notes and increased principal borrowed on our Term Loans (as defined in Note 8 of the Notes to Condensed Consolidated Financial Statements) following our refinancing in March 2025.

See Note 8 of the Notes to Condensed Consolidated Financial Statements for a description of our credit facilities.

Loss on Extinguishment of Debt

In the three months ended March 31, 2025, we recorded an $8.1 million loss on extinguishment of debt, consisting of $6.2 million in connection with the repurchase of a portion of our 2026 Convertible Notes and $1.9 million related to the repayment of our previous term loan. No loss on extinguishment of debt was recorded for the three months ended March 31, 2026.

Income Taxes

The effective income tax rate for the three months ended March 31, 2026 and 2025 was 26.2 percent and 26.5 percent, respectively. The effective tax rate for the three months ended March 31, 2026 differed from the Federal statutory rate primarily due to state taxes, foreign taxes, and non-deductible expenses, partially offset by Federal and Indiana research and development credits. The decrease in the effective tax rate for the three months ended March 31, 2026 as compared to the same period in 2025 was primarily due to the recognition of excess tax benefits on stock-based compensation.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

We maintain a level of cash and liquidity sufficient to allow us to meet our cash needs in the short term. Over the long term, we manage our cash and capital structure to maximize shareholder return, maintain our financial condition, and maintain flexibility for our future strategic investments. We continuously assess our capital requirements, working capital needs, debt and leverage levels, debt and lease maturity schedules, capital expenditure requirements, dividends, future investments or acquisitions, and potential share repurchases. We believe our operating cash flows, credit facilities, as well as any potential future borrowings, will be sufficient to fund our future payments and long-term initiatives.

As of March 31, 2026, we had $142.2 million in cash and cash equivalents, and $595.2 million of availability under our revolving credit facility under the Credit Agreement. We also have the ability to request an increase to the revolving and/or incremental term loan facilities by up to an additional $371.0 million in the aggregate upon approval of the lenders providing any such increase and the satisfaction of certain other conditions. See Note 8 of the Notes to Condensed Consolidated Financial Statements for a description of our credit facilities.

We believe the availability under the revolving credit facility under the Credit Agreement, along with our cash flows from operations, are adequate to finance our anticipated cash requirements for the next twelve months.

The Condensed Consolidated Statements of Cash Flows reflect the following for the three months ended March 31:

(In thousands)

Cash Flows from Operating Activities

Net cash flows used in operating activities were $33.5 million in the first three months of 2026, compared to cash provided by operating activities of $42.7 million in the first three months of 2025. The change in net cash flows used in operating activities was primarily due to the net change in assets and liabilities, which used $83.6 million more cash in the first three months of 2026 compared to the same period in 2025. The net change in assets and liabilities was partially offset by an increase in net income of $13.5 million. The primary use of cash in net assets was the increase of $134.5 million in accounts receivable due to seasonally higher sales in the first three months of 2026. Also driving the use of cash was the increase of $27.3 million in inventories, as inventory levels were replenished for the upcoming selling season, partially offset by an increase in accounts payable, trade.

Depreciation and amortization was $29.8 million in the first three months of 2026, and is expected to be approximately $115 to $125 million for the full year 2026. Non-cash stock-based compensation expense in the first three months of 2026 was $5.3 million. Non-cash stock-based compensation expense is expected to be approximately $24 to $27 million for the full year 2026.

Cash Flows from Investing Activities

Cash flows used in investing activities of $9.6 million in the first three months of 2026 were primarily comprised of $9.7 million for capital expenditures. Cash flows used in investing activities of $42.0 million in the first three months of 2025 were primarily comprised of $29.6 million for the acquisition of a business and $9.0 million for capital expenditures.

Our capital expenditures are primarily for replacement and growth. Over the long term, based on our historical capital expenditures, the replacement portion has averaged approximately one to two percent of net sales, while the growth portion has averaged approximately two to three percent of net sales. However, there are many factors that can impact the actual spending compared to these historical averages. We estimate full year 2026 capital expenditures of $55 to $75 million, including investments in automation and lean projects, which we expect to fund with cash flows from operations or periodic borrowings under the revolving credit facility.

Capital expenditures in the first three months of 2026 were funded by cash on hand. Capital expenditures and any acquisitions in the remainder of fiscal year 2026 are expected to be funded primarily from cash generated from operations, as well as periodic borrowings under our revolving credit facility.

Cash Flows from Financing Activities

Cash flows used in financing activities of $35.6 million in the first three months of 2026 were primarily comprised of payments of quarterly dividends of $27.9 million, cash outflows of $6.6 million related to the vesting of stock-based awards, net of shares tendered for payment of taxes, and net debt repayments of $1.0 million under our Term Loans.

Cash flows provided by financing activities of $66.9 million in the first three months of 2025 were primarily comprised of the following:

• net proceeds from the issuance of our 2030 Convertible Notes of $448.5 million,
• proceeds from Term Loan borrowings of $391.0 million,
• proceeds from the issuance of warrants of $27.6 million, and
• net proceeds of $1.4 million from the termination of a portion of our 2026 Warrants and 2026 Convertible Note Hedge Transactions,

Partially offset by:

• payments of $368.9 million for the repurchase of a portion of our 2026 Convertible Notes,
• debt repayments of $299.4 million under our revolving credit facility, Term Loan, and other borrowings,
• payments of $67.6 million for the purchase of convertible note hedge contracts,
• payments of quarterly dividends of $29.4 million,
• payments for the repurchase of common stock of $28.3 million,
• cash outflows of $4.8 million related to the vesting of stock-based awards, net of shares tendered for payment of taxes, and
• payments of debt issuance costs of $3.1 million.

The Credit Agreement includes both financial and non-financial covenants. The covenants dictate we shall not permit our net leverage ratio to exceed certain limits, shall maintain a minimum debt service coverage ratio, and must meet certain other financial requirements. At March 31, 2026, we were in compliance with all financial covenants.

We have paid regular quarterly dividends since 2016. Future dividend policy with respect to our common stock will be determined by our Board of Directors in light of our prevailing financial needs, earnings, and other relevant factors, including any limitations in our debt agreements, such as maintenance of certain financial ratios.

In May 2022, our Board of Directors authorized a stock repurchase program (the "2022 Share Repurchase Program") for the purchase of up to $200.0 million of our common stock over a three-year period, which ended on May 19, 2025. Under this stock repurchase program, we purchased 308,898 shares at a weighted average price of $91.47 per share during the three months ended March 31, 2025, using approximately $28.3 million of the net proceeds from the offering of the 2030 Convertible Notes. Following such repurchase, no additional shares were purchased under the 2022 Share Repurchase Program prior to its expiration on May 19, 2025.

In May 2025, our Board of Directors authorized a new stock repurchase program (the "2025 Share Repurchase Program") for the purchase of up to $300.0 million of our common stock over a three-year period ending on May 15, 2028. No shares were repurchased during the three months ended March 31, 2026. As of March 31, 2026, there was $200.0 million remaining for the repurchase of shares under the 2025 Share Repurchase Program.

CORPORATE GOVERNANCE

We are in compliance with the corporate governance requirements of the Securities and Exchange Commission (the “SEC”) and the New York Stock Exchange. Our governance documents, committee charters, and key practices have been posted to the “Investors” section of our website (www.lci1.com (http://www.lci1.com)) and are updated periodically. The website also contains, or provides direct links to, all SEC filings, press releases and investor presentations. We have also established a Whistleblower Policy, which includes a toll-free hotline (800-461-9330) to report complaints about our accounting, internal controls, auditing matters or other concerns. The Whistleblower Policy and procedure for complaints can be found on our website (www.lci1.com (http://www.lci1.com)).

CONTINGENCIES

Information required by this item is included in Note 10 of the Notes to Condensed Consolidated Financial Statements and is incorporated herein by reference.

RAW MATERIALS INFLATION

The prices of key raw materials, consisting primarily of steel and aluminum, and components used by us which are made from these raw materials, are influenced by demand and other factors specific to these commodities, including tariffs for materials sourced internationally. The prices for steel and aluminum consumed in certain of our manufactured components were higher during the first three months of 2026 compared to the same period of 2025. Prices of these commodities have historically been volatile and there can be no assurances of future prices. Please see "Results of Operations" above for additional information regarding the impact of raw material costs, including related to tariffs, on our results of operations for the first three months of 2026.

NEW ACCOUNTING PRONOUNCEMENTS

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

CRITICAL ACCOUNTING ESTIMATES

Our Condensed Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which requires certain estimates and assumptions to be made that affect amounts and disclosures reported in those financial statements and the related accompanying notes. Actual results could differ from these estimates and assumptions.

For a discussion of our critical accounting estimates, refer to Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2025. There have been no material changes to our critical accounting estimates as described in that Annual Report.

FORWARD-LOOKING STATEMENTS

This Form 10-Q contains certain "forward-looking statements" with respect to our financial condition, results of operations, profitability, margins, 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 production levels, future business prospects, net sales, expenses and income (loss), capital expenditures, tax rate, cash flow, financial condition, liquidity, covenant compliance, retail and wholesale demand, integration of acquisitions, R&D investments, commodity prices, addressable markets, and industry trends, whenever they occur in this Form 10-Q, are necessarily estimates reflecting the best judgment of the Company's senior management at the time such statements were made. There are a number of factors, many of which are beyond the Company’s control, which could cause actual results and events to differ materially from those described in the forward-looking statements. These factors include, in addition to other matters described in this Form 10-Q, the impacts of costs and availability of, and tariffs on, raw materials (particularly steel and aluminum) and other components, future pandemics, geopolitical tensions, armed conflicts, or natural disasters on the global economy and on the Company's customers, suppliers, team members, business and cash flows, pricing pressures due to domestic and foreign competition, seasonality and cyclicality in the industries to which we sell our products, availability of credit for financing the retail and wholesale purchase of products for which we sell our components, inventory levels of retail dealers and manufacturers, availability of transportation for products for which we sell our components, the financial condition of our customers, the financial condition of retail dealers of products for which we sell our components, retention and concentration of significant customers, the costs, pace of, and successful integration of acquisitions and other growth initiatives, availability and costs of production facilities and labor, team member benefits, team member retention, realization and impact of expansion plans, efficiency improvements and cost reductions, the disruption of business resulting from natural disasters or other unforeseen events, the successful entry into new markets, the costs of compliance with environmental laws, laws of foreign jurisdictions in which we operate, other operational and financial risks related to conducting business internationally, and increased governmental regulation and oversight, information technology performance and security, the ability to protect intellectual property, warranty and product liability claims or product recalls, interest rates, oil and gasoline prices, and availability, the impact of international, national and regional economic conditions and consumer confidence on the retail sale of products for which we sell our components, and other risks and uncertainties discussed more fully under the caption "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2025, and in the Company's subsequent filings with the SEC, including the Company's Quarterly Reports on Form 10-Q. Readers of this report are cautioned not to place undue reliance on these forward-looking statements, since there can be no assurance that these forward-looking statements will prove to be accurate. The Company disclaims any obligation or undertaking to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made, except as required by law.

DISCLOSURES ABOUT MARKET RISK

We are 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 further described in Note 8 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 six percent increase of the weighted-average interest rate on our borrowings as of March 31, 2026), our results of operations would not be materially affected.

We are also exposed to changes in the prices of raw materials, specifically steel and aluminum. We have, from time to time, entered into derivative instruments for the purpose of managing a portion of the exposures associated with fluctuations in steel and aluminum prices. While these derivative instruments are subject to fluctuations in value, these fluctuations are generally offset by the changes in fair value of the underlying exposures. We had no outstanding derivative instruments on commodities at March 31, 2026 and December 31, 2025.

We have historically been able to obtain sales price increases to partially offset the majority of raw material cost increases. However, there can be no assurance future cost increases, if any, can be partially or fully passed on to customers, or that the timing of such sales price increases will match raw material cost increases. Our tariff mitigation strategy of diversifying our supply chain, with help from our vendors and other sourcing strategies, enabled us to minimize the impact of pricing to our customers as well as support profitability in the first quarter of 2026.

Additional information required by this item is included under the caption "Raw Materials Inflation" in the Management's Discussion and Analysis of Financial Condition and Results of Operations section of this report.

a. Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and (ii) accumulated and communicated to our management, including our 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(e) under the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, cannot provide absolute assurance of achieving the desired control objectives. Management included in its evaluation the cost-benefit relationship of possible controls and procedures. We continually evaluate our disclosure controls and procedures to determine if changes are appropriate based upon changes in our operations or the business environment in which we operate.

As of the end of the period covered by this Form 10-Q, we performed an evaluation, under the supervision and with the participation of our management, including our principal executive officer and our principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of March 31, 2026.

b. Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended March 31, 2026, which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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 SEC on February 26, 2026.