LCI Industries (NYSE:LCII) reported higher third-quarter profit margins despite a decline in revenue, as growth in its aftermarket and adjacent businesses partly offset weaker sales to recreational vehicle manufacturers.
The company also reaffirmed its support for a proposed merger with Patrick Industries after its board rejected a separate proposal from Monomoy Capital. Interim CEO Johnny Sirpilla said the board concluded that Monomoy’s offer was not superior to the Patrick transaction.
LCI expects the Patrick combination to generate approximately $150 million in net annual run-rate cost synergies within three years of closing, Sirpilla said. Management said it was limited in what it could discuss about the proposed merger beyond information already publicly disclosed.
Margins improve as RV demand remains soft
Third-quarter net sales were just under $1 billion, down 4% from a year earlier, Chief Financial Officer Lillian Etzkorn said. Lower North American RV wholesale shipments were the main driver of the decline, partly offset by increases in selling prices tied to commodity indices, automotive aftermarket growth and sales from acquired businesses.
Sales to RV original equipment manufacturers fell 17%, while aftermarket sales rose 6% and sales to adjacent industries increased 7%, according to Sirpilla. LCI also increased its towable RV content per unit by 6% year over year to $5,733.
Operating margin rose 30 basis points to 7.6%. Adjusted for restructuring, transaction costs and tariffs, operating margin increased by 100 basis points to 8.3%, on adjusted operating profit of $83 million. Etzkorn attributed the improvement primarily to commodity-linked pricing and cost actions, including material sourcing strategies, partly offset by lower absorption of fixed costs as sales volumes declined.
Adjusted earnings before interest, taxes, depreciation and amortization rose to $111 million from $106 million a year earlier. Net income was $50 million, or $2.05 per diluted share. Adjusted earnings were $2.21 per share, up from $1.97.
Outlook and cost actions
For 2026, LCI expects adjusted revenue of $3.9 billion to $4 billion and adjusted operating margin of 7.5% to 8%. The company tightened its adjusted earnings outlook to $8.25 to $8.50 per share and maintained its capital spending forecast of $55 million to $65 million. October adjusted net sales were approximately $341 million.
Management expects 2026 RV industry wholesale shipments of 285,000 to 295,000 units. During the question-and-answer session, Etzkorn clarified that the forecast applied to 2026, not 2027, and said the company would provide more detail on next year’s wholesale and retail outlook during its fourth-quarter call.
Sirpilla said LCI remained on track to consolidate eight to 10 facilities, with work underway in the fourth quarter and expected to wrap up in the first quarter. A Ranch Hand consolidation in Texas will move operations into a facility with approximately 2.5 times the current capacity, he said. The business had about 20 weeks of backlog entering the new facility, which is expected to be fully operational by year-end.
Sirpilla said the proposed Patrick merger could create additional opportunities to optimize the combined manufacturing footprint and would not negatively affect the consolidations already planned.
Aftermarket growth and pricing
LCI’s aftermarket business has grown to nearly $1 billion in annual revenue, Sirpilla said. He estimated that the company has placed about $20 billion in replaceable parts into original equipment products and that nearly 2 million RVs on the road will enter the repair and replacement cycle over the next several years.
Etzkorn said the company saw exceptional growth in towing and truck accessories, including its CURT business, while also seeing growth in its RV aftermarket operations.
On costs, Etzkorn said most steel and aluminum pricing is indexed, although changes can take one to two quarters to pass through. Prices move both up and down with commodities, she said, adding that LCI was not yet seeing relief from current costs.
LCI ended the quarter with $246 million in cash and $595 million available under its revolving credit facility. Net debt was $607 million, or 1.4 times adjusted EBITDA, down from 1.8 times at the start of the year. The company paid $28 million in dividends during the quarter.
About LCI Industries (NYSE:LCII)
LCI Industries, formerly known as Drew Industries, is a manufacturer and supplier of components and systems used primarily in recreational vehicles (RVs), as well as in the marine, powersports, automotive, and other transportation markets. Through its Lippert business, the company provides products to original equipment manufacturers and serves consumers through replacement and aftermarket channels.
Its product portfolio includes chassis and structural components, axles and suspension systems, slide-out systems, windows, doors, entry steps, awnings, leveling systems, furniture, mattresses, appliances, electronics, and plumbing products.
