Good morning, everyone, and welcome to LCI Industries Third Quarter 2020 Conference Call. I am joined on the call today by the members of LCI’s management team, including Jason Lippert, President, CEO and Director; and Brian Hall, Executive Vice President and CFO. Management will be discussing their results in just a moment. But first, I would like to inform you that certain statements made in today’s conference call regarding LCI Industries and its operations may be considered forward-looking statements under the securities laws and involve a number of risks and uncertainties. As a result, the company cautions you that there are a number of factors, many of which are beyond the company’s control, which would cause actual results and events to differ materially from those described in the forward-looking statements. These factors are discussed in the company’s earnings release and in its Form 10-Q and its other filings with the SEC. 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. With that, I would like to turn the call over to Jason Lippert. Jason?

Good morning everyone. Welcome to LCI’s third quarter 2020 earnings call. We delivered exceptional results in the third quarter as we further captured record RV industry retail demands, driven by strong trends in the outdoor recreation space as new customers and families discovered the benefits of RVing. Leveraging our strong manufacturing capabilities, which have been bolstered by ongoing operational improvement initiatives, we were able to meet this elevated level of demand to deliver revenues of $828 million in the quarter, up 41% year-over-year. Thanks to the outstanding execution of our team, coupled with our reputation for high quality, innovative products, we also significantly expanded market share to include content per vehicle performing at the top tier among suppliers in the space and further solidifying LCI’s position as an industry leader. RV OEM sales increased 32% year-over-year to $451 million for the third quarter, primarily driven by the significant sales increase and retail demand and continuing historical momentum we saw in the second quarter. Based on preliminary results, October trends have remained very strong, with sales on track to grow by 25% over the prior year period. What is even more exciting is RVIA's most recent report on 2021 demand shows a range between 508,000 to 520,000 units for wholesale, which would be a record year for the RV industry. We also delivered further content growth of both towable units and motorhomes, underscoring the strength of the LCI brand despite the ongoing wholesale mix shift towards smaller entry-level units driven by the wave of new RV buyers. Content for towable RVs, adjusted to remove Furrion sales from prior periods, increased 5% year-over-year to $3,428, while content per motorhome RV increased 3% year-over-year to $2,400. We expect our market share gains to continue to drive our content even higher in the coming quarters. Our team worked diligently over the quarter to meet the growing RV demand, upholding our standard of operational excellence to maintain efficiencies while keeping production rates at all-time highs. Due to the long tenure of our leaders, who are leading over 12,000 team members at LCI, coupled with our unique and effective focus on culture and leadership, we were able to capitalize on this massive increase in demand while filling the gaps left by our supplier peers. Our leadership is poised and prepared to continue to take on a heightened level of demand for the foreseeable future as key indicators in our industry point to multi-year record demand. Further, we expect secular trends surrounding outdoor recreation to continue well beyond the near term, with a record number of RVs currently on the road in the U.S. and with 70% of new buyers remaining in the lifestyle and upgrading units in subsequent years. We are very encouraged about these long-term prospects, which serve as tailwinds across our outdoor-related businesses. There is little doubt that even after the pandemic-related anxiety settles down, many Americans will want to continue seeking safer vacation options that offer better overall experiences with more control over their environment, thereby likely reducing travel through airports and hotels. Our diversification strategy remains a priority for LCI as our adjacent aftermarket and international markets grew during this quarter, making up approximately 50% of our trailing twelve months sales. Through both acquisitions and organic growth, LCI is well-positioned to outperform the broader RV industry, as we remain focused on advancing our diversification strategy and developing leading positions in markets outside of RV OEM to drive incremental growth. For the third consecutive quarter, revenues in our aftermarket segment more than doubled year-over-year. Total revenue from aftermarket sales grew to $186 million, up 149% year-over-year, primarily driven by our acquisition in late 2019 of the CURT group. The aftermarket has also seen significant tailwinds from the rise in RV demand, particularly within the used RV market, where we supply many of the items typically replaced first when a used RV is purchased, including furniture and mattresses. The volume of motorhomes and trailers built in the last five years exceeds that of any similar period in the history of LCI, and we are well positioned to capture new business as these RV customers seek to repair and replace products over the long term. In addition, sales of CURT products have skyrocketed as well, and demand has exploded for CURT Hitch products used with RVs, boats, and bike carriers leading the way. Building our aftermarket segment remains a priority for our strategic vision and is a core part of our long-term success of our diversification strategy. The integration of CURT continues to progress smoothly, and their strong leadership team has helped the business exceed our pre-COVID forecasts while realizing even stronger cost synergies than originally planned. Throughout the integration process, we have also focused on expanding market share through the further development of the CURT brand in the RV space. Additionally, we have leveraged CURT and LCI sales teams to build new customer and dealer relationships. We've also invested significantly in our Lippert Care Center for our RV aftermarket customers to ensure they have access to technical support as needed for a wide range of outdoor products. We have heavily invested in our facilities and in our over 300 customer experience and care center team members with a goal of providing the best RV experience in the industry. We are confident this continued unique customer focus can serve as yet another competitive differentiator to drive growth for the aftermarket segments and, in turn, strengthen the overall long-term sustainability of our business. Revenue in our adjacent markets for the third quarter increased 11% to $181 million, driven by our strong performance in marine and other related markets, which continue to benefit from similar secular tailwinds driving RVs. Marine remains a primary focus in our diversification strategy as we align with our proven operations model to scale production and meet the increased retail demand driving our businesses in the space, including a new SureShade brand of electric biminis and boat awnings. Outside of marine, we are driving content growth significantly in the area of cargo and utility trailers in North America, which has an overall annual market of over 600,000 units. We will continue to find and penetrate new markets with existing products, customers, manufacturing, and technologies used in our core businesses. Our international business has maintained its momentum, with sales rising 69% year-over-year to $59 million. We are starting to see European markets, where we operate, including Germany and Italy return to more normalized outputs in line with growth rates in the U.S. markets from a few months ago. Germany, which is the largest market for RVs in Europe, experienced a 55% increase in retail demand in August, and an explosive 155% increase in September. In addition to growth returning in Europe, the products we design and manufacture there continue to become more and more popular with U.S. RV manufacturers. We are putting more and more European product content into U.S. manufactured RVs every year thanks to the popularity and high-end feel of European products. One of the latest European adaptive products entering the U.S. is our new Pop-Top for Class B vans, the fastest-growing category of RVs by percentage. We are confident our outstanding international leadership teams will continue to drive growth as we leverage the opportunities created by our Polyplastic, Lewmar Marine, Lavet, Femto, and Ciesse GSA acquisitions made last year. Innovation and product development, two cornerstones of our culture and our business, play a critical role in our ability to grow market share and drive content growth over the long run. LCI's innovation teams are dedicated to continuing to figure out how to add improved features into existing products, whether it is enhancing the product, or making it easier for consumers to use, or manufacturers to install, or adding technology to the component. LCI is focused on improving all our components on a regular basis. One of our increasingly popular products, OneControl, has continued to rise in popularity since its launch, because newer and younger consumers are seeking technologically sophisticated products on the market. Additionally, OEMs are increasingly adapting electric versus manual products, which should drive additional market share growth and content in our OEM and aftermarket segments. Beyond this, our R&D teams continue to work on further innovations within windows, shade systems, chassis, and awnings, as well as within a wide range of products manufactured by the CURT group. While we always remain receptive to potential M&A opportunities, we remain focused on integrating the eight acquisitions made in 2019 and further paying down debt. At the same time, we are investing in innovation and optimizing our manufacturing footprint to ensure we maintain the appropriate capacity to meet heightened demand for recreational products. The M&A pipeline is full of opportunities and it's become more active in recent months. As we approach the end of an unprecedented year for global markets, we expect that consumers will continue to flock toward the outdoors and enjoy activities that allow them to safely enjoy time with their families and friends. Because LCI's leadership team has exceptional tenure together and have worked together more than the leadership teams of most companies in the industry, LCI is very well positioned to meet this demand and further expand our market share. I want to thank all our LCI team members for their commitment to consistently delivering quality products to our customers throughout this year. Our 12,000 team members in over 90 locations have worked around the clock to keep up with unprecedented increases in demand, and we are so thankful for their successful efforts and hard work over the past several months. Our exceptional third quarter performance is a testament to the unparalleled leadership exhibited by the men and women across our organization, as well as the strength of our operational expertise and innovative capabilities. Together, we will continue to strive to outperform and drive additional shareholder value well into the future. I will now turn to Brian Hall, CFO, to discuss in more detail our third quarter financial results.

Thank you, Jason. And good morning, everyone. Our consolidated net sales for the third quarter increased 41% to $828 million compared to the prior year. The increase in year-over-year net sales was driven by strong RV OEM and aftermarket retail demand, in addition to the impact of incremental revenues from recently completed acquisitions. In Q3 2020, sales to RV OEMs increased 32% compared to the prior year, due to continued record RV OEM retail demand. When normalizing for the termination of our relationship with Furrion, RV OEM sales increased organically by 40%. Content for towable RV units increased 5% to $3,428, and content per motorized unit increased 3% to $2,399 compared to the prior year, excluding the impact of Furrion in 2019. The content increase in towables was primarily driven by organic growth, including new product introductions, partially offset by the increased demand for entry-level products, which traditionally have less content per unit. We estimate the shift to entry-level products is negatively impacting our content per unit growth by approximately three percentage points. In Q3 2020, sales to adjacent markets increased 11% to $181 million compared to the prior year, primarily driven by strong growth in our marine business, coupled with the impact of acquisitions in the market. Sales to North American adjacent industries, which represents 84% of our adjacent industry sales, increased 6%, while sales to international adjacent industries increased 49%, again primarily driven through our recent acquisitions in the space. Aftermarket segment sales increased 149% to $186 million in the third quarter compared to the prior year, while international sales increased 69% to $59 million. The increases in aftermarket and international sales were primarily driven by the impact of recent acquisitions, which contributed $99 million toward total sales across the business during the quarter, as we continue to prioritize our diversification strategy. When normalizing for acquisitions and the termination of our relationship with Furrion, aftermarket and international sales increased organically by 63% and 20%, respectively. Operating margins were 11.4% for the third quarter, increasing roughly 300 basis points from the third quarter of 2019, largely due to strong top and bottom-line performance in the aftermarket segment, as well as the impact of operational efficiencies realized during the quarter, driven by increased automation and lean manufacturing initiatives, coupled with fixed costs absorption on record-level sales volumes. These gains were partially offset by increases in labor and freight costs. Selling, general, and administrative expenses were $127 million during the quarter, slightly higher than previous guidance, primarily due to increased performance-based compensation, increases in transportation costs, and the expiration of certain government systems in Europe. Adjusted EBITDA increased almost 76% to $119.4 million for the third quarter. This increase was driven by the heightened retail RV OEM and aftermarket demand and incremental revenue from recent acquisitions. Non-cash depreciation and amortization was $24.6 million for the third quarter, while non-cash stock-based compensation expense was $6.2 million. GAAP net income in Q3 2020 was $68.3 million or $2.70 per diluted share, compared to $35.8 million or $1.42 per share in Q3 2019, primarily due to the strong growth in net sales. For the nine months ended September 30, 2020, cash generated from operating activities was $212 million. $95 million was used for business acquisitions, $29 million for capital expenditures, and $52 million was returned to shareholders in the form of dividends, which included a $0.10 per share increase in the third quarter following the swift rebound in our core businesses, signaling our confidence in the next 12 months. We are operating with a strong balance sheet as we continue to pay down debt and generate strong cash flow, maintaining available borrowing capacity of $461 million under our current credit facility. At the end of the third quarter, cash and cash equivalents totaled $68 million, up from $35 million at the end of 2019. Our liquidity position has been enhanced by the strategic cost management actions we've put into place to mitigate the impact of COVID-19, as well as the increase in retail demand. For the full year 2020, we are targeting capital expenditures between $50 million to $60 million. At the end of the third quarter, we had an outstanding net debt position of $568 million and remained in compliance with our debt covenants. As a reminder, we have no significant debt maturities until 2022. Currently, our leverage position relative to pro forma EBITDA, which includes the EBITDA of acquisitions, stands at just under 1.7 times. We will continue to prioritize paying down debt as we work towards meeting our target long term leverage of one to one and a half times net debt-to-EBITDA. Our financial and liquidity positions remain quite strong, providing ample liquidity and flexibility as we continue to execute on our strategic initiatives and deliver further shareholder value. That is the end of our prepared remarks. Operator, we're ready to take questions. Thank you.

First question comes from Scott Stember with C.L. King.

Good morning, guys, and thanks for taking my questions.

Thanks Scott.

Can you maybe talk about October? It looks like a 24% or 25% increase in sales and let me flush that out. If you would have backed out acquisitions just to get a sense of where we are organically, and it sounds like RV and marine are probably the two biggest pieces there.

Well, I mean, for the most part, I'm looking at the fourth quarter and what would lapse. I mean, predominantly, most of your acquired sales would be in aftermarket. As we move through Q3, GSA Lewmar. Those have all lapsed. So SureShade and Schwintek would be a couple that lapsed here at the beginning of the quarter, and then really the big ones CURT, which was December 19, I believe was that acquisition date.

From the OEM side? It looks like mostly organic then?

Yes.

Okay. And Jason, you did allude to the RVIA's new forecasts for next year. Can you talk about your thoughts about that and retail on the RV side and what you expect?

On the wholesale side, reaching 508 seems very achievable. The main concern really revolves around two significant issues we're currently facing, which are supply chain challenges and labor shortages, along with the ongoing impact of COVID. The original equipment manufacturers have the orders in place, but the challenge lies in coordinating all the suppliers and OEMs to fulfill the industry's orders. We're very optimistic about the 508 figure on the retail side. We discussed this just before the call, and while it’s difficult to pinpoint whether the number will be 450, 475, or even higher, the demand is definitely there. Factors driving the demand upward are not likely to disappear soon. Thus, we are quite confident about the retail outlook; the wholesale aspect requires some further attention. However, we're in a significantly better position now compared to three months ago when supply chain issues began arising.

Okay, and just the last question before I jump back in the queue. On the margin side, obviously, even with the supply constraints and labor, you put up some phenomenal margins. You've already looks like you're getting pretty close to eclipsing your past peak operating margin of 12%. Just let me talk about where you think that can go, maybe in the fourth quarter, and just as we look at the next 12 to 18 months? How to look at where that could potentially go?

Yes, Scott, this is Brian. First and foremost, you got to talk about the top line. Obviously, Q3 was a tremendous volume quarter. So we're covering up a lot of fixed overheads there. So when you look to the near term, obviously we have a little bit of seasonality to work through. So I wouldn't expect our margins to continue to move upwards when we get into Q4. But certainly when we get back at full throttle in Q1, Q2, and next year, I'm not seeing much that's different from where we are today. So as you start to break that down, you look at our material costs, and our material costs have improved some in the last 12 months. But we've given over $30 million, almost $30 million worth of price reductions to our customers through the indexing arrangements that we have on steel and aluminum. So I would look at materials as not being a significant driver to our margin improvement. Certainly on the labor side, we came out of Q2 in really good shape. Lots of efficiencies, we've consolidated a number of plants, labor started out really solid. But now as everybody's aware, certainly within Elkhart County, labor's somewhat of a challenge. So we're working a lot of overtime. There are a lot of things that I think I'd call them headwinds in the near term until we can identify ways to address some of the labor shortages. Then when you look at SG&A, our SG&A was a little bit higher in Q3 than what I had originally anticipated. I mean, some of that's due to performance-based metrics, as we came out of Q2, and now have better visibility after getting through Q3, certainly on the performance-based compensation side of things, whether it's equity, bonuses, etcetera, we had a little bit of some additional expense there. And then, transportation, transportation has certainly been hitting us pretty hard, both inbound and outbound, just because of a lot of the expedited freight costs that we have, and just the demand that's there. So those are certainly some of the things that I look at as the moving parts and pieces as we go forward. I'm not expecting significant changes here in the fourth quarter, other than volumes. I do think the seasonality has to be taken into account. But other than that, we'll continue to address some of the labor challenges and some of the freight issues that we're seeing to help offset some of that.

And I’d only add there, the robustness of the aftermarket, obviously, we're putting up big numbers there. And that's driving our margins from if you look at historically when we didn't have a whole lot of aftermarket versus the future where we should have a significant amount of aftermarket, those are pushing margins higher. And we're frankly entering probably the biggest replacement cycles on the RV side we've ever seen with 2016, 2017 units, wholesale units, retail units coming into the replacement cycle, and then obviously, you can count last year and this year and probably next year as adding to the replacement cycle. So the aftermarket future looks really, really solid, which will help margins.

Just to clarify, Brian, when you were saying margins shouldn't be moving up, I guess in the gross margin, you were talking sequentially, I imagine, right? I'm just trying to get a sense of year-over-year what kind of expansion we can look for in the fourth quarter?

Yes, I mean, certainly expansion year-over-year, you're correct. I was talking sequentially. So year-over-year, I do think that, we've had a lot of this stuff in play for the last nine to 12 months. So we were probably seeing a lot of benefits early on during Q3 when volumes came back. So, I don't anticipate Q4 being proportionately higher similar to Q3. I think we'll back off of that a little bit just because of some of the cost pressures that we're seeing on labor and freight if that helps you.

Yes, thank you very much.

Next question comes from Kathryn Thompson with Thompson Research.

Hi, thank you for taking my questions today. And just first focusing on the demand outlook in the field. We really with our quarterly RV dealer surveys, we come to the conclusion early this year, probably early 21 when you could successfully restock the field, but that date seems to be pushed out to later 21. Wanted to get your thoughts in terms of those inventory levels, which are quite low, and the ability to restock RV dealer inventories? Thank you.

Hey Kathryn, it’s Brian. Yes, certainly the picture has changed significantly in the last three months. I think as everyone was a little uncertain on these retail sold units and what that was really going to mean and how long those would play out, at least from our dealer touchpoints conversations that we've had. There's still a lot of those pre-sold units moving, so everything that we're shipping, it doesn't seem that we're getting the jump on inventory rebuilds like we normally would by this time in the year. So it probably puts us a little bit further behind. I think it becomes a story of retail demand next year. You know, like, I threw out a little bit ago, if it's a 450,000 unit type year, that certainly gives us more ability to address the inventory shortage a little bit easier than if it continues to be a 490 idea, as an example. That's just making up the, I would suspect we will be at 80, 90,000 units short. I think there's a real good case for that by the time you get to the end of this year. So making up that kind of volume in the springtime is probably not likely; you can probably make up half of it or so or maybe a little more. But it just really depends on what retail demand looks like.

And I would just add to that, Kathryn, the OEMs for the most part, most of them will tell you today that they could stop taking retail orders and have enough production to last them until the fall of next year. Which tells you where the inventory position is, with a lot of the dealers. We just feel that the pandemic-related push is going to continue to extend into next year. And there's a lot of great marketing and there's a lot of great stories out there, where people are just hearing about the advantages of traveling and vacationing with RVs, so we expect that to extend well into next year.

That's helpful. And then when you look at the time off for production around Thanksgiving and Christmas, that can vary pretty widely from year to year. What are you looking at for this year relative to last year, but also handicap, because you're obviously having a very different type of operations this year because of COVID versus last year?

Yes, I would say that the industry is definitely planning to take less time off this year during the holidays. The main uncertainty is the supply chain, as there have been many disruptions in the past few months with Original Equipment Manufacturers. While it may not seem apparent, a significant number of days were taken off by OEMs recently because they lacked the necessary products to operate efficiently. Due to the inconsistency in supply, it's challenging to predict how this will affect the upcoming quarter. However, it's reasonable to consider that the last quarter experienced several days off that might not have occurred otherwise, as some OEMs were unable to source the parts needed to finish their jobs.

Okay. And the final point on supply chain, and that there's been a great deal of focus on this. But do you feel like it's incrementally better, worse, or unchanged relative to say six to eight weeks ago?

I'd say incrementally better. I mean, August and September, and even in October were very tough months for the industry. But it's the one thing that I keep telling people is the industry is so resilient. From the OEM side, I mean, when there are problems, as you know, people around here don't waste time and take action. So, whether it's getting some of the great suppliers to ramp up capacity so that they can do more, or whether it's enabling and finding other new suppliers and vendors to come into the mix, both inside domestically and from a foreign standpoint, there's been a lot of suppliers added over the last few months that are getting ramped up so that we are better prepared to handle the upcoming demand. So it's again, one thing I put my money on is the OEMs finding creative ways around the supply chain problems and fixing it fast.

Okay, great. Thank you very much.

Next question comes from Daniel Moore with CJS Securities.

Jason, Brian. Good morning. Thanks for taking the questions. Just a couple of follow-ups. Maybe talk to the sustainability of the market share gains. Do you see the opportunity to pick up more shares as other suppliers struggle around production capacity in 2021, and any particular products areas?

Absolutely. When a crisis occurs, the weaknesses of those who aren't prepared become evident. I believe we have been well-prepared, particularly due to the culture and team building we've fostered over the past couple of decades. Many of the team members present today have been with us for years, and we're ready for this situation. In terms of windows, awnings, and chassis, we've managed to gain some market share because when our competitors or supplier peers lack capacity, they can't respond like we can. We have 90 facilities worldwide that are equipped to handle increased capacity. With strong teams and a positive culture, it's easier for us to operate extra days and shifts, which has significantly benefited us. We have approached this opportunity cautiously, ensuring we continue to support our loyal existing customers first, but we have certainly gained share in most categories.

Very helpful. And maybe just contrast the inventory situation for Marine with that of RV and what that implies for Marine shipments in 2021 from your perspective?

Yes, I believe what we've discussed historically remains relevant. These are distinct industries, but they are experiencing similar trends where lifestyle choices have become very popular. People are opting for boats and RVs as alternatives to flying to Europe or other destinations. The demand profile and the stories we hear from retail dealerships reflect this, especially since they have little to no inventory. However, one notable difference is the production capacity. The challenges throughout the supply chain are greater, particularly regarding engines and the various components required for boats, which differ from the parts used in RVs. Therefore, the production capacities and supply chains in the Marine sector are significantly different.

Okay. And lastly, the guide implies a ramp in CapEx in Q4 presumably increasing capacity and maybe pulling forward some projects. Just maybe talk about some of the key projects you're working on. And similar levels, so that $50 million to $60 million range for next year seem reasonable? Or do you see that maybe moving higher given the really strong demand outlook? Thank you.

Yes. Certainly, we've revised upwards our CapEx expectation for the year a couple of times now as things have changed so quickly on us post-April. So we revised up slightly to $50 million to $60 million for this year. There are some projects that we were looking at for 2021 that we've pulled forward given our current balance sheet in that position and how positive they look. So things like adding additional capacity. Having a little bit of redundancy, it's one thing that probably doesn't get recognized as much as it should. The fact that we do make the same product in multiple facilities. And when Jason says we're able to react, it's because we can shift production around when others that are maybe in a single site. They don't necessarily have that ability. So we have products that we were not exactly where we need to be and we're putting some of that redundancy in place. So that's pretty significant for us on a go forward basis. For 2021, I would expect it to be a little bit higher. We have quite a few opportunities to expand capacity, and with some very nice return on investment profile. So we're looking to lay all those out now. Probably don't have a ton to say about it at this point. But I would anticipate us to get back into a more normal range as a percentage of sales, which would probably tell you $80 million plus is as a starting point.

And I'll add to that, Dan, real quick. Back in 2017 or 2018, we had $120 million in capital expenditures in one of those years. We've changed the process quite a bit since then. We were probably three quarters of a billion less in revenues when we had that. So I can tell you that our capital expenditure process is as efficient as it's ever been.

Perfect. Very helpful. Thank you both and good luck on Q4.

Thanks, Dan.

Next question comes from Fred Wightman with Wolfe Research.

Hey, guys. Good morning. I just want to circle back on the October sales trends. Is that really just a supply chain disruptions showing up on the RV side of the business? And if it is, is that really just a deferral and timing issue, or is it something else?

I think part of it is if you look at September over September, you'd see probably a bigger increase because we have typically the shows and model changes. You see the OEMs and the dealers really slow up on new product trying to drain the previous model year. So, I'd say that's why the September comp is probably a little bit bigger there. But in terms of October, I think part of us is just that, coupled with the fact that there's the situation with OEMs. So we had several customers in October taking multiple days down almost like days off because they didn't have supply or product. So I think the short answer is had the industry been able to ship 100% of what they had orders for in October, the number would have been significantly higher.

Sure. That's super helpful. And just to follow up on that last point about the days closed. I mean, was that largely concentrated in the beginning part of the month, is it sort of the debate a little bit? Or is it still sort of something you guys are contending with here into the latter part of October as well too?

I'd say it peaked in the middle part of the month. The back part of the month felt a little bit better and it feels better going into November. So I don't expect as many issues. But I can't speak for all the supply base out there that are having the issues. It seems like three issues have been taken care of in a month and then a new one pops up. And one component unfortunately can stop an OEM from shipping product. And that's kind of what we're seeing there.

Perfect. Thanks a lot, guys.

Thanks.

Next question comes from Brett Jordan with Jefferies.

Good morning. This is Mark Jordan for Brett. Most of my questions have been asked here. But I guess thinking about M&A, I understand the company has been more focused on diversification maybe outside of the RV industry in recent years. But how do you see opportunities right now, I guess, within the industry? How do you view conditions? And then also, I guess, outside of the industry?

Outside the core RV business, I mean, obviously, when we talk about Marine, it's just as solid as our RVs. They tend to move a little bit slower, but they've got just as much demand there. And we've got a big shot at taking market share in those areas. On the adjacent side, we talked about cargo trailers being utility trailers and commercial trailers being a 600,000 unit market. And we're constantly looking at content in those areas. Axles and suspensions are a big opportunity for us there because we still only have probably 35 or so percent of the market. So there's a big chunk of it left for us to go after. And we've been going after that market share over the last five, six years pretty heavily. Then we're focused on that replacement cycle for the aftermarket as we continue to talk about the number of units in that replacement cycle from 2016 forward, which is just a huge number. So there are all sorts of aftermarket component opportunities. And then we continue to develop new products specifically for the aftermarket, which is relatively new in the last couple of years. So we're developing products and components specifically for our aftermarket customers and partners to do this as well. And Europe is going to continue to grow. So those are the constant buckets that we've got. We're just looking for more content in those buckets. And I think there's a lot of upside in the non-RV space.

And I guess I would add, Mark. From a liquidity perspective, we're in a great position. Certainly when the pandemic hit our leverage went the wrong way. But now with the results we've seen in the past six months or so, we've made a huge impact on to reduce our leverage position. As I said in my prepared remarks, we're at about 1.7 times on a pro forma basis that includes all 12 months for the acquisitions that we have. So liquidity is in a great position, ready to capitalize on any opportunity that presents itself. I think that the one thing that's maybe, as we went into this pandemic, I think there might have been an expectation that it could be similar to 2008 or 2009 where there's a lot of opportunities. I think there are opportunities presenting themselves, but it's quite a bit different given our industries are at record highs and the multiples that I think everyone would be anticipating as opposed to some of the really nice bargains that you might find when you look back at maybe a deeper recession like 2008, 2009.

Okay, great. Thank you very much.

Next question comes from Alice Wycklendt with Baird.

Yes. Good morning, gentlemen. Hoping to just touch on CURT a bit more coming up on a year of owning that. What have you learned from the acquisition? It sounds like it's gone very well. And then what do you see as the biggest opportunities for CURT from here?

It has been great. We didn't anticipate the COVID situation, but their products fit perfectly into the outdoor segment as outdoor activities became popular due to the pandemic. They have struggled to keep up with the demand, especially in their largest categories of hitches and towing. Many people purchased bikes and similar items to take on road trips or vacations, and 97% of Americans used their cars for vacations this year. In October, they exceeded forecasts significantly. They have a strong innovation department in Wixom, Michigan, with a great engineering team planning to launch several new products next year. Compared to their competitors, CURT has a better chance of exceeding expectations in innovation and new product development.

Yes. Thanks. And then, I think you noted that growth in Europe kind of caught up to the U.S. in the quarter after remaining depressed for a little bit longer. But we've seen additional headlines lockdowns in Europe. Do you expect any impact on your production in Europe as a result?

I think we're currently in a wait and see situation. We know that cases in the U.S. are increasing a bit, and they are trying to determine the best approach by country. I believe they will likely handle things differently than they did in late March and April, opting not to shut everything down like the U.S. Instead, they may feel more confident in managing any rise in cases. Our expectation is that, at worst, they will classify businesses as essential and allow them to operate, so that countries won’t be completely shut down. That seems to be the most probable scenario. However, we are still awaiting a clearer picture on that.

Okay. And then I think, Brian, I think you noted that entry-level, there's kind of a shift toward entry-level units and pressing to your content growth, by I think three percentage points. Could you confirm that number? And then, is that correct? How long do you expect that to persist there?

Yes. I think we've been saying for years now, probably at least five years that this strong push towards entry-level products is certainly negatively impacting our content per unit. I just never really put a number to it. So you're correct. That's what I said. It's almost three percentage points that is a headwind to us within that content per unit, which gives me an idea of the type of wins that we're seeing. Puts us more in that 8% to 9% type range, which is phenomenal given all the issues that our teams are currently dealing with.

Absolutely. Well, thanks. That's all from me. Oh, go ahead. Sorry.

I was just going to say, one other thing on the CURT question you asked that has come to mind is just, the synergies we've got between the RV business on the LCI side and CURT, I mean, CURT did not sell into the RV dealer space that much and we haven't had tremendous success there growing CURT, hitch and towing brands and other related brands that CURT has in the RV dealerships. So we've got the strongest relationships in the industry. So that'll continue to grow as well and help CURT grow.

Great. Thanks, gentlemen.

Yes, thanks.

Next question comes from Shawn Collins with Citigroup.

Great. Thank you. Good morning, Jason and Brian. It's nice to speak with you. My question is about costs, specifically regarding the freight issue you mentioned. Could you compare it to the similar situation we experienced in 2018 when freight costs increased unexpectedly? Also, are you noticing any significant differences with freight in October, especially since we're in the holiday season and amidst a COVID ramp, with some people stocking or restocking items? Any insights would be appreciated. Thank you.

I don't think there is a significant comparison in 2018. Are you referring to over the road freight?

Yes, I am.

Yes, most of the freight increase we are observing is primarily in overseas freight. This area has ramped up significantly due to limited supply and delays caused by COVID, both internationally and domestically. While road freight has also increased, the major factor here is the overseas freight. Brian, do you have anything to add?

Yes. As Jason mentioned, we're observing this phenomenon widely, particularly in overseas freight. I would describe the situation as somewhat chaotic. There has been a significant surge in the industry, leading to rapid changes in orders. This results in increased expedited freight costs, as we are committed to ensuring timely product delivery and avoiding disruptions as a supplier. Looking ahead, we anticipate challenges related to the Chinese New Year, as all industries will likely increase their orders in preparation for the holiday. This trend will likely lead to higher costs due to demand outstripping supply for containers, shipments, and dock efficiencies, both inbound and outbound. The situation feels chaotic yet is somewhat stabilizing after being very hectic from May to October, during which we saw a significant ramp-up. However, we do not expect another major increase in freight costs from this point.

Okay. That's great. That's very helpful. Great. That's all for me. Thank you for the time and insight.

Thanks.

Next question comes from Steve O'Hara with Sidoti & Company.

Hi. Good morning. Thanks for taking the question.

Hi, Steve.

I just wanted to quickly ask, I’m not sure if you mentioned this, but I might have missed it. In regards to motorized OEM sales, it appears they increased by 28%. Wholesale seemed to be around 5% during that period. Is that related to Europe, or was there an acquisition, or is there something else driving that increase?

No acquisitions impacting those. It's our sales within the motorhome category, because keep it in context. It's only about 20% of the industry shipments here. So, they can change up their production schedules pretty significantly. That has an impact on at least our content per unit. So you can see some little bit of volatility in our sales within that category. And I think that's driving some of our content gains right now. As Jason and I were talking through this earlier, a lot more products were slide outs. You'll hear me talk a lot about the shift to Class Cs, but then I'll always talk about the shift towards entry-level Class Cs that don't have a whole lot of content on them. I think we started to see some of that shift a little bit back the other direction, where you've got some larger Class Cs that at least went through in more recent production and that's helping to drive some of our content gains.

And it feels like the motorhome OEMs were a little bit behind some of the trailer ramp-up. So it definitely feels like right now today, the motorhome manufacturers are moving a little bit faster than what they were a few months ago in terms of building more product.

Okay. All right. No, that's helpful. And then maybe just with an aftermarket, it looked like margins improved pretty nicely year-over-year. And I'm just wondering, with CURT, I think CURT came in kind of with margins kind of below your average net segment. And there was talk of moving that towards the corporate average. Can you just talk about where you are in that process and maybe how much opportunity there is for upside from continuing on that process?

Yes. I think the biggest opportunity for CURT is just the competitive landscape. I mean, they really do very well in their market segment, and all the key areas that they play significantly around hitch and towing products. So a lot of that depends on all those added market share that's come. Obviously, there's a little bit more flexibility with prices. We've taken on some new customers. Some of that ecomm, some of that direct-to-consumer, some of that the installers and some of the commercial fleet people. So, because they're such a strong and evident choice in those markets, I think it gives them a little bit more flexibility with price. It's not something where we just take out an acquisition and start moving prices to get things closer to our average. When the opportunities there, we'll certainly take it. But they build a lot of complex products and they're innovating a lot. So the more we can help them innovate and create products that are different than what's in the market, and maybe have added features and values that are different than the market, that's where you can really bolster the margin momentum. So that's what we're pushing them towards, and they're doing a really good job there.

And, Steve, I would add. It's still rings true what we've been saying for a while now. We've identified 2% to 3% of sales of cost synergy opportunities for them. We've probably landed, it's approaching 2%. At this point, we're somewhere in between 1.5% to 2% of improvement, locking in those synergies on a forward basis. So, we've definitely seen tremendous improvement within their margins. Tough problem to have; so is our legacy aftermarket business. So our legacy aftermarket business has improved their profit margin significantly as well. So the CURT business still does kind of hold back that margin some, but we've made tremendous progress in both categories to contribute to that margin improvement.

Okay. And then maybe just on the kind of commentary on sales. I think you said October was up 25%. And I'm just kind of wondering, maybe it would seem like the aftermarket growth should be significant with CURT. I think that was acquired, I think you said December 17th or 19th. So it just seems like there's a bit of a deceleration, I guess, in growth on the RV side. And I assume most of that kind of seasonality and things like that. Is that fair to say? I mean, it seems like obviously, dealer inventories are low, things like that. And obviously, people are kind of concerned about supplier issues and things like that. But is it mostly seasonality that's driving it?

Yes. I would characterize it as seasonality. And then us being conservative to acknowledging the issues that many of our industries are facing right now. I would say, Europe, we think there's a lot of uncertainty there. So, our growth rates that we're at least projecting at this point are a little bit of a deceleration. You certainly, as we discussed with RV and Marine, you have the holidays that we didn't have in Q3, so that's certainly going to impact some of the growth rates there. And so, I think that the one category, it's not the most significant for us, but if you look at some of the other product categories, things like manufactured housing or commercial vehicles, some of those markets are actually down right now. Our manufactured housing is on the uptick. I think, for the full year, it will probably end up pretty close to flat. But it is on a year-over-year growth pace right now. And we're expecting that to continue into 2021. But some of those other product categories have decelerated for sure, mainly things like commercial vehicles, school buses, and other products. Their production rates have slowed post-pandemic.

Okay. Alright. Thanks for taking the questions. Appreciate it.

Last question comes from Brandon Rolle with Northcoast Research.

Good morning and congrats on those strong results.

Thanks, Brandon.

I was just asking, could you comment on used inventory levels you're seeing within the dealer channel right now for RV? And then also as the second question, kind of looking into the beginning of 2021? The potential for maybe not all retail shows happening, do you think that would have an impact on the industry? Or it seems like dealers have been able to overcome the absence of retail shows throughout this fall?

Yes. Without the, without some of the data around us, I mean, just taking anecdotal conversations from a lot of the dealer partners that we talked to, feels like those inventories are low, right alongside the new inventory. So, they're selling just about everything that they can get their hands on. I don't know that that'll change much. But it's a good problem for our industry to have again. I think it's one of the reasons our aftermarket business is doing well is because a lot of used units are getting sold out there. And when people buy used units, they typically replace furniture, mattresses, things like that, which we sell a lot of into the aftermarket business.

Okay, great. And on the retail shows to start the year?

Yes, sorry Brandon on the retail shows. I don't think that's going to impact things one way or the other. I mean, the demand is heavy. And some of the dealers are getting creative and doing their own shows. So instead of going to a show that's being done for a region, the dealers are having their own shows, and inviting people and finding ways to get the word out. But given the fact that there's a lot of word and chatter around how RVs are a real safe choice or a safe way to control your vacation or your trip, that word has gotten out through RVIA marketing, through just social media and other things. And I think dealers have a really easy time selling units right now because the phones are ringing. And I don’t think it’s going to stop in the near future. So I don't think the retail shows, if they all don't happen, are going to be a huge issue for us.

Thank you.

And at this time, I will turn the call over to Mr. Lippert for closing remarks.

Yes, we're really excited about the record retail and wholesale demand that we've seen this year. We're super excited to present our fourth quarter earnings call in a few months. So take care and we'll see you next time. Bye bye.

This concludes today's conference call. You may now disconnect.