LCI INDUSTRIESLCII
LCI INDUSTRIES Income Taxes Disclosure
INCOME TAXES
The components of earnings before income taxes consisted of the following for the years ended December 31:
| (In thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| United States | $ | 255,957 | $ | 195,866 | $ | 92,679 | |||||||||||
| Foreign | (888) | (6,528) | (9,675) | ||||||||||||||
| Total earnings before income taxes | $ | 255,069 | $ | 189,338 | $ | 83,004 | |||||||||||
The provision for income taxes in the Consolidated Statements of Income was as follows for the years ended December 31:
| (In thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 40,179 | $ | 45,922 | $ | 15,454 | |||||||||||
| State and local | 6,727 | 6,887 | 1,752 | ||||||||||||||
| Foreign | 4,031 | 735 | (464) | ||||||||||||||
| Total current provision | 50,937 | 53,544 | 16,742 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | 15,918 | (2,249) | 5,824 | ||||||||||||||
| State and local | 3,537 | (425) | 824 | ||||||||||||||
| Foreign | (3,573) | (4,399) | (4,581) | ||||||||||||||
| Total deferred provision (benefit) | 15,882 | (7,073) | 2,067 | ||||||||||||||
| Provision for income taxes | $ | 66,819 | $ | 46,471 | $ | 18,809 | |||||||||||
The Company had cash and cash equivalents of approximately $222.6 million and $165.8 million at December 31, 2025 and 2024, respectively, of which approximately 15 percent and 11 percent was held by subsidiaries in foreign countries.
The Company examined the potential liabilities related to investments in foreign subsidiaries and concluded that there are no material deferred tax liabilities that should be recorded.
The provision for income taxes differs from the amount computed by applying the federal statutory rate of 21 percent for 2025 to income before income taxes for the reasons detailed in the table below. Due to the adoption of ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, the Company has presented its 2025 income tax disclosures in a revised format that includes enhanced disaggregation and updated categorization consistent with the new FASB requirements:
| (In thousands) | 2025 | % | |||||||||
| Income tax at U.S. federal statutory rate | $ | 53,564 | 21.0% | ||||||||
| Domestic Federal | |||||||||||
| Tax credits | (664) | (0.3)% | |||||||||
| Nontaxable or nondeductible items: | |||||||||||
| Section 162(m) permanent addback | 4,624 | 1.8% | |||||||||
| Other | (396) | (0.1)% | |||||||||
| Cross-border tax laws | — | —% | |||||||||
| Domestic changes in valuation allowances | — | —% | |||||||||
| Other reconciling items | (262) | (0.1)% | |||||||||
| Domestic state and local income taxes, net of federal effect | 8,236 | 3.2% | |||||||||
| Foreign tax effects: | |||||||||||
| Other foreign jurisdictions | 536 | 0.2% | |||||||||
| Worldwide changes in prior year unrecognized tax benefits | 1,181 | 0.5% | |||||||||
| Provision for income taxes | $ | 66,819 | 26.2% | ||||||||
The provision for income taxes differs from the amount computed by applying the federal statutory rate of 21 percent for 2024 and 2023 to income before income taxes for the following reasons for the years ended December 31:
| (In thousands) | 2024 | 2023 | |||||||||
| Income tax at U.S. federal statutory rate | $ | 39,761 | $ | 17,431 | |||||||
| State income tax, net of federal income tax impact | 5,105 | 2,035 | |||||||||
| Section 162(m) limit | 3,735 | 1,896 | |||||||||
| Federal tax credits | (1,002) | (1,219) | |||||||||
| Share-based payment compensation excess tax benefit | (346) | (242) | |||||||||
| Other | (782) | (1,092) | |||||||||
| Provision for income taxes | $ | 46,471 | $ | 18,809 | |||||||
At December 31, 2025, the Company had domestic federal income taxes payable of $2.3 million, domestic state income taxes receivable of $2.7 million, and foreign taxes receivable of $2.3 million recorded. At December 31, 2024, the Company had domestic federal income taxes receivable of $5.6 million, domestic state income taxes receivable of $3.7 million, and foreign taxes receivable of $3.3 million recorded.
At December 31, 2025, state taxes in Indiana and California made up the majority (greater than 50%) of the domestic state and local taxes. At December 31, 2024, state taxes in Indiana and Oregon made up the majority (greater than 50%) of the domestic state and local taxes.
Deferred Income Tax Assets and Liabilities and Valuation Allowances
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities were as follows at December 31:
| (In thousands) | 2025 | 2024 | |||||||||||||||
| Deferred tax assets: | |||||||||||||||||
| Stock-based compensation | $ | 2,468 | $ | 1,836 | |||||||||||||
| Pension | 920 | 909 | |||||||||||||||
| Deferred compensation | 11,737 | 11,114 | |||||||||||||||
| Warranty | 16,608 | 13,540 | |||||||||||||||
| Convertible debt bond hedge | 14,286 | 7,323 | |||||||||||||||
| Inventory | 26,101 | 24,007 | |||||||||||||||
| Research and experimental costs | 215 | 9,018 | |||||||||||||||
| Other | 7,384 | 6,963 | |||||||||||||||
| Lease obligation asset | 69,904 | 57,528 | |||||||||||||||
| Net operating loss, interest, and tax credit carryforwards | 16,131 | 15,152 | |||||||||||||||
| Total deferred tax assets before valuation allowance | 165,754 | 147,390 | |||||||||||||||
| Less valuation allowance | (7,896) | (7,657) | |||||||||||||||
| Total deferred tax assets net of valuation allowance | 157,858 | 139,733 | |||||||||||||||
| Deferred tax liabilities: | |||||||||||||||||
| Lease obligation liability | (65,776) | (54,106) | |||||||||||||||
| Fixed assets | (45,748) | (40,432) | |||||||||||||||
| Intangible assets | (68,288) | (64,953) | |||||||||||||||
| Total deferred tax liabilities | (179,812) | (159,491) | |||||||||||||||
| Net deferred tax liabilities | $ | (21,954) | $ | (19,758) | |||||||||||||
As of December 31, 2025, the Company had deferred tax assets recorded related to foreign net operating losses and tax credit carryforwards of $16.1 million, net. This includes $2.5 million related to U.K. entities, $3.9 million related to Italian entities, $7.8 million related to Hong Kong entities, and $1.9 million related to other foreign entities. The net operating losses and tax credit carryforwards have indefinite lives.
The foreign valuation allowance for Hong Kong deferred tax assets as of December 31, 2025 and 2024 was $7.8 million and $7.5 million, respectively. Based upon historical results and estimated future results, it is the judgment of management that these tax carryforward attributes related to Hong Kong entities are not likely to be realized. The Company has concluded it is more likely than not that it will realize the benefit of all other existing deferred tax assets, net of the valuation allowances mentioned above.
Unrecognized Tax Benefits
The following table reconciles the total amounts of unrecognized tax benefits, at December 31:
| (In thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Balance at beginning of period | $ | 24,915 | $ | 24,395 | $ | 23,376 | |||||||||||
| Changes in tax positions of prior years | — | — | 218 | ||||||||||||||
| Additions based on tax positions related to the current year | 688 | 1,219 | 1,195 | ||||||||||||||
| Decreases due to settlements of liabilities | (411) | — | — | ||||||||||||||
| Decreases due to closure of tax years | (1,235) | (699) | (394) | ||||||||||||||
| Balance at end of period | $ | 23,957 | $ | 24,915 | $ | 24,395 | |||||||||||
In addition, the total amount of accrued interest and penalties related to taxes, recognized as a liability, was $11.2 million, $9.6 million, and $7.2 million at December 31, 2025, 2024, and 2023, respectively.
The total amount of unrecognized tax benefits, net of federal income tax benefits, of $34.6 million, $33.9 million, and $30.8 million at December 31, 2025, 2024, and 2023, respectively, would, if recognized, increase the Company’s earnings, and lower the Company's annual effective tax rate in the year of recognition.
The Company is subject to taxation in the United States and various states and foreign jurisdictions. In the normal course of business, the Company is subject to examinations by taxing authorities in these jurisdictions. For U.S. federal and state income tax purposes, tax years 2024, 2023, and 2022 remain subject to examination.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 21, 2025 | |
| 2023 | Feb 23, 2024 | |
| 2022 | Feb 24, 2023 | |
| 2021 | Feb 25, 2022 | |
| 2020 | Feb 26, 2021 | |
| 2019 | Feb 27, 2020 | |
| 2018 | Feb 27, 2019 | |
| 2017 | Feb 28, 2018 | |
| 2016 | Feb 28, 2017 | |
| 2015 | Feb 29, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.