Tyler Deur - Lambert Edwards Jason Lippert - CEO and Director Scott Mereness - President Brian Hall - CFO.

Daniel Moore - CJS Securities Scott Stember - C.L. King & Associates Wenjun Xu - Thompson Research Group Stephen O'Hara - Sidoti & Company Barry Kaplan - Maple Tree Capital.

Good day, ladies and gentlemen, and welcome to the LCI Industries’ Q4 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call maybe recorded.

I would now like to introduce your host for today's conference Tyler Deur from Lambert Edwards. Please go ahead..

Thank you. Good morning everyone. And welcome to the LCI Industry's 2016 fourth quarter and year-end conference call. I'm Tyler Deur with Lambert Edwards, LCIs Investor Relations firm. And I'm join on the call today by member of the LCIs management team, including Jason Lippert, CEO and the Director; Scott Mereness, President; and Brian Hall CFO.

Management will be discussing fourth quarter and year-end results in just a moment. But first, they have asked me to inform you that certain statements made in today's conference call regarding LCI Industry's units operations maybe consider forward-looking statements under the Securities Laws, and involve number of risks and uncertainties.

As a result, the Company cautions you that there are number of factor, 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 statement.

These factors are discussed in the Company's earnings release, in its Annual Report on Form 10-K and in 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?.

Thanks, Tyler. Hello everyone and thank you for joining us on today's call. We are proud to announce another year of record revenues where we achieved approximately $1.7 billion in total sales, 20% growth over last year's $1.4 billion in sales.

We’re especially proud of the growth in our operating profit for the year, which finished at a record $201 million, up approximately $85 million from last year, a 73% increase. ROIC for the year finished at 41% and we acquired $89 million in revenue from acquisitions.

The driving forces behind these record results included Company initiatives such as attrition, lean and new product development, complemented by the best industry wholesale numbers in 40 years.

In January, our sales topped $149 million or 18% over the last January, a record for January and an indicator that the industry is running very strong, fueled by continued changing bio-demographics and more attractive products; not to mention, attractive entry level price points.

It is noteworthy to mention that this is the first earnings release since we officially changed our name LCI Industries. As many of you know, we changed the name of our organization from Drew Industries to LCI Industries at the beginning of this year.

LCI’s business has gone considerably over the past decade and the new corporate name was selected to better align the investment community and our customers with the strength of the LCI brand and the industry it serves. 2016 ended strong and all indications point toward a positive 2017.

Interest rates, fuel prices, and availability of wholesale and retail credit are favorable. Dealer inventories remained stable, interest rates are low, and consumer sentiment is still very positive.

Dealer inventories are not only healthy but many dealers reported record years and are reinvesting and adding more sales and services bases to their dealerships. All of these green lights provide good momentum for our industry as we head into this New Year. Total RV shipped in 2016 reached 430,000 units up from 374,000 units in 2015.

RV is predicting an increase this year, which would mark a record seventh year of growth. We believe that because there are so many new affordable price points and entry points for new buyers that the industry has several more years of legs.

As we’ve said in the past, we along with other industry leaders, think that we are on a realistic pace for 500,000 units in the next few years. As I stated in the last earnings call, our RV OEM partners are making serious capital investments by adding several new facilities.

We believe these investments alone could generate a gain of approximately 30,000 to 40,000 more units produced annually. At approximately $300,000 and content per vehicle, this could equate to an increase in sales of over $100 million, just based on the addition of the capacity with existing LCI products.

More importantly, these significantly capital investments by our customers are a great signal that they don’t expect the industry to slowdown anytime soon. In addition, many of our customers have raised production rates in existing facilities with some of our larger customers looking in double-digit increases over last year Q1.

The RV has shown in Louisville produced very good results, and the first retail shows of the year have echoed the deposit sentiments predicted by industry leaders. Most shows have announced record attendances, including the largest retail show of the year, the Tampa SuperShow.

Backlogs for our customers are at all time highs, and it appears that the consumer interest in our vain continues to grow at all price points and age groups.

As a result of the continued industry growth, LCI is addressing capacity issues by adding at least two more facilities, one in Michigan, Indiana and one in Fort Wayne, Indiana, giving us an additional 800,000 square-feet of manufacturing space.

These facilities will add much needed production capacity for our growing RV, Furion, Marine and other adjacent market product lines. We are considering adding capacity in other areas as well. We will be talking in the next couple of quarters about increasing our focus and CapEx spending to include more automation projects.

We feel automation will not only improve product quality, manufacturing efficiency and employee safety, but will also help us address more effectively the tight labor market we face in Elkhart County as unemployment in the county gets closers of 3%.

In the last few years, we’ve also invested significant resources into our lean manufacturing initiatives. These initiatives have added over 150,000 square-feet of manufacturing space in each of the last two years, and improved profits each year through scrap and efficiency and labor savings.

We plan on continuing our investments in lean in 2017, expanding lean and VAVE teams and projects. The success of our lean programs has clearly allowed us to slow our need for adding building capacity as the industry has grown. As for acquisitions, we continue to see a full pipeline of opportunities.

As many of you know, a significant portion of our acquisitions in the last three years have been outside the North American RV market. Components sold to these industries often carry equal to or better margins, so we will continue seeking companies in these adjacent industries, as well as other geographic markets.

In 2016, we invested heavily into the Marine market as we make two acquisitions in that space. As we begin 2017, we anticipate looking at several acquisition opportunities, both inside and outside the RV market.

And as a result of our growth we’ve experienced, it also makes strategic sense to look at transaction opportunities with companies whose revenues are much larger than companies we’ve acquired in the past. On that note, our sales outside the RV towable market for the year, was approximately $580 million.

Our adjacent teams are making progress in the adjacent markets. I've never more positive about the teams we have in place at LCI, and everyone on the team knows what it will take to continue this incredible journey of growth and success that we’ve experienced in the last two decades.

We’re so fortunate to be in a position where we are focused on people like never before. We have great momentum with new product development, acquisitions, industry growth. We have firm foot-holes in the many different industries, and most importantly, we have senior leadership team that’s been together for almost 20 years.

We know this is a recipe for continued success. I’d also like to say thanks to all of our teams who help us lead us to a record 2016. I’ve spent the last part of the year visiting with every team in Indiana. And the dedication and enthusiasm for LCI makes me excited for our future potential.

As I say every quarter, we have an exceptional group of leaders all over the Company that make us an exceptional business, and we have some exceptional customers as well. We couldn’t attain these results without any of them. I’ll now turn to Brian Hall, our CFO, to discuss Q4 financial results and then we’ll follow up with questions..

Thanks, Jason. Good morning everyone. Over the next few minutes, I’ll provide some additional color regarding the financial results, as well as point out some highlights of our cash flows and financial position. For the quarter, our consolidated net sales increased approximately 21% to $403 million.

Sales to RV OEMs, our largest customer base, grew at 23% compared to the fourth quarter of 2015. The RV industry continue to show strong growth as wholesale shipments of towable RVs and motorized RVs increased over 20% and 16% respectively.

Sales to other OEMs outside of RV grew at over 14% to $79 million for the quarter, while our aftermarket segment increased sales at over 16% to $30 million for the quarter. I would also note that January 2017 sales for the aftermarket segment grew in excess of 35% over the prior year, driven both by some seasonality and new business.

Acquired revenues were approximately $17 million of the $69 million of increased consolidated net sales for the quarter.

Our consolidated net sales for the full year 2016 increased $276 million or 20%, and is now approaching $1.7 billion; again, driven significantly by the strong growth in the wholesale shipments of towable RVs and motorized RVs, which increased over 15% and 16% respectively. Sales to RV OEMs grew at 19% to $1.2 billion.

Sales to other OEMs, outside of RV, grew at 21% to $332 million while our aftermarket segment increased sales at over 27% to $131 million. Acquired revenues were approximately $64 million of the $276 million of increased consolidated net sales.

Motorized RV content per unit for the 12 months ended December 31, 2016 increased over $211 to $2,011 per unit, while towable RV content per unit increased $35 to $3,022 per unit.

We have exciting opportunities with many of our products, including travel trailer leveling, electronics, and Furion products as we're in the early stages of these product cycles. Q4 diluted earnings per share increased to $1.05 per share compared to $0.65 per share in Q4 of 2015.

While our steel and aluminum costs increased slightly during the quarter, the quarter-over-quarter improvements continued to be the same as those that we've discussed throughout 2016.

The growth in sales to aftermarket, international and other markets outside of RV, as well as the incremental margin on the RV sales growth continued to be the driving forces.

In addition, the focus on lean, automation and employee turnover, are paying dividends through reduced scrap, improved efficiency, reduced training and workers’ compensation costs, to name a few. Full year diluted earnings per share increased to $5.20 per share compared to $3.02 per share in 2015, an increase of over 72%.

The Company generated over $200 million of operating income, an increase of almost 73% from 2015 operating income of just over $116 million. While the improvement in the income statement has been strong, the improvement in our financial position and cash flows is equally important.

While using $49 million in cash for business acquisitions, $45 million for capital expenditures and returning $34 million to shareholders in the form of dividends, we changed our net debt position of $38 million at December 31, 2015 to a net cash position of $36 million at December 31, 2016.

This cash position, along with the borrowing availability under our amended credit facility, position us well for future investments. That is the end of our prepared remarks. Charlotte, we are ready to entertain questions. Thank you..

[Operator Instructions] Our first question comes from the line of Daniel Moore from CJS Securities. Your line is now open..

Wanted to focus first on gross margins, obviously, I know there is solid quarter of expansion.

Just talk about the various puts and takes as we think about 2017? And putting them all together, do you expect to be able to sustain the gross margins we saw this year, or even perhaps expand a little?.

I'll start off, and Scott can maybe chime in as well. We've been talking throughout the year about the five or six drivers of our improvement during 2016. And I think we've said a couple of times that there's a few of those that move to a neutral position during 2017.

We certainly don't anticipate significant headwinds in steel and aluminum at this point. But that always remains volatile. There are couple of other items that were one and done. But can we continue to, as we grow the top-line, manage for some additional incremental margin, I think there is additional room for some nominal growth there.

I would certainly -- threw out that there’s a couple of other things that we’d look to for challenges during 2017. We know that labor is always a challenge, and we might see a little bit of headwind there. And we’ve talked a little bit on the call today about some additional capital expenditures.

So, there could be some increased fixed charges on a go forward basis. But really our capital expenditures for 2017, while we have a range determined, a lot of those things are yet to be seen. Some could take -- some could get pushed into future years.

But those would certainly be a couple of things that we would look to for some negatives, but offset by some leverage of our other fixed cost..

And on the positive side of the equation, Dan would be to start continued improvement in attrition. We really feel that that’s going to continue to drive better results and give us more and more opportunity every year. We’re going to continue to focus on acquisitions that have higher margins.

And I think that we can point to several last year that had better margins than what our typical margin profile looks like with the rest of our businesses.

And then, obviously, the increased sales as a -- the biggest chunk of that, and we certainly expect that to continue as we look at January to some of 20% better than last January on a 40-year record and the shipments..

Dan this is Scott. One more comment on gross margin, and in relation to steel prices. Steel prices, just in the past couple of days, have come down. Scrap was announced last night, where it was down almost $25 a ton.

And for those of you who track that over the last couple of months, it has ticked up at the forward six months probably look to continue to be softening from where it is now.

And that’s evident by last night’s announcement on February scrap, as well as some of the futures contract that show a lower future price for how raw material as compared to the stock price. So, we don’t look to have materials be a headwind if anything, at this point; again, like Brian said, it's kind of volatile.

But at this point, we feel like it’s a neutral trade item for 2017 expectations..

Shifting gears, if I'm saying it correctly, Sessa Klein?.

Sessa Klein.

How did that come about? And I guess, talk about train windows as an area of opportunity and maybe the overall size of the opportunity in U.S.

and Europe that that acquisition opens up for you?.

So, Sessa Klein recently we announced this upcoming acquisition last night. Sessa Klein is a small train window manufacture just north of the Milan, just outside Milan, Italy. And they had approached us earlier in 2016 about manufacturing windows in the United States for the U.S. train market.

They didn’t have manufacturing capability in United States, and there was a requirement to get the contracts going in the United States. That quickly turned into acquisition talks, and here we are today looking at a pending in acquisition. Here is what we like about the acquisition. We love the team.

We love the fact that it's just an hour train right away from our first acquisition in Italy. So, those teams can collaborate together. This particular company can be a platform for building caravan RV windows in Europe, which they don't today but we'll help them get into that market.

Our manufacturing facilities in the United States can be a platform for growth in the U.S. train market; and then our financial strength to LCI financial strength helping them get bigger contracts within the European train market. They struggled a little bit with the larger train contracts, because of their size. They're a small company.

And the big guys, when they're awarding contracts, they sometimes ended up going with somebody financially stronger and bigger. We feel like our financial strength will help them prove their chances of winning contracts in the European market. So, U.S.

train growth, European train growth and RV window growth in Europe would be the three ways that we're going focus short-term on growing the company; roughly 75 people at the company and a great aggressive management team. So, looking forward to working with those guys on these growth initiatives..

And I'd just add real quick that they've got a phenomenal management team that’s deep, and they're a small company. They can handle a lot more business than what they're doing today.

So, like Scott said, the combining forces with their design and talent and experience in the industry, and our ability to expose them to clients that would be more apt to jump onboard with the contract, because we're just bigger in size and we're more of a long- term known entity that those things will help significantly..

One more and I'll leave you alone. So it feel that they’ve had a nice little bit of an uptick or comeback as of late.

Talk about trends you're seeing in inventory levels, specifically fifth-wheels and how that might bode for your content growth as we look at 2017?.

I think it's a really bright spot for us right now. Obviously, last year, fifth-wheel growth was not that impressive, it was mid single digits and we've come into January.

And just looking -- obviously, wholesale numbers aren’t out yet, but just looking at our January numbers, our fifth-wheel production in January was up about 22%, 25%, towables were actually only up for us -- trailers are only up about 20%. So that's a huge shift. Talking to some other OEM leadership out there, they’re seeing the same thing obviously.

And looks like it's going to be a trend, at least for the next few months maybe quarter or two, but it's definitely a powerful part of our mix when mix trends towards fifth-wheels, a lot more content there.

We look at upward to $10,000 in content on some of the bigger fifth-wheels, and as well as the content opportunities with more-and-more new products that are developed going to fifth-wheels first versus the trailers, because they're more entry level. So, it's a good opportunity for us if it keeps going.

But dealers are selling bigger fifth-wheels, they're selling high-end units right now, and all the shows -- retail shows that are happening are pointing to that. So it's a big positive..

Thank you. Our next question comes from the line of Scott Stember from C.L. King. Your line is now open..

Can you maybe talk about some of the newer products? I know leveling for travel trailers has been a pretty good success to you on the 2017 model year for a lot of the OEMs.

Can you maybe talk about what we've seen so far in your numbers and the potential again toward proliferation if you were to get 100% of that market at least on the lower end of the trailer market?.

Well, we probably won't dive into the numbers on each new product. But we can tell you that where is the biggest opportunities are as we’ve been talking about the last several conference calls, Furion is a big opportunity.

That all have a second anniversary in July of this year, and we’re making great progress there; well above 20% improvements year-over-year with their products. And they’re rapidly accelerating our new product introduction.

So, you might know that we introduced through Furion residential for some of the bigger fifth-wheel high-end towable units in August. And those have gone over really well, that was a brand new edition to the product line.

Of course we do a lot of back-up cameras and we do lot of TVs and televisions and serials, and products in those categories and the electronics, and the things. And then those all carry over well into our aftermarket efforts too. So, we’re taking all the Furion products in the aftermarket, which is a big deal.

Electronics and my RV, that’s one we’ve been talking about that will continue to have lots of legs as technology continues to makes its way into a lot of the higher end coaches, and ultimately the entry level coaches.

We think that the electronics and the my RV flash one control products they have Bluetooth capability and Wi-Fi capability, and ultimately cellular capability towards the end of this year will totally change the game for electronics in the towable and motorhome market.

So, lots of opportunity there, because we don’t think that there is a travel trailer or fifth-wheel or motorhome that you couldn’t put my RV into. And then travel trailer leveling we just launched that in August, that’s a $100 million opportunity for us.

I think that we’re early in innings, just launched with about 10 brands in August at the September open-house, and it's getting a lot of visibility during the show season right now. So, I think we’ll have a lot more update in the next couple of quarters, but certainly a lot of opportunity there.

The consumers love it, because they just touch a button and they set up the camp whereas in a lot of cases they have to do a lot of work and manually cranking on manual jacks to get the unit in place. So that they can actually enjoy their camp or the camp ground. And then we got kitchen and bath.

We’ve got a lot of opportunity there with a lot of new kitchen and bath products coming out this year. That’s in excess of $15 million market for us. More motorhome content, we’ve talked for the last couple of years about really developing a better strategy there. And we obviously saw our motorhome content jump a couple of 100 bucks.

So, those are kind of the headlines, Scott..

And just moving over to the aftermarket, it seems that you mentioned that in January, and the sale seems to have reaccelerated well above 20%, and some new products.

Is there anything specific that that’s any high content items that are starting to reach there, or usual way to carry levels, and that’s why you’re seeing some of that stuff come in?.

I think, you’ve seen a lot of everything in aftermarket. We’re up about 35% in January, so some of this timing at this year-end, and some it's just the end of the year, the Q4 for aftermarket, is generally the slowest period there.

But we’re still really optimistic and we’re still taking a lot of products that we have in our line-up, our product line-ups across the RV category, and still trying to work those in. You can’t just do a pitch and then it's in the retail stores.

It’s a little bit longer of a cycle getting it into the dealerships and the accessory stores around the country. I can't say where it certainly helps us, because they continue to grow and acquire and expand. We're dealing with one team there and we've got a good relationship and we continue to expand with them.

So we've got some really good customers with wholesale distributors and the dealerships that continue to grow. But the most exciting thing is, is we've done a lot of the heavy lifting and have a lot of great customers there today that are doing great job, helping to sell products and we're helping each other.

But as we continue to introduce new products, we have that outlet to move products into those customers now, whereas three years ago, we were doing a lot of pitching and trying to prove ourselves to the customers..

One other quick comment, this is Scott. One other quick comment on that, the Atwood acquisition that happened in November had -- of their revenue that we acquired, it was close to 25%, 30% of their annualized revenue was aftermarket related.

So that definitely was -- and some new products for us to be able to push to some of the dealers in some of the channels that they hadn't yet penetrated, so that's another positive sign when you look to 2017 growth..

And just last question on the aftermarket operating margin. It looks like it was a little bit static compared to a year ago.

Was there any start-up costs, or any one-time -- any integration issues of acquisitions? May just talk about that a little bit?.

I don't -- there isn't anything unusual going on there. I would say, I think a lot of what you have is changing mix, which does seem to have a significant impact as -- we haven't been in this business for very long.

But between the wholesale distributors and dealers versus the end retail consumer, that margin is -- it's a wide range of margins between those three products, or customer category. So, I just see some changes in mix there, I think that's probably one of the bigger drivers..

Thank you. Our next question comes from the line of Kathryn Thompson from Thompson Research Group. Your line is now open..

This is Wenjun sitting in for Kathryn.

I just have one question about, if you can comment on what broader product categories right now, you're seeing the greatest growth in terms of percentage?.

On OEM products, or our products?.

Your products, and OEM, in general, in RV categories..

So, I can comment more on OEM to get pretty granular, when you look at. We've got probably 25 different product categories between -- among the chassis, furniture and windows, and slide-ups and everything else we do.

But like I mentioned with Dan's initial question on fifth-wheels that it definitely feels like motorhomes are accelerating and fifth-wheels are accelerating faster than last year. Total growth is still real strong on the trailer side. But like I said, at least from what we can see 20% for January with our chassis numbers.

But that would be kind of a quick color on motorhomes versus the towable fifth-wheels and towable trailers. And then in adjacent markets we probably have a lot more market share opportunities there than having to worry what the industry is doing, because we're relatively still in early innings and a lot of the adjacent markets that we're in..

[Operator Instructions] Our next question comes from the line of Stephen O'Hara from Sidoti & Company. Your line is now open..

My question is just in terms of the January sales that you guys had. I mean, do you have a feeling or sense as to what the industry growth was in that period. And if you mentioned that, I apologize, but I didn’t hear it..

No, I mean, we have a pretty good idea, because our market shares are on the high side. So, we see a lot of what goes on. We do business with every customer. Our January sales for units, we just look at chassis. So it’s a one-to-one relationship with. We saw one chassis that equals to one unit for the customer.

So, having close to 80% of the market share in the RV business on chassis, so it's easier for us to kind of see what’s going on earlier than when we typically get wholesale shipment. So, like we said, I mean our fifth-wheels were up 25%, January this year versus last year and our travel trailers were up just about 20%.

So, I mean, great numbers for shipments, I think. And we’re hearing the same thing from the OEMs. And the fact that the backlogs are the best they’ve ever had and the dealers are restocking right now.

And the Baird report this morning, talked about the dealers optimism for restocking and healthy demand, and dealers starting to reaching at all high time on Baird's index, and they're serving anyway. So, I think that that all points to what we’re looking for for the selling season between January and June. So, hopefully, that answers your question..

And then just on the Furion opportunity. I mean can you just talk about maybe where you are in relation to what you see as maybe the full opportunity there, maybe on the current business outside of -- are you getting what you thought you get out of it so far.

And maybe how growth there is to that as well?.

I think just to -- and Scott could probably comment on this too. But I would say that our sales, from when we started, are tracking forward looking, close or a little bit more than double where we started with them.

Our content opportunity is $1,700 and forward looking for, if you take -- roll the last quarter forward, we’re probably looking at over $125 in content. So, we’re still in an early innings there.

They still have to develop and launch products that they've committed to over the course of the next two years that will add to that ability to get that $1,700. But the products are having a lot of success. The quality is good. They’re being well received by the OEM customers that we have.

The Furion took their -- took and went to CES this year, and that was their first year there. So they got a lot of exposure out in the Vegas at that large Consumer Electronics Show.

So, the brands just becoming more -- I think it's becoming one of the strongest brands for electronics, and the RV business, just from a standpoint that they're doing the most marketing with consumers at their price points..

Stephen, it's up in excess since we canceled the deal with those guys about 18 months ago. It’s more than 60% in terms of where it started from. And like Jason said, the $1,700 number is the total addressable market, if you look at shipments, continuing to increase in the future.

Even our total addressable market slide that we have in our IR deck, we talked about that the other day of growing that, because all the industry is in a positive growth mode. That number continues to expand. So, definitely and probably the fastest growing part of our business when you look at the product line..

Thank you [Operator Instructions]. Our next question comes from the line of Barry Kaplan from Maple Tree Capital. Your line is now open..

Jason, you were talking so fast in your prepared remarks. I had trouble keeping up.

Did you say the return on invested capital was 41%?.

Yes. ROIC was 41%. Yes, I've a bad habit of talking fast. I try to slow down Barry, but….

So, I mean, that's extremely high number. How do you think about that going forward? I mean, it just seems like an unsustainably high number.

And also, while you were talking about in the press release the return on equity, I think you said it was 26%?.

Yes, correct..

Barry this is Brian. I'll jump in. As far as ROIC goes, yes, I mean is it on the high side, yes it's a great year for ROIC. I mean, that's an incredible jump from -- and I don't remember the exact number for the prior year, but in the high 20s.

So that percentage increase is outstanding, and they -- so can we maintain something like that? I mean, we continue to be focused on making investments in automation, and projects with high return on investment. And those are the types of things that can help maintain it.

But certainly, in the long-term, you're going to have periods of times where it pulls back, and it'll change..

I think one thing, it shows that we're getting -- making a lot more intelligent decisions over our time of our management team been together for 20 years. We're just getting better at how we deploy capital. And looking at, like Brian said, we're doing a lot of lean projects.

We're looking at automation more-and-more and implying more-and-more automation every year. And continue to make sure that we're making smart decisions when we're making these investments. But part of it would just our team has been together for a long time, our attrition top in the time.

We're just getting better manufacturing, because we're doing more with less. There is a lot of things that play into the number. But I think that certainly, if you look at our maybe our past five or seven year average, I think we're betting that we're can continually improve on what our average is. We may have a high year once in a while..

That sounds kind of like a challenge. Our team is always up for new challenges. So, watch out..

Yes, I mean, it's just an amazing number. Because it plays into my next question, which was now that you're back at a net cash balance.

Are you -- how are you thinking about potentially returning capital to the extent that you don't need it in the business? But if you can get 40% return on capital by doing acquisitions and running the business, don't give any of it to me..

Yes. So, I mean that, first and foremost, that's where the cash goes back in the business, CapEx and M&A. And that's one of the reasons why you see an increase in CapEx this year as we know what our cash position is and we know what it looks like. So, we’re okay with looking at a little bit more for CapEx. And we feel the same way about M&A.

We feel okay with more for M&A as well. So, when you look to the future, I think the amount of cash that we’re generating in our forward 12 of EBITDA is going to be strong enough that we’re going have plenty deployment of money back into the Company, which is great. It's great to go after the ROIC numbers that we put up last year.

That bodes well for the growth in the Company. There probably still -- we’ve announced $2 increase from $1.20 up to $2 per year in our regular dividend. So that will continue to be a part of our cash deployment. And beyond that, we’re not going to really change our strategy in terms of how we grow the Company.

And like Jason said, we’ve been doing largely the same strategy with same people for long time. We don’t have any plans to stray a whole lot with maybe the exception of a little bit more CapEx deployment, a little bit more M&A deployment, going forward, just given the size that our Company is and how much cash we’re generating.

So, I think, all-in-all, that’s a positive sign..

And not to drag this out, but I think if I look back over the last decade and how we run the business. I mean 10 years ago, Scott and I were still relatively new to the business.

And we’ve got a lot more -- we’ve got a lot of developed leaders, making great decisions on these types of capital projects that are going to help build to return higher in the business than we did 10 years ago, 10 years ago, just a couple of us making these decision.

And today, we’ve got a lot of great people and leadership decisions and leadership positions driving these decisions that are help them create better returns for the Company. So, hope that answers your question..

I have just one other like a business related question, related to the acquisition, this Italian acquisition of a window company. Is that part of strategy -- this was -- sounded like it was just opportunistic.

But is there -- are you thinking about a broader strategy to get more involved in the whole rolling stock market going beyond windows and other components?.

No, I mean, I think we’ll start with how I mentioned early on in the call. I mean, we’ll start with the easy low hanging fruits certainly growing their market share in their existing market is, will be the first to grow the company. Second way we grow the company as beginning to penetrate European caravan window market.

We feel like that’s really two or three main opportunities for growth. I think the other aspect of that is their window systems are currently going on trains that are 350 miles an hour. So, it’s a highly engineered product.

We feel like that product could be, maybe de-contented somewhat and go in some of the most expensive RVs that you see in the United States. So, they definitely bring a technology component that will help us innovate our current window line-up at the high end of the RV market.

So, definitely their technology will be beneficial to bring back to the United States. But in terms of the train market, certainly, there is a lot of seating and interior, furniture components, tables and seating within that, and you never know. But the first thing we’re going to focus on is windows in these particular areas.

One thing I failed to mention earlier, we probably -- we’re still trying to come up with a more exact number. But we would say between caravan windows and the train market potential between Europe and the United States, we would look at, I believe to be a $200 million total addressable market.

So we feel pretty comfortable saying that it's at least that, and we're poised to go after that aggressively over the next five years. So we're looking forward to that for sure..

That's $200 million just for windows?.

Yes, just for windows..

Global?.

Yes..

Thank you. Our next question comes from the line of Daniel Moore from CJS Securities. Your line is now open..

You touched on it obviously a little bit Jason. But the tick-up in CapEx, I know you’ve got continued facilities coming in.

Just talk about, even that's a little bit higher level than we've seen, how we should we think about that in 2018 terms and going forward?.

Maybe higher in terms of dollars, but we're a much bigger company than what we were two years ago at $1 billion when we were spending $30 million, or I think, we had one year in 2014 at $40 million. So, it's really much in line with where our revenues are at.

And again, part of it's just we're going to invest a little bit more in automation than what we have in the past. And we've got several projects that we want to do.

And part of it's to get more efficient, and create safer work environments, create higher quality products, but also at the same time like I mentioned in our earnings release comments that there’s a tightening labor market in Elkhart. And the labor market, I think, here is down 10,000 last year, or short 10,000 workers for the jobs available.

And when you talk about adding 15 OEM facilities over 12 months, and all the other suppliers that are going to increase capacity, it's just going to squeeze the need for jobs. So, we want to get ahead of it, and implement more automation. And I think that's going to continue to help us.

But I don’t think it's driving our CapEx number to a rate that's much different in terms of percentage of our total revenues and profits on what it's been in the past..

One other quick comment, Jason mentioned the square footage that we're bringing on as part of the 2017 CapEx. We think about that as kind of a step investment. These particular investments probably will last us three to five years. It's not every year that we see this level investment in brick-and-mortar.

So for 2018, you might say, yes we want to invest more in the automation piece of it but we might not have as significant of a brick-and-mortar investment like we did in 2017. So higher, but maybe offset by slightly less brick-and-mortar, for '18..

Okay. So I don't think we have any more questions in queue. So just want to thank everybody for coming out today, and appreciate the questions. And we'll talk to you next quarter. Thanks..

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone, have a great day..