-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DiuQPbKS7GFcVy/oGdGKOx3kSfbx57Ohc7ZlS68/slvoerjpHYvFNvfgWo6WZepJ ygOhFcJNN9/oAC858ZFKvA== 0000021212-97-000009.txt : 19971114 0000021212-97-000009.hdr.sgml : 19971114 ACCESSION NUMBER: 0000021212-97-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971112 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: COACHMEN INDUSTRIES INC CENTRAL INDEX KEY: 0000021212 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR HOMES [3716] IRS NUMBER: 351101097 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-07160 FILM NUMBER: 97714634 BUSINESS ADDRESS: STREET 1: 601 E BEARDSLEY AVE STREET 2: P O BOX 3300 CITY: ELKHART STATE: IN ZIP: 46514 BUSINESS PHONE: 2192620123 MAIL ADDRESS: STREET 1: 601 E BEARDSLEY AVE CITY: ELKHART STATE: IN ZIP: 46515 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-Q (MARK ONE) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1997 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from__________________to__________________ Commission file number 1-7160 COACHMEN INDUSTRIES, INC. (Exact name of registrant as specified in its charter) INDIANA 35-1101097 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification number) 601 EAST BEARDSLEY AVENUE, ELKHART, INDIANA 46514 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 219-262-0123 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No _ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date: At October 31, 1997: Common Shares, without par value 17,273,075 shares outstanding with an equivalent number of common share purchase rights. COACHMEN INDUSTRIES, INC. INDEX Page No. PART I. FINANCIAL INFORMATION Financial Statements: Condensed Consolidated Balance Sheets- September 30, 1997 and December 31, 1996.................3-4 Condensed Consolidated Statements of Income- Three and Nine Months Ended September 30, 1997 and 1996...5 Condensed Consolidated Statements of Cash Flows- Nine Months Ended September 30, 1997 and 1996.............6 Notes to Condensed Consolidated Financial Statements.....7-8 Management's Discussion and Analysis of Financial Condition and Results of Operations.........................9-13 PART II. OTHER INFORMATION......................................14 Item 6. Exhibits and Reports on Form 8-K SIGNATURES.......................................................15 Page 2 COACHMEN INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, DECEMBER 31, 1997 1996 ASSETS CURRENT ASSETS Cash and temporary cash investments $ 89,070,513 $66,448,901 Certificate of deposit - 500,000 Trade receivables, less allowance for doubtful receivables 1997 - $1,477,000 and 1996 - $919,000 35,446,180 20,575,048 Other receivables 2,173,022 2,103,168 Refundable income taxes - 1,865,000 Inventories 59,634,848 68,311,038 Prepaid expenses and other 1,927,508 930,244 Deferred income taxes 3,180,000 3,180,000 Total current assets 191,432,071 163,913,399 PROPERTY AND EQUIPMENT, at cost Land and improvements 8,981,865 6,640,920 Buildings and improvements 38,908,218 33,516,736 Machinery and equipment 16,488,384 14,563,955 Transportation equipment 10,800,644 9,619,667 Office furniture and fixtures 5,720,664 4,830,577 Total property and equipment, at cost 80,899,775 69,171,855 Less, Accumulated depreciation 33,916,703 29,314,413 Net property and equipment 46,983,072 39,857,442 OTHER ASSETS Real estate held for sale 4,128,025 4,902,105 Rental properties 2,018,977 2,530,608 Intangibles, less accumulated amortization 1997 - $482,513 and 1996 - $380,363 4,961,763 5,063,913 Deferred income taxes 600,000 600,000 Other 10,922,465 10,580,105 Total other assets 22,631,230 23,676,731 TOTAL ASSETS $261,046,373 $227,447,572 The accompanying notes are part of the condensed consolidated financial statements. Page 3 COACHMEN INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (CONT'D) SEPTEMBER 30, DECEMBER 31, 1997 1996 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Current maturities of long-term debt $ 2,264,661 $2,278,519 Accounts payable, trade 29,578,326 14,532,948 Accrued wages, salaries and commissions 5,898,822 4,410,925 Accrued dealer incentives 2,547,739 3,064,437 Accrued warranty expense 5,576,782 4,460,137 Accrued income taxes 1,748,974 628,051 Accrued insurance 3,845,404 3,697,709 Other accrued liabilities 6,326,901 5,449,270 Total current liabilities 57,787,609 38,521,996 LONG-TERM DEBT 13,027,025 14,841,262 OTHER 6,649,897 6,428,373 Total liabilities 77,464,531 59,791,631 SHAREHOLDERS' EQUITY Common shares, without par value: authorized 60,000,000 shares; issued 1997 - 20,633,144 shares and 1996 - 20,527,644 shares 87,077,768 86,248,042 Additional paid-in capital 2,357,622 2,313,743 Retained earnings 110,527,417 94,670,593 199,962,807 183,232,378 Less, Cost of shares reacquired for the treasury 1997 - 3,387,667 shares and 1996 - 3,340,996 shares 16,380,965 15,576,437 Total shareholders' equity 183,581,842 167,655,941 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $261,046,373 $227,447,572 The accompanying notes are part of the condensed consolidated financial statements. Page 4 COACHMEN INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME THREE MONTHS NINE MONTHS ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, 1997 1996 1997 1996 Net sales $174,885,358 $154,244,238 $502,359,402 $469,599,312 Cost of goods sold 148,461,929 130,087,358 432,361,204 401,328,935 Gross profit 26,423,429 24,156,880 69,998,198 68,270,377 Operating expenses: Selling and delivery 8,102,059 6,572,380 24,113,819 20,545,700 General and administrative 7,472,979 4,888,141 20,003,278 16,151,897 Total operating expenses 15,575,038 11,460,521 44,117,097 36,697,597 Operating income 10,848,391 12,696,359 25,881,101 31,572,780 Nonoperating income (expense): Interest expense (369,581) (398,520) (1,164,643) (1,239,555) Interest income 1,048,145 374,114 3,188,818 979,056 Gain (loss) on sale of properties, net (87,913) 1,979 45,379 728,548 Other income, net 361,210 509,631 552,260 958,430 Total nonoperating income 951,861 487,204 2,621,814 1,426,479 Income before income taxes and cumulative effect of accounting change 11,800,252 13,183,563 28,502,915 32,999,259 Income taxes 4,207,000 4,851,000 10,061,000 12,024,000 Income before cumulative effect of accounting change 7,593,252 8,332,563 18,441,915 20,975,259 Cumulative effect of accounting change for Company-owned life insurance policies - - - 2,293,983 Net income $ 7,593,252 $ 8,332,563 $ 18,441,915 $ 23,269,242 Earnings per common share: Income before cumulative effect of accounting change $ .44 $ .55 $ 1.07 $ 1.40 Net income $ .44 $ .55 $ 1.07 $ 1.55 Weighted average number of common shares outstanding 17,233,378 15,070,652 17,225,930 15,028,672 Cash dividends per common share $ .05 $ .05 $ .15 $ .135 The accompanying notes are part of the condensed consolidated financial statements. Page 5 COACHMEN INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 1997 1996 CASH FLOWS FROM OPERATING ACTIVITIES Net cash provided by operating activities $ 36,547,875 $22,764,705 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from: Sale of property and equipment, real estate held for sale and rental properties 1,213,142 1,380,557 Certificate of deposit 500,000 - Acquisitions of property and equipment (11,193,626) (12,066,649) Proceeds from life insurance death benefit - 171,770 Other (34,819) 466,562 Net cash (used in) investing activities (9,515,303) (10,047,760) CASH FLOWS FROM FINANCING ACTIVITIES Payments of long-term debt (1,828,095) (1,843,174) Proceeds from sale of common shares 829,726 988,115 Purchases of common shares for treasury (827,500) - Cash dividends paid (2,585,091) (2,029,605) Net cash (used in) financing activities (4,410,960) (2,884,664) Increase in cash and temporary cash investments 22,621,612 9,832,281 CASH AND TEMPORARY CASH INVESTMENTS Beginning of period 66,448,901 17,020,744 End of period $ 89,070,513 $ 26,853,025 The accompanying notes are part of the condensed consolidated financial statements. Page 6 COACHMEN INDUSTRIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. The consolidated balance sheet data as of December 31, 1996 was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. 2. In the opinion of management, the information furnished herein includes all adjustments of a normal and recurring nature necessary to reflect a fair statement of the interim periods reported. The results of operations for the three and nine months ended September 30, 1997 are not necessarily indicative of the results to be expected for the full year. 3. Inventories consist of the following: September 30, December 31, 1997 1996 Raw material $ 20,504,359 $ 20,951,906 Work-in-process 9,252,700 6,467,066 Finished goods 29,877,789 40,892,066 Total $ 59,634,848 $ 68,311,038 4. Effective January 1, 1996, the Company changed its method of accounting for its investment in life insurance contracts which were purchased to fund liabilities under deferred compensation agreements with executives and other key employees. Prior to January 1, 1996, the Company accounted for its investments in life insurance contracts by capitalizing premiums under the ratable charge method (a method of accounting which was acceptable when the insurance contracts were originally acquired and continued to be acceptable for contracts acquired prior to November 14, 1985). Effective January 1, 1996, the Company changed to the cash surrender value method of accounting which is the preferred method under generally accepted accounting principles, as this method more accurately reflects the economic value of the contracts. On that date, the Company recorded a $2.3 million noncash credit for the cumulative effect of the accounting change. 6. The Company was contingently liable at September 30, 1997 to banks and other financial institutions on repurchase agreements in connection with financing provided by such institutions to most of the Company's independent dealers in connection with their purchase of the Company's recreational vehicle products. These agreements provide for the Company to repurchase its products from the financing institution in the event that they have repossessed them upon a dealer's default. The risk of loss resulting from these agreements is spread over the Company's numerous dealers and is further reduced by the resale value of the products repurchased. The Company is involved in various legal proceedings which are ordinary litigations incidental to the industry and which are covered in whole or in part by insurance. Management believes that Page 7 any liability which may result from these proceedings will not be significant. 7. On May 1, 1997 the Board of Directors authorized the repurchase of up to one million shares of the Company's outstanding common stock. Shares may be purchased from time to time, depending on market conditions and other factors, on the open market or through privately negotiated transactions at the then prevailing market prices. During the second quarter of 1997, the Company repurchased 50,000 shares of its common stock on the open market. There were no purchases of common stock by the Company during the third quarter of 1997. Page 8 COACHMEN INDUSTRIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is management's discussion and analysis of certain significant factors which have affected the Company's financial condition, results of operations and cash flows during the periods included in the accompanying condensed consolidated financial statements. A summary of the changes in the principal items included in the condensed consolidated statements of income is shown below. Comparison of Three Months Nine Months Ended September 30, 1997 and 1996 Increases (Decreases) Net sales $ 20,641,120 13.4% $ 32,760,090 7.0% Cost of goods sold 18,374,571 14.1 31,032,269 7.7 Selling and delivery expenses 1,529,679 23.3 3,568,119 17.4 General and administrative expenses 2,584,838 52.9 3,851,381 23.8 Interest expense (28,939) (7.3) (74,912) (6.0) Interest income 674,031 180.2 2,209,762 225.7 Gain (loss) on sale of properties, net (89,892) * (683,169)(93.8) Other income, net (148,421)(29.1) (406,170)(42.4) Income before income taxes and cumulative effect of accounting change (1,383,311)(10.5) (4,496,344)(13.6) Income taxes (644,000)(13.3) (1,963,000)(16.3) Cumulative effect of accounting change for Company-owned life insurance policies - - (2,293,983) * Net income (739,311) (8.9) (4,827,327)(20.7) * Not meaningful Page 9 NET SALES Consolidated net sales for the quarter ended September 30, 1997 were $174,885,358 an increase of 13.4% over the $154,244,238 reported for the corresponding quarter last year. Net sales for the nine months were $502,359,402 representing an increase of 7.0% over the $469,599,312 reported for the same period in 1996. The Company's vehicle segment, which includes the parts and supply group of companies, experienced net sales increases of 16.3% and 5.0% for the quarter and nine months, respectively. Recreational vehicle ("RV") sales increased in the third quarter as dealers reacted very favorably to the introduction of 1998 models. RV sales for the nine months were hampered by difficult and sometimes severe weather in several areas of the country during the first and second quarters. The Company's housing segment had a net sales increase for the 1997 third quarter of 1.3% and 17.8% for the nine months. The smaller increase for the quarter was primarily the result of reduced production at the Company's largest housing operation to facilitate the implementation of a seven-day production schedule. While the RV segment was up in the number of units sold and down slightly in the average sales price of units sold compared to the first nine months of 1996, the housing segment was up in both the number of units sold and in the average sales price per unit. COST OF GOODS SOLD Cost of goods sold increased 14.1% or $18,374,571 for the three months and 7.7% or $31,032,269 for the nine months ended September 30, 1997. The increase for both periods is substantially in line with the increases in net sales. The slightly higher increase in the cost of goods sold than in the increase in net sales negatively affected gross margins in the RV group by the additional capacity added primarily for the production of larger travel trailers and fifth wheels. This increase in capacity was not utilized to the extent anticipated as net sales, although a record, were below planned levels. The housing segment also continued experiencing lower gross margins attributable to the expansion in North Carolina and the costs associated with implementing a seven-day work week at the Indiana plant. Production volume is increasing in these two plants and gross margins are expected to improve. OPERATING EXPENSES As a percentage of net sales, operating expenses, which include selling, delivery, general and administrative expenses, were 8.9% and 7.4% for the 1997 and 1996 quarter, respectively, and 8.8% and 7.8% for the comparable nine- month periods. Selling expenses, as a percentage of net sales, increased by .3% for the quarter and .4% for the nine months, primarily due to increased dealer volume sales incentives attributable to increased sales in the housing group. As a percentage of net sales, delivery expenses remained relatively unchanged. General and administrative expenses were 4.3% of net sales for the third quarter compared to 3.2% for the 1996 corresponding quarter and 4.0% of net sales for the nine-month period compared to 3.4% for 1996. This increase for both periods is primarily the result of increasing the Page 10 Company's bad debt expense by approximately $1.5 million reflecting a slowdown in the overall van conversion industry. The Company's parts & supply group primarily supplies components to this industry. While the Company's own van conversion division experienced good performance, many companies in the industry are experiencing financial difficulties. INTEREST EXPENSE Interest expense was $369,581 and $1,164,643 for the three and nine-month periods in 1997 compared to $398,520 and $1,239,555 in the same periods last year. The nine-month decrease was primarily the result of a larger increase in cash surrender value for the Company's investment in life insurance contracts in 1997 than in 1996. These life insurance contracts were purchased to fund obligations under deferred compensation agreements with executives and other key employees. The interest costs associated with deferred compensation obligations and with the borrowings against the cash value of the insurance policies are partially offset by the increases in cash surrender values. INTEREST INCOME Interest income increased $674,031 and $2,209,762, respectively, for the 1997 three and nine-month periods. This is indicative of the amounts of cash and temporary cash investments in 1997 in comparison to 1996. Increases in cash and temporary cash investments were primarily generated from operating activities throughout 1997 and the sale of 2,070,000 shares of common stock in November 1996. GAIN (LOSS) ON THE SALE OF PROPERTIES, NET The net gain (loss) on the sale of properties for the third quarter of 1997 represented a loss of $87,913 and for the nine months a gain of $45,379. For the same periods in 1996, there was a gain of $1,979 and $728,548, respectively. Variances in each period reflect the result of the amount of gain or loss recognized upon the disposition of various properties. Assets are continually analyzed and every effort is made to sell or dispose of properties that are determined to be unproductive. OTHER INCOME, NET Other income, net, represents income of $361,210 for the third quarter and $552,260 for the nine months compared to income of $509,631 and $958,430 for the 1996 third quarter and nine months, respectively. The most significant variance for the nine-months was due to the receipt of deferred compensation related life insurance proceeds during the 1996 period. INCOME TAXES For the third quarter ended September 30, 1997, the effective tax rate was 35.7% and a year-to-date rate of 35.3% compared with a 1996 third quarter and year-to-date effective tax rate of 36.8% and 36.4%, respectively. The Company's effective tax rate fluctuates based upon the Page 11 states where sales occur, with the level of export sales and also with the amount of nontaxable income realized in each period. CUMULATIVE EFFECT OF ACCOUNTING CHANGE FOR COMPANY-OWNED LIFE INSURANCE POLICIES See Note 4 of Notes to Condensed Consolidated Financial Statements on page 7 herein. FORWARD LOOKING STATEMENTS Some matters set forth herein are forward looking statements that are dependent on certain risks and uncertainties including such factors, among others, as the availability of gasoline, which can impact sales of recreational vehicles, availability of chassis, which are used in the production of many of the Company's recreational vehicle products, interest rates, which affect the affordability of the Company's products, and also on the state of the recreational vehicle and modular housing industries in the United States. Other factors affecting forward looking statements include competition in these industries and the Company's ability to maintain or increase gross margins which are critical to profitability whether there are or are not increased sales. At times, the Company's actual performance differs materially from its projections and estimates regarding the economy, the recreational vehicle and housing industries and other key performance indicators. The Company's actual results could vary significantly from the performance projected in the forward looking statements. OTHER MATTERS In February 1997, Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS No. 128") was issued by the Financial Accounting Standards Board. The Company is required to adopt this pronouncement in its financial statements for the year ending December 31, 1997. SFAS No. 128 will require the Company to make a dual presentation of basic and diluted earnings per share on the face of its consolidated statements of income. The Company does not anticipate SFAS No. 128 will have a significant impact on the Company's consolidated statements of income. In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income" and SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information" both of which the Company will be required to adopt in its financial statements for the year ending December 31, 1998. SFAS No. 130 will require the Company to report comprehensive income in its financial statements. Comprehensive income includes net income and certain transactions that are reported as a separate component of shareholders' equity. SFAS No. 131 specifies revised guidelines for determining operating segments and the type and level of information to be disclosed. The Company has not yet determined what changes in its disclosures, if any, will be required by SFAS No. 131. Page 12 LIQUIDITY AND CAPITAL RESOURCES The Company generally relies on funds from operations as its primary source of liquidity. In addition, the Company maintains an unsecured committed line of credit, which totaled $30 million at September 30, 1997, to meet its seasonal working capital needs. At September 30, 1997, there were no borrowings against this line of credit. For the nine months, the major source of cash was from operating activities. The significant items in this category were net income, depreciation and a decrease in inventories. Increases in receivables were substantially offset by increases in trade accounts payable. Investing activities reflected a net cash use of $9,515,303. The principal use of cash in investing activities was the acquisition of property and equipment. This investment included the acquisition of a new recreational vehicle manufacturing facility in Indiana. The negative cash flow from financing activities was primarily for cash dividends and repayment of long-term debt. At September 30, 1997, working capital increased to $133.6 million from $125.4 million at December 31, 1996. The $8.2 million increase in current assets at September 30, 1997 versus December 31, 1996, was primarily due to increased cash and receivables. The $19.3 million increase in current liabilities was substantially due to increased trade accounts payable. Page 13 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K None SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. COACHMEN INDUSTRIES, INC. (Registrant) Date: November 12, 1997 S/S: GARY L. GROOM _______________________________ Gary L. Groom, Executive Vice President - Finance (Principal Financial Officer) Date: November 12, 1997 S/S: WILLIAM M. ANGELO _______________________________ William M. Angelo, Corporate Controller (Principal Accounting Officer) Page 14 EX-27 2
5 This schedule contains summary financial information extracted from the consolidated statement of income and consolidated balance sheet and is qualified in its entirety by reference to such financial statements. 0000021212 COACHMEN INDUSTRIES, INC. 1000 9-MOS DEC-31-1997 SEP-30-1997 89,071 0 39,096 1,477 59,635 191,432 80,900 33,917 261,046 57,788 13,027 70,697 0 0 110,527 261,046 502,359 502,359 432,361 476,478 2,622 1,682 1,165 28,503 10,061 18,442 0 0 0 18,442 1.07 1.07
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