-----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, E20SK/mhl2H4sthR9MErvd2Lydjs0X1nnj+mu6KSZ3jaVQB0v77FEQ6Y7eEts4rl 8u1L5Z/jElluJkSSmkJAdg== 0000021212-98-000003.txt : 19980330 0000021212-98-000003.hdr.sgml : 19980330 ACCESSION NUMBER: 0000021212-98-000003 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980327 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-K SEC ACT: SEC FILE NUMBER: 001-07160 FILM NUMBER: 98575196 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-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark one) (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 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 of incorporation (IRSEmployer Identification No.) or organization) 601 E. Beardsley Ave., Elkhart, Indiana 46514 (Address of principal executive offices) (Zip Code) (219) 262-0123 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Common Stock, Without Par Value New York Stock Exchange (Title of each class) (Name of each exchange on which registered) Securities registered pursuant to Section 12(g) of the Act: None 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. X Yes _ No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment hereto. X While it is difficult to determine the number of shares owned by non- affiliates (within the meaning of such term under the applicable regulations of the Securities and Exchange Commission), the registrant estimates that the aggregate market value of the registrant's Common Stock on March 17, 1998 held by non-affiliates was $441.27 million (based upon the closing price on the New York Stock Exchange and an estimate that 90.5% of such shares are owned by non-affiliates). As of March 17, 1998, 17,375,188 shares of the registrant's Common Stock were outstanding. Documents Incorporated by Reference Parts of Form 10-K into which Document the Document is Incorporated Portions of the Proxy Statement for the Annual Meeting of Shareholders to be held on April 30, 1998 Part III This Report contains certain statements that are "forward-looking" statements within the meaning of Section 27A of the Securities Exchange Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended. Those statements include, but are not limited to statements related to 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 the profitability whether there are or are not increased sales; and the Company's ability to make its software compliant with the year 2000. 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. Readers of this Report are cautioned that reliance on any forward-looking statements involves risks and uncertainties. Although the Company believes that the assumptions on which the forward-looking statements contained herein are based are reasonable, any of those assumptions could prove to be inaccurate given the inherent uncertainties as to the occurence or nonoccurrence of future events. There can be no assurance that the forward-looking statements contained in this Report will prove to be accurate. The inclusion of a forward-looking statement herein should not be regarded as a representation by the Company that the Company's objectives will be achieved. Part I. Item 1. Business Coachmen Industries, Inc. (the "Company" or the "Registrant") was incorporated under the laws of the State of Indiana on December 31, 1964, as the successor to a proprietorship established earlier that year. All references to the Company include its wholly owned subsidiaries and divisions. The Company is one of the largest full-line producers of recreational vehicles ("RVs") and is the largest builder of modular homes in the country. The Company's RVs are marketed under various brand names including Coachmen, Shasta, and Viking through approximately 1,300 independent dealers located in 49 states and internationally and through nine Company-owned dealerships. Modular homes are manufactured by the Company's All American Homes operation which sells homes through approximately 300 builder/dealers. The Company maintains approximately 61 trademarks, which are up for renewal from 1998 through 2011, and approximately 3 patents due to expire between 2001 and 2006. There are no material licenses, franchises, or concessions and no material foreign operations. The Company operates primarily in two business segments, vehicles and housing. The vehicle segment consists of the manufacture and distribution of class A and class C motorhomes, travel trailers, fifth wheel trailers, camping trailers, truck campers, van campers, van and truck conversions and related parts and supplies. The housing segment consists of factory produced modular homes. The table below sets forth the composition of the Company's net sales for each of the last three years (dollar amounts in thousands): 1997 1996 1995 Amount % Amount % Amount % Vehicles: Motorhomes $346,435 52 $327,802 54 $279,917 54 Travel Trailers 134,045 20 119,268 20 102,229 20 Camping Trailers 22,527 4 19,013 3 12,728 2 Truck Campers 4,593 1 2,306 1 3,748 1 Parts and Supplies 39,941 6 39,327 6 33,991 7 Total Vehicles 547,541 83 507,716 84 432,613 84 Housing 114,050 17 98,758 16 83,249 16 Total $661,591 100 $606,474 100 $515,862 100 Note: See Note 3 of Notes to Consolidated Financial Statements regarding segment information on page 27. 1 Vehicles Segment The Vehicles Segment consists of two groups of businesses, recreational vehicles and parts and supplies. The RV group is comprised of five divisions: Coachmen Recreational Vehicle Company, Georgie Boy Mfg., Inc., Shasta Industries, Coachmen Automotive and Viking Recreational Vehicles, Inc. Recreational vehicles are either driven or towed and serve as temporary living quarters for camping, travel and other leisure activities. Recreational vehicles may be categorized as motorhomes, travel trailers, camping trailers or truck campers. A motorhome is a self-powered mobile dwelling built on a special heavy duty chassis. A travel trailer is a mobile dwelling designed to be towed behind another vehicle. Camping trailers are smaller towed units constructed with sidewalls that may be raised up and foldedout. Truck campers are designed to be mounted on the bed of a pickup truck. The Company's principal brand names for its recreational vehicles are Coachmen, Sportscoach, Shasta, Viking, Travelmaster, Cruise Air, Encounter, Cruise Master, Swinger, Pursuit, Custom Swinger, Dearborn, Jimmy, Greenbriar and Saratoga. Other brand names the Company has protected and used and anticipates using in the future include Normandy, Cross Country, Pathfinder and Frolic. The Parts and Supply Group is composed of Viking Formed Products and The Lux Company, Inc. which provide a variety of products to the recreational vehicle and automotive industries, as well as other industries. Viking Formed Products is a diversified manufacturer of fiberglass and thermoplastic parts, including fiberglass van camper tops, raised roofs for van conversions and ground effects produced at its Prodesign operations. Additional products produced include plastic and fiberglass flared fenders, running boards and lower front and rear moldings. The Lux Company, Inc. manufactures seating products for the RV, office and healthcare industries. The largest portion of Lux's sales are in the RV seating category, including sofa beds, convertible pit groups, swivel chairs and ergonomic pilot seats. Lux also manufactures managerial, conference, guest and high-back executive chairs. Lux healthcare products encompass end-opening sofas and task chairs for laboratory and emergency care workers. In January 1995, the Company acquired all of the issued and outstanding capital stock of Georgie Boy Mfg., Inc., the nation's third largest manufacturer of class A motorhomes. All manufacturing facilities for Georgie Boy are located in Edwardsburg, Michigan. (See Note 10 of Notes to Consolidated Financial Statements on page 35 regarding acquisition information.) The Company currently produces recreational vehicles on an assembly line basis in Indiana, Michigan, Georgia and Oregon. Components used in the manufacture of recreational vehicles are primarily purchased from outside sources. However, in some cases (such as cushions, fiberglass products and furniture) where it is profitable for the Company to do so, or where the Company has experienced shortages of supplies, the Company has undertaken to manufacture its own supplies. The Company depends on the availability of chassis from a limited number of manufacturers. 2 Occasionally, chassis availability has limited the Company's production. (See Note 11 of Notes to Consolidated Financial Statements on page 35 for information concerning the use of converter pool agreements to purchase vehicle chassis.) The Company considers itself as being customer driven. Sales and service representatives regularly visit dealers in their regions, and respond quickly to questions and suggestions. Divisions host dealer advisory groups and conduct informative dealer seminars and specialized training classes in areas such as sales and service. Open forum meetings with owners are held at campouts, providing ongoing focus group feedback for product improvements. Engineers and product development team members are encouraged to travel and vacation in Company RVs to gain a complete understanding and appreciation for the products. The Company believes it has the ability to respond promptly to changes in market conditions. Most of the manufacturing facilities can be changed over to the assembly of other existing products in two to six weeks. In addition, these facilities may be used for other types of light manufacturing or assembly operations. This flexibility enables the Company to adjust its manufacturing capabilities in response to changes in demand for its products. Recreational vehicles are generally manufactured against orders received from the Company's dealers. Sales are seasonal with the highest level of sales occurring during the spring and summer months. Agreements with most of its dealers are cancelable on short notice, provide for minimum inventory levels and establish sales territories. No dealer accounts for more than 5% of the Company's net sales. Most dealers' purchases of RVs from the Company are financed through "floor plan" arrangements. Under these arrangements, a bank or other financial institution agrees to lend the dealer all or most of the purchase price of its RV inventory, collateralized by a lien on such inventory. The Company generally executes repurchase agreements at the request of the financing institution. These agreements provide that, for up to twelve months after a unit is financed, the Company will repurchase a unit which has been repossessed by the financing institution for the amount then due to the financing institution, which is usually less than 100% of the dealer's cost. 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. (See Note 11 of Notes to Consolidated Financial Statements on page 36.) In addition, the Company guarantees certain obligations of some dealers to a financial institution for purchases of the Company's products. The Company's annual aggregate obligations under this arrangement are limited to 2% of the average annual outstanding floor plan obligations to the financial institution which currently approximate $32 million. Over the past three years, the Company has not reported any significant losses from the repurchase agreements or the guarantee arrangement. The Company does not finance retail consumer purchases of its products, nor does it generally guarantee consumer financing. 3 Housing Segment The Company's housing group, which is the largest producer of modular homes in the country, is composed of four All American Homes ("All American") operations strategically located in Indiana, Iowa, North Carolina and Tennessee. Together these plants serve more than 300 builder/dealers in 18 states. All American's modular homes are built to the same local building codes as site-built homes by skilled craftsmen in a factory environment unaffected by weather conditions. Nearly complete when they leave the plant, modular homes are delivered to their final location, typically in two to five sections, and are crane set onto a waiting basement or crawl space foundation. Production takes place on an assembly line, with components moving from workstation to workstation for framing, electrical, plumbing, drywall, roofing, and cabinet setting, among other operations. An average two-module home can be produced in just a few days. All American regularly conducts builder meetings to review the latest in new design options and component upgrades. These meetings provide an opportunity for valuable builder input and suggestions from their customers at the planning stage. Business Factors Many RVs produced by the Company require gasoline for their operation. Gasoline has, at various times in the past, been difficult to obtain, and there can be no assurance that the supply of gasoline will continue uninterrupted, that rationing will not be imposed or that the price of, or tax on, gasoline will not significantly increase in the future. Shortages of gasoline and significant increases in gasoline prices have had a substantial adverse effect on the demand for RV's in the past and could have a material adverse effect on demand in the future. The vehicle and housing businesses are dependent upon the availability of and terms of the financing used by dealers and retail purchasers. Consequently, increases in interest rates and the tightening of credit through governmental action or other means have adversely affected the Company's business in the past and could do so in the future. Competition and Regulation The RV and housing industries are highly competitive, and the Company has numerous competitors and potential competitors in each of its classes of products, some of whom have greater financial and other resources. Initial capital requirements for entry into the manufacture of recreational vehicles or housing are comparatively small; however, codes, standards, and safety requirements introduced in recent years may deter potential competitors. 4 Recreational vehicles, the largest portion of the Company's business, generally compete in the lower to mid-price range markets. The Company believes it is a leader in the RV industry in its focus on quality. A quality product and a strong commitment to competitive pricing are emphasized by the Company in the markets it serves. The Company estimates that its current share of the recreational vehicle market is in excess of nine percent. The Company continues to recognize its obligations to protect the environment insofar as its operations are concerned. To date, the Company has not experienced any material adverse effect from existing federal, state, or local environmental regulations. Employees At December 31, 1997, Coachmen employed 4,274 persons, of whom 787 were employed in office and administrative capacities. The Company provides group life, dental, hospitalization, and major medical plans under which the employee pays a portion of the cost. In addition, employees can participate in a stock purchase plan and certain employees can participate in a stock option plan. The Company considers its relations with employees to be good. Research and Development During 1997, the Company spent approximately $3,521,000 on research related to the development of new products and improvement of existing products. The amounts spent in 1996 and 1995 were approximately $2,721,000 and $2,240,000, respectively. 5 Item 2. Properties The Registrant owns or leases 2,911,290 square feet of plant and office space, located on 1,214 acres, of which 1,998,184 square feet are used for manufacturing, 253,365 square feet are used for warehousing and distribution, 46,024 square feet are used for research and development, 69,644 square feet are used for customer service and 159,436 square feet are offices. 146,054 square feet are leased to others and 238,583 square feet are available for sale or lease. The Registrant believes that its present facilities, consisting primarily of steel clad, steel frame or wood frame construction and the machinery and equipment contained therein, are well maintained and in good condition. The following table indicates the location, number and size of the Registrant's properties by segment as of December 31, 1997: No. of Building Area Location Acreage Buildings (Sq. Ft.) Properties Owned and Used by Registrant: Vehicles Elkhart, Indiana 88 16 455,713 Middlebury, Indiana 543 33 755,213 Fitzgerald, Georgia 17 3 67,070 Centreville, Michigan 105 4 84,865 Edwardsburg, Michigan 83 12 303,254 Colfax, North Carolina 4 2 14,000 Grants Pass, Oregon 24 1 62,563 Marietta, Georgia 5 1 12,600 Subtotal 869 72 1,755,278 Housing Decatur, Indiana 43 4 286,500 Dyersville, Iowa 20 1 111,625 Springfield, Tennessee 45 1 131,453 Rutherfordton, North Carolina 38 1 131,497 Zanesville, Ohio 23 - - Subtotal 169 7 661,075 Total owned 1,038 79 2,416,353 6 Properties (Continued) Properties Leased and Used by Registrant: Vehicles Elkhart, Indiana 2 1 8,000 Goshen, Indiana 18 1 80,000 Banning, California 3 1 2,700 Ft. Myers, Florida 3 1 10,400 Mt. Morris, Michigan 8 1 9,200 Grants Pass, Oregon 9 - - Subtotal 43 5 110,300 Properties Owned by Registrant and Leased to Others: Vehicles Winter Garden, Florida 5 1 42,176 Lake Park, Georgia 8 1 11,720 Crooksville, Ohio 10 2 39,310 Grapevine, Texas 5 4 52,848 Subtotal 28 8 146,054 Properties Owned by Registrant and Available for Sale or Lease: Vehicles Perris, California 15 - - Grapevine, Texas 4 - - Longview, Texas 19 - - Housing Ellenboro, North Carolina 24 3 80,300 Montezuma, Georgia 43 2 158,283 Subtotal 105 5 238,583 Total 1,214 97 2,911,290 7 Item 3. Legal Proceedings From time to time, the Company is involved in certain litigation arising out of its operations in the normal course of business. The Company believes that there are no claims or litigation pending, the outcome of which will have a material adverse effect on the financial position of the Company. Item 4. Submission of Matters to a Vote of Security Holders No matters were submitted during the quarter ended December 31, 1997 to a vote of security holders. Executive Officers of the Registrant The following table sets forth the executive officers of the Company, as of December 31, 1997: Name Position *Claire C. Skinner....Chairman of the Board and Chief Executive Officer *Keith D. Corson......President and Chief Operating Officer and Director *Gary L. Groom........Executive Vice President, Finance, Secretary and Director *Gene E. Stout........Executive Vice President, Corporate Development * Member of Finance Committee Claire C. Skinner (age 43) has served as Chairman of the Board and Chief Executive Officer since August 1997. Before that, Vice Chairman of the Company since May 1995, and served as Executive Vice President from 1990 to 1995. From 1987 through July 1997, Ms. Skinner served as the President of Coachmen RV, the Company's largest division. Prior to that, she held several management positions in operations and marketing since 1983. Keith D. Corson (age 62) has served as President and Chief Operating Officer of the Company since November 1991. From June 1991 to November 1991 he served in the position of Office of the President after rejoining the Company. Mr. Corson was owner and President of Koszegi Products, a soft case manufacturer for the eight years prior to June 1991. He was a co- founder of the Company in 1964, and served in several senior management positions from 1964 until 1982, including President of the Company from 1978 until 1982. Gary L. Groom (age 52) has served as Executive Vice President, Finance and Secretary of the Company since May 1983 and served as Senior Vice President, Finance and Secretary from 1980 to 1983. He was Corporate Controller from 1975 through 1980. From 1972 to 1975 he was Assistant Controller. 8 Gene E. Stout (age 64) has served as Executive Vice President, Corporate Development of the Company since May 1983. From April 1982 to May 1983 he was Senior Vice President Corporate Planning and Industry Relations. Between 1971 and 1982 he held various management positions with the Company. Part II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters The following table discloses the high and low closing prices for Coachmen's common stock during the past two years as reported on the New York Stock Exchange, along with information on dividends paid per share during the same periods. High & Low Closing Prices Dividends Paid 1997 1996 1997 1996 1st Quarter $29.875 - $18.25 $13.875 -$ 9.4375 $.05 $.035 2nd Quarter 19.625 - 15.50 19.5625 - 12.875 .05 .05 3rd Quarter 19.625 - 16.625 26.75 - 15.375 .05 .05 4th Quarter 22.625 - 19.00 29.00 - 24.125 .05 .05 The Company's common stock is traded on the New York Stock Exchange. The number of shareholders of record as of January 31, 1998 was 1,674. 9 Item 6. Selected Financial Data Five-Year Summary of Selected Financial Data -Year Ended December 31- 1997 1996 1995 1994 1993 Net sales $661,591,185 $606,474,128 $515,862,065 $394,023,774 $329,511,226 Net income 24,762,624 29,630,813* 17,549,400 14,784,094 12,695,727 Net income per share Basic 1.44 1.94* 1.18 1.00 .87 Diluted 1.42 1.91* 1.17 1.00 .86 Cash dividends per share .20 .185 .14 .12 .095 At year end: Total assets 259,062,026 227,447,572 150,248,757 125,021,282 94,736,482 Long-term debt 12,591,144 14,841,262 12,117,756 7,023,394 3,749,950 *Net income and net income per share for 1996 includes $2,293,893 and $.15, respectively, for the cumulative effect of an accounting change (see Note 2 of Notes to Consolidated Financial Statements). Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with the Selected Financial Data and the Consolidated Financial Statements. OVERVIEW The Company was founded in 1964 as a manufacturer of RVs and began manufacturing modular homes in 1982. Since that time, the Company has evolved into a market leader in both business segments through a combination of internal growth and strategic acquisitions. As part of its continuing effort to focus on its core business, the Company acquired in January 1995 the third largest class A motorhome producer, Georgie Boy Mfg., Inc., which more than doubled the Company's market share in this sector of the motorized RV market. The Company's new plant openings have been an important component of its internal growth strategy. In May 1995, the Company opened a new modular housing plant in Tennessee. In addition, the Company further expanded its modular housing production capacity with the late 1996 construction of a new facility for the North Carolina housing operation and in late 1997 started construction of a new housing plant in Ohio. The anticipated completion date for the new facility in Ohio is June 1998. In March 1996, the Company increased its RV production capacity by opening a new fifth wheel and conventional travel trailer plant in 10 Oregon. Additional travel trailer plants in Indiana also became operational in December 1996 and May 1997 to capitalize on the growing market share of the value-priced travel trailer segment of the RV business. The Company's business segments are cyclical and subject to certain seasonal demand cycles and changes in general economic and political conditions. Demand in the RV and modular housing industries generally declines during the winter season, while sales and profits are generally highest during the spring and summer months. Inflation and changing prices have had minimal direct impact on the Company in the past in that selling prices and material costs have generally followed the rate of inflation. RESULTS OF OPERATIONS Comparison of 1997 to 1996 Consolidated net sales for 1997 were $661.6 million, an increase of 9.1% over the $606.5 million reported in 1996. The Company's vehicle segment, which includes the parts and supply businesses, experienced a sales increase of 7.8%, while the modular housing segment of the Company's business increased by 15.5%. Sales increases in the vehicle segment reflect continued market share gains in all product categories. The increased capacity in the Company's housing segment also resulted in continued sales growth, as well as, gains in market share. The Company's RV and housing segments experienced increases in both the number of units sold and the average sales price per unit. Historically, the Company's first and fourth quarters are the slowest for sales in both segments. See Note 13 of Notes to Consolidated Financial Statements for unaudited interim financial information. Gross profit for the year increased to $92.8 million, or 14.0% of net sales, from $88.5 million, or 14.6% of net sales in 1996. The increase in gross profit for 1997 was primarily attributable to the increase in net sales. The decrease in the gross profit percentage represents lower gross margins associated with the housing segment from the Tennessee plant opening and the North Carolina expansion, as well as, implementation of a seven-day workweek at our largest housing operation in Indiana. As these plants better utilize their increased capacity, inefficiencies should be reduced and eventually eliminated. Operating expenses, which include selling, delivery, general and administrative expenses, were $57.5 million or 8.7% of net sales in 1997 compared with $48.8 million or 8.1% of net sales in 1996. Selling and delivery expenses were $31.6 million, or 4.8% of net sales, in 1997 compared with $27.7 million, or 4.6% in 1996. The slight increase in selling expense is primarily due to increased dealer volume sales incentives attributable to increased sales in the housing segment. As a percentage of net sales, delivery expenses remained relatively unchanged. General and administrative expenses were $25.9 million or 3.9% of net sales in 1997 compared with $21.1 million or 3.5% of net 11 sales in 1996. General and administrative expenses were adversely impacted by a $1.5 million increase in the bad debt expense reflecting the downturn 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 a good performance during the year, many companies in the industry experienced financial difficulties. Operating income was $35.3 million in 1997 compared with $39.7 million in 1996, a decrease of 11.1%. This decrease is consistent with the overall increase in gross profit of $4.2 million and increase in operating expenses of $8.7 million. The Company's vehicle segment produced operating income of $26.7 million, or 4.9% of vehicle net sales, compared with operating income of $29.9 million, or 5.9% of vehicle net sales in 1996. The modular housing segment generated operating income of $9.7 million in both 1997 and 1996, or 8.5% and 9.8%, respectively, of housing net sales. Interest expense increased in 1997 to $2.5 million from $1.6 million in 1996. Interest income increased to $5.0 million in 1997 from $1.6 million in 1996. The increase in interest expense is substantially due to the settlement of examinations by the Internal Revenue Service during the year, and this increase was mostly offset with an increase in interest income from the favorable settlement of open state income tax examinations. The balance of the increase in interest income is basically due to increased cash and short- term investments which were generated by operating activities throughout 1997 and the sale of 2,070,000 shares of common stock in November 1996. The net gain on the sales of properties decreased to $137,000 in 1997 from $726,000 in 1996. The variance reflects the result of the amount of gain or loss recognized upon the disposition of various small properties. Assets are continually analyzed and every effort is made to sell or dispose of properties that are determined to be unproductive. The 1997 provision for income taxes was $14.1 million for both 1997 and 1996, represented an effective tax rate of 36.2%, and 34.1%, respectively. The lower effective rate in 1996 was due to the reversals of federal and state income tax accruals of $250,000 and $550,000, respectively, resulting from favorable settlements of tax examinations. Net income for the year ended December 31, 1997 was $24.8 million compared to $29.6 million for the prior year. The prior year includes the $2.3 million cumulative effect of an accounting change for Company-owned life insurance. See Note 2 of Notes to Consolidated Financial Statements. Comparison of 1996 to 1995 Consolidated net sales increased $90.6 million, or 17.6% to $606.5 million in 1996 from $515.9 million in 1995. The Company's vehicle segment, which includes the Parts and Supply Group of companies, 12 experienced a net sales increase of 17.4% while the housing segment had a net sales increase of 18.6%. The vehicle segment continued its 1995 trend by outpacing the industry with market share gains in most of its product categories. Both vehicles and housing experienced increases in unit sales and in the average sales price per unit during 1996. Gross profit was $88.5 million and was 14.6% of net sales in 1996 compared to $71.2 million and 13.8% reported for 1995. The increase in gross profit for 1996 was primarily due to the increase in net sales. The increase in the gross profit percentage represented the spreading of fixed costs over higher production volume. The housing segment experienced lower gross margins due to the North Carolina expansion and the Tennessee plant opening. Operating expenses, consisting of selling, delivery, general and administrative expenses, were $48.8 million and $44.6 million, or as a percentage of net sales, 8.1% and 8.6% for 1996 and 1995, respectively. Selling expenses for 1996 decreased .4% as a percentage of net sales, primarily as a result of increased demand for the Company's products. As a percentage of net sales, delivery expenses remained relatively unchanged. General and administrative expenses were $21.1 million or 3.5% of net sales compared with $19.0 million and 3.7% in 1995 and decreased as a percentage of sales due to the increase in net sales. The increase in general and administrative expenses during 1996 in absolute dollars was principally the result of increased administrative requirements and related salaries and payroll taxes associated with the Company's growth. Operating income was $39.7 million in 1996 compared with $26.7 million in 1995, an increase of 48.8%. This increase was consistent with the $17.3 million increase in gross profit and the overall decrease of .5% in operating expenses as a percentage of net sales. The Company's vehicle segment produced operating income of $29.9 million, or 5.9% of vehicle net sales, compared with operating income of $18.1 million, or 4.2% of vehicle net sales in 1995. The modular housing segment generated 1996 operating income of $9.7 million, or 9.8% of housing net sales, compared with 1995 operating income of $8.6 million, or 10.4% of housing net sales. The decrease in operating income as a percentage of net sales for the Company's housing segment was attributable to the North Carolina expansion and Tennessee plant opening. Interest expense for 1996 decreased to $1.6 million, or .3% of net sales, from $3.1 million, or .6% of net sales in 1995 primarily as a result of a change to the cash surrender value method of accounting for the Company's investment in life insurance contracts. 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 now partially offset by the increases in cash surrender values each accounting period. Previously, the increases in cash surrender values were not recognized, since the investment in life insurance contracts 13 consisted only of the capitalized insurance premiums. Interest income for 1996 increased to $1.6 million from $1.3 million for 1995, primarily due to the amounts of cash and temporary cash investments in 1996 versus 1995. Increases in cash and temporary cash investments were primarily generated from operating activities throughout the year and the sale of 2,070,000 shares of common stock in November 1996. The gain on sale of properties decreased to $726,000 for 1996 from $793,000 for 1995. This small variance is the result of the amount of gain recognized upon the disposition of various small properties. Other income, net, represents income of $1.0 million for 1996 compared to income of $2.3 million for 1995. The 1996 income was primarily from a final determination of insurance proceeds from assets destroyed in a fire that consumed the Company's Prodesign production facility in August 1995 and interest participation in finance company transactions. The 1995 income was primarily from the Prodesign fire. See Note 12 of Notes to Consolidated Financial Statements. Income taxes for 1996 increased to $14.1 million, or 2.3% of net sales, from $10.4 million, or 2.0% of net sales in 1995. The effective tax rate was 34.1% compared to 37.2% in 1995. The decrease in the effective tax rate for 1996 is attributable to an increase in nontaxable income and the reversals of federal and state income tax accruals of $250,000 and $550,000, respectively, resulting from favorable settlements of tax examinations. Net income for 1996 was $29.6 million compared to $17.5 million in 1995, which included $2.3 million for the cumulative effect of an accounting change for Company-owned life insurance. See Note 2 of Notes to Consolidated Financial Statements. 14 Liquidity and Capital Resources The Company generally relies on funds from operations as its primary source of working capital and liquidity. In addition, the Company maintains an unsecured committed line of credit, which totaled $30 million at December 31, 1997, to meet its seasonal working capital needs. There were no borrowings against this line of credit during 1997, 1996 and 1995. The Company's operating activities have been a principal source of cash flows in each of the last three years. Operating cash flows were $36.7 million, $15.3 million and $13.2 million for 1997, 1996 and 1995, respectively. For each of these years, net income, adjusted by certain noncash items such as depreciation, was a significant factor in generating operating cash flows. In 1997, an increase in accounts payable and other current liabilities was basically offset by increases in receivables. In 1996, net income was utilized to fund the increased inventory levels associated with higher sales and production. Investing activities used cash of $27.1 million, $15.7 million and $11.7 million in 1997, 1996 and 1995, respectively. In 1997, the acquisition of short-term investments of $52.1 million was partially offset by the sale of short-term investments of $36.5 million. Otherwise the principal use of cash for investing activities in each of the last three years has been property, plant and equipment acquisitions. Major capital expenditures during 1997 were acquisitions of production facilities for the RV segment, including properties previously leased, and initiating the construction of a new facility in Ohio for the housing segment. Major capital expenditures during 1996 included, the North Carolina expansion (financed in part by a $5.0 million industrial revenue bond) and the Oregon plant opening. Significant capital expenditures in 1995 were primarily associated with the Tennessee plant opening. During 1997, financing cash flows basically consisted of payments of long-term debt, dividends and the purchases of common shares for the treasury. These negative cash flows were partially offset by the issuance of common shares under stock option and stock purchase plans. Financing cash flows for 1996 included $48 million of proceeds from a public sale of the Company's common shares and $5 million of proceeds from the industrial revenue bond mentioned above. For a more detailed analysis of the Company's cash flows for each of the last three years, see the Consolidated Statements of Cash Flows. The Company's cash and temporary cash investments at December 31, 1997 were $71.4 million, or an increase of $5.0 million over 1996. The Company anticipates that available funds, together with anticipated cash flows generated from future operations and amounts available under its line of credit will be sufficient to fund the Company's planned capital expenditures and other operating cash requirements through the end of 1998. In 1997, working capital increased $14.9 million, from $125.4 million to $140.3 million. The $26.0 million increase in current assets at December 31, 1997 versus December 31, 1996, was primarily due to the current year's profits, as well as, an increase in trade receivables. The $11.2 million increase in current liabilities is substantially due to increases in trade payables and other liabilities, principally warranty and income taxes. 15 Other Matters The Company has determined that certain of its computer software was originally programmed using two digits rather than four to define the applicable year. As a result, this software may be unable to process transactions beyond December 31, 1999. The Company has undertaken to replace the affected software and has established a timetable for completion of not later than December 31, 1998. The total cost of the project, including hardware, software and training costs is estimated to be $2.5 million, of which $.5 million was incurred during 1997. Failure to successfully implement the new systems, or delays in the implementation could cause disruptions in operations, including, among other things, a temporary inability to process transactions, send invoices or pay vendors and employees. Item 7A. Quantitative and Qualitative Disclosures About Market Risk Not Applicable. 16 Item 8. Financial Statements and Supplementary Data REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders and Board of Directors of Coachmen Industries, Inc.: We have audited the accompanying consolidated balance sheets of Coachmen Industries, Inc. and subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of income and retained earnings and cash flows for each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Coachmen Industries, Inc. and subsidiaries as of December 31, 1997 and 1996, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. As discussed in Note 2 to the consolidated financial statements, effective January 1, 1996 the Company changed its method of accounting for its investments in life insurance contracts. COOPERS & LYBRAND L.L.P. ----------------------------- COOPERS & LYBRAND L.L.P. South Bend, Indiana January 30, 1998 17 Coachmen Industries, Inc. And Subsidiaries Consolidated Balance Sheets as of December 31, 1997 and 1996 ASSETS 1997 1996 CURRENT ASSETS Cash and temporary cash investments $ 71,427,918 $ 66,448,901 Short-term investments 15,852,718 500,000 Trade receivables, less allowance for doubtful receivables 1997 - $1,354,000 and 1996 - $919,000 25,212,595 20,575,048 Other receivables 2,980,257 2,103,168 Refundable income taxes 1,761,000 1,865,000 Inventories 68,416,006 68,311,038 Prepaid expenses and other 1,247,973 930,244 Deferred income taxes 3,040,000 3,180,000 Total current assets 189,938,467 163,913,399 PROPERTY AND EQUIPMENT, at cost Land and improvements 9,041,817 6,640,920 Buildings and improvements 39,950,161 33,516,736 Machinery and equipment 16,874,788 14,563,955 Transportation equipment 10,159,168 9,619,667 Office furniture and fixtures 5,712,961 4,830,577 81,738,895 69,171,855 Less, Accumulated depreciation 35,137,268 29,314,413 46,601,627 39,857,442 OTHER ASSETS Real estate held for sale 4,188,063 4,902,105 Rental properties 2,000,218 2,530,608 Intangibles, less accumulated amortization 1997 - $516,469 and 1996 - $380,363 4,927,807 5,063,913 Deferred income taxes 569,000 600,000 Other 10,836,844 10,580,105 22,521,932 23,676,731 TOTAL ASSETS $259,062,026 $227,447,572 The accompanying notes are a part of the consolidated financial statements. 18 LIABILITIES AND SHAREHOLDERS' EQUITY 1997 1996 CURRENT LIABILITIES Current maturities of long-term debt $ 2,258,519 $ 2,278,519 Accounts payable, trade 22,818,303 14,532,948 Accrued wages, salaries and commissions 4,876,790 4,410,925 Accrued dealer incentives 3,226,255 3,064,437 Accrued warranty expense 6,013,528 4,460,137 Accrued income taxes 1,529,543 628,051 Accrued insurance 2,319,518 3,697,709 Other accrued liabilities 6,633,762 5,449,270 Total current liabilities 49,676,218 38,521,996 LONG-TERM DEBT 12,591,144 14,841,262 OTHER 6,658,872 6,428,373 Total liabilities 68,926,234 59,791,631 COMMITMENTS AND CONTINGENCIES (Note 11) SHAREHOLDERS' EQUITY Common shares, without par value: authorized 60,000,000 shares; issued 1997 - 20,689,214 shares and 1996 - 20,527,644 shares 87,519,740 86,248,042 Additional paid-in capital 3,012,596 2,313,743 Retained earnings 115,984,289 94,670,593 206,516,625 183,232,378 Less, Cost of shares reacquired for the treasury 1997 - 3,387,648 shares and 1996 - 3,340,996 shares 16,380,833 15,576,437 Total shareholders' equity 190,135,792 167,655,941 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $259,062,026 $227,447,572 19 Coachmen Industries, Inc. And Subsidiaries Consolidated Statements Of Income And Retained Earnings for the years ended December 31, 1997, 1996 and 1995 1997 1996 1995 Net sales $661,591,185 $606,474,128 $515,862,065 Cost of goods sold 568,836,172 517,966,127 444,626,666 Gross profit 92,755,013 88,508,001 71,235,399 Operating expenses: Selling and delivery 31,605,666 27,719,131 25,593,164 General and administrative 25,889,028 21,116,814 18,983,252 57,494,694 48,835,945 44,576,416 Operating income 35,260,319 39,672,056 26,658,983 Nonoperating income (expense): Interest expense (2,544,021) (1,572,092) (3,141,763) Interest income 4,975,360 1,615,442 1,306,148 Gain on sale of properties, net 137,246 726,023 793,412 Other, net 996,720 1,041,401 2,340,620 3,565,305 1,810,774 1,298,417 Income before income taxes and cumulative effect of accounting change 38,825,624 41,482,830 27,957,400 Income taxes 14,063,000 14,146,000 10,408,000 Income before cumulative effect of accounting change 24,762,624 27,336,830 17,549,400 Cumulative effect of accounting change for Company-owned life insurance policies - 2,293,983 - Net income 24,762,624 29,630,813 17,549,400 Retained earnings, beginning of the year 94,670,593 67,824,816 52,359,629 Cash dividends (per common share: 1997 - $.20, 1996 - $.185 and 1995 - $.14) (3,448,928) (2,785,036) (2,084,213) Retained earnings, end of year $115,984,289 $ 94,670,593 $ 67,824,816 Earnings per common share: Income before cumulative effect of accounting change: Basic $ 1.44 $ 1.79 $ 1.18 Diluted 1.42 1.76 1.17 Net income: Basic 1.44 1.94 1.18 Diluted 1.42 1.91 1.17 The accompanying notes are a part of the consolidated financial statements. 20 Coachmen Industries, Inc. And Subsidiaries Consolidated Statements Of Cash Flows for the years ended December 31, 1997, 1996 and 1995 1997 1996 1995 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 24,762,624 $ 29,630,813 $ 17,549,400 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 6,696,517 5,487,528 3,993,282 Amortization of intangibles 136,106 135,592 136,620 Provision for doubtful receivables, net 1,616,801 158,024 291,564 Gain on sale of properties (137,246) (726,023) (793,412) Gain on insurance settlement - (393,014) (2,124,539) Cumulative effect of accounting change - (2,293,983) - Increase in cash surrender value of life insurance policies (1,017,007) (1,087,678) - Deferred income taxes 171,000 (240,000) (93,000) Other 431,051 113,666 107,243 Changes in certain assets and liabilities, net of effect of acquisitions and dispositions: Receivables, excluding current portion of notes (7,280,485) (875,253) (2,577,413) Inventories 394,046 (11,077,327) 1,361,916 Prepaid expenses and other (317,729) 640,248 (304,327) Accounts payable, trade 8,285,355 (3,902,614) (4,188,586) Income taxes - accrued and refundable 1,005,492 (1,711,749) (1,408,039) Other current liabilities 1,987,375 1,447,503 1,277,349 Net cash provided by operating activities 36,733,900 15,305,733 13,228,058 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from: Sale of short-term investments 36,534,842 - 263,888 Sale of properties 1,644,501 925,452 3,477,934 Insurance settlement - 2,821,014 846,463 Acquisitions of: Short-term investments (52,082,223) - - Property and equipment (14,202,539) (14,919,168) (15,222,794) Real estate held for sale and rental properties - (1,861,458) - Acquisition of businesses net of acquired cash - (1,852,596) (4,313,046) (Advances) collections on notes receivable, net 553,399 (1,136,340) 39,177 Unexpended industrial revenue bond proceeds 254,463 (254,463) 3,337,122 Other 162,841 560,195 (130,153) Net cash (used in) investing activities (27,134,716) (15,717,364) (11,701,409) 21 Consolidated Statements of Cash Flows (Concluded) for the years ended December 31, 1997, 1996 and 1995 1997 1996 1995 CASH FLOWS FROM FINANCING ACTIVITIES Payment of short-term borrowings - - (900,000) Proceeds from long-term debt - 5,000,000 - Payments of long-term debt (2,270,118) (2,092,447) (1,833,892) Sale of common stock, net of offering expenses - 47,970,779 - Issuance of common shares under stock option and stock purchase plans 1,271,698 1,126,061 550,815 Tax benefit from stock options exercised 654,681 620,431 227,000 Cash dividends paid (3,448,928) (2,785,036) (2,084,213) Purchases of common shares for treasury (827,500) - - Net cash provided by (used in) financing activities (4,620,167) 49,839,788 (4,040,290) Increase (decrease) in cash and temporary cash investments 4,979,017 49,428,157 (2,513,641) CASH AND TEMPORARY CASH INVESTMENTS Beginning of year 66,448,901 17,020,744 19,534,385 End of year $71,427,918 $ 66,448,901 $ 17,020,744 Supplemental disclosures of cash flow information: Cash paid during the year for: Interest $ 1,272,000 $ 2,018,439 $ 2,398,000 Income taxes 13,142,000 15,628,000 12,265,000 The accompanying notes are a part of the consolidated financial statements. 22 Coachmen Industries, Inc. And Subsidiaries Notes To Consolidated Financial Statements 1. NATURE OF OPERATIONS AND ACCOUNTING POLICIES. Nature of Operations - Coachmen Industries, Inc. and its subsidiaries (the "Company") manufacture a full line of recreationalvehicles and van conversions through seven divisions with manufacturing facilities located in Indiana, Georgia, Michigan and Oregon. These products are marketed through a nationwide dealer network. The Company's housing divisions, with locations in Indiana, Iowa, North Carolina and Tennessee, supply modular housing to builder/dealers in eighteen adjoining states. The Company's parts and supply divisions concentrate primarily on providing parts and supplies to the recreational vehicle and van conversion industries, and also have an important interest in the office furniture market. Principles of Consolidation - The accompanying consolidated financial statements include the accounts of Coachmen Industries, Inc. and its subsidiaries, all of which are wholly owned. Use of Estimates in the Preparation of Financial Statements - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Revenue Recognition, Concentrations of Credit Risk and Allowances for Credit Losses - Sales are recognized as revenue upon shipment. The Company has a concentration of credit risk in the recreational vehicle industry, although there is no geographic concentration of credit risk. The Company performs ongoing credit evaluations of its customers' financial condition and sales to its recreational vehicle dealers are generally subject to preapproved dealer floor plan financing whereby the Company is paid upon delivery or shortly thereafter. The Company generally requires no collateral from its customers. Future credit losses are provided for currently through the allowance for doubtful receivables and actual credit losses are charged to the allowance when incurred. At December 31, 1997 and 1996, cash and temporary cash investments include approximately $42.8 million and $45.2 million, respectively, invested in variable rate demand notes with a seven-day put option. In addition, cash and temporary cash investments include $28.1 million and $20.8 million invested in a money market mutual fund at December 31, 1997 and 1996, respectively. Cash Flows and Noncash Activities - For purposes of the consolidated statements of cash flows, cash and temporary cash investments include cash, cash investments and any highly liquid investments purchased with an original maturity of three months or less. The Company's acquisitions of and dispositions of subsidiaries included certain noncash activities (see Note 10). For each of the three years in the period ended December 31, 1997, the Company issued common shares with a market value of $67,276, $55,665 and $38,280, respectively, in lieu of cash compensation. The Company recognizes a tax benefit in additional paid-in capital from exercise of stock options (see Note 7). 23 Coachmen Industries, Inc. And Subsidiaries Notes To Consolidated Financial Statements, Continued 1. NATURE OF OPERATIONS AND ACCOUNTING POLICIES, Continued. Short-Term Investments - The Company accounts for its short-term investments under Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities" which requires certain securities to be categorized as either trading, available- for-sale or held-to-maturity. The Company's short-term investments at December 31, 1997, which consist entirely of equity securities, are classified as available-for-sale and, accordingly, are carried at fair value with unrealized gains and losses recorded as a separate component of shareholders' equity. At December 31, 1997, the cost of short-term investments approximated their fair value. At December 31, 1996, short-term investments consisted solely of a $500,000 certificate of deposit carried at cost. Realized gains (losses) on sales of investments were $(194,663) in 1997 and $13,888 in 1995. The cost of securities sold is determined by the specific identification method. Fair Value of Financial Instruments - The carrying amounts of cash equivalents, short-term investments, receivables and accounts payable approximated fair value as of December 31, 1997 and 1996, because of the relatively short maturities of these instruments. The carrying amount of long-term debt, including current maturities, approximated fair value as of December 31, 1997 and 1996, based upon terms and conditions currently available to the Company in comparison to terms and conditions of the existing long-term debt. The Company has investments in life insurance contracts to fund obligations under deferred compensation agreements (see Notes 2 and 8). At December 31, 1997 and 1996, the carrying amount of these policies, which equaled their fair value, was $9.9 million and $8.9 million, respectively (cash surrender values of $22.6 million and $20.3 million, net of $12.7 million and $11.4 million of policy loans, respectively). Inventories - Inventories are valued at the lower of cost (first-in, first- out method) or market. Property and Equipment - Depreciation is computed by the straight-line method on the costs of the assets, at rates based on their estimated useful lives as follows: land improvements 3-15 years; buildings and improvements 10-30 years; machinery and equipment 3-10 years; transportation equipment 2-7 years; and office furniture and fixtures 2-10 years. Upon sale or retirement of property and equipment, including real estate held for sale and rental properties, the asset cost and related accumulated depreciation is removed from the accounts and any resulting gain or loss is included in income. Real Estate Held For Sale - Real estate held for sale represents real properties which are carried at the lower of estimated realizable value or cost less accumulated depreciation. As of December 31, 1997 and 1996, the carrying value of real estate held for sale (and the related accumulated depreciation) aggregated $4,451,596 ($263,533) and $5,269,155 ($367,050), respectively. 24 Coachmen Industries, Inc. And Subsidiaries Notes To Consolidated Financial Statements, Continued Rental Properties - Rental properties represent owned facilities which are currently leased to others under lease agreements with expiring terms through August 31, 2002. Certain of the lease agreements contain options for the lessee to renew the lease or purchase the facilities. Lease income for the years ended December 31, 1997, 1996 and 1995 aggregated $302,931, $256,855 and $381,287, respectively. Future minimum annual lease income under these lease agreements is as follows: 1998 - $441,000, 1999 - $419,750, 2000 - $186,000, 2001 - $186,000 and 2002 - $124,000. The rental properties are carried at cost less accumulated depreciation, which is not in excess of net realizable value. The rental properties are depreciated by the straight-line method over the estimated useful lives of the assets (15- 20 years). At December 31, 1997 and 1996, the cost of rental properties (and the related accumulated depreciation) aggregated $2,859,991 ($859,773) and $3,488,179 ($957,571), respectively. Intangibles - Intangibles represent the excess of cost over the fair value of net assets of businesses acquired, and are being amortized over a 40-year period by the straight-line method. Income Taxes - The provision for income taxes is based on income recognized for financial statement purposes and includes the effects of temporary differences between such income and that recognized for tax return purposes. Deferred tax assets and liabilities are established for the expected future tax consequences of events that have been included in the financial statements or tax returns using enacted tax rates in effect for the years in which the differences are expected to reverse. Research and Development Expenses - Research and development expenses charged to operations were approximately $3,521,000, $2,721,000 and $2,240,000 for the years ended December 31, 1997, 1996 and 1995, respectively. Warranty Expense - The Company accrues an estimated warranty liability at the time the warranted products are sold. Stock-Based Compensation - The Company has adopted the disclosure only provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," and, accordingly, accounts for its stock option plan under the provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." New Accounting Pronouncements - In June 1997, the Financial Accounting Standards Board issued SFAS No. 130, "Reporting Comprehensive Income," and SFAS No. 131, "Disclosure about Segments of an Enterprise and Related Information." SFAS No. 130 establishes standards for the reporting and disclosure of comprehensive income and its components in a full set of general purpose financial statements. SFAS No. 131 changes the manner in which public companies report segment information in annual reports and requires companies to report selected segment information in interim financial reports. Companies will be required to report financial and descriptive information about the Company's operating segments. Both these statements are effective for fiscal years beginning after December 15, 1997, with reclassification of the financial statements for earlier periods required for comparative purposes. The Company plans to adopt these statements for its year ending December 31, 1998. 25 Coachmen Industries, Inc. And Subsidiaries Notes To Consolidated Financial Statements, Continued 2. ACCOUNTING CHANGES. Effective January 1, 1996, the Company changed its method of accounting for its investments 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 January 1, 1996, the Company recorded a $2.3 million noncash credit for the cumulative effect of this accounting change ($.15 per share for both basic and diluted earnings per share). This accounting method change also increased income before cumulative effect of accounting change and net income for the year ended December 31, 1996 by $1,087,678 or $.07 per share for both basic and diluted earnings per share. If the cash surrender value method had been applied during 1995, proforma net income would have been $18,292,792 and proforma net income per share would have been $1.23 - basic and $1.22 - diluted. 26 Coachmen Industries, Inc. And Subsidiaries Notes To Consolidated Financial Statements, Continued 3. OPERATIONS IN DIFFERENT INDUSTRIES. The Company's business and operations are comprised of two segments: Vehicles(recreational, vans, specialized and related parts and accessories) and Housing (modular). Segment information is set forth in the following table: 1997 1996 1995 Net sales: Vehicles $547,540,761 $507,715,622 $432,612,786 Housing 114,050,424 98,758,506 83,249,279 Total $661,591,185 $606,474,128 $515,862,065 Operating income (loss): Vehicles $ 26,663,164 $ 29,934,813 $ 18,136,796 Housing 9,699,814 9,674,894 8,644,906 General Corporate (1,102,659) 62,349 (122,719) Total $ 35,260,319 $ 39,672,056 $ 26,658,983 Identifiable assets: Vehicles $114,171,173 $109,701,864 $ 89,173,588 Housing 30,161,106 31,406,963 23,957,173 General Corporate 114,729,747 86,338,745 37,117,996 Total $259,062,026 $227,447,572 $150,248,757 Depreciation: Vehicles $ 3,657,050 $ 2,931,270 $ 2,218,420 Housing 2,477,634 2,140,587 1,487,159 General Corporate 561,833 415,671 287,703 Total $ 6,696,517 $ 5,487,528 $ 3,993,282 Additions to property and equipment(including property and equipment acquired in the acquisition of businesses): Vehicles $ 10,365,839 $ 11,421,971 $ 8,905,728 Housing 2,601,505 6,846,332 6,834,516 General Corporate 1,235,195 482,865 2,602,967 Total $ 14,202,539 $ 18,751,168 $ 18,343,211 4. INVENTORIES. Inventories consist of the following: 1997 1996 Raw materials $ 19,437,977 $ 20,951,906 Work in process 9,327,308 6,467,066 Finished goods 39,650,721 40,892,066 Total $ 68,416,006 $ 68,311,038 27 Coachmen Industries, Inc. And Subsidiaries Notes To Consolidated Financial Statements, Continued 5. SHORT-TERM BORROWINGS. At December 31, 1997 and 1996, the Company has an unsecured bank line of credit aggregating $30 million with interest on outstanding borrowings payable monthly at a formula rate, which approximates the bank's cost of funds plus a mark-up, which generally results in a rate at least 2% below the prime rate. There were no outstanding borrowings under this bank line of credit during 1997 and 1996. 6: LONG-TERM DEBT. Long-term debt consists of the following: 1997 1996 Obligations under industrial development revenue bonds, variable rates, with various maturities through 2011 $ 9,807,836 $10,832,781 Promissory notes payable, issued or assumed in the acquisition of Georgie Boy (see Note 10), principal payable in annual installments through January 2001, interest payable monthly at the prime rate, (8.5% at December 31, 1997), unsecured 5,041,827 6,266,998 Other - 20,002 Total 14,849,663 17,119,781 Less, Current maturities 2,258,519 2,278,519 Long-term debt $12,591,144 $14,841,262 Aggregate maturities of long-term debt for each of the next five years ending December 31 are as follows: 1998 - $2,258,519; 1999 - $2,258,519; 2000 - $1,966,323; 2001 - $1,766,302 and 2002 - $400,000. In connection with four of its industrial development revenue bond obligations, the Company obtained, as a credit enhancement for the bondholders, irrevocable letters of credit in favor of the bond trustees. The agreements relating to these letters of credit contain, among other provisions, certain covenants relating to required amounts of working capital and net worth and the maintenance of certain required financial ratios. 7. COMMON STOCK MATTERS AND EARNINGS PER SHARE. Stock Offering In November 1996, the Company completed a public stock offering consisting of 2,070,000 shares of its common stock at $24.50 per share. Net of underwriting fees and offering expenses, proceeds to the Company aggregated $48 million. 28 Coachmen Industries, Inc. And Subsidiaries Notes To Consolidated Financial Statements, Continued 7. COMMON STOCK MATTERS AND EARNINGS PER SHARE, CONTINUED Stock Option Plan The Company's stock option plan provides for the granting to eligible key employees of options to purchase common shares. Under terms of the plan, the Company may grant incentive stock options or non-qualified stock options. The option price for options granted to key employees is an amount per share of not less than the fair market value per share on the date of granting the option. No such options may be exercised during the first year after grant, and are exercisable cumulatively in four installments of 25% each year thereafter. The following table summarizes stock option activity: Weighted Average Number Exercise of Shares Price Outstanding, January 1, 1995 458,800 $ 5.50 Granted 272,400 7.98 Canceled (33,150) 7.54 Exercised (123,150) 3.71 Outstanding, December 31, 1995 574,900 6.95 Granted 251,800 12.61 Canceled (14,100) 7.65 Exercised (165,500) 5.88 Outstanding, December 31, 1996 647,100 9.36 Granted 222,550 19.53 Canceled (47,700) 11.81 Exercised (147,425) 6.94 Outstanding, December 31, 1997 674,525 13.07 Options outstanding at December 31, 1997 are exercisable at prices ranging from $6.44 to $27.13 and have a weighted average remaining contractual life of 3.02 years. The following table summarizes information about stock options outstanding at December 31, 1997. Options Outstanding Options Exercisable Weighted- Number Average Weighted- Number Weighted- Outstanding at Remaining Average Exercisable at Average Range of December 31, Contractual Exercise December 31, Exercise Exercise Price 1997 Life Price 1997 Price $ 6.44 -$ 8.00 95,700 1.7 $ 7.02 67,050 $ 6.94 8.01 - 12.00 275,525 2.3 8.99 120,080 8.69 12.01 - 15.00 42,250 3.3 14.07 10,563 14.07 15.01 - 27.13 261,050 4.2 19.45 11,488 19.09 674,525 209,181 29 Coachmen Industries, Inc. And Subsidiaries Notes To Consolidated Financial Statements, Continued 7. COMMON STOCK MATTERS AND EARNINGS PER SHARE, Continued At December 31, 1996 and 1995, there were exercisable options to purchase 178,638 and 153,623 shares at weighted-average exercise prices of $6.62 and $5.14, respectively. The weighted-average grant-date fair value of options granted during the years ended December 31, 1997, 1996 and 1995 was $4.81, $3.08 and 2.08, respectively. As of December 31, 1997, 612,250 shares were reserved for the granting of future stock options, compared with 787,100 shares at December 31, 1996. Had the Company adopted the provisions SFAS No. 123, "Accounting for Stock- Based Compensation," the Company's net income and net income per share would have been: 1997 1996 1995 Pro forma net income $24,533,000 $29,512,000 $17,499,000 Pro forma net income per share: Basic 1.42 1.93 1.18 Diluted 1.41 1.90 1.17 The pro forma amounts and the weighted-average grant-date fair-value of options granted were estimated using the Black-Scholes option-pricing model with the following assumptions: 1997 1996 1995 Risk free interest rate 6.00% 6.00% 6.87% Expected life 2.75 years 2.75 years 2.75 years Expected volatility 30.7% 30.7% 30.7% Expected dividends 1.2% 1.2% 1.2% Stock Purchase Plan The Company has an employee stock purchase plan under which a total of 562,083 shares of the Company's common stock are reserved for purchase by full-time employees through payroll deductions, cash payments, or a combination of both at a price equal to 90% of the market price of the Company's common stock on the purchase date. As of December 31, 1997, there were 267 employees actively participating in the plan. Since its inception, a total of 237,917 shares have been purchased by employees under the plan. Certain restrictions in the plan limit the amount of payroll deductions and cash payments an employee may make in any one quarter. There are also limitations as to the amount of ownership in the Company an employee may acquire under the plan. Earnings Per Share The Company has adopted the provisions of SFAS No. 128, "Earnings Per Share," retroactively for all periods presented. SFAS No. 128 requires the Company to present "basic" and "diluted" earnings per share. Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings 30 Coachmen Industries, Inc. And Subsidiaries Notes To Consolidated Financial Statements, Continued 7. COMMON STOCK MATTERS AND EARNINGS PER SHARE, Continued per share is computed by dividing net income by the weighted average number of shares of common stock outstanding plus the dilutive effect of stock options. The number of shares used in the computation of basic and diluted earnings per share are as follows: 1997 1996 1995 Basic 17,238,353 15,280,578 14,881,968 Diluted 17,401,402 15,494,731 14,943,836 31 Coachmen Industries, Inc. And Subsidiaries Notes To Consolidated Financial Statements, Continued 7. COMMON STOCK MATTERS AND EARNINGS PER SHARE, Continued Changes in Common Shares, Additional Paid-In Capital and Treasury Shares Additional Common Paid-in Treasury Shares Capital Shares Balance, January 1, 1995 $36,600,387 $ 1,431,055 $(15,635,125) Issuance of 12,130 common shares under employee stock purchase plan 94,396 - - Issuance of 4,638 common shares from treasury - 6,834 31,446 Issuance of 123,150 common shares upon the exercise of stock options 456,419 - - Tax benefit from exercise of stock options - 227,000 - Balance, December 31, 1995 37,151,202 1,664,889 (15,603,679) Sale of 2,070,000 common shares, net of offering expenses 47,970,779 - - Issuance of 9,472 common shares under employee stock purchase plan 152,646 - - Issuance of 4,008 common shares from treasury - 28,423 27,242 Issuance of 165,500 common shares upon the exercise of stock options 973,415 - - Tax benefit from exercise of stock options - 620,431 - Balance, December 31, 1996 86,248,042 2,313,743 (15,576,437) Issuance of 14,145 common shares under employee stock purchase plan 249,144 - - Issuance of 3,348 common shares from treasury - 44,172 23,104 Issuance of 147,425 common shares upon the exercise of stock options 1,022,554 - - Acquisition of 50,000 common shares for treasury - - (827,500) Tax benefit from exercise of stock options - 654,681 - Balance, December 31, 1997 $87,519,740 $ 3,012,596 $(16,380,833) 32 Coachmen Industries, Inc. And Subsidiaries Notes To Consolidated Financial Statements, Continued 7. COMMON STOCK MATTERS AND EARNINGS PER SHARE, Concluded. Shareholder Rights Plan On January 19, 1990, the Board of Directors adopted a shareholder rights plan and declared a dividend distribution of one common share purchase right on each outstanding common share. Such rights only become exercisable, or transferable apart from the common shares, (i) ten days after a person or group of persons ("Acquiring Person") acquires or obtains the right to acquire beneficial ownership of 20% or more of the Company's common shares or (ii) ten business days (or such later date established by the Board) following the commencement of a tender offer or exchange offer for 20% or more of the Company's common shares. Upon the occurrence of certain events and after the rights become exercisable, each right would, subject to certain adjustments and alternatives, entitle the rightholder to purchase the number of common shares of the Company or the acquiring company having a market value of twice the $15 exercise price of the right (except that the Acquiring Person would not be able to purchase common shares of the Company on these terms). The rights are nonvoting, may be redeemed by the Company at a price of $.005 per right at any time prior to the date on which an Acquiring Person acquires 20% or more of the Company's common shares and expire February 15, 2000. 8. INCENTIVE AND DEFERRED COMPENSATION PLANS. The Company has incentive compensation plans for its officers and other key management personnel. The amounts charged to expense for the years ended December 31, 1997, 1996 and 1995 aggregated $2,870,270, $2,662,668 and $2,577,692, respectively. The Company has established a deferred compensation plan for executives and other key employees. The plan provides for benefit payments upon termination of employment, retirement, disability, or death. The Company recognizes the cost of this plan over the projected service lives of the participating employees based on the present value of the estimated future payments to be made. The plan is funded by insurance contracts on the lives of the participants, and investments in insurance contracts (included in other assets) aggregated $9.9 million and $8.9 million as of December 31, 1997 and 1996, respectively. The deferred compensation obligations, which aggregated $6,913,896 and $6,500,123 as of December 31, 1997 and 1996, respectively, are included in other non-current liabilities, with the current portion ($341,514 and $186,559 at December 31, 1997 and 1996, respectively) included in other accrued liabilities. All full-time employees of the Company (subject to certain eligibility restrictions) are eligible to participate in the Coachmen Assisted Retirement For Employees (C.A.R.E.) program which provides a mechanism for each eligible employee to establish an individual retirement account and receive matching contributions from the Company based on the amount contributed by the employee, the employee's years of service and the profitability of the Company. Company matching contributions charged to expense under the C.A.R.E. program aggregated $724,541, $704,173 and $537,118 for the years ended December 31, 1997, 1996 and 1995, respectively. 33 Coachmen Industries, Inc. And Subsidiaries Notes To Consolidated Financial Statements, Continued 9. INCOME TAXES. Income taxes are summarized as follows: 1997 1996 1995 Federal: Current $12,765,000 $13,553,000 $ 9,530,000 Deferred 150,000 (210,000) (79,000) 12,915,000 13,343,000 9,451,000 State: Current 1,127,000 833,000 971,000 Deferred 21,000 (30,000) (14,000) 1,148,000 803,000 957,000 Total $14,063,000 $14,146,000 $10,408,000 The following is a reconciliation of the provision for income taxes computed at the federal statutory rate (35%) to the reported provision for income taxes: 1997 1996 1995 Computed federal income tax at federal statutory rate $13,589,000 $14,519,000 $ 9,785,000 Changes resulting from: Increase in cash surrender value of life insurance contracts (356,000) (381,000) - Foreign Sales Corporation subject to lower tax rate (396,000) (310,000) (222,000) State income taxes, net of federal income tax benefit 746,000 522,000 622,000 Other, net 480,000 (204,000) 223,000 Total $14,063,000 $14,146,000 $10,408,000 The components of the net deferred tax assets are as follows: 1997 1996 Current deferred tax asset (liability): Accrued warranty expense $2,455,000 $1,784,000 Receivables (126,000) 368,000 Other 711,000 1,028,000 Net current deferred tax asset $3,040,000 $3,180,000 Noncurrent deferred tax asset (liability): Deferred compensation $2,765,000 $2,600,000 Property and equipment (1,584,000) (1,434,000) Intangible assets (612,000) (566,000) Net noncurrent deferred tax asset $ 569,000 $ 600,000 34 Coachmen Industries, Inc. And Subsidiaries Notes To Consolidated Financial Statements, Continued 10. ACQUISITIONS AND DISPOSITIONS. In September 1996, the Company acquired a recreational vehicle dealership for $1.9 million cash, which approximated the fair value of the acquired assets. The acquisition, which has been accounted for as a purchase, was immaterial to the Company's consolidated financial statements. On January 3, 1995, the Company acquired all of the issued and outstanding capital stock of Georgie Boy Mfg., Inc. ("Georgie Boy") a manufacturer of class A motorhomes. The purchase price aggregated $12.8 million and consisted of $6.7 million in cash and a $6.1 million promissory note payable to the seller. In conjunction with the acquisition, the Company assumed liabilities of $8,757,000. The acquisition was accounted for as a purchase and the excess of the purchase price over the cost of acquired net assets approximated $5.0 million. 11: COMMITMENTS AND CONTINGENCIES. Lease Commitments The Company leases various manufacturing and office facilities under noncancelable agreements which expire at various dates through November 2006. Several of the leases contain renewal options and options to purchase and require the payment of property taxes, normal maintenance and insurance on the properties. Certain office and delivery equipment are also leased under various noncancelable agreements. The above described leases are accounted for as operating leases. Future minimum annual lease commitments at December 31, 1997 aggregated $1,405,000 and are payable as follows: 1998 - $584,000; 1999 - $280,000; 2000 - $196,000; 2001 - $128,000; 2002 - $78,000 and thereafter - $139,000. Total rental expense for the years ended December 31, 1997, 1996 and 1995 aggregated $1,472,009, $1,754,272 and $1,222,156, respectively. Obligation to Purchase Consigned Inventories The Company obtains vehicle chassis for its recreational and specialized vehicle products directly from automobile manufacturers under converter pool agreements. The agreements generally provide that the manufacturer will provide a supply of chassis at the Company's various production facilities under the terms and conditions as set forth in the agreement. Chassis are accounted for as consigned inventory until either assigned to a unit in the production process or 90 days have passed. At the earlier of these dates, the Company is obligated to purchase the chassis and it is recorded as inventory. At December 31, 1997 and 1996, chassis inventory, accounted for as consigned inventory, approximated $12.6 million and $11.0 million, respectively. 35 Coachmen Industries, Inc. And Subsidiaries Notes To Consolidated Financial Statements, Continued 11: COMMITMENTS AND CONTINGENCIES, Concluded Repurchase Agreements The Company is contingently liable 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 financial institution in the event that they have repossessed them upon a dealer's default. Although the total contingent liability approximated $190 million at December 31, 1997 ($171 million at December 31, 1996), 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. Self-Insurance The Company is self-insured for a portion of its product liability and certain other liability exposures. Depending on the nature of the claim and the date of occurrence, the Company's maximum exposure ranges from $250,000 to $500,000 per claim. The Company accrues an estimated liability based on various factors, including sales levels and the amount of outstanding claims. Management believes the liability recorded is adequate to cover the Company's self-insured risk. Litigation The Company is involved in various legal proceedings which are ordinary routine litigations incidental to the industry and which are covered in whole or in part by insurance. Management believes that any liability which may result from these proceedings will not be significant. 12. INSURANCE SETTLEMENT. On August 14, 1995, a fire destroyed the Company's Prodesign production facility. The loss was covered by insurance and estimated insurance proceeds in excess of the net book value of destroyed assets and related expenses resulted in a gain of $2.5 million which was included in other nonoperating income ($.4 million in 1996 and $2.1 million in 1995). 36 Coachmen Industries, Inc. And Subsidiaries Notes To Consolidated Financial Statements, Concluded 13: UNAUDITED INTERIM FINANCIAL INFORMATION. Certain selected unaudited quarterly financial information for the years ended December 31, 1997 and 1996 is as follows: 1997 Quarter Ended March 31 June 30 September 30 December 31 Net sales $158,105,811 $169,368,233 $174,885,358 $159,231,783 Gross profit 20,335,371 23,239,398 26,423,429 22,756,815 Net income 4,419,034 6,429,629 7,593,252 6,320,709 Net income per common share: Basic .26 .37 .44 .37 Diluted .25 .37 .44 .36 1996 Quarter Ended March 31 June 30 September 30 December 31 Net sales $148,640,023 $166,715,051 $154,244,238 $136,874,816 Gross profit 19,151,520 24,961,977 24,156,880 20,237,624 Income before cumulative effect of accounting change 3,956,973 8,685,723 8,332,563 6,361,571 Net income 6,250,956 8,685,723 8,332,563 6,361,571 Income before cumulative effect of accounting change per common share: Basic .26 .58 .55 .40 Diluted .26 .57 .54 .39 37 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not Applicable Part III. Item 10. Directors and Executive Officers of the Registrant (a) Identification of Directors Information for Item 10(a) is contained on page 3 of the Company's Proxy Statement dated March 23, 1998 and is incorporated herein by reference. (b) Executive Officers of the Company See "Executive Officers of the Registrant" on page 8. Item 11. Executive Compensation Information for Item 11 is contained under the heading "Compensation of Executive Officers and Directors" in the Company's Proxy Statement dated March 23, 1998 and is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management Information for Item 12 is contained on pages 2 and 3 of the Company's Proxy Statement dated March 23, 1998 and is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions Not Applicable 38 Part IV. Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) (1) Financial Statements Page Reference Financial statements included in Part II of the report: Report of Independent Accountants 17 Consolidated Balance Sheets as of December 31, 1997 and 1996 18-19 Consolidated Statements of Income and Retained Earnings for the years ended December 31, 1997, 1996 and 1995 20 Consolidated Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995 21-22 Notes to Consolidated Financial Statements for the years ended December 31, 1997, 1996 and 1995 23-37 (a) (2) Financial Statement Schedules Report of Independent Accountants on Financial Statement Schedule 40 Schedule II - Valuation and Qualifying Accounts 41 All other financial statement schedules have been omitted as they are not required, not applicable or because the information is included in the Notes to Consolidated Financial Statements. (a) (3) Exhibits See Index to Exhibits (b) Reports on Form 8-K No reports on Form 8-K were required to be filed during the last quarter of the period covered by this report. 39 Report of Independent Accountants on Financial Statement Schedule To the Board of Directors of Coachmen Industries, Inc.: Our report on the consolidated financial statements of Coachmen Industries, Inc. and subsidiaries is included on page 17 of this Form 10-K. In connection with our audits of such financial statements, we have also audited the related financial statement schedule listed in Item 14(a)(2) of this Form 10-K. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein. COOPERS & LYBRAND L.L.P. ---------------------------- COOPERS & LYBRAND L.L.P. South Bend, Indiana January 30, 1998 40 SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS Balance At Charged Balance Beginning To Costs Deductions- At End Description Of Period And Expenses Describe Of Period Allowance for doubtful receivables - deducted from trade receivables in the consolidated balance sheets: For the year ended December 31, 1997 $ 919,000 $1,617,000 $(1,182,000) (A) $1,354.000 For the year ended December 31, 1996 844,000 158,000 (83,000) (A) 919,000 For the year ended December 31, 1995 986,000 292,000 (434,000) (A) 844,000 (A) Write-off of bad debts, less recoveries. 41 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities 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. Date: March 27, 1998 G. L. Groom ----------------------------- G. L. Groom (Chief Financial Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities as of March 27, 1998. P. C. Barker K. D. Corson - ------------------------------- ------------------------------ P. C. Barker K. D. Corson (Director) (Director) T. H. Corson G. L. Groom - ------------------------------- ------------------------------ T. H. Corson G. L. Groom (Director) (Director) (Chief Financial Officer) R. J. Harring W. P. Johnson - ------------------------------- ------------------------------ R. J. Harring W. P. Johnson (Director) (Director) P. G. Lux W. G. Milliken - ------------------------------- ------------------------------ P. G. Lux W. G. Milliken (Director) (Director) C. C. Skinner W. M. Angelo - ------------------------------- ------------------------------ C. C. Skinner W. M. Angelo (Director) (Chief Accounting Officer) (Chief Executive Officer) 42 INDEX TO EXHIBITS Number Assigned In Regulation S-K, Item 601 Description of Exhibit (3) No exhibit (4) No exhibit (9) No exhibit (10) No exhibit (11) No exhibit - See Consolidated Statements of Income and Retained Earnings (on page 20 herein) and Note 7 of Notes to Consolidated Financial Statements (on page 30-31 herein). (12) No exhibit (13) No exhibit (16) No exhibit (18) No exhibit (21) Registrant and Subsidiaries of the Registrant (22) No exhibit (23) Consent of Independent Accountants (24) No exhibit (27) Financial Data Schedule (EDGAR filing only) (99) No exhibit EX-21 2 REGISTRANT AND SUBSIDIARIES OF THE REGISTRANT Exhibit 21 Registrant and Subsidiaries of the Registrant Percent of Voting State of Securities Owned Incorporation By the Registrant Coachmen Industries, Inc. (Registrant) Indiana The Lux Co., Inc. Indiana 100% Michiana Easy Livin' Country, Inc. Indiana 100% All American Homes, Inc. Indiana 100% Clarion Motors Corporation Indiana 100% Coachmen Foreign Sales Corporation U.S. Virgin Islands 100% Viking Recreational Vehicles, Inc. Michigan 100% Northwoods RV Country, Inc. Michigan 100% Georgie Boy Mfg., Inc. Indiana 100% Coachmen Industries of Texas, Inc. Texas 100% Coachmen Industries of Oregon, Inc. Oregon 100% Coachmen Industries of California, Inc. California 100% Freeway Easy Livin' Country, Inc. California 100% Gulf Coast Easy Livin' Country, Inc. Florida 100% VFP Composites, Inc. Florida 100% Rover, Inc. Ohio 100% All American Homes of Iowa, Inc. Iowa 100% Southern Ambulance Builders, Inc. Georgia 100% Colfax Country RV, Inc. North Carolina 100% All American Homes of North Carolina, Inc. North Carolina 100% All American Homes of Tennessee, Inc. Tennessee 100% EX-23 3 CONSENT OF INDEPENDENT ACCOUNTANTS Exhibit 23 (LETTERHEAD OF COOPERS & LYBRAND L.L.P.) CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statements of Coachmen Industries, Inc. on Form S-8 (File No. 33-59251, No. 2-45373, No. 2-47923, No. 2-56027 and No. 2-64572) and in the related Prospectus of our reports dated January 30, 1998, on our audits of the consolidated financial statements and financial statement schedule of Coachmen Industries, Inc. and subsidiaries as of December 31, 1997 and 1996, and for each of the three years in the period ended December 31, 1997, which reports are included in this Annual Report on Form 10-K. COOPERS & LYBRAND L.L.P. ------------------------------ COOPERS & LYBRAND L.L.P. South Bend, Indiana March 27, 1998 EX-27 4 FINANCIAL DATA SCHEDULE
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 YEAR YEAR YEAR DEC-31-1997 DEC-31-1996 DEC-31-1995 DEC-31-1997 DEC-31-1996 DEC-31-1995 71,428 66,449 17,021 15,853 500 500 31,308 25,462 25,395 1,354 919 863 68,416 68,311 55,434 189,938 163,913 101,722 81,739 69,172 59,045 35,137 29,314 27,298 259,062 227,448 150,249 49,676 38,522 41,135 12,591 14,841 12,118 71,139 70,672 21,548 0 0 0 0 0 0 118,997 96,984 69,490 259,062 227,448 150,249 661,591 606,474 515,862 661,591 606,474 515,862 568,836 517,966 444,627 626,331 566,802 489,203 3,565 1,811 1,298 1,617 158 292 2,544 1,572 3,142 38,826 41,483 27,957 14,063 14,146 10,408 24,763 27,337 17,549 0 0 0 0 0 0 0 2,294 0 24,763 29,631 17,549 1.44 1.94 1.18 1.42 1.91 1.17 RESTATED.
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