-----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, JGqeuHo7Xq4BSnYGnZyNAhD24dRFEevkwnT9Cgk+SLTx+2Csc/M+pu3Punh9Sz3k 5Yrs3CV1tqMO8PZNmnzvTg== 0000021212-00-000015.txt : 20000516 0000021212-00-000015.hdr.sgml : 20000516 ACCESSION NUMBER: 0000021212-00-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 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: 630484 BUSINESS ADDRESS: STREET 1: 2831 DEXTER DR CITY: ELKHART STATE: IN ZIP: 46514 BUSINESS PHONE: 2192620123 MAIL ADDRESS: STREET 1: 2831 DEXTER DR CITY: ELKHART STATE: IN ZIP: 46514 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 March 31, 2000 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) 2831 Dexter Drive, 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 April 30, 2000: Common Shares, without par value 15,564,717 shares outstanding including an equivalent number of common share purchase rights. 1 COACHMEN INDUSTRIES, INC. INDEX Page No. PART I. FINANCIAL INFORMATION Financial Statements: Condensed Consolidated Balance Sheets- March 31, 2000 and December 31, 1999 3-4 Condensed Consolidated Statements of Income- Three Months Ended March 31, 2000 and 1999 5 Condensed Consolidated Statements of Cash Flows- Three Months Ended March 31, 2000 and 1999 6 Notes to Condensed Consolidated Financial Statements 7-9 Management's Discussion and Analysis of Financial Condition and Results of Operations 10-12 PART II. OTHER INFORMATION 13 Item 6. Exhibits and Reports on Form 8-K SIGNATURES 14 This Form 10-Q contains certain statements that are "forward- looking" statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended. These forward looking statements involve risks and uncertainties, and are dependent on factors which may include, but are not limited to, the availability and price 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; the functioning of the Company's enterprise-wide technology system, which can impact the Company's day-to-day operations; legislation governing the relationships of the Company with its recreational vehicle dealers, which may affect the Company's options and liabilities in the event of a general economic downturn; 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. 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 reasonable, any of those assumptions could prove to be inaccurate given the inherent uncertainties as to the occurrence 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. 2 COACHMEN INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) MARCH 31, DECEMBER 31, 2000 1999 ASSETS CURRENT ASSETS Cash and temporary cash investments $ 15,044 $ 4,269 Marketable securities 22,274 32,550 Trade receivables, less allowance for doubtful receivables 2000 - $549 and 1999 - $550 42,989 39,398 Other receivables 2,422 2,892 Refundable income taxes 2,248 4,748 Inventories 107,651 100,008 Prepaid expenses and other 2,236 2,214 Deferred income taxes 4,743 4,743 Total current assets 199,607 190,822 PROPERTY AND EQUIPMENT, at cost 125,212 122,184 Less, accumulated depreciation 49,854 47,506 Property and equipment, net 75,358 74,678 INTANGIBLES, less accumulated amortization 2000 - $675 and 1999 - $644 4,395 4,426 OTHER 15,980 15,840 TOTAL ASSETS $295,340 $285,766 The accompanying notes are part of the condensed consolidated financial statements. 3 COACHMEN INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (continued) (in thousands) MARCH 31, DECEMBER 31, 2000 1999 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Current maturities of long-term debt $ 2,746 $ 1,543 Accounts payable, trade 29,360 25,041 Accrued income taxes 3,055 1,096 Accrued expenses and other liabilities 27,890 28,039 Total current liabilities 63,051 55,719 LONG-TERM DEBT 7,000 8,346 DEFERRED INCOME TAXES 1,489 1,489 OTHER 6,594 6,566 TOTAL LIABILITIES 78,134 72,120 SHAREHOLDERS' EQUITY Common shares, without par value: authorized 60,000 shares; issued 2000 - 20,998 shares and 1999 - 20,971 shares 90,652 90,405 Additional paid-in capital 4,639 4,623 Retained earnings 173,964 170,716 Treasury shares, at cost: 2000 - 5,436 Shares and 1999 - 5,443 shares (52,049) (52,098) TOTAL SHAREHOLDERS' EQUITY 217,206 213,646 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $295,340 $285,766 The accompanying notes are part of the condensed consolidated financial statements. 4 COACHMEN INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data) THREE MONTHS ENDED MARCH 31, 2000 1999 Net sales $195,228 $211,025 Cost of goods sold 171,062 183,452 Gross profit 24,166 27,573 Operating expenses: Selling and delivery 9,904 10,120 General and administrative 7,818 6,972 17,722 17,092 Operating income 6,444 10,481 Nonoperating income (expense): Interest expense (429) (434) Investment income (127) 347 Gain on sale of properties, net 30 3 Other, net 282 332 (244) 248 Income before income taxes 6,200 10,729 Income taxes 2,170 3,512 Net income $ 4,030 $ 7,217 Earnings per common share: Basic $ .26 $ .43 Diluted .26 .43 Shares used in the computation of earnings per common share: Basic 15,551 16,625 Diluted 15,570 16,631 Cash dividends per common share $ .05 $ .05 The accompanying notes are part of the condensed consolidated financial statements. 5 COACHMEN INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) THREE MONTHS ENDED MARCH 31, 2000 1999 CASH FLOWS FROM OPERATING ACTIVITIES Net cash provided by operating activities $ 2,677 $ 6,842 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from: Sale of marketable securities 56,604 31,348 Sale of properties 55 - Sale of businesses 2,351 - Acquisitions of: Marketable securities (47,192) (33,086) Property and equipment (3,316) (5,676) Other 207 (610) Net cash provided by (used in) investing activities 8,709 (8,024) CASH FLOWS FROM FINANCING ACTIVITIES Payments of long-term debt (143) (1,525) Issuance of common shares under stock option and stock purchase plans 247 599 Tax benefit from stock options exercised 67 292 Cash dividends paid (782) (832) Net cash (used in) financing activities (611) (1,466) Increase(decrease)in cash and temporary cash investments 10,775 (2,648) CASH AND TEMPORARY CASH INVESTMENTS Beginning of period 4,269 23,009 End of period $ 15,044 $ 20,361 The accompanying notes are part of the condensed consolidated financial statements. 6 COACHMEN INDUSTRIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (in thousands) 1. BASIS OF PRESENTATION The consolidated balance sheet data as of December 31, 1999 was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. 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 months ended March 31, 2000 are not necessarily indicative of the results to be expected for the full year. 2. SEGMENT INFORMATION The Company has determined that its reportable segments are those that are based on the Company's method of internal reporting, which disaggregates its business by product category. The Company's two reportable segments are: Vehicles (recreational, including related parts and supplies, and Housing (modular). The Company evaluates the performance of its segments and allocates resources to them based on pretax income. Differences between reported segment amounts and corresponding consolidated totals represent corporate expenses for administrative functions and costs or expenses relating to property and equipment that are not allocated to segments. The table below presents information about segments used by the chief operating decision maker of the Company for the three months ended March 31, 2000 and 1999: 2000 1999 Net sales: Vehicles $159,465 $178,795 Housing 35,763 32,230 Consolidated total $195,228 $211,025 Pretax income: Vehicles $ 5,867 $ 8,996 Housing 1,854 2,344 Other reconciling items (1,521) (611) Consolidated total $ 6,200 $ 10,729 Total assets: Vehicles $165,999 $169,622 Housing 41,918 42,511 Other reconciling items 87,423 83,718 Consolidated total $295,340 $295,851 7 3. INVENTORIES Inventories consist of the following: March 31, December 31, 2000 1999 Raw materials $ 36,756 $ 39,926 Work in process 12,741 11,131 Finished goods 58,154 48,951 Total $107,651 $100,008 4. COMMITMENTS AND CONTINGENCIES The Company was contingently liable at March 31, 2000 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 any liability which may result from these proceedings will not be significant. On February 3, 2000, the Board of Directors approved a resolution, Subject to ratification by the Company's shareholders, to adopt the 2000 Omnibus Stock Incentive Program (the "Stock Incentive Program"). The Stock Incentive Program was ratified by the shareholders at the annual meeting of shareholders on May 4, 2000. The resolution for the Stock Incentive Program provided that an additional one million shares be reserved for grant under the Company's stock options, appreciation rights and award programs. Also, under the terms of the Stock Incentive Program, in the event of a change in control of the Company, as defined, all outstanding stock options and stock appreciation rights shall become immediately exercisable, all stock awards shall immediately vest and all performance goals shall be deemed fully achieved. Also on February 3, 2000, the Company entered into Change of Control Agreements with 25 Key executives. Under the terms of these agreements, in the event of a change in control of the Company, as defined, the Company would be obligated to pay these key executives for severance and other benefits aggregating approximately $16 million based on salaries and benefits at March 31, 2000. In addition, on February 3, 2000 the Company established a qualified rabbi trust, which in the event of a change of control, as defined, will be funded to cover the Company's obligations under its deferred compensation plan. The Company's obligations under the deferred compensation plan aggregated $6.5 million at March 31, 2000. 8 5. SUBSEQUENT EVENT On May 1, 2000, the Company entered into a definitive agreement to acquire all the issued and outstanding common shares of Mod-U-Kraf Homes, Inc. ("Mod-U-Kraf") for $11.75 per share, or approximately $10 million cash plus the assumption of liabilities. The cash purchase price will be paid at closing which is expected to occur in June 2000. Following the consummation of the transaction, Mod-U- Kraf will operate as a separate subsidiary under the Company's housing segment. The acquisition will be accounted for as a purchase. 9 COACHMEN INDUSTRIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (in thousands, except per share data) 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 Ended March 31, 2000 and 1999 Increases (Decreases) Amount Percentage Net sales $ (15,797) (7.5)% Cost of goods sold (12,390) (6.8) Selling and delivery expenses (216) (2.1) General and administrative expenses 846 12.1 Interest expense (5) (1.2) Investment income (474) (136.6) Gain on sale of properties, net (27) * Other, net (50) (15.1) Income before income taxes (4,529) (42.2) Income taxes (1,342) (38.2) Net income (3,187) (44.2) * Not meaningful 10 NET SALES Consolidated net sales for the quarter ended March 31, 2000 were $195,228, a decrease of 7.5% from the $211,025 reported in the same quarter of 1999. The Company's vehicle segment, which includes the parts and supply businesses, experienced a sales decrease of 10.8%. For motorized products, both the number of units and sales dollars reflected decreases from the 1999 period. For towable products, both the number of units and the sales dollars reflected increases over the 1999 period. The Company's housing segment experienced an 11.0% increase in net sales for the quarter compared to last year's first quarter. This increase was both in the number of units and sales dollars. While the RV segment was slightly down the housing segment had an increase in the average sales price per unit. COST OF GOODS SOLD Cost of goods sold decreased 6.8% or $12,390 for the three months ended March 31, 2000. As a percentage of net sales, cost of goods sold was 87.6% for the 2000 quarter and 86.9% for the 1999 quarter. The higher costs in the current quarter is attributable to the reconfiguration of the facilities that were formerly occupied by the Company's van conversion business to build Georgie Boy diesel Class A motorhomes, and costs related to the growth of the modular housing segment. These costs include higher labor and overhead costs consistent with anticipated growth. In addition there were continuing costs associated with the ongoing implementation of technology system solutions. OPERATING EXPENSES As a percentage of net sales, operating expenses, which include selling, delivery, general and administrative expenses, were 9.1% and 8.1% for the quarters ended March 31, 2000 and 1999, respectively. Selling expense increased .2% as a percentage of net sales and delivery expense increased .1% as a percentage of net sales over the 1999 quarter, while total dollars spent in both categories were down. General and administrative expenses were 4.0% of net sales for the first quarter of 2000 and 3.3% of net sales for the first quarter of 1999. This increase is primarily due to the increase in depreciation expense with the capitalization of the new technology system. Also, in the current quarter there has been a decrease from the comparable quarter in the salaries that qualify for capitalization related to the implementation of the new technology system. INTEREST EXPENSE Interest expense was $429 and $434 for the quarters ended March 31, 2000 and 1999, respectively. This small decrease reflects the pay- down of long-term debt, as well as, the amount of current year's increase in the cash surrender value of the Company's investment in life insurance contracts. These life insurance contracts have been 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. 11 INVESTMENT INCOME Investment income reflects a loss of $127 for the 2000 quarter compared with income of $347 for the 1999 comparable quarter. The decrease is principally attributable to unrealized losses on open US Treasury bond futures options, as well as a reduction of interest and dividend income resulting from less funds being invested in the 2000 quarter. GAIN ON THE SALE OF PROPERTIES, NET The net gain on the sale of properties for the quarter ended March 31, 2000 was $30 while the comparative quarter in 1999 was $3. This classification represents the net result of the amount of gain or loss recognized upon the disposition of various small properties. OTHER, NET Other income, net, represents income of $282 for the 2000 first quarter and $332 for the 1999 first quarter. There were no significant variances for the comparable quarters. INCOME TAXES For the first quarter ended March 31, 2000, the effective tax rate was 35.0% compared to a first quarter tax rate of 32.7% in 1999. The Company's effective tax rate fluctuates based upon the states where sales occur, the level of export sales and the amount of nontaxable dividend income on investments. 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 March 31, 2000, to meet its seasonal working capital needs. At March 31, 2000, there were no borrowings against this line of credit. For the three months ended March 31, 2000, the major source of cash was with investing activities. The main investing activities were sales, net of purchases, of marketable securities and the sale of a business, partially offset by the acquisition of property and equipment. The Company liquidated approximately $10.3 million of its marketable securities in anticipation of the pending acquisition of Mod-U-Kraf Homes, Inc. (see Note 5 of Notes to Condensed Consolidated Financial Statements). In addition the Company is reviewing its overall cash management investing activities. The cash provided by operating activities was substantially income from operations and depreciation, as well as, increases in trade payables and accrued income taxes, partially offset by increases in inventories and receivables. The negative cash flow from financing activities was primarily for cash dividends and repayment of long-term debt. At March 31, 2000, working capital increased to $136.6 million from $135.1 million at December 31, 1999. The $8.8 million increase in current assets at March 31, 2000 versus December 31, 1999, was primarily due to increased receivables and inventories. The increase in current liabilities of $7.3 million is substantially due to increased trade payables, accrued income taxes and other accrued liabilities. 12 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 During the quarter the Company filed a Form 8-K dated January 5, 2000, reporting an item 5 event (adoption of Shareholder Rights Agreement). 13 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) /S/ JAMES E. JACK Date: May 12, 2000 _______________________________ James E. Jack, Executive Vice President & Chief Financial Officer /S/ WILLIAM M. ANGELO Date: May 12, 2000 _______________________________ William M. Angelo, Vice President & Chief Accounting Officer 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 3-MOS DEC-31-2000 MAR-31-2000 15,044 22,274 48,208 549 107,651 199,607 125,212 49,854 295,340 63,051 7,000 38,603 0 0 173,964 295,340 195,228 195,228 171,062 188,784 244 31 429 6,200 2,170 4,030 0 0 0 4,030 .26 .26
-----END PRIVACY-ENHANCED MESSAGE-----