EX-99.1 2 coa3q08earningsrelease.htm 3RD QUARTER 2008 EARNINGS RELEASE coa3q08earningsrelease.htm

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COACHMEN INDUSTRIES, INC.
423 N. Main St. • P.O. Box 30 • Middlebury, Indiana 46540 • 574/825-5821 • Fax 574/825-8141

NEWS RELEASE

For immediate release Monday, October 27, 2008

COACHMEN INDUSTRIES, INC. POSTS POSITIVE CASH FLOW AND SIGNS DEAL IN CHINA; HOUSING GROUP PROFITABLE DESPITE CONSOLIDATED LOSS FOR THIRD QUARTER

Middlebury, IN - Coachmen Industries, Inc. (NYSE: COA) today announced its financial results for the third quarter ended September 30, 2008.

“The world economy has endured a financial hurricane during the last few months, which we hope has finally abated” commented Richard M. Lavers, President and Chief Executive Officer.  “Nowhere has it been felt more strongly than in the housing and recreation vehicle (RV) markets.  Both of our primary market segments are down by roughly 50%, industry wide. However, in spite of severe discounting and lower than expected sales we improved cash flow and reduced our finished goods inventories.  We decreased our borrowing, and have experienced significant financial improvements over 2007 despite the constantly worsening economic conditions” continued Lavers. “Through the three quarters, we have cut our losses by over 30%.  We have focused on cash flow in the past quarter and were successful in reducing our finished goods inventories by $14.3 million and improving our cash flow by $0.3 million. Of course, the financial turmoil also affects other businesses, and unfortunately as a result our balance sheet and profit and loss statement were also both hit this quarter by impairment charges on certain amounts owed to us. Accordingly, we will take even further measures to reduce our operating costs.”

“On the brighter side, we are pleased to announce that we have signed a teaming agreement with one of the largest auto manufacturers in China to develop RV’s specifically for the Chinese market.  They will act as our importer, distributor and sales partner for China.” concluded Lavers.

Net Sales for the third quarter were $74.8 million compared to $123.9 million reported for the same period in 2007.  Gross profit for the quarter dropped to ($0.5) million or (0.7)% of revenues from $7.8 million, or 6.2% of revenues for the third quarter of 2007.  The Company reported a net loss of ($14.5) million, or ($0.92) per share, versus a net loss of ($4.3) million, or ($0.28) per share in the third quarter of 2007.  

Sales for the nine-month period ended September 30 were $292.8 million versus $403.9 million reported for the same period last year.  Gross profit improved to $17.2 million, or 5.9% of revenues, from $15.2 million, or 3.8% of revenues, in the first nine months of 2007.  Operating expenses decreased $8.4 million from last year to $32.0 million.  The Company reported a net loss of ($16.1) million or ($1.02) per share, versus a net loss of ($24.9) million or ($1.58) per share for the same period in 2007.
 
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Coachmen Industries, Inc. Announces Third Quarter Results
Page 2
October 27, 2008  
 
Recreation Vehicle Group

The RV Industry unit shipments are down dramatically.  In Third Quarter RV Industry numbers reported, motorized shipments were down 63% and towable shipments were down 38.5%.  When compared to the Industry’s numbers, Coachmen shipments for the 3rd quarter were slightly better in towable shipments and within a percent of the Industry in motorized shipments.  “These are not mere market adjustments; they are reflections of the financial market crisis and the declining US economy.  We continue to navigate through these unprecedented conditions with capacity consolidation, expense and cost reductions and improved inventory management,” said Michael R Terlep, President of Coachmen RV Group.  “Despite an extreme inventory liquidation environment, and the challenges of the financial markets, we managed to reduce our finished goods inventory by 40% in the third quarter, our manufacturing overhead by $5.9 million and our operating expense by $2.1 million from the third quarter of 2007.”

Housing Group

“The Housing Group’s core business of single family homes was again adversely affected by the dismal conditions in the nationwide housing market,” commented Housing Group President Rick Bedell. “According to the U.S. Census Bureau, single family housing starts for the quarter were down 38.7% nationwide versus the same quarter in 2007.  However, the Housing Group's revenues for single family homes beat the nationwide market numbers by 15%.  We posted profits for the third consecutive quarter despite tough economic conditions. A combination of our major project activities, improved gross margins and reduced operating expenses, helped to generate a pre-tax profit of $0.6 million compared with a pre-tax loss of ($0.7) million for the year-ago quarter,” concluded Bedell.

Coachmen Industries will conduct a conference call to discuss these financial results at 10:00 a.m. (Eastern Time), Tuesday, October 28, 2008.  Members of the news media, investors and the general public are invited to access a live broadcast of the conference call over the internet at www.earnings.com. The online replay will be available at approximately 12:00 p.m. (Eastern Time) and continue for 30 days.

Coachmen Industries, Inc. is one of America’s leading manufacturers of recreational vehicles, systems-built homes and commercial buildings, with prominent subsidiaries in each industry.  The Company’s RV brand names include COACHMEN®, GEORGIE BOYTM, SPORTSCOACH® and VIKING®. Through ALL AMERICAN HOMES® and MOD-U-KRAF®, Coachmen is one of the nation’s largest producers of systems-built homes, and a major builder of commercial structures with its ALL AMERICAN BUILDING SYSTEMSTM products. Coachmen Industries, Inc. is a publicly held company with stock listed on the New York Stock Exchange (NYSE) under the ticker COA.

This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.   Investors are cautioned not to place undue reliance on forward-looking statements, which are inherently uncertain.  Actual results may differ materially from that projected or suggested due to certain risks and uncertainties including, but not limited to, the potential fluctuations in the Company’s operating results, increased interest rates, the availability for floorplan financing for the Company’s recreational vehicle dealers and corresponding availability of cash to Company, uncertainties and timing with respect to sales resulting from recovery efforts in the Gulf Coast, uncertainties regarding the impact on sales in the recreational vehicle and housing segments caused by uncertainties in the credit markets and other negative events, the impact of performance on the valuation of intangible assets, the availability and the price of gasoline, price volatility of raw materials used in production, the Company’s dependence on chassis and other suppliers, the availability and cost of real estate for residential housing, the supply of existing homes within the company’s markets, the impact of home values on housing demand, the impact of sub-prime lending on the availability of credit for the broader housing market, the ability of the Company to perform in new market segments where it has limited experience, adverse weather conditions affecting home deliveries, competition, government regulations, legislation governing the relationships of the Company with its recreational vehicle dealers, potential liabilities under recreational vehicle buy-back obligations, dependence on significant customers within certain product types, consolidation of distribution channels in the recreational vehicle industry, consumer confidence, uncertainties of matters in litigation, current litigation relating to the Company’s use of components containing formaldehyde in its products, further developments in the war on terrorism and related international crises, oil supplies, the addition or loss of our dealers or builders, the introduction and marketing of competitive products by others, including significant discounting by our competitors and other risks identified in the Company’s SEC filings.
 
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Coachmen Industries, Inc. Announces Third Quarter Results
Page 3
October 27, 2008  
 
For more information:
     
 
Thomas Gehl   Colleen Zuhl 
Secretary   Chief Financial Officer 
574-825-8776    

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Coachmen Industries, Inc. Announces Third Quarter Results
Page 4
October 27, 2008                                                                                                                                 

Coachmen Industries, Inc. and Subsidiaries
Consolidated Statements of Operations
(in thousands, except per share amounts)
(Unaudited)
                             
   
Three Months Ended September 30,
  
Nine Months Ended September 30,
  
   
2008
  
2007
    
2008
  
2007
  
Net sales
  
$ 
74,822
  
$ 
123,854
    
$ 
292,848
  
$ 
403,861
  
                             
Gross profit - $
    
(501
) 
  
7,758
      
17,238
    
15,179
  
Gross profit - %
    
(0.7
 )%   
6.2
 %    
5.9
 %   
3.8
 % 
                             
GS&A - $
    
10,506
    
12,130
      
28,836
    
37,093
  
GS&A - %
    
14.0
 %  
9.8
 %     
9.8
 %   
9.2
 % 
                             
Gain on sale of assets, net - $
    
(66
)
  
(143
)
    
(313
)
  
(610
)
Gain on sale of assets, net - %
    
(0.1
 )%   
(0.1
 )%     
(0.1
 )%   
(0.2
 )% 
                             
Impairment charge - $
    
3,448
    
-
      
3,448
    
3,872
  
Impairment charge - %
    
4.6
 %   
0.0
 %     
1.2
 %   
1.0
 % 
                             
Total operating expenses - $
    
13,888
    
11,987
      
31,971
    
40,355
  
Total operating expenses - %
    
18.6
 %   
9.7
 %     
10.9
 %   
10.0
 % 
                             
Operating loss - $
    
(14,389
)
  
(4,229
)
    
(14,733
)
  
(25,176
)
Operating loss - %
    
(19.2
 )%   
(3.4
 )%     
(5.0
 )%   
(6.2
 )% 
                             
   Outside interest expense
    
996
    
808
      
3,134
    
2,595
  
   Outside investment income
    
(298
) 
  
(423
) 
    
(852
)
  
 (1,376
)
   Other income
    
(624
) 
  
(271
) 
    
(916
)
  
 (486
)
Other expense
    
74
    
114
      
1,366
    
733
  
                             
Pre-tax loss - $
    
(14,463
)
  
(4,343
) 
    
(16,099
)
  
(25,909
)
Pre-tax loss - %
    
 (19.3
 )%   
(3.5
 )%     
(5.5
 )%   
(6.4
 )% 
                             
Tax expense (credit) 
    
-
    
1
      
-
    
(994
)
                             
Net loss
  
$ 
(14,463
)
$
(4,344
)
  
$
(16,099
)
$
(24,915
)
                             
Loss per share - Basic & Diluted
  
$ 
(.92
) 
$
(.28
)
  
$ 
 (1.02
) 
$ 
 (1.58
) 
                             
Weighted average shares outstanding: 
                            
   Basic
    
15,815 
    
15,736 
      
15,787 
    
 15,725
  
   Diluted
    
15,815 
    
15,736 
      
15,787 
    
 15,725
  
                             
                             
 
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Coachmen Industries, Inc. Announces Third Quarter Results
Page 5
October 27, 2008                                                                                                                                 

 Coachmen Industries, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands)

     
September 30,
    
December 31,
  
     
2008
    
2007
  
Assets
    
(Unaudited)
        
CURRENT ASSETS
              
Cash and cash equivalents
  
$
2,621
  
$
1,549
  
Accounts receivable
    
15,722
    
9,122
  
Inventories
    
55,937
    
79,268
  
Refundable income taxes
    
1,552
    
1,628
  
Prepaid expenses and other
    
7,554
    
7,623
  
Assets held for sale
    
5,021
    
-
  
Total current assets
    
88,407
    
99,190
  
               
Property, plant and equipment, net
    
44,452
    
52,932
  
Goodwill
    
12,993
    
12,993
  
Cash value of life insurance, net of loans
    
22,623
    
33,936
  
Notes receivable
    
2,548
    
6,158
  
Other
    
2,198
    
2,459
  
TOTAL ASSETS
  
$
173,221
  
$
207,668
  
               
Liabilities and Shareholders' Equity
              
CURRENT LIABILITIES
              
Short-term borrowings & current portion of LT debt
  
$
15,819
  
$
20,925
  
Accounts payable, trade
    
13,332
    
15,042
  
Floor plan notes payable
    
3,294
    
4,116
  
Accrued income taxes
    
497
    
536
  
Accrued expenses and other liabilities
    
23,376
    
33,235
  
Total current liabilities
    
56,318
    
73,854
  
               
Long-term debt
    
2,807
    
3,010
  
Postretirement deferred compensation benefits
    
6,590
    
7,632
  
Deferred income taxes
    
1,990
    
1,990
  
Other
    
32
    
49
  
Total liabilities
    
67,737
    
86,535
  
               
Total shareholders' equity
    
105,484
    
121,133
  
               
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
  
$
173,221
  
$
207,668
  
 
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Coachmen Industries, Inc. Announces Third Quarter Results
Page 6
October 27, 2008                                                                                                                                 

Coachmen Industries, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)

 
 Nine Months Ended September 30,
   
2008
  
2007
  
               
Net loss
  
$
(16,099
) 
$
(24,915
) 
Depreciation
    
3,872
    
4,389
  
Changes in current assets and liabilities
    
7,327
    
 26,237
  
Net cash (used in) provided by operating activities
    
(4,900
) 
  
5,711
  
               
Net cash used in investing activities
    
(1,010
) 
  
(1,790
) 
               
Net borrowings (repayments)
    
6,869
    
(2,634
)
Issuance of stock
    
113
    
115
  
Dividends paid
    
-
    
(944
)
Net cash provided by (used in) financing activities
    
6,982
    
(3,463
)
               
Increase in cash and cash equivalents
    
1,072
    
458
  
               
Beginning of period
    
1,549
    
2,651
  
               
End of period
  
$
2,621
  
$
3,109
  
 
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Coachmen Industries, Inc. Announces Third Quarter Results
Page 7
October 27, 2008                                                                                                                                 

Coachmen Industries, Inc. and Subsidiaries
Segment Data
(in thousands)
 (Unaudited)

   
Three Months Ended September 30,
  
Nine Months Ended September 30,
  
   
2008
  
2007
  
2008
  
2007
  
Net sales
                          
Recreational vehicles
  
$
44,059
  
$
91,778
  
$
193,319
  
$
307,158
  
Housing
    
30,763
    
32,076
    
99,529
    
96,703
  
                           
Consolidated total
  
$
74,822
  
$
123,854
  
$
292,848
  
$
403,861
  
                           
Gross profit
                          
Recreational vehicles
  
$
(5,432
)
$
3,501
  
$
(490
)
$
2,566
  
Housing
    
4,931
    
4,257
    
17,729
    
12,613
  
Other reconciling items
    
-
    
-
    
(1
)
  
-
  
                           
Consolidated total
  
$
(501
)
$
7,758
  
$
17,238
  
$
15,179
  
                           
Gross profit percentage
                          
Recreational vehicles
    
(12.3
)%
  
3.8
%
  
(0.3
)%
  
0.8
%
Housing
    
16.0
%
  
13.3
%
  
17.8
%
  
13.0
%
                           
Consolidated total
    
(0.7
)%
  
6.2
%
  
5.9
%
  
3.8
%
                           
Operating expenses
                          
Recreational vehicles
  
$
5,699
  
$
7,758
  
$
18,722
  
$
27,011
  
Housing
    
4,347
    
4,907
    
12,664
    
14,944
  
Other reconciling items
    
3,842
    
(678
)
  
585
    
(1,600
)
                           
Consolidated total
  
$
13,888
  
$
11,987
  
$
31,971
  
$
40,355
  
                   
Operating expenses percentage
                          
Recreational vehicles
    
12.9
%
  
8.5
%
  
9.7
%
  
8.8
%
Housing
    
14.1
%
  
15.3
%
  
12.7
%
  
15.5
%
                           
Consolidated total
    
18.6
%
  
9.7
%
  
10.9
%
  
10.0
%
                           
Operating income (loss)
                          
Recreational vehicles
  
$
(11,131
)
$
(4,257
)
$
(19,212
)
$
(24,445
)
Housing
    
584
    
(650
)
  
5,065
    
(2,331
)
Other reconciling items
    
(3,842
)
  
678
    
(586
)
  
1,600
  
                           
Consolidated total
  
$
(14,389
)
$
(4,229
)
$
(14,733
)
$
(25,176
)
                           
Pre-tax income (loss)
                          
Recreational vehicles
  
$
(10,956
)
$
(4,156
)
$
(18,881
)
$
(24,471
)
Housing
    
572
    
(690
)
  
4,981
    
(2,271
)
Other reconciling items
    
(4,079
)
  
503
    
(2,199
)
  
833
  
                           
Consolidated total
  
$
(14,463
)
$
(4,343
)
$
(16,099
)
$
(25,909
)
 
 
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