-----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, I+skMGo9IQD0riV76psC0iMl852qWbxXk4EHtOUfTZ1dzacUB7DYdEMtrGjztacP UsDjcN7LRhrl9yct7ZaNQA== 0000021212-96-000006.txt : 19960513 0000021212-96-000006.hdr.sgml : 19960513 ACCESSION NUMBER: 0000021212-96-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960510 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: COACHMEN INDUSTRIES INC CENTRAL INDEX KEY: 0000021212 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR HOMES [3716] IRS NUMBER: 351101097 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07160 FILM NUMBER: 96560139 BUSINESS ADDRESS: STREET 1: 601 E BEARDSLEY AVE STREET 2: P O BOX 3300 CITY: ELKHART STATE: IN ZIP: 46514 BUSINESS PHONE: 2192620123 MAIL ADDRESS: STREET 1: 601 E BEARDSLEY AVE CITY: ELKHART STATE: IN ZIP: 46515 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1996 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________________to__________________ Commission file number 1-7160 COACHMEN INDUSTRIES, INC. (Exact name of registrant as specified in its charter) INDIANA 35-1101097 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification number) 601 EAST BEARDSLEY AVENUE, ELKHART, INDIANA 46514 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 219-262-0123 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No _ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date: At April 30, 1996: Common Shares, without par value 7,511,697 shares outstanding Rights to purchase Common Shares 7,511,697 rights outstanding COACHMEN INDUSTRIES, INC. INDEX Page No. PART I. FINANCIAL INFORMATION Financial Statements: Consolidated Balance Sheets- March 31, 1996 and December 31, 1995....................3-4 Consolidated Statements of Income- Three Months Ended March 31, 1996 and 1995.............. 5 Consolidated Statements of Cash Flows- Three Months Ended March 31, 1996 and 1995.............. 6 Condensed Notes to Consolidated Financial Statements....7-8 Management's Discussion and Analysis of Financial Condition and Results of Operations........................9-12 PART II. OTHER INFORMATION.................................... 13 SIGNATURES..................................................... 13 INDEX TO EXHIBITS.............................................. 13 Page 2 COACHMEN INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS MARCH 31, DECEMBER 31, 1996 1995 ASSETS CURRENT ASSETS Cash and temporary cash investments $ 18,727,002 $17,020,744 Certificates of deposit 500,000 500,000 Trade receivables less allowance for doubtful receivables 1996 - $923,000 and 1995 - $863,000 31,251,264 19,780,160 Other receivables 1,638,000 4,244,387 Refundable income taxes 507,000 507,000 Inventories 56,839,900 55,434,497 Prepaid expenses and other 900,749 1,570,492 Deferred income taxes 2,665,000 2,665,000 Total current assets 113,028,915 101,722,280 PROPERTY AND EQUIPMENT, at cost Land and improvements 5,636,377 5,537,033 Buildings and improvements 29,346,846 27,405,744 Machinery and equipment 11,217,326 10,524,486 Transportation equipment 9,335,362 11,307,747 Office furniture and fixtures 4,405,227 4,269,837 Total property and equipment, at cost 59,941,138 59,044,847 Less, Accumulated depreciation 26,496,929 27,297,851 Net property and equipment 33,444,209 31,746,996 OTHER ASSETS Real estate held for sale 3,324,059 3,458,539 Rental properties 1,011,905 925,538 Intangibles, less accumulated amortization 1996 - $278,797 and 1995 - $244,771 5,165,479 5,199,505 Deferred income taxes 875,000 875,000 Other 8,559,335 6,320,899 Total other assets 18,935,778 16,779,481 TOTAL ASSETS $165,408,902 $150,248,757 The accompanying notes are part of the consolidated financial statements. Page 3 COACHMEN INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS (CONT'D) MARCH 31, DECEMBER 31, 1996 1995 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Current maturities of long-term debt $ 2,094,472 $ 2,094,472 Accounts payable, trade 23,880,972 18,435,562 Accrued wages, salaries and commissions 2,780,733 3,583,423 Accrued dealer incentives 2,958,841 2,289,376 Accrued warranty expense 4,003,433 3,784,712 Accrued income taxes 3,229,994 981,800 Other liabilities 12,580,883 9,965,433 Total current liabilities 51,529,298 41,134,778 LONG-TERM DEBT 10,547,997 12,117,756 OTHER 6,094,580 5,958,995 Total liabilities 68,171,875 59,211,529 SHAREHOLDERS' EQUITY Common shares, without par value: authorized 30,000,000 shares; issued 1996 - 9,178,921 shares and 1995 - 9,141,336 shares 37,604,044 37,151,202 Additional paid-in capital 1,671,501 1,664,889 Retained earnings 73,551,411 67,824,816 Treasury shares at cost 1996 - 1,674,116 shares and 1995 - 1,672,502 shares (15,589,929) (15,603,679) Total shareholders' equity 97,237,027 91,037,228 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $165,408,902 $150,248,757 The accompanying notes are part of the consolidated financial statements. Page 4 COACHMEN INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF INCOME THREE MONTHS ENDED MARCH 31, 1996 1995 Net sales $148,640,023 $131,770,379 Cost of goods sold 129,488,503 115,208,267 Gross profit 19,151,520 16,562,112 Operating expenses: Selling and delivery 7,561,188 6,482,492 General and administrative 5,599,626 4,627,614 Total operating expenses 13,160,814 11,110,106 Operating income 5,990,706 5,452,006 Nonoperating income (expense): Interest expense (440,089) (728,332) Interest income 234,314 171,405 Gain on sale of properties, net (3,288) 18,592 Other, net 341,330 172,793 Total nonoperating income 132,267 33,352 Income before income taxes and cumulative effect of accounting change 6,122,973 5,086,464 Income taxes 2,166,000 1,883,000 Income before cumulative effect of accounting change 3,956,973 3,203,464 Cumulative effect of accounting change for Company-owned life insurance policies 2,293,983 - Net income $ 6,250,956 $ 3,203,464 Earnings per common share: Income before cumulative effect of accounting change $ .53 $ .43 Cumulative effect of accounting change $ .30 - Net income $ .83 $ .43 Weighted average number of common shares outstanding 7,490,249 7,415,985 Cash dividends per common share $ .07 $ .07 The accompanying notes are part of the consolidated financial statements. Page 5 COACHMEN INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 1996 1995 CASH FLOWS FROM OPERATING ACTIVITIES Net cash provided by (used in) operating activities $ 5,573,662 $(2,234,613) CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from: Sale of properties 363,512 782,079 Sale of investments - 13,888 Acquisitions of property and equipment (3,175,772) (5,155,669) Acquisition of a business, net of cash acquired - (4,654,877) Unexpended industrial revenue bond proceeds - 2,406,900 Proceeds from life insurance death benefit 171,770 - Other 414,364 168,568 Net cash (used in) investing activities (2,226,126) (6,739,111) CASH FLOWS FROM FINANCING ACTIVITIES Payments of short-term borrowings - (900,000) Payments of long-term debt (1,569,759) (392,582) Cash dividends paid (524,361) (518,996) Proceeds from sale of common shares 452,842 242,776 Net cash (used in) financing activities (1,641,278) (1,568,802) Increase (decrease) in cash and temporary cash investments 1,706,258 (10,452,526) CASH AND TEMPORARY CASH INVESTMENTS Beginning of period 17,020,744 19,534,385 End of period $ 18,727,002 $ 8,991,859 Noncash investing and financing activities: Liabilities assumed in acquisition of a business $ 8,757,472 Long-term debt issued in conjunction with acquisition of a business 6,141,129 The accompanying notes are part of the consolidated financial statements. Page 6 COACHMEN INDUSTRIES, INC. CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. The consolidated balance sheet data as of December 31, 1995 was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. 2. In the opinion of management, the information furnished herein includes all adjustments of a normal and recurring nature necessary to reflect a fair statement of the interim periods reported. The results of operations for the three-month period ended March 31, 1996 are not necessarily indicative of the results to be expected for the full year. 3. Inventories consist of the following: March 31, December 31, 1996 1995 Raw material $ 17,382,957 $ 16,580,013 Work in-process 7,388,602 7,268,705 Finished goods 32,068,341 31,585,779 Total inventories $ 56,839,900 $ 55,434,497 4. Effective January 1, 1996, the Company changed its method of accounting for its investment in life insurance contracts which were purchased to fund liabilities under deferred compensation agreements with executives and other key employees. Prior to January 1, 1996, the Company accounted for its investments in life insurance contracts by capitalizing premiums under the ratable charge method (a method of accounting which was acceptable when the insurance contracts were originally acquired and continued to be acceptable for contracts acquired prior to November 14, 1985). Effective January 1, 1996, the Company changed to the cash surrender value method of accounting which is the preferred method under generally accepted accounting principles, as this method more accurately reflects the economic value of the contracts. On January 1, 1996, the Company recorded a $2.3 million noncash credit for the cumulative effect of this accounting change. This change also increased net income for the three months ended March 31, 1996 by $223,232 or $.03 per share. On a pro forma basis, net income and net income per share for the three months ended March 31, 1995 would have been $3,389,312 and $.46, respectively, if this accounting change had been made prior to 1995. 5. The Company was contingently liable at March 31, 1996 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 Page 7 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. Page 8 COACHMEN INDUSTRIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is management's discussion and analysis of certain significant factors which have affected the Company's financial condition, results of operations and cash flows during the periods included in the accompanying consolidated financial statements. A summary of the changes in the principal items included in the consolidated statements of income is shown below. Comparison of Three Months Ended March 31, 1996 and 1995 Increases (Decreases) Net sales $ 16,869,644 12.8% Cost of goods sold 14,280,236 12.4 Selling and delivery expense 1,078,696 16.6 General and administrative expense 972,012 21.0 Interest expense (288,243) (39.6) Interest income 62,909 36.7 Gain on sale of properties, net (21,880) (117.7) Other, net 168,537 97.5 Income before income taxes and cumulative effect of accounting change 1,036,509 20.4 Income taxes 283,000 15.0 Cumulative effect of accounting change for Company-owned life insurance policies 2,293,983 * Net income 3,047,492 95.1 * not meaningful Page 9 NET SALES Consolidated net sales for the quarter ended March 31, 1996 were $148,640,023, an increase of 12.8% over the $131,770,379 reported for the corresponding quarter last year. The Company's vehicle segment, which includes the parts and supply group of companies, experienced a net sales increase of 13.8% and the Company's housing segment had a net sales increase of 5.7%. Vehicles experienced increases in both unit sales and unit sales prices, as well as increases in market share. Housing experienced an increase in sales prices but a small decrease in unit sales due to shipments being hampered by severe weather conditions and the resulting lack of foundations to place homes on. COST OF GOODS SOLD Cost of goods sold increased 12.4% or $14,280,236 for the first quarter of 1996 over 1995. This increase is generally in line with the increase in net sales. The slight decrease in cost of goods sold as a percentage of net sales is principally attributable to the product mix for the quarter. SELLING AND DELIVERY EXPENSES As a percentage of net sales, selling and delivery expenses were 5.1% and 4.9% for 1996 and 1995, respectively. There was a .2% decrease in selling expense as a percentage of net sales, primarily as the result of increased demand for the Company's products, while delivery expenses increased .4%. The recent expansion of the Company's housing segment into North Carolina and Tennessee required the formation of new delivery and setting crews to cover these geographical sales areas. These crews include inexperienced personnel who should return this expense category to a more historical percentage after completion of a learning curve. GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses were $5,599,626 or 3.8% of net sales for the 1996 three months compared to $4,627,614 or 3.5% for the corresponding 1995 three months. The most significant portion of the increase was due to increased incentive compensation earned at an earlier point in the year as a result of increased profits. INTEREST EXPENSE Interest expense was $440,089 in 1996 compared to $728,332 the prior year. The decrease is primarily the 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 liabilities 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 consisted only of the capitalized insurance premiums. Page 10 INTEREST INCOME Interest income increased $62,909 for the 1996 quarter compared to 1995. The amount is indicative of the increase in cash and temporary cash investments in 1996 over the 1995 quarter. This increase in cash and temporary cash investments was basically generated from operating activities throughout 1995. GAIN ON THE SALE OF PROPERTIES, NET The net gain on sale of properties for the first quarter of 1996 was $21,880 lower than in 1995. This variance was the result of the disposition of miscellaneous small properties. Assets are continually analyzed and every effort is made to sell or dispose of property that is idle or determined to be unproductive. OTHER, NET Other income, net, represented income in the amount of $341,330 and $172,793 for the first three months of 1996 and 1995, respectively. The increase over 1995 is primarily attributable to the receipt of key-man life insurance proceeds in the first quarter of 1996. INCOME TAXES During the first quarter of 1996, the effective income tax rate was 35.4% compared to an effective income tax rate of 37.0% for the same quarter in 1995. The decrease in the for 1996 is due to the amount of nontaxable income recognized during the quarter. CUMULATIVE EFFECT OF ACCOUNTING CHANGE FOR COMPANY-OWNED LIFE INSURANCE POLICIES See Note 4 of Condensed Notes to Consolidated Financial Statements on page 7 herein. Page 11 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, 1996, to meet its seasonal working capital needs. At March 31, 1996, there were no borrowings against this line of credit. For the quarter, the major source of cash was from operating activities. The most significant items in this category were net income and depreciation. Significant increases in receivables and inventories were basically offset by increases in accounts payable and accrued expenses, including income taxes. Investing activities reflected a net use of cash of $2,226,126. The principal use of cash in investing activities was the investment in property and equipment. The negative cash flow for financing activities was primarily from cash dividends and payments of long-term debt. At March 31, 1996, the working capital increased $.9 million from December 31, 1995 to $61.5 million. Page 12 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K a) Exhibits: Exhibit 18 - Letter regarding change in accounting principles. Exhibit 27 - Financial Data Schedule b) Reports on Form 8-K None SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. COACHMEN INDUSTRIES, INC. (Registrant) Gary L. Groom Date May 10, 1996 ------------------------------ Gary L. Groom, Executive Vice President - Finance (Principal Financial Officer) William M. Angelo Date May 10, 1996 ------------------------------ William M. Angelo, Corporate Controller (Principal Accounting Officer) Page 13 EX-1 2 LETTER FROM INDEPENDENT ACCOUNTANTS May 8, 1996 Coachmen Industries, Inc. P.O. Box 3300 Elkhart, Indiana 46515 We are providing this letter to you for inclusion as an exhibit to your Form 10-Q filing pursuant to Item 601 of Regulation S-K. We have read management's justification for the change in accounting for insurance contracts, from capitalizing premiums paid to the cash surrender value method, contained in the Company's Form 10-Q for the quarter ended March 31, 1996. Based on our reading of the data and discussions with Company officials of the business judgment and business planning factors relating to the change, we believe management's justification to be reasonable. Accordingly, we concur that the newly adopted accounting principle described above is preferable in the Company's circumstances to the method previously applied. We have not audited any financial statements of Coachmen Industries, Inc. as of any date or for any period subsequent to December 31, 1995, nor have we audited the application of the change in accounting principle disclosed in Form 10-Q of Coachmen Industries, Inc. for the three months ended March 31, 1996; accordingly, our comments are subject to revision on completion of an audit of the financial statements that include the accounting change. COOPERS & LYBRAND L.L.P. --------------------------- COOPERS & LYBRAND L.L.P. EX-27 3
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-31-1996 MAR-31-1996 18,727 500 34,319 923 56,840 113,029 59,941 26,497 165,409 51,529 10,548 22,014 0 0 75,223 165,409 148,640 148,640 129,489 142,649 132 80 440 6,123 2,166 3,957 0 0 2,294 6,251 .83 .83
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