-----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, VrgNBtug8lC4BocPhq7RDu5Cz6C4xfeO+dF3ylxbcDtoDjR5lHkGPyFGXa2Ow3bQ r2pPDHVB0Mv1xa5QZVRZ/g== 0000021212-97-000005.txt : 19970514 0000021212-97-000005.hdr.sgml : 19970514 ACCESSION NUMBER: 0000021212-97-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970513 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: 97601827 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, 1997 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from__________________to__________________ Commission file number 1-7160 COACHMEN INDUSTRIES, INC. (Exact name of registrant as specified in its charter) INDIANA 35-1101097 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification number) 601 EAST BEARDSLEY AVENUE, ELKHART, INDIANA 46514 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 219-262-0123 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No _ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date: At April 30, 1997: Common Shares, without par value 17,244,399 shares outstanding including an equivalent number of common share purchase rights. COACHMEN INDUSTRIES, INC. INDEX Page No. PART I. FINANCIAL INFORMATION Financial Statements: Condensed Consolidated Balance Sheets- March 31, 1997 and December 31, 1996....................3-4 Condensed Consolidated Statements of Income- Three Months Ended March 31, 1997 and 1996.............. 5 Condensed Consolidated Statements of Cash Flows- Three Months Ended March 31, 1997 and 1996.............. 6 Notes to Condensed Consolidated Financial Statements....7-8 Management's Discussion and Analysis of Financial Condition and Results of Operations........................9-12 PART II. OTHER INFORMATION.................................... 13 Item 6. Exhibits and Reports on Form 8-K SIGNATURES..................................................... 13 Page 2 COACHMEN INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS MARCH 31, DECEMBER 31, 1997 1996 ASSETS CURRENT ASSETS Cash and temporary cash investments $ 72,124,233 $ 66,448,901 Certificates of deposit 500,000 500,000 Trade receivables, less allowance for doubtful receivables 1997 - $1,007,000 and 1996 - $919,000 33,977,923 20,575,048 Other receivables 2,219,850 2,103,168 Refundable income taxes 1,865,000 1,865,000 Inventories 61,300,374 68,311,038 Prepaid expenses and other 872,497 930,244 Deferred income taxes 3,180,000 3,180,000 Total current assets 176,039,877 163,913,399 PROPERTY AND EQUIPMENT, at cost Land and improvements 7,348,533 6,640,920 Buildings and improvements 35,515,040 33,516,736 Machinery and equipment 15,310,864 14,563,955 Transportation equipment 9,966,794 9,619,667 Office furniture and fixtures 4,962,433 4,830,577 Total property and equipment, at cost 73,103,664 69,171,855 Less, Accumulated depreciation 30,664,250 29,314,413 Net property and equipment 42,439,414 39,857,442 OTHER ASSETS Real estate held for sale 4,902,105 4,902,105 Rental properties 2,500,272 2,530,608 Intangibles, less accumulated amortization 1997 - $414,413 and 1996 - $380,363 5,029,863 5,063,913 Deferred income taxes 600,000 600,000 Other 10,316,313 10,580,105 Total other assets 23,348,553 23,676,731 TOTAL ASSETS $241,827,844 $227,447,572 The accompanying notes are part of the condensed consolidated financial statements. Page 3 COACHMEN INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (CONT'D) MARCH 31, DECEMBER 31, 1997 1996 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Current maturities of long-term debt $ 2,271,019 $ 2,278,519 Accounts payable, trade 23,629,859 14,532,948 Accrued wages, salaries and commissions 2,873,222 4,410,925 Accrued dealer incentives 3,314,316 3,064,437 Accrued warranty expense 4,800,121 4,460,137 Accrued income taxes 2,944,783 628,051 Accrued insurance 4,420,354 3,697,709 Other liabilities 6,228,960 5,449,270 Total current liabilities 50,482,634 38,521,996 LONG-TERM DEBT 13,291,152 14,841,262 OTHER 6,572,508 6,428,373 Total liabilities 70,346,294 59,791,631 SHAREHOLDERS' EQUITY Common shares, without par value: authorized 60,000,000 shares; issued 1997 - 20,552,372 shares and 1996 - 20,527,644 shares 86,462,969 86,248,042 Additional paid-in capital 2,347,998 2,313,743 Retained earnings 98,229,597 94,670,593 187,040,564 183,232,378 Less, Cost of shares reacquired for the treasury 1997 - 3,338,470 shares and 1996 - 3,340,996 shares 15,559,014 15,576,437 Total shareholders' equity 171,481,550 167,655,941 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $241,827,844 $227,447,572 The accompanying notes are part of the condensed consolidated financial statements. Page 4 COACHMEN INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME THREE MONTHS ENDED MARCH 31, 1997 1996 Net sales $158,105,811 $148,640,023 Cost of goods sold 137,770,440 129,488,503 Gross profit 20,335,371 19,151,520 Operating expenses: Selling and delivery 8,330,879 7,561,188 General and administrative 6,007,899 5,599,626 Total operating expenses 14,338,778 13,160,814 Operating income 5,996,593 5,990,706 Nonoperating income (expense): Interest expense (356,256) (440,089) Interest income 992,464 234,314 Gain (loss) on sale of properties, net 9,456 (3,288) Other, net 93,777 341,330 Total nonoperating income, net 739,441 132,267 Income before income taxes and cumulative effect of accounting change 6,736,034 6,122,973 Income taxes 2,317,000 2,166,000 Income before cumulative effect of accounting change 4,419,034 3,956,973 Cumulative effect of accounting change for Company-owned life insurance policies - 2,293,983 Net income $ 4,419,034 $ 6,250,956 Earnings per common share: Income before cumulative effect of accounting change $ .26 $ .26 Net income $ .26 $ .42 Weighted average number of common shares outstanding 17,202,020 14,980,498 Cash dividends per common share $ .05 $ .035 The accompanying notes are part of the condensed consolidated financial statements. Page 5 COACHMEN INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 1997 1996 CASH FLOWS FROM OPERATING ACTIVITIES Net cash provided by operating activities $11,304,882 $ 5,573,662 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from: Sale of property and equipment, real estate held for sale and rental properties 113,707 363,512 Acquisitions of property and equipment (3,951,450) (3,175,772) Proceeds from life insurance death benefit - 171,770 Other 410,906 414,364 Net cash (used in) investing activities (3,426,837) (2,226,126) CASH FLOWS FROM FINANCING ACTIVITIES Payments of long-term debt (1,557,610) (1,569,759) Proceeds from sale of common shares 214,927 452,842 Cash dividends paid (860,030) (524,361) Net cash (used in) financing activities (2,202,713) (1,641,278) Increase in cash and temporary cash investments 5,675,332 1,706,258 CASH AND TEMPORARY CASH INVESTMENTS Beginning of period 66,448,901 17,020,744 End of period $ 72,124,233 $ 18,727,002 The accompanying notes are part of the condensed consolidated financial statements. Page 6 COACHMEN INDUSTRIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. The consolidated balance sheet data as of December 31, 1996 was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. 2. In the opinion of management, the information furnished herein includes all adjustments of a normal and recurring nature necessary to reflect a fair statement of the interim periods reported. The results of operations for the three months ended March 31, 1997 are not necessarily indicative of the results to be expected for the full year. 3. Inventories consist of the following: March 31, December 31, 1997 1996 Raw material $ 20,343,218 $ 20,951,906 Work-in-process 8,230,167 6,467,066 Finished goods 32,726,989 40,892,066 Total $ 61,300,374 $ 68,311,038 4. Effective January 1, 1996, the Company changed its method of accounting for its investment in life insurance contracts which were purchased to fund liabilities under deferred compensation agreements with executives and other key employees. Prior to January 1, 1996, the Company accounted for its investments in life insurance contracts by capitalizing premiums under the ratable charge method (a method of accounting which was acceptable when the insurance contracts were originally acquired and continued to be acceptable for contracts acquired prior to November 14, 1985). Effective January 1, 1996, the Company changed to the cash surrender value method of accounting which is the preferred method under generally accepted accounting principles, as this method more accurately reflects the economic value of the contracts. On that date, the Company recorded a $2.3 million noncash credit for the cumulative effect of the accounting change. 5. On July 17, 1996, the Board of Directors declared a two-for-one stock split of the Company's common shares, which was paid on August 28, 1996 to shareholders of record on August 7, 1996. All share and per share data appearing in the condensed consolidated financial statements and notes thereto have been retroactively restated to reflect this stock split. 6. The Company was contingently liable at March 31, 1997 to banks and other financial institutions on repurchase agreements in connection with financing provided by such institutions to most of the Company's independent dealers in connection with their purchase of the Company's recreational vehicle products. These agreements provide for the Company to repurchase its products from the Page 7 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. 7. On May 1, 1997 the Board of Directors authorized the repurchase of up to one million shares of the Company's outstanding common stock. Shares may be purchased from time to time, depending on market conditions and other factors, on the open market or through privately negotiated transactions at the then prevailing market prices. Page 8 COACHMEN INDUSTRIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is management's discussion and analysis of certain significant factors which have affected the Company's financial condition, results of operations and cash flows during the periods included in the accompanying condensed consolidated financial statements. A summary of the changes in the principal items included in the condensed consolidated statements of income is shown below. Comparison of Three Months Ended March 31, 1997 and 1996 Increases (Decreases) Net sales $ 9,465,788 6.4% Cost of goods sold 8,281,937 6.4 Selling and delivery expenses 769,691 10.2 General and administrative expenses 408,273 7.3 Interest expense (83,833) (19.0) Interest income 758,150 323.6 Gain on sale of properties, net 12,744 * Other, net (247,553) (72.5) Income before income taxes and cumulative effect of accounting change 613,061 11.7 Income taxes 151,000 7.0 Cumulative effect of accounting change for Company-owned life insurance policies (2,293,983) * Net income (1,831,922) (29.3) * Not meaningful Page 9 NET SALES Consolidated net sales for the quarter ended March 31, 1997 were $158,105,811, an increase of 6.4% over $148,640,023 reported in the same quarter of 1996. The Company's vehicle segment, which includes the parts and supply businesses, experienced a sales increase of 1.0%. Recreational vehicle ("RV") sales were hampered during the quarter by unusually severe weather and major floods in several areas of the country. The Company's housing segment experienced a 48.9% increase in net sales for the quarter compared to last year's first quarter as a result of excellent demand and increased capacity. While the RV segment was slightly down in the number of units sold compared to the first quarter of 1996, the housing segment was significantly up in the number of units sold. Both RV and housing segments also experienced increases in the average sales price per unit. COST OF GOODS SOLD Cost of goods sold increased 6.4% or $8,281,937 for the three months ended March 31, 1997. The increase is consistent with the increase in net sales. Cost of goods sold as a percentage of net sales was 87.1% for both quarters; however, the favorable gross margins for the RV segment were offset by lower gross margins for the housing segment. The housing segment continued experiencing lower gross margins attributable to the expansion in North Carolina and recent Tennessee plant opening. Production volume is increasing in these two plants and gross margins are expected to improve. OPERATING EXPENSES As a percentage of net sales, operating expenses, which include selling, delivery, general and administrative expenses, were 9.1% and 8.9% for the quarters ended March 31, 1997 and 1996, respectively. Selling expenses increased by .2% as the result of increases in dealer volume sales incentives attributable to significantly increased sales in the housing group. As a percentage of net sales, delivery expenses remained relatively unchanged. General and administrative expenses were 3.8% of net sales for both the first quarter of 1997 and the first quarter of 1996. INTEREST EXPENSE Interest expense was $356,256 for the quarter ended March 31, 1997 and $440,089 for the quarter ended March 31, 1996. The decrease was primarily the result of a larger increase in cash surrender value for the Company's investment in life insurance contracts in 1997 than in 1996. These life insurance contracts were purchased to fund obligations under deferred compensation agreements with executives and other key employees. The interest costs associated with deferred compensation obligations and with the borrowings against the cash value of the insurance policies are partially offset by the increases in cash surrender values. Page 10 INTEREST INCOME Interest income increased $758,150 for the 1997 quarter over 1996. This is indicative of the amounts of cash and temporary cash investments in 1997 in comparison to 1996. Increases in cash and temporary cash investments were primarily generated from operating activities throughout 1996 and the sale of 2,070,000 shares of common stock in November 1996. GAIN ON THE SALE OF PROPERTIES, NET The net gain on the sale of properties for the quarter ended March 31, 1997 was $9,456 while the comparative quarter in 1996 was a loss of $3,288. This classification represents the net result of the amount of gain or loss recognized upon the disposition of various small properties. OTHER, NET Other, net, represents income of $93,777 for the 1997 first quarter and $341,330 for the 1996 first quarter. The larger amount in 1996 was attributable to the receipt of key-man life insurance proceeds during the quarter. INCOME TAXES For the first quarter ended March 31, 1997, the effective tax rate was 34.4% compared to a first quarter tax rate of 35.4% in 1996. The Company's effective tax rate fluctuates with the state's tax rates where sales incur and also with the level of export sales. CUMULATIVE EFFECT OF ACCOUNTING CHANGE FOR COMPANY-OWNED LIFE INSURANCE POLICIES See Note 4 of Notes to Condensed Consolidated Financial Statements on page 7 herein. FORWARD LOOKING STATEMENTS Some matters set forth herein are forward looking statements that are dependent on certain risks and uncertainties including such factors, among others, as the availability of gasoline, which can impact sales of recreational vehicles; availability of chassis, which are used in the production of many of the Company's recreational vehicle products; interest rates, which affect the affordability of the Company's products; and also on the state of the recreational vehicle and modular housing industries in the United States. Other factors affecting forward looking statements include competition in these industries and the Company's ability to maintain or increase gross margins which are critical to profitability whether there are or are not increased sales. At times, the Company's actual performance differs materially from its projections and estimates regarding the economy, Page 11 the recreational vehicle and housing industries and other key performance indicators. The Company's actual results could vary significantly from the performance projected in the forward looking statements. OTHER MATTERS In February 1997, Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS No. 128"), was issued by the Financial Accounting Standards Board. The Company is required to adopt this pronouncement in its financial statements for the year ended December 31, 1997. SFAS No. 128 will require the Company to make a dual presentation of basic and diluted earnings per share on the face of its consolidated statements of income. The Company does not anticipate SFAS No. 128 will have a significant impact on the Company's consolidated statements of income. 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, 1997, to meet its seasonal working capital needs. At March 31, 1997, there were no borrowings against this line of credit. For the three months, the major source of cash was from operating activities. The significant items in this category were net income, depreciation and the increase in current liabilities. Significant increases in receivables were more than offset by decreases in inventories and increases in accounts payable and accrued expenses, including income taxes. Investing activities reflected a net cash use of $3,426,837. The principal use of cash in investing activities was the acquisition of property and equipment. This investment included the acquisition of a new recreational vehicle manufacturing facility in Indiana. The negative cash flow from financing activities was primarily for cash dividends and repayment of long-term debt. At March 31, 1997, working capital increased to $125.6 million from $125.4 million at December 31, 1996. The $12.1 million increase in current assets at March 31, 1997 versus December 31, 1996, was primarily due to increased cash and receivables. The $12.0 million increase in current liabilities is substantially due to increased trade payables as well as accrued income taxes. Page 12 PART II. OTHER INFORMATION Item 5. Other Information On May 1, 1997 the Board of Directors authorized the repurchase of up to one million shares of the Company's outstanding common stock. Shares may be purchased from time to time, depending on market conditions and other factors, on the open market or through privately negotiated transactions at the then prevailing market prices. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K None SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. COACHMEN INDUSTRIES, INC. (Registrant) s/s: GARY L. GROOM Date: May 13, 1997 _______________________________ Gary L. Groom, Executive Vice President - Finance (Principal Financial Officer) s/s: WILLIAM M. ANGELO Date: May 13, 1997 _______________________________ William M. Angelo, Corporate Controller (Principal Accounting Officer) Page 13 EX-27 2
5 This schedule contains summary financial information extracted from the consolidated statements of income and consolidated balance sheets and is qualified in its entirety by reference to such financial statements. 0000021212 COACHMEN INDUSTRIES, INC. 1000 3-MOS DEC-31-1997 MAR-31-1997 72,124 500 37,205 1,007 61,300 176,040 73,104 30,664 241,828 50,483 13,291 70,904 0 0 100,578 241,828 158,106 158,106 137,771 152,109 739 80 356 6,736 2,317 4,419 0 0 0 4,419 .26 .26
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