-----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, Ml3jfrFg4KX9IBqiCmc3GVRoZAZfcf5Dl8GOG62KP/WSAIkxxhYVCPGgkn349ov4 hAHp/zWMh9NkiZQqY0bkgA== 0000021212-97-000007.txt : 19970812 0000021212-97-000007.hdr.sgml : 19970812 ACCESSION NUMBER: 0000021212-97-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970811 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: 97655030 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 June 30, 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 July 31, 1997: Common Shares, without par value 17,230,063 shares outstanding with an equivalent number of common share purchase rights. COACHMEN INDUSTRIES, INC. INDEX Page No. PART I. FINANCIAL INFORMATION Financial Statements: Condensed Consolidated Balance Sheets- June 30, 1997 and December 31, 1996.....................3-4 Condensed Consolidated Statements of Income- Three and Six Months Ended June 30, 1997 and 1996....... 5 Condensed Consolidated Statements of Cash Flows- Six Months Ended June 30, 1997 and 1996................. 6 Notes to Condensed Consolidated Financial Statements....7-8 Management's Discussion and Analysis of Financial Condition and Results of Operations........................9-13 PART II. OTHER INFORMATION.................................... 14 Item 6. Exhibits and Reports on Form 8-K SIGNATURES..................................................... 15 Page 2 COACHMEN INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS JUNE 30, DECEMBER 31, 1997 1996 ASSETS CURRENT ASSETS Cash and temporary cash investments $ 81,334,653 $ 66,448,901 Certificate of deposit - 500,000 Trade receivables, less allowance for doubtful receivables 1997 - $1,069,000 and 1996 - $919,000 24,786,655 20,575,048 Other receivables 1,976,953 2,103,168 Refundable income taxes 365,000 1,865,000 Inventories 64,579,745 68,311,038 Prepaid expenses and other 1,861,568 930,244 Deferred income taxes 3,180,000 3,180,000 Total current assets 178,084,574 163,913,399 PROPERTY AND EQUIPMENT, at cost Land and improvements 8,557,144 6,640,920 Buildings and improvements 36,432,897 33,516,736 Machinery and equipment 15,890,644 14,563,955 Transportation equipment 10,245,975 9,619,667 Office furniture and fixtures 5,080,984 4,830,577 Total property and equipment, at cost 76,207,644 69,171,855 Less, Accumulated depreciation 32,101,810 29,314,413 Net property and equipment 44,105,834 39,857,442 OTHER ASSETS Real estate held for sale 4,902,105 4,902,105 Rental properties 2,469,938 2,530,608 Intangibles, less accumulated amortization 1997 - $448,463 and 1996 - $380,363 4,995,813 5,063,913 Deferred income taxes 600,000 600,000 Other 10,728,098 10,580,105 Total other assets 23,695,954 23,676,731 TOTAL ASSETS $245,886,362 $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) JUNE 30, DECEMBER 31, 1997 1996 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Current maturities of long-term debt $ 2,267,161 $ 2,278,519 Accounts payable, trade 26,045,341 14,532,948 Accrued wages, salaries and commissions 3,885,868 4,410,925 Accrued dealer incentives 1,300,919 3,064,437 Accrued warranty expense 5,109,486 4,460,137 Accrued income taxes 167,551 628,051 Accrued insurance 4,885,984 3,697,709 Other accrued liabilities 5,762,637 5,449,270 Total current liabilities 49,424,947 38,521,996 LONG-TERM DEBT 13,261,271 14,841,262 OTHER 6,578,929 6,428,373 Total liabilities 69,265,147 59,791,631 SHAREHOLDERS' EQUITY Common shares, without par value: authorized 60,000,000 shares; issued 1997 - 20,610,789 shares and 1996 - 20,527,644 shares 86,863,284 86,248,042 Additional paid-in capital 2,348,469 2,313,743 Retained earnings 103,795,678 94,670,593 193,007,431 183,232,378 Less, Cost of shares reacquired for the treasury 1997 - 3,388,427 shares and 1996 - 3,340,996 shares 16,386,216 15,576,437 Total shareholders' equity 176,621,215 167,655,941 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $245,886,362 $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 SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, 1997 1996 1997 1996 Net sales $169,368,233 $166,715,051 $327,474,044 $315,355,074 Cost of goods sold 146,128,835 141,753,074 283,899,275 271,241,577 Gross profit 23,239,398 24,961,977 43,574,769 44,113,497 Operating expenses: Selling and delivery 7,680,881 6,412,132 16,011,760 13,973,320 General and administrative 6,522,400 5,664,130 12,530,299 11,263,756 Total operating expenses 14,203,281 12,076,262 28,542,059 25,237,076 Operating income 9,036,117 12,885,715 15,032,710 18,876,421 Nonoperating income (expense): Interest expense (438,806) (400,946) (795,062) (841,035) Interest income 1,148,209 370,628 2,140,673 604,942 Gain on sale of properties, net 123,836 729,857 133,292 726,569 Other income, net 97,273 107,469 191,050 448,799 Total nonoperating income 930,512 807,008 1,669,953 939,275 Income before income taxes and cumulative effect of accounting change 9,966,629 13,692,723 16,702,663 19,815,696 Income taxes 3,537,000 5,007,000 5,854,000 7,173,000 Income before cumulative effect of accounting change 6,429,629 8,685,723 10,848,663 12,642,696 Cumulative effect of accounting change for Company-owned life insurance policies - - - 2,293,983 Net income $ 6,429,629 $ 8,685,723 $ 10,848,663 $ 14,936,679 Earnings per common share: Income before cumulative effect of accounting change $ .37 $ .58 $ .63 $ .84 Net income $ .37 $ .58 $ .63 $ 1.00 Weighted average number of common shares outstanding 17,242,047 15,035,436 17,222,144 15,007,966 Cash dividends per common share $ .05 $ .05 $ .10 $ .085 The accompanying notes are part of the condensed consolidated financial statements. Page 5 COACHMEN INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED MARCH 31, 1997 1996 CASH FLOWS FROM OPERATING ACTIVITIES Net cash provided by operating activities $ 24,255,801 $ 15,181,045 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from: Sale of property and equipment, real estate held for sale and rental properties 537,476 1,157,040 Certificate of deposit 500,000 - Acquisitions of property and equipment (7,049,867) (7,222,704) Proceeds from life insurance death benefit - 171,770 Other 169,527 680,056 Net cash (used in) investing activities (5,842,864) (5,213,838) CASH FLOWS FROM FINANCING ACTIVITIES Payments of long-term debt (1,591,349) (1,591,134) Proceeds from sale of common shares 615,242 708,054 Purchases of common shares for treasury (827,500) - Cash dividends paid (1,723,578) (1,276,458) Net cash (used in) financing activities (3,527,185) (2,159,538) Increase in cash and temporary cash investments 14,885,752 7,807,669 CASH AND TEMPORARY CASH INVESTMENTS Beginning of period 66,448,901 17,020,744 End of period $ 81,334,653 $ 24,828,413 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 and six months ended June 30, 1997 are not necessarily indicative of the results to be expected for the full year. 3. Inventories consist of the following: June 30, December 31, 1997 1996 Raw material $ 23,639,036 $ 20,951,906 Work-in-process 8,155,490 6,467,066 Finished goods 32,785,219 40,892,066 Total $ 64,579,745 $ 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 June 30, 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. During the second quarter, the Company repurchased 50,000 shares of its common stock on the open market. 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 Six Months Ended June 30, 1997 and 1996 Increases (Decreases) Net sales $ 2,653,182 1.6% $ 12,118,970 3.8% Cost of goods sold 4,375,761 3.1 12,657,698 4.7 Selling and delivery expenses 1,268,749 19.8 2,038,440 14.6 General and administrative expenses 858,270 15.2 1,266,543 11.2 Interest expense 37,860 9.4 (45,973) (5.5) Interest income 777,581 209.8 1,535,731 253.9 Gain on sale of properties, net (606,021)(83.0) (593,277)(81.7) Other income, net (10,196) (9.5) (257,749)(57.4) Income before income taxes and cumulative effect of accounting change (3,726,094)(27.2) (3,113,033)(15.7) Income taxes (1,470,000)(29.4) (1,319,000)(18.4) Cumulative effect of accounting change for Company-owned life insurance policies - - (2,293,983) * Net income (2,256,094)(26.0) (4,088,016)(27.4) * Not meaningful Page 9 NET SALES Consolidated net sales for the quarter ended June 30, 1997 were $169,368,233 an increase of 1.6% over the $166,715,051 reported for the corresponding quarter last year. Net sales for the six months were $327,474,044 representing an increase of 3.8% over the $315,355,074 reported for the same period in 1996. The Company's vehicle segment, which includes the parts and supply group of companies, experienced net sales decreases of 1.1% and .1% for the quarter and six months, respectively. Recreational vehicle ("RV") sales were hampered during both periods by difficult and sometimes severe weather in several areas of the country. The Company's housing segment had a net sales increase for the 1997 quarter of 16.6% and 29.5% for the six months as a result of continued strong demand for the Company's modular housing products and increased capacity. While the RV segment was down slightly in the number of units sold and average sales price of units sold compared to the first six months of 1996, the housing segment was significantly up in the number of units sold and also up in the average sales price per unit. COST OF GOODS SOLD Cost of goods sold increased 3.1% or $4,375,761 for the three months and 4.7% or $12,657,698 for the six months ended June 30, 1997. The increase for both periods is higher than the increase in net sales. Gross margins were negatively affected in the RV group by the additional capacity added primarily for the production of larger travel trailers and fifth wheels. This increase in capacity was not utilized to the extent anticipated as net sales, although a record, were below planned levels. The housing segment continued experiencing lower gross margins attributable to the expansion in North Carolina and the costs associated with implementing a seven day work week at the Indiana plant. 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 8.4% and 7.2% for the 1997 and 1996 quarter, respectively and 8.7% and 8.0% for the comparable six-month periods. Selling expenses, as a percentage of net sales, increased by .6% for the quarter and .5% for the six months, primarily due to increased 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 3.9% of net sales for the second quarter compared to 3.4% for the 1996 corresponding quarter and 3.8% of net sales for the six-month period compared to 3.6% for 1996. INTEREST EXPENSE Interest expense was $438,806 and $795,062 for the three and six-month periods in 1997 compared to $400,946 and $841,035 in the same periods last year. The six-month decrease was primarily the result of a larger Page 10 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. INTEREST INCOME Interest income increased $777,581 and $1,535,731 respectively, for the 1997 three and six-month periods. 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 1997 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 second quarter of 1997 was $606,021 lower and for the six months was $593,277 lower than in the same periods in 1996. These variances are the result of the amount of gain 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. OTHER INCOME, NET Other income, net, represents income of $97,273 for the second quarter and $191,050 for the six months compared to income of $107,469 and $448,799 for the 1996 second quarter and six months, respectively. The most significant variance for the six-months was due to the receipt of deferred compensation related life insurance proceeds during the 1996 period. INCOME TAXES For the second quarter ended June 30, 1997, the effective tax rate was 35.5% and a year-to-date rate of 35.0% compared with a 1996 second quarter and year-to-date effective tax rate of 36.6% and 36.2%, respectively. The Company's effective tax rate fluctuates based upon the states where sales incur, with the level of export sales and also with the amount of nontaxable income realized in each period. 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 Page 11 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, 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 ending 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. In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income" and SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information" both of which the Company will be required to adopt in its financial statements for the year ending December 31, 1998. SFAS No. 130 will require the Company to report comprehensive income in its financial statements. Comprehensive income includes net income and certain transactions that are reported as a separate component of shareholders' equity. SFAS No. 131 specifies revised guidelines for determining operating segments and the type and level of information to be disclosed. The Company has not yet determined what changes in its disclosures, if any, will be required by SFAS No. 131. 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 June 30, 1997, to meet its seasonal working capital needs. At June 30, 1997, there were no borrowings against this line of credit. For the six months, the major source of cash was from operating activities. The significant items in this category were net income, depreciation and an increase in trade accounts payable. Increases in receivables were substantially offset by decreases in inventories. Investing activities reflected a net cash use of $5,842,864. 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 Page 12 activities was primarily for cash dividends and repayment of long-term debt. At June 30, 1997, working capital increased to $128.7 million from $125.4 million at December 31, 1996. The $14.2 million increase in current assets at June 30, 1997 versus December 31, 1996, was primarily due to increased cash and receivables. The $10.9 million increase in current liabilities was substantially due to increased trade accounts payable and accrued insurance. Page 13 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders a) The annual meeting of the shareholders of Coachmen Industries, Inc. was held on May 1, 1997. b) The following nominees were elected Directors for a one-year term: Thomas H. Corson Keith D. Corson Gary L. Groom Claire C. Skinner Philip C. Barker R. James Harring William P. Johnson Philip G. Lux William G. Milliken c) The tabulation of votes for each Director nominee was as follows: For Withheld Election of Directors: Thomas H. Corson 15,184,995 283,538 Keith D. Corson 15,184,095 284,438 Gary L. Groom 15,190,095 278,438 Claire C. Skinner 15,184,545 283,988 Philip C. Barker 15,188,950 279,583 R. James Harring 15,187,050 281,433 William P. Johnson 15,189,895 278,638 Philip G. Lux 15,189,450 279,083 William G. Milliken 15,184,545 282,474 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K None Page 14 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: August 11, 1997 _______________________________ Gary L. Groom, Executive Vice President - Finance (Principal Financial Officer) S/S: WILLIAM M. ANGELO Date: August 11, 1997 _______________________________ William M. Angelo, Corporate Controller (Principal Accounting Officer) Page 15 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 6-MOS DEC-31-1997 JUN-30-1997 81,335 0 28,198 1,069 64,580 178,085 76,208 32,102 245,886 49,425 13,261 70,477 0 0 103,796 245,886 327,474 327,474 283,899 312,441 1,670 175 795 16,703 5,854 10,849 0 0 0 10,849 .63 .63
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