-----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, CVKdzmonNSeIGk5jh6HO0pyVFuMPpKcwiYY4bKY0wLCM51KIZr8oRppQfxvIBSlL xHtBS9TpnC/zPMi2f3ad6Q== 0000950137-96-002011.txt : 19961023 0000950137-96-002011.hdr.sgml : 19961023 ACCESSION NUMBER: 0000950137-96-002011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961022 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: 96646069 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 FORM 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 September 30, 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 October 16, 1996: Common Shares, without par value 15,103,780 shares outstanding including an equivalent number of common share purchase rights. - -------------------------------------------------------------------------------- 2 COACHMEN INDUSTRIES, INC. INDEX Page No. PART I. FINANCIAL INFORMATION Financial Statements: Condensed Consolidated Balance Sheets- September 30, 1996 and December 31, 1995................3-4 Condensed Consolidated Statements of Income- Three and Nine Months Ended September 30, 1996 and 1995. 5 Condensed Consolidated Statements of Cash Flows- Nine Months Ended September 30, 1996 and 1995........... 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 2 3 COACHMEN INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31, 1996 1995 ---- ---- ASSETS CURRENT ASSETS Cash and temporary cash investments $ 26,853,025 $ 17,020,744 Certificates of deposit 500,000 500,000 Trade receivables and current portion of notes receivable, less allowance for doubtful receivables 1996 - $1,048,000 and 1995 - $863,000 30,864,067 19,780,160 Other receivables 1,883,291 4,244,387 Refundable income taxes - 507,000 Inventories 64,352,179 55,434,497 Prepaid expenses and other 1,366,374 1,570,492 Deferred income taxes 2,665,000 2,665,000 ------------ ------------ Total current assets 128,483,936 101,722,280 ------------ ------------ PROPERTY AND EQUIPMENT, at cost Land and improvements 6,770,639 5,537,033 Buildings and improvements 33,632,165 27,405,744 Machinery and equipment 13,133,044 10,524,486 Transportation equipment 10,330,812 11,307,747 Office furniture and fixtures 4,761,627 4,269,837 ------------ ------------ Total property and equipment, at cost 68,628,287 59,044,847 Less, Accumulated depreciation 28,520,970 27,297,851 ------------ ------------ Net property and equipment 40,107,317 31,746,996 ------------ ------------ OTHER ASSETS Real estate held for sale 3,627,322 3,458,539 Rental properties 879,715 925,538 Intangibles, less accumulated amortization 1996 - $346,849 and 1995 - $244,771 5,097,427 5,199,505 Deferred income taxes 875,000 875,000 Other 8,847,827 6,320,899 ------------ ------------ Total other assets 19,327,291 16,779,481 ------------ ------------ TOTAL ASSETS $187,918,544 $150,248,757 ============ ============
The accompanying notes are part of the condensed consolidated financial statements. 3 4 COACHMEN INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (CONT'D)
SEPTEMBER 30, DECEMBER 31, 1996 1995 ---- ---- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Current maturities of long-term debt $ 2,108,979 $ 2,094,472 Accounts payable, trade 29,297,459 18,435,562 Accrued wages, salaries and commissions 5,201,283 3,583,423 Accrued dealer incentives 2,046,807 2,289,376 Accrued warranty expense 4,417,314 3,784,712 Accrued income taxes 2,645,340 981,800 Other liabilities 12,257,440 9,965,433 ------------ ------------ Total current liabilities 57,974,622 41,134,778 LONG-TERM DEBT 10,260,075 12,117,756 OTHER 6,363,202 5,958,995 ------------ ------------ Total liabilities 74,597,899 59,211,529 ------------ ------------ SHAREHOLDERS' EQUITY Common shares, without par value: authorized 60,000,000 shares; issued 1996 - 18,441,624 shares and 1995 - 18,282,672 shares 38,139,317 37,151,202 Additional paid-in capital 1,693,312 1,664,889 Retained earnings 89,064,453 67,824,816 ------------ ------------ 128,897,082 106,640,907 Less, Cost of shares reacquired for the treasury 1996 - 3,340,996 shares and 1995 - 3,345,004 shares 15,576,437 15,603,679 ------------ ------------ Total shareholders' equity 113,320,645 91,037,228 ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $187,918,544 $150,248,757 ============ ============
The accompanying notes are part of the condensed consolidated financial statements. 4 5 COACHMEN INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS NINE MONTHS ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, 1996 1995 1996 1995 ---- ---- ---- ---- Net sales $ 154,244,238 $130,973,395 $469,599,312 $390,936,444 Cost of goods sold 130,087,358 112,311,937 401,328,935 337,751,916 ------------ ------------ ------------- ------------ Gross profit 24,156,880 18,661,458 68,270,377 53,184,528 ------------ ------------ ------------- ------------ Operating expenses: Selling and delivery 6,572,380 6,753,034 20,545,700 19,586,516 General and administrative 4,888,141 4,308,232 16,151,897 14,428,916 ------------ ------------ ------------- ------------ Total operating expenses 11,460,521 11,061,266 36,697,597 34,015,432 ------------ ------------ ------------- ------------ Operating income 12,696,359 7,600,192 31,572,780 19,169,096 ------------ ------------ ------------- ------------ Nonoperating income (expense): Interest expense (398,520) (793,353) (1,239,555) (2,306,449) Interest income 374,114 372,889 979,056 891,010 Gain on sale of properties, net 1,979 13,394 728,548 786,540 Other, net 509,631 265,304 958,430 713,779 ------------ ------------ ------------- ------------ Total nonoperating income: 487,204 (141,766) 1,426,479 84,880 ------------ ------------ ------------- ------------ Income before income taxes and cumulative effect of accounting change 13,183,563 7,458,426 32,999,259 19,253,976 Income taxes 4,851,000 2,775,000 12,024,000 7,155,000 ------------ ------------ ------------- ------------ Income before cumulative effect of accounting change 8,332,563 4,683,426 20,975,259 12,098,976 Cumulative effect of accounting change for Company-owned life insurance policies - - 2,293,983 - ------------ ------------ ------------- ------------ Net income $ 8,332,563 $ 4,683,426 $ 23,269,242 12,098,976 ============ ============ ============= ============ Earnings per common share: Income before cumulative effect of accounting change $ .55 $ .31 $ 1.40 $ .81 Cumulative effect of accounting change - - .15 - ------------ ------------ ------------- ------------ Net income $ .55 $ .31 $ 1.55 $ .81 ============ ============ ============= ============ Weighted average number of common shares outstanding 15,070,652 14,895,930 15,028,672 14,871,300 ------------ ------------ ------------- ------------ Cash dividends per common share $ .05 $ .035 $ .135 $ .105 ------------ ------------ ------------- ------------
The accompanying notes are part of the condensed consolidated financial statements. 5 6 COACHMEN INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1996 1995 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES Net cash provided by operating activities $ 22,764,705 $ 18,707,227 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from: Sale of property and equipment, real estate held for sale and rental properties 1,380,557 2,899,362 Sale of investments - 263,888 Acquisitions of property and equipment (12,066,649) (10,162,117) Acquisition of a business, net of cash acquired - (4,313,046) Unexpended industrial revenue bond proceeds - 3,337,122 Proceeds from life insurance death benefit 171,770 - Other 466,562 (92,417) ------------ ------------ Net cash (used in) investing activities (10,047,760) (8,067,208) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Payments of short-term borrowings - (900,000) Payments of long-term debt (1,843,174) (1,598,786) Cash dividends paid (2,029,605) (1,561,372) Proceeds from sale of common shares 988,115 352,687 ------------ ------------ Net cash (used in) financing activities (2,884,664) (3,707,471) ------------ ------------ Increase in cash and temporary cash investments 9,832,281 6,932,548 CASH AND TEMPORARY CASH INVESTMENTS Beginning of period 17,020,744 19,534,385 ------------ ------------ End of period $ 26,853,025 $ 26,466,933 ============ ============ 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 condensed consolidated financial statements. 6 7 COACHMEN INDUSTRIES, INC. NOTES TO CONDENSED 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 and nine-month periods ended September 30, 1996 are not necessarily indicative of the results to be expected for the full year. 3. Inventories consist of the following: SEPTEMBER 30, DECEMBER 31, 1996 1995 Raw material $ 23,423,558 $ 16,580,013 Work in-process 7,867,030 7,268,705 Finished goods 33,061,591 31,585,779 ------------ ------------ Total $ 64,352,179 $ 55,434,497 ============ ============ 4. Effective January 1, 1996, the Company changed its method of accounting for its investments 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 accounting method change also increased net income for the nine months ended September 30, 1996 by $749,970 or $.05 per share. On a pro forma basis, net income and net income per share for the nine months ended September 30, 1995 would have been $12,656,520 and $.85, respectively, if this accounting change had been made prior to 1995. 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. Also on July 17, 1996, the Board of Directors adopted a resolution to amend the Company's Articles of Incorporation to increase the authorized common shares from 30,000,000 shares to 60,000,000 shares. 6. The Company was contingently liable at September 30, 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 7 8 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. 7. On October 18, 1996, the Company's Board of Directors approved a resolution to cancel the Company's stock repurchase program. 8 9 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 NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 INCREASES (DECREASES) --------------------- Net sales $ 23,270,843 17.8% $ 78,662,868 20.1% Cost of goods sold 17,775,421 15.8 63,577,019 18.8 Selling and delivery expenses (180,654) (2.7) 959,184 4.9 General and administrative expenses 579,909 13.5 1,722,981 11.9 Interest expense (394,833) (49.8) (1,066,894) (46.3) Interest income 1,225 .3 88,046 9.9 Gain on sale of properties, net (11,415) (85.2) (57,992) (7.4) Other, net 244,327 92.1 244,651 34.3 Income before income taxes and cumulative effect of accounting change 5,725,137 76.8 13,745,283 71.4 Income taxes 2,076,000 74.8 4,869,000 68.1 Cumulative effect of accounting change for Company-owned life insurance policies - - 2,293,983 * Net income 3,649,137 77.9 11,170,266 92.3
* Not meaningful 9 10 NET SALES Consolidated net sales for the quarter ended September 30, 1996 were $154,244,238 an increase of 17.8% over the $130,973,395 reported for the corresponding quarter last year. Net sales for the nine months were $469,599,312 representing an increase of 20.1% over the $390,936,444 reported for the same period in 1995. The Company's vehicle segment, which includes the parts and supply group of companies, experienced net sales increases of 16.4% and 19.8% for the quarter and nine months, respectively. The Company's housing segment had a net sales increase for the 1996 quarter of 23.7% and 22.0% for the nine months. Both vehicles and housing experienced increases in unit sales and in the average sales price per unit. COST OF GOODS SOLD Cost of goods sold increased 15.8% or $17,775,421 for the three months and 18.8% or $63,577,019 for the nine months ended September 30, 1996. The increase for both periods is generally in line with the increase in net sales. The increase in gross margins was attributable to the spreading of fixed costs over higher production volume. The housing segment continued experiencing lower gross margins associated with the recent expansions into North Carolina and Tennessee. OPERATING EXPENSES As a percentage of net sales, operating expenses, which include selling, delivery, general and administrative expenses, were 7.4% and 8.4% for the 1996 and 1995 quarter and 7.8% and 8.7% for the comparable nine-month periods. Selling expense decreased by .9% for the quarter and .6% for the nine months, primarily due to increased demand for the Company's products. As a percentage of net sales, delivery expenses remained relatively unchanged. General and administrative expenses were 3.2% of net sales for the third quarter compared to 3.3% for the 1995 corresponding three months and 3.4% of net sales for the nine months compared to 3.7% for the 1995 nine months due to an increase in net sales. General and administrative expenses increased during the nine months of 1996 due to increased incentive compensation earned as a result of increased profits. INTEREST EXPENSE Interest expense was $398,520 and $1,239,555 for the three and nine-month periods in 1996 compared to $793,353 and $2,306,449 in the same periods last year. These decreases are 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 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 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. 10 11 INTEREST INCOME Interest income increased $1,225 and $88,046 respectively, for the 1996 three and nine-month periods. The amounts are indicative of the amounts of cash and temporary cash investments in 1996 in comparison to 1995. Increases in cash and temporary cash investments were primarily generated from operating activities throughout 1995 and the first nine months of 1996. GAIN ON THE SALE OF PROPERTIES, NET The net gain on the sale of properties for the third quarter of 1996 was $11,415 lower and for the nine months was $57,992 lower than in the same periods in 1995. 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, NET Other income, net, represents income of $509,631 for the third quarter and $958,430 for the nine months compared to income of $265,304 and $713,779 for the 1995 third quarter and nine months, respectively. The most significant variance for the three and nine month periods was due to a final determination of insurance proceeds from assets destroyed in a fire which consumed the Company's Prodesign production facility in August 1995. INCOME TAXES For the third quarter ended September 30, 1996, the effective tax rate was 36.8% and a year-to-date rate of 36.4% compared to a third quarter and year-to-date effective tax rate in 1995 of 37.2%. The decrease in the effective tax rate is attributable to an increase in nontaxable income. 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. 11 12 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 September 30, 1996, to meet its seasonal working capital needs. At September 30, 1996, there were no borrowings against this line of credit. For the nine months, 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 largely offset by increases in accounts payable and accrued expenses, including income taxes. Investing activities reflected a net cash use of $10,047,760. The principal use of cash in investing activities was the acquisition of property and equipment. This investment included construction in progress of $5.1 million, principally for the construction of the new All American Homes facility in North Carolina, $2.0 million for the new recreational vehicle manufacturing facility in Oregon and $1.6 million in new machinery and equipment for the Viking Formed Products division. The negative cash flow from financing activities was primarily for cash dividends and repayment of long-term debt. The Company's profitability has strengthened its financial position during the first nine months of 1996. At September 30, 1996, working capital increased $9.9 million over December 31, 1995 to $70.5 million. The $26.8 million increase in current assets at September 30, 1996 versus December 31, 1995, was primarily due to increased cash, receivables and inventories. The $16.8 million increase in liabilities is substantially due to increased trade payables as well as insurance accruals. 12 13 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 August 6, 1996, reporting an Item 5 event. 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) Date: October 21, 1996 /s/ Gary L. Groom -------------------------------- Gary L. Groom, Executive Vice President - Finance (Principal Financial Officer) Date: October 21, 1996 /s/ William M. Angelo -------------------------------- William M. Angelo, Corporate Controller (Principal Accounting Officer) 13 EX-27 2 FINANCIAL DATA SCHEDULE
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. 9-MOS DEC-31-1996 SEP-30-1996 26,853 500 33,795 1,048 64,352 128,484 68,628 28,521 187,919 57,975 10,260 0 0 22,563 90,758 187,919 469,599 469,599 401,329 438,027 (1,426) 244 1,240 32,999 12,024 20,975 0 0 2,294 23,269 1.55 1.55
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