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, 1995
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 31, 1995:
Common Shares, without par value 7,454,066 shares outstanding
Rights to purchase Common Shares 7,454,066 rights outstanding
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COACHMEN INDUSTRIES, INC.
INDEX
PART I. FINANCIAL INFORMATION
Financial Statements:
Consolidated Balance Sheets-
September 30, 1995 and December 31, 1994
Consolidated Statements of Income-
Three and Nine Months Ended September 30, 1995 and 1994
Consolidated Statements of Cash Flows-
Nine Months Ended September 30, 1995 and 1994
Condensed Notes to Consolidated Financial Statements
Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II. OTHER INFORMATION
SIGNATURES
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COACHMEN INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
1995 1994
ASSETS
CURRENT ASSETS
Cash and temporary cash investments $ 26,466,933 $19,534,385
Investments 550,000 800,000
Trade receivables and current portion of
notes receivable, less allowance for
doubtful receivables 1995 - $863,000 and
1994 - $986,000 24,828,480 15,410,757
Other receivables 2,722,018 2,121,910
Inventories 45,334,121 48,152,342
Prepaid expenses and other 1,413,585 1,179,475
Deferred income taxes 1,954,000 1,954,000
Total current assets 103,269,137 89,152,869
PROPERTY AND EQUIPMENT, at cost
Land and improvements 5,082,123 4,646,331
Buildings and improvements 28,640,246 20,618,726
Machinery and equipment 8,910,366 8,316,127
Transportation equipment 8,886,844 6,978,543
Office furniture and fixtures 4,186,167 3,795,421
Total property and equipment, at cost 55,705,746 44,355,148
Less, Accumulated depreciation 26,153,073 25,144,558
Net property and equipment 29,552,673 19,210,590
OTHER ASSETS
Notes receivable 277,054 288,767
Real estate held for sale, less
accumulated depreciation 3,458,613 3,458,883
Rental properties, less
accumulated depreciation 940,446 1,796,193
Unexpended industrial revenue bond
proceeds - 3,337,122
Intangibles, less accumulated amortization
1995 - $197,953 and 1994 - $108,151 4,594,899 327,121
Deferred income taxes 1,493,000 1,493,000
Other 6,072,868 5,956,737
Total other assets 16,836,880 16,657,823
TOTAL ASSETS $149,658,690 $125,021,282
The accompanying notes are part of the consolidated financial statements.
<PAGE>
COACHMEN INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS (CONT'D)
SEPTEMBER 30, DECEMBER 31,
1995 1994
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 2,096,854 $ 1,530,553
Accounts payable, trade 21,869,900 20,398,679
Accrued wages, salaries and commissions 4,122,811 3,075,622
Accrued dealer incentives 1,775,080 2,071,042
Accrued warranty expense 3,735,194 2,710,068
Other accrued expenses 10,753,437 6,304,825
Accrued income taxes 1,419,496 1,728,200
Total current liabilities 45,772,772 37,818,989
LONG-TERM DEBT 12,350,480 7,023,394
OTHER 5,850,921 5,422,953
Total liabilities 63,974,173 50,265,336
SHAREHOLDERS' EQUITY
Common shares, without par value: authorized
30,000,000 shares; issued 1995 - 9,122,791
shares and 1994 - 9,073,696 shares 36,953,074 36,600,387
Additional paid-in capital 1,437,889 1,431,055
Retained earnings 62,897,233 52,359,629
Total shareholders' equity before
treasury shares 101,288,196 90,391,071
Less, Cost of shares reacquired for the
treasury 1995 - 1,672,502 shares and
1994 - 1,674,821 shares 15,603,679 15,635,125
Total shareholders' equity 85,684,517 74,755,946
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $149,658,690 $125,021,282
The accompanying notes are part of the consolidated financial statements.
<PAGE>
COACHMEN INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
1995 1994 1995 1994
Net sales $130,973,395 $102,974,854 $390,936,444 $296,930,182
Cost of goods sold 112,311,937 87,629,178 337,751,916 253,881,180
Gross profit 18,661,458 15,345,676 53,184,528 43,049,002
Operating expenses:
Selling and delivery 6,753,034 5,233,155 19,586,516 15,186,780
General and administrative 4,308,232 3,684,106 14,428,916 12,105,217
Total operating expenses 11,061,266 8,917,261 34,015,432 27,291,997
Operating income 7,600,192 6,428,415 19,169,096 15,757,005
Nonoperating income
(expense):
Interest expense (793,353) (375,589) (2,306,449) (1,119,719)
Interest income 372,889 204,041 891,010 409,593
Gain on sale of
property, net 13,394 (63,703) 786,540 746,684
Other, net 265,304 (52,598) 713,779 245,131
Total nonoperating
income (expense): (141,766) (287,849) 84,880 281,689
Income before
income taxes 7,458,426 6,140,566 19,253,976 16,038,694
Income taxes 2,775,000 2,332,000 7,155,000 5,491,000
Net income $ 4,683,426 $ 3,808,566 $ 12,098,976 $ 10,547,694
Net income per
common share $ .63 $ .52 $ 1.63 $ 1.43
Weighted average number
of common shares
outstanding 7,447,965 7,388,721 7,435,650 7,363,907
Cash dividends per
common share $ .07 $ .06 $ .21 $ .18
The accompanying notes are part of the consolidated financial statements.
<PAGE>
COACHMEN INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS
ENDED SEPTEMBER 30,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash provided by operating
activities $18,707,227 $23,570,844
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from:
Sale of property and equipment, real
estate held for sale and rental
properties 2,899,362 1,855,847
Sale of investments 263,888 1,629,661
Acquisitions of property and equipment (10,162,117) (3,837,452)
Acquisition of a business, net of
cash acquired (4,654,877) (1,180,000)
Collections on notes receivable, net 11,713 804,783
Unexpended industrial revenue bond proceeds 3,337,122 -
Other 237,701 (90,716)
Net cash used in investing
activities (8,067,208) (817,877)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of short-term borrowings (900,000) -
Payments of long-term debt (1,598,786) (683,779)
Cash dividends paid (1,561,372) (1,325,843)
Proceeds from sale of common shares 352,687 434,561
Other - 11,303
Net cash used in financing activities (3,707,471) (1,563,758)
Increase in cash and temporary
cash investments 6,932,548, 21,189,209
CASH AND TEMPORARY CASH INVESTMENTS
Beginning of period 19,534,385 2,200,911
End of period $ 26,466,933 $23,390,120
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>
COACHMEN INDUSTRIES, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated balance sheet data as of December 31, 1994 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, 1995 are not necessarily indicative of the results to be
expected for the full year.
3. Inventories consist of the following:
September 30, December 31,
1995 1994
Raw material $ 15,359,997 $ 15,751,077
Work in-process 6,236,208 5,053,551
Finished goods 23,737,916 27,347,714
Total inventories $ 45,334,121 $ 48,152,342
4. The provision for income taxes consists of the following:
Three Months Nine Months
September 30, September 30,
1995 1994 1995 1994
Federal $2,522,000 $2,053,000 $6,515,000 $4,903,000
State 253,000 279,000 640,000 588,000
Total provision $2,775,000 $2,332,000 $7,155,000 $5,491,000
At December 31, 1993, the Company had net deferred tax assets not
previously reinstated to the balance sheet of approximately $1.3
million. During the first quarter of 1994, the Company recognized
additional net deferred tax assets of approximately $.5 million.
The federal and state income tax provisions for that quarter were
reduced by corresponding credits for deferred income taxes,
representing the reduction of the valuation allowance to recognize
deferred income tax assets.
5. The Company was contingently liable at September 30, 1995 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>
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.
6. On January 3, 1995, the Company acquired all of the issued and
outstanding capital stock of Georgie Boy Mfg., Inc., ("Georgie Boy")
a manufacturer of Class A motorhomes. The purchase price aggregated
$12.8 million and consisted of $6.7 million in cash and a $6.1
million promissory note payable to the seller. The promissory note
bears interest at the prime rate, payable monthly, with annual
principal installments of $1,000,000 commencing January 3, 1996 with
the balance due January 3, 2001.
The acquisition was accounted for using the purchase method, and the
operating results of Georgie Boy have been included in the Company's
1995 consolidated financial statements since the date of acquisition.
The excess of the purchase price over the acquired tangible and
intangible net assets of approximately $5.4 million was recorded as
goodwill and is being amortized on a straight-line basis over forty
years. Unaudited pro forma financial information for 1994, as if this
acquisition had occurred on January 1, 1994, is as follows:
Pro Forma
Nine Months
Ended September 30, 1994
(Unaudited)
Net sales $368,041,245
Pro forma net income 12,111,148
Pro forma net income per share 1.64
The unaudited pro forma data shown above is not necessarily
indicative of the consolidated results that would have occurred
had the acquisition taken place on January 1, 1994, nor is it
necessarily indicative of the results that may occur in the
future.
7. On August 14, 1995, the Prodesign plant of the Company's Viking
Formed Products division was destroyed by fire. Prodesign
manufactures thermoformed components for the van conversion
industry. The building and contents were fully insured and it is
anticipated that a gain will be recognized from the insurance
proceeds. The gain will be reported in the fourth quarter when
reliable estimates will be available and/or a settlement with the
insurance company occurs.
<PAGE>
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, 1995 and 1994
Increases (Decreases)
Net sales $ 27,998,541 27.2% $ 94,006,262 31.7%
Cost of goods sold 24,682,759 28.2 83,870,736 33.0
Selling and
delivery expenses 1,519,879 29.0 4,399,736 29.0
General and
administrative expenses 624,126 16.9 2,323,699 19.2
Interest expense 417,764 111.2 1,186,730 106.0
Interest income 168,848 82.8 481,417 117.5
Gain on sale of
property, net 77,097 121.0 39,856 5.3
Other, net 317,902 * 468,648 191.2
Income before income taxes 1,317,860 21.5 3,215,282 20.0
Income taxes 443,000 19.0 1,664,000 30.3
Net income 874,860 23.0 1,551,282 14.7
* Not meaningful
<PAGE>
NET SALES
Consolidated net sales for the quarter ended September 30, 1995 were
$130,973,395, an increase of 27.2% over the $102,974,854 reported for the
corresponding quarter last year. Net sales for the nine months were
$390,936,444 representing an increase of 31.7% over the $296,930,182 reported
for the same period in 1994. Vehicle segment sales for the 1995 quarter and
nine months were augmented with the sales of Georgie Boy Mfg., Inc. ("Georgie
Boy"), a manufacturer of Class A motor homes, acquired January 3, 1995. In
addition, the 1994 nine month period included the sales of Southern Ambulance
Builders, Inc. which was sold April 29, 1994. After eliminating the net sales
of both Georgie Boy from the 1995 periods and Southern Ambulance from the 1994
periods, the Company's vehicle segment experienced a net sales increase of
4.7% for the quarter and 10.1% for the nine months. Housing segment sales for
the 1995 quarter and nine months were increased by the sales of All American
Homes in North Carolina and Tennessee. The acquisition of assets from Muncy
Building Enterprises, L.P. for the North Carolina plant and construction of
the Tennessee plant occurred subsequent to September 30, 1994. Both vehicles
and housing experienced increases in unit sales and unit sales prices, as well
as, increases in market share.
COST OF GOODS SOLD
Cost of goods sold increased 28.2% or $24,682,759 for the three months and
33.0% or $83,870,736 for the nine months ended September 30, 1995. The in-
crease for both periods is generally in line with the increase in net sales.
The higher increase than the increase in net sales is substantially due
to an industry wide sales decline in van conversions and intensified
competition in camping trailers, as well as an expected lower profitability
level in the new housing operations in North Carolina and Tennessee. As these
plants reach full capacity, inefficiencies associated with the plant openings
should be eliminated. The industry decline in sales of van conversions and
increased competition in camping trailers has led to strong pricing
competition and underutilized capacity. Also, contributing to a higher
percentage cost of goods sold is the increase in motorized sales as a result
of the acquisition of Georgie Boy. Motorized products generally have a
higher cost of goods manufactured as a percentage of net sales due to the
chassis cost.
SELLING AND DELIVERY EXPENSES
As a percentage of net sales, selling and delivery expenses were 5.2% and
5.1% for the 1995 and 1994 quarter and 5.0% and 5.1% for the comparable nine-
month periods. Delivery expenses tend to fluctuate with sales mix, as well as
changes in geographical areas to which products are delivered. The slight
nine-month decrease in selling and delivery expenses as a percentage of net
sales was primarily the result of increased demand for the Company's
products, a focus on reducing selling expenses where practical, and
concentration on competitive pricing.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses were $4,308,232 or 3.3% of net sales for
the third quarter compared to $3,684,106 or 3.6% for the 1994 corresponding
<PAGE>
three months and $14,428,916 or 3.7% of net sales for the nine months compared
to $12,105,217 or 4.1% for the 1994 nine months. A decrease in the percent
usually accompanies an increase in net sales due to the fixed nature of the
expenses in this category. The most substantial portion of the increase in
dollars is in administrative salaries and payroll taxes due to the
acquisition of Georgie Boy, All American Homes in North Carolina (assets
acquired in September 1994) and the start-up of a new manufacturing facility
for All American Homes in Tennessee, subsequent to the third quarter of
1994.
INTEREST EXPENSE
Interest expense was $793,353 and $2,306,449 for the three and nine-month
periods in 1995 compared to $375,589 and $1,119,719 in the same periods last
year. This increase is primarily due to increases in long-term debt from the
acquisition of Georgie Boy and the economic development bond obtained for
construction of the All American Homes Tennessee facility. There has also
been a general increase in interest rates subsequent to the 1994 periods.
INTEREST INCOME
Interest income increased $168,848 and $481,417, respectively, for the 1995
three and nine-month periods. The amount is indicative of the increase in
cash and temporary cash investments in 1995 over 1994 and a general rise in
interest rates since the 1994 periods. This increase in cash and temporary
cash investments was basically generated from operating activities throughout
1994 and the first nine months of 1995.
GAIN ON THE SALE OF PROPERTY, NET
The amount in net gain on the sale of property for the third quarter of 1995
represents income of $13,394 compared to a loss of $63,703 in the same period
in 1994. For the nine months the amount represents income of $786,540 and
$746,684 for 1995 and 1994, respectively. The net gain in 1995 primarily
results from the disposition of investment and rental properties located in
Florida, Georgia and Indiana, while the net gain in 1994 reflects the
disposition of idle properties located in Georgia and Indiana.
OTHER, NET
Other income, net, reflects income of $265,304 for the third quarter and
$713,779 for the nine months compared to expense of $52,598 for the 1994
quarter and income of $245,131 for the 1994 nine months. The most
significant variance was due to an increase in interest participation in
finance company transactions.
INCOME TAXES
For the third quarter and nine-month periods ended September 30, 1995, the
effective tax rate was 37.2% compared to a third quarter effective tax rate
in 1994 of 38.0% and a year-to-date rate of 34.2%. As a result of available
federal tax loss carryforwards, no federal income tax provision was recorded
<PAGE>
in 1993 and net deferred tax assets were fully reserved for by a valuation
allowance. During the first quarter of 1994, the effective federal tax rate
was low due to the reduction of the federal tax provision by a deferred tax
credit of approximately $.5 million, resulting from the elimination of the
remaining valuation allowance.
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, 1995, to meet its
seasonal working capital needs. At September 30, 1995, there were no
borrowings against this line of credit. The Company experienced a net cash
increase of $6,932,548 for the 1995 nine months, principally from operating
activities. Operating activities provided cash primarily through net income
and a substantial decrease in inventories. This was partially offset by cash
used from an increase in accounts receivable and a decrease in accounts
payable. Cash flows from operating activities reflect the operations of
Georgie Boy from January 3, 1995. All acquired assets and liabilities of
Georgie Boy are excluded from operating cash flows. The use of funds in
financing activities consisted mainly of the acquisition of property and
equipment for start-up of the All American Homes, Tennessee modular housing
division and the January 3, 1995 acquisition of Georgie Boy. Financing
activities consumed cash for dividends, payments of long-term debt and the
repayment of short-term borrowings assumed with the acquisition of Georgie
Boy. At September 30, 1995, the working capital increased $6.2 million over
December 31, 1994 to $57.5 million.
<PAGE>
PART II. OTHER INFORMATION
Item 4. Items 1 through 6 inclusive are not applicable.
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: November 10, 1995 GARY L. GROOM
Gary L. Groom, Executive Vice
President - Finance (Principal
Financial Officer)
Date: November 10, 1995 WILLIAM M. ANGELO
William M. Angelo, Corporate
Controller (Principal Accounting
Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
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.
</LEGEND>
<CIK> 0000021212
<NAME> COACHMEN INDUSTRIES, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
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<SECURITIES> 550
<RECEIVABLES> 27,550
<ALLOWANCES> 863
<INVENTORY> 45,334
<CURRENT-ASSETS> 103,269
<PP&E> 55,706
<DEPRECIATION> 26,153
<TOTAL-ASSETS> 149,659
<CURRENT-LIABILITIES> 45,773
<BONDS> 12,350
<COMMON> 21,349
0
0
<OTHER-SE> 64,335
<TOTAL-LIABILITY-AND-EQUITY> 149,659
<SALES> 390,936
<TOTAL-REVENUES> 390,936
<CGS> 337,752
<TOTAL-COSTS> 371,767
<OTHER-EXPENSES> (85)
<LOSS-PROVISION> 237
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<NET-INCOME> 12,099
<EPS-PRIMARY> 1.63
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</TABLE>
