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, 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 August 7, 1996:
Common Shares, without par value 15,064,852 shares outstanding
Rights to purchase Common Shares 15,064,852 rights outstanding
<PAGE>
COACHMEN INDUSTRIES, INC.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Financial Statements:
Consolidated Balance Sheets-
June 30, 1996 and December 31, 1995.....................3-4
Consolidated Statements of Income-
Three and Six Months Ended June 30, 1996 and 1995....... 5
Consolidated Statements of Cash Flows-
Six Months Ended June 30, 1996 and 1995................. 6
Condensed Notes to Consolidated Financial Statements....7-8
Management's Discussion and Analysis of Financial
Condition and Results of Operations........................9-12
PART II. OTHER INFORMATION.................................... 13
SIGNATURES..................................................... 14
Page 2
<PAGE>
COACHMEN INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
June 30, DECEMBER 31,
1996 1995
ASSETS
CURRENT ASSETS
Cash and temporary cash investments $ 24,828,413 $17,020,744
Certificates of deposit 500,000 500,000
Trade receivables and current portion of
notes receivable, less allowance for
doubtful receivables 1996 - $1,004,000 and
1995 - $863,000 28,249,998 19,780,160
Other receivables 1,749,412 4,244,387
Refundable income taxes - 507,000
Inventories 59,957,297 55,434,497
Prepaid expenses and other 1,730,743 1,570,492
Deferred income taxes 2,665,000 2,665,000
Total current assets 119,680,863 101,722,280
PROPERTY AND EQUIPMENT, at cost
Land and improvements 6,385,699 5,537,033
Buildings and improvements 30,283,467 27,405,744
Machinery and equipment 12,518,518 10,524,486
Transportation equipment 9,729,558 11,307,747
Office furniture and fixtures 4,584,314 4,269,837
Total property and equipment, at cost 63,501,556 59,044,847
Less, Accumulated depreciation 27,380,714 27,297,851
Net property and equipment 36,120,842 31,746,996
OTHER ASSETS
Real estate held for sale 3,609,186 3,458,539
Rental properties 893,348 925,538
Intangibles, less accumulated amortization
1996 - $312,823 and 1995 - $244,771 5,131,453 5,199,505
Deferred income taxes 875,000 875,000
Other 8,544,976 6,320,899
Total other assets 19,053,963 16,779,481
TOTAL ASSETS $174,855,668 $150,248,757
The accompanying notes are part of the consolidated financial statements.
Page 3
<PAGE>
COACHMEN INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS (CONT'D)
JUNE 30, DECEMBER 31,
1996 1995
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 2,117,683 $ 2,094,472
Accounts payable, trade 25,999,600 18,435,562
Accrued wages, salaries and commissions 3,986,525 3,583,423
Accrued dealer incentives 1,311,913 2,289,376
Accrued warranty expense 4,292,323 3,784,712
Accrued income taxes 2,781,997 981,800
Other liabilities 12,192,249 9,965,433
Total current liabilities 52,682,290 41,134,778
LONG-TERM DEBT 10,503,411 12,117,756
OTHER 6,228,266 5,958,995
Total liabilities 69,413,967 59,211,529
SHAREHOLDERS' EQUITY
Common shares, without par value: authorized
60,000,000 shares; issued 1996 - 18,394,736
shares and 1995 - 18,282,672 shares 37,859,256 37,151,202
Additional paid-in capital 1,679,038 1,664,889
Retained earnings 81,485,037 67,824,816
121,023,331 106,640,907
Less, Cost of shares reacquired for the
treasury 1996 - 3,341,752 shares and
1995 - 3,345,004 shares 15,581,630 15,603,679
Total shareholders' equity 105,441,701 91,037,228
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $174,855,668 $150,248,757
The accompanying notes are part of the consolidated financial statements.
Page 4
<PAGE>
COACHMEN INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1996 1995 1996 1995
Net sales $166,715,051 $128,192,670 $315,355,074 $259,963,049
Cost of goods sold 141,753,074 110,231,712 271,241,577 225,439,979
Gross profit 24,961,977 17,960,958 44,113,497 34,523,070
Operating expenses:
Selling and delivery 6,412,132 6,350,990 13,973,320 12,833,482
General and administrative 5,664,130 5,493,070 11,263,756 10,120,684
Total operating expenses 12,076,262 11,844,060 25,237,076 22,954,166
Operating income 12,885,715 6,116,898 18,876,421 11,568,904
Nonoperating income (expense):
Interest expense (400,946) (784,764) (841,035) (1,513,096)
Interest income 370,628 346,716 604,942 518,121
Gain on sale of
properties, net 729,857 754,554 726,569 773,146
Other, net 107,469 275,682 448,799 448,475
Total nonoperating income 807,008 592,188 939,275 226,646
Income before income taxes
and cumulative effect of
accounting change 13,692,723 6,709,086 19,815,696 11,795,550
Income taxes 5,007,000 2,497,000 7,173,000 4,380,000
Income before cumulative
effect of accounting
change $ 8,685,723 $ 4,212,086 $ 12,642,696 $ 7,415,550
Cumulative effect of accounting
change for Company-owned life
insurance policies 2,293,983
Net income $ 8,685,723 $ 4,212,086 $ 14,936,679 $ 7,415,550
Earnings per common share:
Income before cumulative
effect of accounting
change $ .58 $ .28 $ .84 $ .50
Cumulative effect of
accounting change $ $ $ .16 $
Net income $ .58 $ .28 $ 1.00 $ .50
Weighted average number of
common shares outstanding 15,035,436 14,885,296 15,007,966 14,858,780
Cash dividends per
common share $ .05 $ .035 $ .085 $ .07
The accompanying notes are part of the consolidated financial statements.
Page 5
<PAGE>
COACHMEN INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS
ENDED JUNE 30,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash provided by operating
activities $15,181,045 $ 7,726,808
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from:
Sale of property and equipment, real
estate held for sale and rental
properties 1,157,040 2,025,203
Sale of investments - 263,888
Acquisitions of property and equipment (7,222,704) (8,826,711)
Acquisition of a business, net of
cash acquired - (4,654,877)
Unexpended industrial revenue bond proceeds - 3,337,122
Proceeds from life insurance death benefit 171,770 -
Other 680,056 128,918
Net cash (used in) investing
activities (5,213,838) (7,726,457)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of short-term borrowings - (900,000)
Payments of long-term debt (1,591,134) (804,700)
Cash dividends paid (1,276,458) (1,040,067)
Proceeds from sale of common shares 708,054 315,938
Net cash (used in) financing activities (2,159,538) (2,428,829)
Increase (decrease) in cash and temporary
cash investments 7,807,669 (2,428,478)
CASH AND TEMPORARY CASH INVESTMENTS
Beginning of period 17,020,744 19,534,385
End of period $ 24,828,413 $17,105,907
Noncash investing and financing activities:
Liabilities assumed in acquisition
of a business - $ 8,757,472
Long-term debt issued in conjunction
with acquisition of a business - $ 6,141,129
The accompanying notes are part of the consolidated financial statements.
Page 6
<PAGE>
COACHMEN INDUSTRIES, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
1. The consolidated balance sheet data as of December 31, 1995 was
derived from audited financial statements, but does not include all
disclosures required by generally accepted accounting principles.
2. In the opinion of management, the information furnished herein
includes all adjustments of a normal and recurring nature necessary
to reflect a fair statement of the interim periods reported. The
results of operations for the three and six-month periods ended June
30,1996 are not necessarily indicative of the results to be expected
for the full year.
3. Inventories consist of the following:
June 30, December 31,
1996 1995
Raw material $ 21,473,580 $ 16,580,013
Work in-process 7,474,784 7,268,705
Finished goods 31,008,933 31,585,779
Total inventories $ 59,957,297 $ 55,434,497
4. Effective January 1, 1996, the Company changed its method of
accounting for its investment in life insurance contracts which were
purchased to fund liabilities under deferred compensation agreements
with executives and other key employees. Prior to January 1, 1996,
the Company accounted for its investments in life insurance
contracts by capitalizing premiums under the ratable charge method
(a method of accounting which was acceptable when the insurance
contracts were originally acquired and continued to be acceptable
for contracts acquired prior to November 14, 1985). Effective
January 1, 1996, the Company changed to the cash surrender value
method of accounting which is the preferred method under generally
accepted accounting principles, as this method more accurately
reflects the economic value of the contracts.
On January 1, 1996, the Company recorded a $2.3 million noncash
credit for the cumulative effect of this accounting change. This
change also increased net income for the six months ended June 30,
1996 by $486,601 or $.03 per share. On a pro forma basis, net
income and net income per share for the six months ended June 30,
1995 would have been $7,787,246 and $.52, respectively, if this
accounting change had been made prior to 1995.
5. The Company was contingently liable at June 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 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
Page 7
<PAGE>
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.
6. On July 17, 1996, the Company's Board of Directors approved a two-
for-one split of its common stock for shareholders of record on
August 7, 1996. The split has an effective date of August 28, 1996.
All share and per share amounts in the accompanying consolidated
financial statements have been retroactively adjusted to give effect
to the stock split.
Page 8
<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 Six Months
Ended June 30, 1996 and 1995
Increases (Decreases)
Net sales $ 38,522,381 30.1% $ 55,392,025 21.3%
Cost of goods sold 31,521,362 28.6 45,801,598 20.3
Selling and
delivery expense 61,142 1.0 1,139,838 8.9
General and
administrative expense 171,060 3.1 1,143,072 11.3
Interest expense (383,818)(48.9) (672,061)(44.4)
Interest income 23,912 6.9 86,821 16.8
Gain on sale of
properties, net (24,697) (3.3) (46,577) (6.0)
Other, net (168,213)(61.0) 324 .1
Income before income taxes and
cumulative effect of
accounting change 6,983,637 104.1 8,020,146 68.0
Income taxes 2,510,000 100.5 2,793,000 63.8
Cumulative effect of accounting
change for Company-owned
life insurance policies - - 2,293,983 *
Net income 4,473,637 106.2 7,521,129 101.4
* Not meaningful
Page 9
<PAGE>
NET SALES
Consolidated net sales for the quarter ended June 30, 1996 were $166,715,051,
an increase of 30.1% over the $128,192,670 reported for the corresponding
quarter last year. Net sales for the six months were $315,355,074
representing an increase of 21.3% over the $259,963,049 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 29.4% and 21.4%
for the quarter and six months, respectively. The Company's housing segment
had a net sales increase for the 1996 quarter of 33.6% and 20.9% for the six
months. Both vehicles and housing experienced increases in unit sales and
increases in market share.
COST OF GOODS SOLD
Cost of goods sold increased 28.6% or $31,521,362 for the three months and
20.3% or $45,801,598 for the six months ended June 30, 1996. The increase
for both periods is generally in line with the increase in net sales. The
slightly lower increase than the increase in net sales represents the
spreading of fixed costs over higher production volume. The housing segment
of the Company continues to experience expected lower profitability levels
from recent expansion into North Carolina and Tennessee.
SELLING AND DELIVERY EXPENSES
As a percentage of net sales, selling and delivery expenses were 3.8% and
5.0% for the 1996 and 1995 quarter and 4.4% and 4.9% for the comparable
six-month periods. For selling expense, this represents decreases, as a
percentage of net sales, of .6% for the quarter and .9% for the six months,
primarily resulting from increased demand for the Company's products.
Delivery expenses tend to fluctuate with sales mix, as well as changes in
geographical areas to which products are delivered. As a percentage of net
sales, there was an overall increase in delivery expense of .1% for the
six months.
GENERAL AND ADMINISTRATIVE EXPENSE
General and administrative expense was $5,664,130 or 3.4% of net sales for
the second quarter compared to $5,493,070 or 4.3% for the 1995 corresponding
three months and $11,263,756 or 3.6% of net sales for the six months compared
to $10,120,684 or 3.9% for the 1995 six 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 significant portion of the increase in
dollars for both periods is increased incentive compensation earned at an
earlier point in the year as a result of increased profits.
INTEREST EXPENSE
Interest expense was $400,946 and $841,035 for the three and six-month
periods in 1996 compared to $784,764 and $1,513,096 in the same periods last
year. These decreases are primarily the result of a change to the cash
Page 10
<PAGE>
surrender value method of accounting for the Company's investment in life
insurance contracts. These life insurance contracts were purchased to fund
liabilities under deferred compensation agreements with executives and other
key employees. The interest costs associated with deferred compensation
obligations and with the borrowings against the cash value of the insurance
policies are now partially offset by the increases in cash surrender values
each accounting period. Previously, the increases in cash surrender values
were not recognized, since the investment in life insurance contracts
consisted only of the capitalized insurance premiums.
INTEREST INCOME
Interest income increased $23,912 and $86,821, respectively, for the 1996
three and six-month periods. The amount is indicative of the increase in
cash and temporary cash investments in 1996 over 1995. This increase in cash
and temporary cash investments was basically generated from operating
activities throughout 1995 and the first six months of 1996.
GAIN ON THE SALE OF PROPERTY, NET
The net gain on the sale of property for the second quarter of 1996 was
$24,697 lower and for the six months was $46,577 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 idle or determined to be unproductive.
OTHER, NET
Other income, net, represented income of $107,469 for the second quarter and
$448,799 for the six months compared to income of $275,682 and $448,475 for
the 1995 second quarter and six months, respectively. The most significant
variance for the second quarter was due to an increase in interest
participation in finance company transactions.
INCOME TAXES
For the second quarter ended June 30, 1996, the effective tax rate was 36.6%
and a year-to-date rate of 36.2% compared to a second quarter effective tax
rate in 1995 of 37.2% and a year-to-date rate of 37.1%. The decrease in the
rate for 1996 is due to the amount of nontaxable income recognized over the
prior year.
CUMULATIVE EFFECT OF ACCOUNTING CHANGE FOR
COMPANY-OWNED LIFE INSURANCE POLICIES
See Note 4 of Condensed Notes to Consolidated Financial Statements
on page 7 herein.
Page 11
<PAGE>
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, 1996, to meet its seasonal
working capital needs. At June 30, 1996, there were no borrowings against
this line of credit. For the six 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 $5,213,838. The principal use of cash in investing activities was the
investment in property and equipment. The negative cash flow for financing
activities was primarily from cash dividends and payments of long-term debt.
At June 30, 1996, the working capital increased $6.4 million over December 31,
1995 to $67.0 million.
Page 12
<PAGE>
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 2, 1996.
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 6,557,591 23,513
Keith D. Corson 6,558,725 22,397
Gary L. Groom 6,558,811 22,293
Claire C. Skinner 6,558,591 22,513
Philip C. Barker 6,557,525 23,579
R. James Harring 6,555,905 25,199
William P. Johnson 6,558,891 22,213
Philip G. Lux 6,557,791 23,313
William G. Milliken 6,556,016 25,088
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
None
b) Reports on Form 8-K
A Current Report on Form 8-K was filed on August 6, 1996 relating to
the July 17, 1996 approval by the Board of Directors of a two-for-one stock
split to shareholders of record on August 7, 1996.
Page 13
<PAGE>
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: August 14, 1996 GARY L. GROOM
_______________________________
Gary L. Groom, Executive Vice
President - Finance (Principal
Financial Officer)
Date: August 14, 1996 WILLIAM M. ANGELO
_______________________________
William M. Angelo, Corporate
Controller (Principal Accounting
Officer)
Page 14
<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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 24,828
<SECURITIES> 500
<RECEIVABLES> 31,003
<ALLOWANCES> 1,004
<INVENTORY> 59,957
<CURRENT-ASSETS> 119,681
<PP&E> 63,502
<DEPRECIATION> 27,381
<TOTAL-ASSETS> 174,856
<CURRENT-LIABILITIES> 52,682
<BONDS> 12,595
<COMMON> 22,278
0
0
<OTHER-SE> 83,164
<TOTAL-LIABILITY-AND-EQUITY> 174,856
<SALES> 315,355
<TOTAL-REVENUES> 315,355
<CGS> 271,242
<TOTAL-COSTS> 296,479
<OTHER-EXPENSES> (939)
<LOSS-PROVISION> 153
<INTEREST-EXPENSE> 841
<INCOME-PRETAX> 19,816
<INCOME-TAX> 7,713
<INCOME-CONTINUING> 12,643
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 2,294
<NET-INCOME> 14,937
<EPS-PRIMARY> 1.00
<EPS-DILUTED> 1.00
</TABLE>
