SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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 April 30, 1996:
Common Shares, without par value 7,511,697 shares outstanding
Rights to purchase Common Shares 7,511,697 rights outstanding
<PAGE>
COACHMEN INDUSTRIES, INC.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Financial Statements:
Consolidated Balance Sheets-
March 31, 1996 and December 31, 1995....................3-4
Consolidated Statements of Income-
Three Months Ended March 31, 1996 and 1995.............. 5
Consolidated Statements of Cash Flows-
Three Months Ended March 31, 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..................................................... 13
INDEX TO EXHIBITS.............................................. 13
Page 2
<PAGE>
COACHMEN INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
1996 1995
ASSETS
CURRENT ASSETS
Cash and temporary cash investments $ 18,727,002 $17,020,744
Certificates of deposit 500,000 500,000
Trade receivables less allowance for
doubtful receivables 1996 - $923,000
and 1995 - $863,000 31,251,264 19,780,160
Other receivables 1,638,000 4,244,387
Refundable income taxes 507,000 507,000
Inventories 56,839,900 55,434,497
Prepaid expenses and other 900,749 1,570,492
Deferred income taxes 2,665,000 2,665,000
Total current assets 113,028,915 101,722,280
PROPERTY AND EQUIPMENT, at cost
Land and improvements 5,636,377 5,537,033
Buildings and improvements 29,346,846 27,405,744
Machinery and equipment 11,217,326 10,524,486
Transportation equipment 9,335,362 11,307,747
Office furniture and fixtures 4,405,227 4,269,837
Total property and equipment, at cost 59,941,138 59,044,847
Less, Accumulated depreciation 26,496,929 27,297,851
Net property and equipment 33,444,209 31,746,996
OTHER ASSETS
Real estate held for sale 3,324,059 3,458,539
Rental properties 1,011,905 925,538
Intangibles, less accumulated amortization
1996 - $278,797 and 1995 - $244,771 5,165,479 5,199,505
Deferred income taxes 875,000 875,000
Other 8,559,335 6,320,899
Total other assets 18,935,778 16,779,481
TOTAL ASSETS $165,408,902 $150,248,757
The accompanying notes are part of the consolidated financial statements.
Page 3
<PAGE>
COACHMEN INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS (CONT'D)
MARCH 31, DECEMBER 31,
1996 1995
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 2,094,472 $ 2,094,472
Accounts payable, trade 23,880,972 18,435,562
Accrued wages, salaries and commissions 2,780,733 3,583,423
Accrued dealer incentives 2,958,841 2,289,376
Accrued warranty expense 4,003,433 3,784,712
Accrued income taxes 3,229,994 981,800
Other liabilities 12,580,883 9,965,433
Total current liabilities 51,529,298 41,134,778
LONG-TERM DEBT 10,547,997 12,117,756
OTHER 6,094,580 5,958,995
Total liabilities 68,171,875 59,211,529
SHAREHOLDERS' EQUITY
Common shares, without par value: authorized
30,000,000 shares; issued 1996 - 9,178,921
shares and 1995 - 9,141,336 shares 37,604,044 37,151,202
Additional paid-in capital 1,671,501 1,664,889
Retained earnings 73,551,411 67,824,816
Treasury shares at cost 1996 - 1,674,116
shares and 1995 - 1,672,502 shares (15,589,929) (15,603,679)
Total shareholders' equity 97,237,027 91,037,228
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $165,408,902 $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
ENDED MARCH 31,
1996 1995
Net sales $148,640,023 $131,770,379
Cost of goods sold 129,488,503 115,208,267
Gross profit 19,151,520 16,562,112
Operating expenses:
Selling and delivery 7,561,188 6,482,492
General and administrative 5,599,626 4,627,614
Total operating expenses 13,160,814 11,110,106
Operating income 5,990,706 5,452,006
Nonoperating income (expense):
Interest expense (440,089) (728,332)
Interest income 234,314 171,405
Gain on sale of properties, net (3,288) 18,592
Other, net 341,330 172,793
Total nonoperating income 132,267 33,352
Income before income taxes and
cumulative effect of accounting
change 6,122,973 5,086,464
Income taxes 2,166,000 1,883,000
Income before cumulative effect
of accounting change 3,956,973 3,203,464
Cumulative effect of accounting change
for Company-owned life insurance policies 2,293,983 -
Net income $ 6,250,956 $ 3,203,464
Earnings per common share:
Income before cumulative effect
of accounting change $ .53 $ .43
Cumulative effect of accounting change $ .30 -
Net income $ .83 $ .43
Weighted average number of
common shares outstanding 7,490,249 7,415,985
Cash dividends per common share $ .07 $ .07
The accompanying notes are part of the consolidated financial statements.
Page 5
<PAGE>
COACHMEN INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS
ENDED MARCH 31,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash provided by (used in)
operating activities $ 5,573,662 $(2,234,613)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from:
Sale of properties 363,512 782,079
Sale of investments - 13,888
Acquisitions of property and equipment (3,175,772) (5,155,669)
Acquisition of a business, net of
cash acquired - (4,654,877)
Unexpended industrial revenue bond proceeds - 2,406,900
Proceeds from life insurance death benefit 171,770 -
Other 414,364 168,568
Net cash (used in) investing
activities (2,226,126) (6,739,111)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of short-term borrowings - (900,000)
Payments of long-term debt (1,569,759) (392,582)
Cash dividends paid (524,361) (518,996)
Proceeds from sale of common shares 452,842 242,776
Net cash (used in) financing activities (1,641,278) (1,568,802)
Increase (decrease) in cash and temporary
cash investments 1,706,258 (10,452,526)
CASH AND TEMPORARY CASH INVESTMENTS
Beginning of period 17,020,744 19,534,385
End of period $ 18,727,002 $ 8,991,859
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-month period ended March 31, 1996
are not necessarily indicative of the results to be expected for the
full year.
3. Inventories consist of the following:
March 31, December 31,
1996 1995
Raw material $ 17,382,957 $ 16,580,013
Work in-process 7,388,602 7,268,705
Finished goods 32,068,341 31,585,779
Total inventories $ 56,839,900 $ 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 three months ended March 31, 1996 by
$223,232 or $.03 per share. On a pro forma basis, net income and net
income per share for the three months ended March 31, 1995 would have
been $3,389,312 and $.46, respectively, if this accounting change had
been made prior to 1995.
5. The Company was contingently liable at March 31, 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
upon a dealer's default. The risk of loss resulting from these
agreements is spread over the Company's numerous dealers and is
Page 7
<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.
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 Ended
March 31, 1996 and 1995
Increases (Decreases)
Net sales $ 16,869,644 12.8%
Cost of goods sold 14,280,236 12.4
Selling and delivery expense 1,078,696 16.6
General and administrative expense 972,012 21.0
Interest expense (288,243) (39.6)
Interest income 62,909 36.7
Gain on sale of properties, net (21,880) (117.7)
Other, net 168,537 97.5
Income before income taxes and
cumulative effect of accounting
change 1,036,509 20.4
Income taxes 283,000 15.0
Cumulative effect of accounting
change for Company-owned life
insurance policies 2,293,983 *
Net income 3,047,492 95.1
* not meaningful
Page 9
<PAGE>
NET SALES
Consolidated net sales for the quarter ended March 31, 1996 were
$148,640,023, an increase of 12.8% over the $131,770,379 reported for the
corresponding quarter last year. The Company's vehicle segment, which
includes the parts and supply group of companies, experienced a net sales
increase of 13.8% and the Company's housing segment had a net sales increase
of 5.7%. Vehicles experienced increases in both unit sales and unit sales
prices, as well as increases in market share. Housing experienced an increase
in sales prices but a small decrease in unit sales due to shipments being
hampered by severe weather conditions and the resulting lack of foundations
to place homes on.
COST OF GOODS SOLD
Cost of goods sold increased 12.4% or $14,280,236 for the first quarter of
1996 over 1995. This increase is generally in line with the increase in net
sales. The slight decrease in cost of goods sold as a percentage of net
sales is principally attributable to the product mix for the quarter.
SELLING AND DELIVERY EXPENSES
As a percentage of net sales, selling and delivery expenses were 5.1% and
4.9% for 1996 and 1995, respectively. There was a .2% decrease in selling
expense as a percentage of net sales, primarily as the result of increased
demand for the Company's products, while delivery expenses increased .4%.
The recent expansion of the Company's housing segment into North Carolina and
Tennessee required the formation of new delivery and setting crews to cover
these geographical sales areas. These crews include inexperienced personnel
who should return this expense category to a more historical percentage after
completion of a learning curve.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses were $5,599,626 or 3.8% of net sales for
the 1996 three months compared to $4,627,614 or 3.5% for the corresponding
1995 three months. The most significant portion of the increase was due to
increased incentive compensation earned at an earlier point in the year as a
result of increased profits.
INTEREST EXPENSE
Interest expense was $440,089 in 1996 compared to $728,332 the prior year.
The decrease is 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 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.
Page 10
<PAGE>
INTEREST INCOME
Interest income increased $62,909 for the 1996 quarter compared to 1995. The
amount is indicative of the increase in cash and temporary cash investments
in 1996 over the 1995 quarter. This increase in cash and temporary cash
investments was basically generated from operating activities throughout 1995.
GAIN ON THE SALE OF PROPERTIES, NET
The net gain on sale of properties for the first quarter of 1996 was $21,880
lower than in 1995. This variance was the result of the disposition of
miscellaneous small properties. Assets are continually analyzed and every
effort is made to sell or dispose of property that is idle or determined to
be unproductive.
OTHER, NET
Other income, net, represented income in the amount of $341,330 and $172,793
for the first three months of 1996 and 1995, respectively. The increase over
1995 is primarily attributable to the receipt of key-man life insurance
proceeds in the first quarter of 1996.
INCOME TAXES
During the first quarter of 1996, the effective income tax rate was 35.4%
compared to an effective income tax rate of 37.0% for the same quarter in
1995. The decrease in the for 1996 is due to the amount of nontaxable income
recognized during the quarter.
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 March 31, 1996, to meet its seasonal
working capital needs. At March 31, 1996, there were no borrowings against
this line of credit. For the quarter, 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 basically offset by increases in accounts payable and
accrued expenses, including income taxes. Investing activities reflected a
net use of cash of $2,226,126. 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 March 31, 1996, the working capital increased $.9
million from December 31, 1995 to $61.5 million.
Page 12
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits:
Exhibit 18 - Letter regarding change in accounting principles.
Exhibit 27 - Financial Data Schedule
b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COACHMEN INDUSTRIES, INC.
(Registrant)
Gary L. Groom
Date May 10, 1996 ------------------------------
Gary L. Groom, Executive Vice
President - Finance (Principal
Financial Officer)
William M. Angelo
Date May 10, 1996 ------------------------------
William M. Angelo, Corporate
Controller (Principal Accounting
Officer)
Page 13
May 8, 1996
Coachmen Industries, Inc.
P.O. Box 3300
Elkhart, Indiana 46515
We are providing this letter to you for inclusion as an exhibit to your
Form 10-Q filing pursuant to Item 601 of Regulation S-K.
We have read management's justification for the change in accounting for
insurance contracts, from capitalizing premiums paid to the cash surrender
value method, contained in the Company's Form 10-Q for the quarter ended
March 31, 1996. Based on our reading of the data and discussions with
Company officials of the business judgment and business planning factors
relating to the change, we believe management's justification to be
reasonable. Accordingly, we concur that the newly adopted accounting
principle described above is preferable in the Company's circumstances to
the method previously applied.
We have not audited any financial statements of Coachmen Industries, Inc. as
of any date or for any period subsequent to December 31, 1995, nor have we
audited the application of the change in accounting principle disclosed in
Form 10-Q of Coachmen Industries, Inc. for the three months ended March 31,
1996; accordingly, our comments are subject to revision on completion of an
audit of the financial statements that include the accounting change.
COOPERS & LYBRAND L.L.P.
---------------------------
COOPERS & LYBRAND L.L.P.
<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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 18,727
<SECURITIES> 500
<RECEIVABLES> 34,319
<ALLOWANCES> 923
<INVENTORY> 56,840
<CURRENT-ASSETS> 113,029
<PP&E> 59,941
<DEPRECIATION> 26,497
<TOTAL-ASSETS> 165,409
<CURRENT-LIABILITIES> 51,529
<BONDS> 10,548
<COMMON> 22,014
0
0
<OTHER-SE> 75,223
<TOTAL-LIABILITY-AND-EQUITY> 165,409
<SALES> 148,640
<TOTAL-REVENUES> 148,640
<CGS> 129,489
<TOTAL-COSTS> 142,649
<OTHER-EXPENSES> 132
<LOSS-PROVISION> 80
<INTEREST-EXPENSE> 440
<INCOME-PRETAX> 6,123
<INCOME-TAX> 2,166
<INCOME-CONTINUING> 3,957
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 2,294
<NET-INCOME> 6,251
<EPS-PRIMARY> .83
<EPS-DILUTED> .83
</TABLE>
