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, 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 April 30, 1997:
Common Shares, without par value 17,244,399 shares outstanding
including an equivalent number of common share purchase rights.
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COACHMEN INDUSTRIES, INC.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Financial Statements:
Condensed Consolidated Balance Sheets-
March 31, 1997 and December 31, 1996....................3-4
Condensed Consolidated Statements of Income-
Three Months Ended March 31, 1997 and 1996.............. 5
Condensed Consolidated Statements of Cash Flows-
Three Months Ended March 31, 1997 and 1996.............. 6
Notes to Condensed Consolidated Financial Statements....7-8
Management's Discussion and Analysis of Financial
Condition and Results of Operations........................9-12
PART II. OTHER INFORMATION.................................... 13
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES..................................................... 13
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COACHMEN INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
1997 1996
ASSETS
CURRENT ASSETS
Cash and temporary cash investments $ 72,124,233 $ 66,448,901
Certificates of deposit 500,000 500,000
Trade receivables, less allowance for
doubtful receivables 1997 - $1,007,000
and 1996 - $919,000 33,977,923 20,575,048
Other receivables 2,219,850 2,103,168
Refundable income taxes 1,865,000 1,865,000
Inventories 61,300,374 68,311,038
Prepaid expenses and other 872,497 930,244
Deferred income taxes 3,180,000 3,180,000
Total current assets 176,039,877 163,913,399
PROPERTY AND EQUIPMENT, at cost
Land and improvements 7,348,533 6,640,920
Buildings and improvements 35,515,040 33,516,736
Machinery and equipment 15,310,864 14,563,955
Transportation equipment 9,966,794 9,619,667
Office furniture and fixtures 4,962,433 4,830,577
Total property and equipment, at cost 73,103,664 69,171,855
Less, Accumulated depreciation 30,664,250 29,314,413
Net property and equipment 42,439,414 39,857,442
OTHER ASSETS
Real estate held for sale 4,902,105 4,902,105
Rental properties 2,500,272 2,530,608
Intangibles, less accumulated amortization
1997 - $414,413 and 1996 - $380,363 5,029,863 5,063,913
Deferred income taxes 600,000 600,000
Other 10,316,313 10,580,105
Total other assets 23,348,553 23,676,731
TOTAL ASSETS $241,827,844 $227,447,572
The accompanying notes are part of the condensed consolidated
financial statements.
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COACHMEN INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (CONT'D)
MARCH 31, DECEMBER 31,
1997 1996
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 2,271,019 $ 2,278,519
Accounts payable, trade 23,629,859 14,532,948
Accrued wages, salaries and commissions 2,873,222 4,410,925
Accrued dealer incentives 3,314,316 3,064,437
Accrued warranty expense 4,800,121 4,460,137
Accrued income taxes 2,944,783 628,051
Accrued insurance 4,420,354 3,697,709
Other liabilities 6,228,960 5,449,270
Total current liabilities 50,482,634 38,521,996
LONG-TERM DEBT 13,291,152 14,841,262
OTHER 6,572,508 6,428,373
Total liabilities 70,346,294 59,791,631
SHAREHOLDERS' EQUITY
Common shares, without par value: authorized
60,000,000 shares; issued 1997 - 20,552,372
shares and 1996 - 20,527,644 shares 86,462,969 86,248,042
Additional paid-in capital 2,347,998 2,313,743
Retained earnings 98,229,597 94,670,593
187,040,564 183,232,378
Less, Cost of shares reacquired for the
treasury 1997 - 3,338,470 shares and
1996 - 3,340,996 shares 15,559,014 15,576,437
Total shareholders' equity 171,481,550 167,655,941
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $241,827,844 $227,447,572
The accompanying notes are part of the condensed consolidated
financial statements.
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COACHMEN INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS
ENDED MARCH 31,
1997 1996
Net sales $158,105,811 $148,640,023
Cost of goods sold 137,770,440 129,488,503
Gross profit 20,335,371 19,151,520
Operating expenses:
Selling and delivery 8,330,879 7,561,188
General and administrative 6,007,899 5,599,626
Total operating expenses 14,338,778 13,160,814
Operating income 5,996,593 5,990,706
Nonoperating income (expense):
Interest expense (356,256) (440,089)
Interest income 992,464 234,314
Gain (loss) on sale of properties, net 9,456 (3,288)
Other, net 93,777 341,330
Total nonoperating income, net 739,441 132,267
Income before income taxes
and cumulative effect of
accounting change 6,736,034 6,122,973
Income taxes 2,317,000 2,166,000
Income before cumulative
effect of accounting change 4,419,034 3,956,973
Cumulative effect of accounting
change for Company-owned life
insurance policies - 2,293,983
Net income $ 4,419,034 $ 6,250,956
Earnings per common share:
Income before cumulative
effect of accounting
change $ .26 $ .26
Net income $ .26 $ .42
Weighted average number of
common shares outstanding 17,202,020 14,980,498
Cash dividends per common share $ .05 $ .035
The accompanying notes are part of the condensed consolidated
financial statements.
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COACHMEN INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS
ENDED MARCH 31,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash provided by operating
activities $11,304,882 $ 5,573,662
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from:
Sale of property and equipment, real
estate held for sale and rental
properties 113,707 363,512
Acquisitions of property and equipment (3,951,450) (3,175,772)
Proceeds from life insurance death benefit - 171,770
Other 410,906 414,364
Net cash (used in) investing
activities (3,426,837) (2,226,126)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of long-term debt (1,557,610) (1,569,759)
Proceeds from sale of common shares 214,927 452,842
Cash dividends paid (860,030) (524,361)
Net cash (used in) financing activities (2,202,713) (1,641,278)
Increase in cash and temporary
cash investments 5,675,332 1,706,258
CASH AND TEMPORARY CASH INVESTMENTS
Beginning of period 66,448,901 17,020,744
End of period $ 72,124,233 $ 18,727,002
The accompanying notes are part of the condensed consolidated
financial statements.
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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 months ended March 31, 1997 are
not necessarily indicative of the results to be expected for the full
year.
3. Inventories consist of the following:
March 31, December 31,
1997 1996
Raw material $ 20,343,218 $ 20,951,906
Work-in-process 8,230,167 6,467,066
Finished goods 32,726,989 40,892,066
Total $ 61,300,374 $ 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 March 31, 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
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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.
Page 8
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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
Ended March 31, 1997 and 1996
Increases (Decreases)
Net sales $ 9,465,788 6.4%
Cost of goods sold 8,281,937 6.4
Selling and
delivery expenses 769,691 10.2
General and
administrative expenses 408,273 7.3
Interest expense (83,833) (19.0)
Interest income 758,150 323.6
Gain on sale of
properties, net 12,744 *
Other, net (247,553) (72.5)
Income before income taxes and
cumulative effect of
accounting change 613,061 11.7
Income taxes 151,000 7.0
Cumulative effect of accounting
change for Company-owned
life insurance policies (2,293,983) *
Net income (1,831,922) (29.3)
* Not meaningful
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NET SALES
Consolidated net sales for the quarter ended March 31, 1997 were
$158,105,811, an increase of 6.4% over $148,640,023 reported in the same
quarter of 1996. The Company's vehicle segment, which includes the parts and
supply businesses, experienced a sales increase of 1.0%. Recreational vehicle
("RV") sales were hampered during the quarter by unusually severe weather and
major floods in several areas of the country. The Company's housing segment
experienced a 48.9% increase in net sales for the quarter compared to last
year's first quarter as a result of excellent demand and increased capacity.
While the RV segment was slightly down in the number of units sold compared
to the first quarter of 1996, the housing segment was significantly up in the
number of units sold. Both RV and housing segments also experienced
increases in the average sales price per unit.
COST OF GOODS SOLD
Cost of goods sold increased 6.4% or $8,281,937 for the three months ended
March 31, 1997. The increase is consistent with the increase in net sales.
Cost of goods sold as a percentage of net sales was 87.1% for both quarters;
however, the favorable gross margins for the RV segment were offset by lower
gross margins for the housing segment. The housing segment continued
experiencing lower gross margins attributable to the expansion in North
Carolina and recent Tennessee plant opening. 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 9.1% and 8.9% for the
quarters ended March 31, 1997 and 1996, respectively. Selling expenses
increased by .2% as the result of increases in 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 3.8% of net sales for both the
first quarter of 1997 and the first quarter of 1996.
INTEREST EXPENSE
Interest expense was $356,256 for the quarter ended March 31, 1997 and
$440,089 for the quarter ended March 31, 1996. The decrease was primarily
the result of a larger 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.
Page 10
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INTEREST INCOME
Interest income increased $758,150 for the 1997 quarter over 1996. 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 1996 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 quarter ended March 31, 1997
was $9,456 while the comparative quarter in 1996 was a loss of $3,288. This
classification represents the net result of the amount of gain or loss
recognized upon the disposition of various small properties.
OTHER, NET
Other, net, represents income of $93,777 for the 1997 first quarter
and $341,330 for the 1996 first quarter. The larger amount in 1996 was
attributable to the receipt of key-man life insurance proceeds during the
quarter.
INCOME TAXES
For the first quarter ended March 31, 1997, the effective tax rate was 34.4%
compared to a first quarter tax rate of 35.4% in 1996. The Company's
effective tax rate fluctuates with the state's tax rates where sales incur and
also with the level of export sales.
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
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,
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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 ended 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.
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, 1997, to meet its seasonal
working capital needs. At March 31, 1997, there were no borrowings against
this line of credit. For the three months, the major source of cash was from
operating activities. The significant items in this category were net
income, depreciation and the increase in current liabilities. Significant
increases in receivables were more than offset by decreases in inventories
and increases in accounts payable and accrued expenses, including income
taxes. Investing activities reflected a net cash use of $3,426,837. 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 activities was primarily for cash dividends and repayment
of long-term debt.
At March 31, 1997, working capital increased to $125.6 million from $125.4
million at December 31, 1996. The $12.1 million increase in current assets
at March 31, 1997 versus December 31, 1996, was primarily due to increased
cash and receivables. The $12.0 million increase in current liabilities is
substantially due to increased trade payables as well as accrued income taxes.
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PART II. OTHER INFORMATION
Item 5. Other Information
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.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
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)
s/s: GARY L. GROOM
Date: May 13, 1997 _______________________________
Gary L. Groom, Executive Vice
President - Finance (Principal
Financial Officer)
s/s: WILLIAM M. ANGELO
Date: May 13, 1997 _______________________________
William M. Angelo, Corporate
Controller (Principal Accounting
Officer)
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
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.
</LEGEND>
<CIK> 0000021212
<NAME> COACHMEN INDUSTRIES, INC.
<MULTIPLIER> 1000
<S> <C>
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<PERIOD-END> MAR-31-1997
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<BONDS> 13,291
<COMMON> 70,904
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<OTHER-SE> 100,578
<TOTAL-LIABILITY-AND-EQUITY> 241,828
<SALES> 158,106
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