FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark one)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 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 of incorporation (IRSEmployer Identification No.)
or organization)
601 E. Beardsley Ave., Elkhart, Indiana 46514
(Address of principal executive offices) (Zip Code)
(219) 262-0123
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, Without Par Value New York Stock Exchange
(Title of each class) (Name of each exchange on
which registered)
Securities registered pursuant to Section 12(g) of the Act: None
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. X Yes _ No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment hereto. X
While it is difficult to determine the number of shares owned by non-
affiliates (within the meaning of such term under the applicable regulations
of the Securities and Exchange Commission), the registrant estimates that the
aggregate market value of the registrant's Common Stock on March 17, 1998
held by non-affiliates was $441.27 million (based upon the closing price on
the New York Stock Exchange and an estimate that 90.5% of such shares are
owned by non-affiliates).
As of March 17, 1998, 17,375,188 shares of the registrant's Common Stock were
outstanding.
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Documents Incorporated by Reference
Parts of Form 10-K into which
Document the Document is Incorporated
Portions of the Proxy Statement for
the Annual Meeting of Shareholders
to be held on April 30, 1998 Part III
This Report contains certain statements that are "forward-looking" statements
within the meaning of Section 27A of the Securities Exchange Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, as amended. Those
statements include, but are not limited to statements related to 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 the profitability whether there are or are not
increased sales; and the Company's ability to make its software compliant with
the year 2000. At times, the Company's actual performance differs materially
from its projections and estimates regarding the economy, the recreational
vehicle and housing industries and other key performance indicators. Readers
of this Report are cautioned that reliance on any forward-looking statements
involves risks and uncertainties. Although the Company believes that the
assumptions on which the forward-looking statements contained herein are based
are reasonable, any of those assumptions could prove to be inaccurate given
the inherent uncertainties as to the occurence or nonoccurrence of future
events. There can be no assurance that the forward-looking statements
contained in this Report will prove to be accurate. The inclusion of a
forward-looking statement herein should not be regarded as a representation by
the Company that the Company's objectives will be achieved.
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Part I.
Item 1. Business
Coachmen Industries, Inc. (the "Company" or the "Registrant") was
incorporated under the laws of the State of Indiana on December 31, 1964, as
the successor to a proprietorship established earlier that year. All
references to the Company include its wholly owned subsidiaries and divisions.
The Company is one of the largest full-line producers of recreational
vehicles ("RVs") and is the largest builder of modular homes in the country.
The Company's RVs are marketed under various brand names including Coachmen,
Shasta, and Viking through approximately 1,300 independent dealers located in
49 states and internationally and through nine Company-owned dealerships.
Modular homes are manufactured by the Company's All American Homes operation
which sells homes through approximately 300 builder/dealers.
The Company maintains approximately 61 trademarks, which are up for renewal
from 1998 through 2011, and approximately 3 patents due to expire between
2001 and 2006. There are no material licenses, franchises, or concessions
and no material foreign operations.
The Company operates primarily in two business segments, vehicles and
housing. The vehicle segment consists of the manufacture and distribution of
class A and class C motorhomes, travel trailers, fifth wheel trailers, camping
trailers, truck campers, van campers, van and truck conversions and related
parts and supplies. The housing segment consists of factory produced modular
homes.
The table below sets forth the composition of the Company's net sales for
each of the last three years (dollar amounts in thousands):
1997 1996 1995
Amount % Amount % Amount %
Vehicles:
Motorhomes $346,435 52 $327,802 54 $279,917 54
Travel Trailers 134,045 20 119,268 20 102,229 20
Camping Trailers 22,527 4 19,013 3 12,728 2
Truck Campers 4,593 1 2,306 1 3,748 1
Parts and Supplies 39,941 6 39,327 6 33,991 7
Total Vehicles 547,541 83 507,716 84 432,613 84
Housing 114,050 17 98,758 16 83,249 16
Total $661,591 100 $606,474 100 $515,862 100
Note: See Note 3 of Notes to Consolidated Financial Statements
regarding segment information on page 27.
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Vehicles Segment
The Vehicles Segment consists of two groups of businesses, recreational
vehicles and parts and supplies. The RV group is comprised of five
divisions: Coachmen Recreational Vehicle Company, Georgie Boy Mfg., Inc.,
Shasta Industries, Coachmen Automotive and Viking Recreational Vehicles, Inc.
Recreational vehicles are either driven or towed and serve as temporary
living quarters for camping, travel and other leisure activities.
Recreational vehicles may be categorized as motorhomes, travel trailers,
camping trailers or truck campers. A motorhome is a self-powered mobile
dwelling built on a special heavy duty chassis. A travel trailer is a mobile
dwelling designed to be towed behind another vehicle. Camping trailers are
smaller towed units constructed with sidewalls that may be raised up and
foldedout. Truck campers are designed to be mounted on the bed of a pickup
truck.
The Company's principal brand names for its recreational vehicles are
Coachmen, Sportscoach, Shasta, Viking, Travelmaster, Cruise Air, Encounter,
Cruise Master, Swinger, Pursuit, Custom Swinger, Dearborn, Jimmy, Greenbriar
and Saratoga. Other brand names the Company has protected and used and
anticipates using in the future include Normandy, Cross Country, Pathfinder
and Frolic.
The Parts and Supply Group is composed of Viking Formed Products and The Lux
Company, Inc. which provide a variety of products to the recreational vehicle
and automotive industries, as well as other industries. Viking Formed
Products is a diversified manufacturer of fiberglass and thermoplastic parts,
including fiberglass van camper tops, raised roofs for van conversions and
ground effects produced at its Prodesign operations. Additional products
produced include plastic and fiberglass flared fenders, running boards and
lower front and rear moldings. The Lux Company, Inc. manufactures seating
products for the RV, office and healthcare industries. The largest portion
of Lux's sales are in the RV seating category, including sofa beds,
convertible pit groups, swivel chairs and ergonomic pilot seats. Lux also
manufactures managerial, conference, guest and high-back executive chairs.
Lux healthcare products encompass end-opening sofas and task chairs for
laboratory and emergency care workers.
In January 1995, the Company acquired all of the issued and outstanding
capital stock of Georgie Boy Mfg., Inc., the nation's third largest
manufacturer of class A motorhomes. All manufacturing facilities for Georgie
Boy are located in Edwardsburg, Michigan. (See Note 10 of Notes to
Consolidated Financial Statements on page 35 regarding acquisition information.)
The Company currently produces recreational vehicles on an assembly line
basis in Indiana, Michigan, Georgia and Oregon. Components used in the
manufacture of recreational vehicles are primarily purchased from outside
sources. However, in some cases (such as cushions, fiberglass products and
furniture) where it is profitable for the Company to do so, or where the
Company has experienced shortages of supplies, the Company has undertaken to
manufacture its own supplies. The Company depends on the availability of
chassis from a limited number of manufacturers.
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Occasionally, chassis availability has limited the Company's production.
(See Note 11 of Notes to Consolidated Financial Statements on page 35 for
information concerning the use of converter pool agreements to purchase
vehicle chassis.)
The Company considers itself as being customer driven. Sales and service
representatives regularly visit dealers in their regions, and respond quickly
to questions and suggestions. Divisions host dealer advisory groups and
conduct informative dealer seminars and specialized training classes in areas
such as sales and service. Open forum meetings with owners are held at
campouts, providing ongoing focus group feedback for product improvements.
Engineers and product development team members are encouraged to travel and
vacation in Company RVs to gain a complete understanding and appreciation for
the products.
The Company believes it has the ability to respond promptly to changes in
market conditions. Most of the manufacturing facilities can be changed over
to the assembly of other existing products in two to six weeks. In addition,
these facilities may be used for other types of light manufacturing or
assembly operations. This flexibility enables the Company to adjust its
manufacturing capabilities in response to changes in demand for its products.
Recreational vehicles are generally manufactured against orders received from
the Company's dealers. Sales are seasonal with the highest level of sales
occurring during the spring and summer months. Agreements with most of its
dealers are cancelable on short notice, provide for minimum inventory levels
and establish sales territories. No dealer accounts for more than 5% of the
Company's net sales.
Most dealers' purchases of RVs from the Company are financed through "floor
plan" arrangements. Under these arrangements, a bank or other financial
institution agrees to lend the dealer all or most of the purchase price of its
RV inventory, collateralized by a lien on such inventory. The Company
generally executes repurchase agreements at the request of the financing
institution. These agreements provide that, for up to twelve months after a
unit is financed, the Company will repurchase a unit which has been
repossessed by the financing institution for the amount then due to the
financing institution, which is usually less than 100% of the dealer's cost.
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. (See Note 11 of Notes to Consolidated Financial Statements on
page 36.) In addition, the Company guarantees certain obligations of some
dealers to a financial institution for purchases of the Company's products.
The Company's annual aggregate obligations under this arrangement are limited
to 2% of the average annual outstanding floor plan obligations to the financial
institution which currently approximate $32 million. Over the past three
years, the Company has not reported any significant losses from the
repurchase agreements or the guarantee arrangement. The Company does not
finance retail consumer purchases of its products, nor does it generally
guarantee consumer financing.
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Housing Segment
The Company's housing group, which is the largest producer of modular homes
in the country, is composed of four All American Homes ("All American")
operations strategically located in Indiana, Iowa, North Carolina and Tennessee.
Together these plants serve more than 300 builder/dealers in 18 states.
All American's modular homes are built to the same local building codes as
site-built homes by skilled craftsmen in a factory environment unaffected by
weather conditions. Nearly complete when they leave the plant, modular homes
are delivered to their final location, typically in two to five sections, and
are crane set onto a waiting basement or crawl space foundation. Production
takes place on an assembly line, with components moving from workstation to
workstation for framing, electrical, plumbing, drywall, roofing, and cabinet
setting, among other operations. An average two-module home can be produced
in just a few days.
All American regularly conducts builder meetings to review the latest in new
design options and component upgrades. These meetings provide an opportunity
for valuable builder input and suggestions from their customers at the planning
stage.
Business Factors
Many RVs produced by the Company require gasoline for their operation.
Gasoline has, at various times in the past, been difficult to obtain, and
there can be no assurance that the supply of gasoline will continue
uninterrupted, that rationing will not be imposed or that the price of, or tax
on, gasoline will not significantly increase in the future. Shortages of
gasoline and significant increases in gasoline prices have had a substantial
adverse effect on the demand for RV's in the past and could have a material
adverse effect on demand in the future.
The vehicle and housing businesses are dependent upon the availability of and
terms of the financing used by dealers and retail purchasers. Consequently,
increases in interest rates and the tightening of credit through governmental
action or other means have adversely affected the Company's business in the
past and could do so in the future.
Competition and Regulation
The RV and housing industries are highly competitive, and the Company has
numerous competitors and potential competitors in each of its classes of
products, some of whom have greater financial and other resources. Initial
capital requirements for entry into the manufacture of recreational vehicles
or housing are comparatively small; however, codes, standards, and safety
requirements introduced in recent years may deter potential competitors.
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Recreational vehicles, the largest portion of the Company's business,
generally compete in the lower to mid-price range markets. The Company
believes it is a leader in the RV industry in its focus on quality. A
quality product and a strong commitment to competitive pricing are emphasized by
the Company in the markets it serves. The Company estimates that its current
share of the recreational vehicle market is in excess of nine percent.
The Company continues to recognize its obligations to protect the environment
insofar as its operations are concerned. To date, the Company has not
experienced any material adverse effect from existing federal, state, or
local environmental regulations.
Employees
At December 31, 1997, Coachmen employed 4,274 persons, of whom 787 were
employed in office and administrative capacities. The Company provides group
life, dental, hospitalization, and major medical plans under which the
employee pays a portion of the cost. In addition, employees can participate
in a stock purchase plan and certain employees can participate in a stock
option plan. The Company considers its relations with employees to be good.
Research and Development
During 1997, the Company spent approximately $3,521,000 on research related
to the development of new products and improvement of existing products. The
amounts spent in 1996 and 1995 were approximately $2,721,000 and $2,240,000,
respectively.
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Item 2. Properties
The Registrant owns or leases 2,911,290 square feet of plant and office
space, located on 1,214 acres, of which 1,998,184 square feet are used for
manufacturing, 253,365 square feet are used for warehousing and distribution,
46,024 square feet are used for research and development, 69,644 square feet
are used for customer service and 159,436 square feet are offices. 146,054
square feet are leased to others and 238,583 square feet are available for
sale or lease. The Registrant believes that its present facilities, consisting
primarily of steel clad, steel frame or wood frame construction and the
machinery and equipment contained therein, are well maintained and in good
condition.
The following table indicates the location, number and size of the
Registrant's properties by segment as of December 31, 1997:
No. of Building Area
Location Acreage Buildings (Sq. Ft.)
Properties Owned and Used by Registrant:
Vehicles
Elkhart, Indiana 88 16 455,713
Middlebury, Indiana 543 33 755,213
Fitzgerald, Georgia 17 3 67,070
Centreville, Michigan 105 4 84,865
Edwardsburg, Michigan 83 12 303,254
Colfax, North Carolina 4 2 14,000
Grants Pass, Oregon 24 1 62,563
Marietta, Georgia 5 1 12,600
Subtotal 869 72 1,755,278
Housing
Decatur, Indiana 43 4 286,500
Dyersville, Iowa 20 1 111,625
Springfield, Tennessee 45 1 131,453
Rutherfordton, North Carolina 38 1 131,497
Zanesville, Ohio 23 - -
Subtotal 169 7 661,075
Total owned 1,038 79 2,416,353
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Properties (Continued)
Properties Leased and Used by Registrant:
Vehicles
Elkhart, Indiana 2 1 8,000
Goshen, Indiana 18 1 80,000
Banning, California 3 1 2,700
Ft. Myers, Florida 3 1 10,400
Mt. Morris, Michigan 8 1 9,200
Grants Pass, Oregon 9 - -
Subtotal 43 5 110,300
Properties Owned by Registrant and Leased to Others:
Vehicles
Winter Garden, Florida 5 1 42,176
Lake Park, Georgia 8 1 11,720
Crooksville, Ohio 10 2 39,310
Grapevine, Texas 5 4 52,848
Subtotal 28 8 146,054
Properties Owned by Registrant and Available for Sale or Lease:
Vehicles
Perris, California 15 - -
Grapevine, Texas 4 - -
Longview, Texas 19 - -
Housing
Ellenboro, North Carolina 24 3 80,300
Montezuma, Georgia 43 2 158,283
Subtotal 105 5 238,583
Total 1,214 97 2,911,290
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Item 3. Legal Proceedings
From time to time, the Company is involved in certain litigation arising out
of its operations in the normal course of business. The Company believes
that there are no claims or litigation pending, the outcome of which will have
a material adverse effect on the financial position of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted during the quarter ended December 31, 1997 to a
vote of security holders.
Executive Officers of the Registrant
The following table sets forth the executive officers of the Company, as of
December 31, 1997:
Name Position
*Claire C. Skinner....Chairman of the Board and Chief Executive Officer
*Keith D. Corson......President and Chief Operating Officer and Director
*Gary L. Groom........Executive Vice President, Finance, Secretary and
Director
*Gene E. Stout........Executive Vice President, Corporate Development
* Member of Finance Committee
Claire C. Skinner (age 43) has served as Chairman of the Board and Chief
Executive Officer since August 1997. Before that, Vice Chairman of the
Company since May 1995, and served as Executive Vice President from 1990 to
1995. From 1987 through July 1997, Ms. Skinner served as the President of
Coachmen RV, the Company's largest division. Prior to that, she held several
management positions in operations and marketing since 1983.
Keith D. Corson (age 62) has served as President and Chief Operating Officer
of the Company since November 1991. From June 1991 to November 1991 he
served in the position of Office of the President after rejoining the
Company. Mr. Corson was owner and President of Koszegi Products, a soft
case manufacturer for the eight years prior to June 1991. He was a co-
founder of the Company in 1964, and served in several senior management
positions from 1964 until 1982, including President of the Company from 1978
until 1982.
Gary L. Groom (age 52) has served as Executive Vice President, Finance and
Secretary of the Company since May 1983 and served as Senior Vice President,
Finance and Secretary from 1980 to 1983. He was Corporate Controller from
1975 through 1980. From 1972 to 1975 he was Assistant Controller.
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Gene E. Stout (age 64) has served as Executive Vice President, Corporate
Development of the Company since May 1983. From April 1982 to May 1983 he was
Senior Vice President Corporate Planning and Industry Relations. Between
1971 and 1982 he held various management positions with the Company.
Part II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters
The following table discloses the high and low closing prices for Coachmen's
common stock during the past two years as reported on the New York Stock
Exchange, along with information on dividends paid per share during the same
periods.
High & Low Closing Prices Dividends Paid
1997 1996 1997 1996
1st Quarter $29.875 - $18.25 $13.875 -$ 9.4375 $.05 $.035
2nd Quarter 19.625 - 15.50 19.5625 - 12.875 .05 .05
3rd Quarter 19.625 - 16.625 26.75 - 15.375 .05 .05
4th Quarter 22.625 - 19.00 29.00 - 24.125 .05 .05
The Company's common stock is traded on the New York Stock Exchange.
The number of shareholders of record as of January 31, 1998 was 1,674.
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Item 6. Selected Financial Data
Five-Year Summary of Selected Financial Data
-Year Ended December 31-
1997 1996 1995 1994 1993
Net sales $661,591,185 $606,474,128 $515,862,065 $394,023,774 $329,511,226
Net income 24,762,624 29,630,813* 17,549,400 14,784,094 12,695,727
Net income per share
Basic 1.44 1.94* 1.18 1.00 .87
Diluted 1.42 1.91* 1.17 1.00 .86
Cash dividends
per share .20 .185 .14 .12 .095
At year end:
Total assets 259,062,026 227,447,572 150,248,757 125,021,282 94,736,482
Long-term debt 12,591,144 14,841,262 12,117,756 7,023,394 3,749,950
*Net income and net income per share for 1996 includes $2,293,893 and $.15,
respectively, for the cumulative effect of an accounting change (see Note 2
of Notes to Consolidated Financial Statements).
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion should be read in conjunction with the Selected
Financial Data and the Consolidated Financial Statements.
OVERVIEW
The Company was founded in 1964 as a manufacturer of RVs and began
manufacturing modular homes in 1982. Since that time, the Company has
evolved into a market leader in both business segments through a combination
of internal growth and strategic acquisitions. As part of its continuing
effort to focus on its core business, the Company acquired in January 1995
the third largest class A motorhome producer, Georgie Boy Mfg., Inc., which
more than doubled the Company's market share in this sector of the motorized
RV market.
The Company's new plant openings have been an important component of its
internal growth strategy. In May 1995, the Company opened a new modular
housing plant in Tennessee. In addition, the Company further expanded its
modular housing production capacity with the late 1996 construction of a new
facility for the North Carolina housing operation and in late 1997 started
construction of a new housing plant in Ohio. The anticipated completion date
for the new facility in Ohio is June 1998. In March 1996, the Company
increased its RV production capacity by opening a new fifth wheel and
conventional travel trailer plant in
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Oregon. Additional travel trailer plants in Indiana also became operational
in December 1996 and May 1997 to capitalize on the growing market share of
the value-priced travel trailer segment of the RV business.
The Company's business segments are cyclical and subject to certain seasonal
demand cycles and changes in general economic and political conditions.
Demand in the RV and modular housing industries generally declines during the
winter season, while sales and profits are generally highest during the
spring and summer months. Inflation and changing prices have had minimal
direct impact on the Company in the past in that selling prices and material
costs have generally followed the rate of inflation.
RESULTS OF OPERATIONS
Comparison of 1997 to 1996
Consolidated net sales for 1997 were $661.6 million, an increase of 9.1% over
the $606.5 million reported in 1996. The Company's vehicle segment, which
includes the parts and supply businesses, experienced a sales increase of 7.8%,
while the modular housing segment of the Company's business increased by
15.5%. Sales increases in the vehicle segment reflect continued market share
gains in all product categories. The increased capacity in the Company's
housing segment also resulted in continued sales growth, as well as, gains in
market share. The Company's RV and housing segments experienced increases in
both the number of units sold and the average sales price per unit.
Historically, the Company's first and fourth quarters are the slowest for
sales in both segments. See Note 13 of Notes to Consolidated Financial
Statements for unaudited interim financial information.
Gross profit for the year increased to $92.8 million, or 14.0% of net sales,
from $88.5 million, or 14.6% of net sales in 1996. The increase in gross
profit for 1997 was primarily attributable to the increase in net sales. The
decrease in the gross profit percentage represents lower gross margins
associated with the housing segment from the Tennessee plant opening and the
North Carolina expansion, as well as, implementation of a seven-day workweek
at our largest housing operation in Indiana. As these plants better utilize
their increased capacity, inefficiencies should be reduced and eventually
eliminated.
Operating expenses, which include selling, delivery, general and
administrative expenses, were $57.5 million or 8.7% of net sales in 1997
compared with $48.8 million or 8.1% of net sales in 1996. Selling and
delivery expenses were $31.6 million, or 4.8% of net sales, in 1997 compared
with $27.7 million, or 4.6% in 1996. The slight increase in selling expense
is primarily due to increased dealer volume sales incentives attributable to
increased sales in the housing segment. As a percentage of net sales,
delivery expenses remained relatively unchanged. General and administrative
expenses were $25.9 million or 3.9% of net sales in 1997 compared with $21.1
million or 3.5% of net
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sales in 1996. General and administrative expenses were adversely impacted
by a $1.5 million increase in the bad debt expense reflecting the downturn in
the overall van conversion industry. The Company's Parts & Supply Group
primarily supplies components to this industry. While the Company's own van
conversion division experienced a good performance during the year, many
companies in the industry experienced financial difficulties.
Operating income was $35.3 million in 1997 compared with $39.7 million in
1996, a decrease of 11.1%. This decrease is consistent with the overall
increase in gross profit of $4.2 million and increase in operating expenses
of $8.7 million. The Company's vehicle segment produced operating income of
$26.7 million, or 4.9% of vehicle net sales, compared with operating income
of $29.9 million, or 5.9% of vehicle net sales in 1996. The modular housing
segment generated operating income of $9.7 million in both 1997 and 1996, or
8.5% and 9.8%, respectively, of housing net sales.
Interest expense increased in 1997 to $2.5 million from $1.6 million in 1996.
Interest income increased to $5.0 million in 1997 from $1.6 million in 1996.
The increase in interest expense is substantially due to the settlement of
examinations by the Internal Revenue Service during the year, and this
increase was mostly offset with an increase in interest income from the
favorable settlement of open state income tax examinations. The balance of
the increase in interest income is basically due to increased cash and short-
term investments which were generated by operating activities throughout 1997
and the sale of 2,070,000 shares of common stock in November 1996.
The net gain on the sales of properties decreased to $137,000 in 1997 from
$726,000 in 1996. The variance reflects the result of the amount of gain or
loss 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.
The 1997 provision for income taxes was $14.1 million for both 1997 and 1996,
represented an effective tax rate of 36.2%, and 34.1%, respectively. The
lower effective rate in 1996 was due to the reversals of federal and state
income tax accruals of $250,000 and $550,000, respectively, resulting from
favorable settlements of tax examinations.
Net income for the year ended December 31, 1997 was $24.8 million compared to
$29.6 million for the prior year. The prior year includes the $2.3 million
cumulative effect of an accounting change for Company-owned life insurance.
See Note 2 of Notes to Consolidated Financial Statements.
Comparison of 1996 to 1995
Consolidated net sales increased $90.6 million, or 17.6% to $606.5 million in
1996 from $515.9 million in 1995. The Company's vehicle segment, which
includes the Parts and Supply Group of companies,
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experienced a net sales increase of 17.4% while the housing segment had a net
sales increase of 18.6%. The vehicle segment continued its 1995 trend by
outpacing the industry with market share gains in most of its product
categories. Both vehicles and housing experienced increases in unit sales and
in the average sales price per unit during 1996.
Gross profit was $88.5 million and was 14.6% of net sales in 1996 compared to
$71.2 million and 13.8% reported for 1995. The increase in gross profit for
1996 was primarily due to the increase in net sales. The increase in the
gross profit percentage represented the spreading of fixed costs over higher
production volume. The housing segment experienced lower gross margins due
to the North Carolina expansion and the Tennessee plant opening.
Operating expenses, consisting of selling, delivery, general and
administrative expenses, were $48.8 million and $44.6 million, or as a
percentage of net sales, 8.1% and 8.6% for 1996 and 1995, respectively.
Selling expenses for 1996 decreased .4% as a percentage of net sales,
primarily as a result of increased demand for the Company's products. As a
percentage of net sales, delivery expenses remained relatively unchanged.
General and administrative expenses were $21.1 million or 3.5% of net sales
compared with $19.0 million and 3.7% in 1995 and decreased as a percentage of
sales due to the increase in net sales. The increase in general and
administrative expenses during 1996 in absolute dollars was principally the
result of increased administrative requirements and related salaries and
payroll taxes associated with the Company's growth.
Operating income was $39.7 million in 1996 compared with $26.7 million in
1995, an increase of 48.8%. This increase was consistent with the $17.3
million increase in gross profit and the overall decrease of .5% in operating
expenses as a percentage of net sales. The Company's vehicle segment
produced operating income of $29.9 million, or 5.9% of vehicle net sales,
compared with operating income of $18.1 million, or 4.2% of vehicle net sales
in 1995. The modular housing segment generated 1996 operating income of $9.7
million, or 9.8% of housing net sales, compared with 1995 operating income of
$8.6 million, or 10.4% of housing net sales. The decrease in operating income
as a percentage of net sales for the Company's housing segment was attributable
to the North Carolina expansion and Tennessee plant opening.
Interest expense for 1996 decreased to $1.6 million, or .3% of net sales,
from $3.1 million, or .6% of net sales in 1995 primarily as a 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
13
<PAGE>
consisted only of the capitalized insurance premiums.
Interest income for 1996 increased to $1.6 million from $1.3 million for
1995, primarily due to the amounts of cash and temporary cash investments in
1996 versus 1995. Increases in cash and temporary cash investments were
primarily generated from operating activities throughout the year and the
sale of 2,070,000 shares of common stock in November 1996.
The gain on sale of properties decreased to $726,000 for 1996 from $793,000
for 1995. This small variance is the result of the amount of gain recognized
upon the disposition of various small properties.
Other income, net, represents income of $1.0 million for 1996 compared to
income of $2.3 million for 1995. The 1996 income was primarily from a final
determination of insurance proceeds from assets destroyed in a fire that
consumed the Company's Prodesign production facility in August 1995 and
interest participation in finance company transactions. The 1995 income was
primarily from the Prodesign fire. See Note 12 of Notes to Consolidated
Financial Statements.
Income taxes for 1996 increased to $14.1 million, or 2.3% of net sales, from
$10.4 million, or 2.0% of net sales in 1995. The effective tax rate was 34.1%
compared to 37.2% in 1995. The decrease in the effective tax rate for 1996 is
attributable to an increase in nontaxable income and the reversals of federal
and state income tax accruals of $250,000 and $550,000, respectively,
resulting from favorable settlements of tax examinations.
Net income for 1996 was $29.6 million compared to $17.5 million in 1995,
which included $2.3 million for the cumulative effect of an accounting change
for Company-owned life insurance. See Note 2 of Notes to Consolidated
Financial Statements.
14
<PAGE>
Liquidity and Capital Resources
The Company generally relies on funds from operations as its primary source
of working capital and liquidity. In addition, the Company maintains an
unsecured committed line of credit, which totaled $30 million at December 31,
1997, to meet its seasonal working capital needs. There were no borrowings
against this line of credit during 1997, 1996 and 1995. The Company's
operating activities have been a principal source of cash flows in each of
the last three years. Operating cash flows were $36.7 million, $15.3 million
and $13.2 million for 1997, 1996 and 1995, respectively. For each of these
years, net income, adjusted by certain noncash items such as depreciation, was a
significant factor in generating operating cash flows. In 1997, an increase
in accounts payable and other current liabilities was basically offset by
increases in receivables. In 1996, net income was utilized to fund the
increased inventory levels associated with higher sales and production.
Investing activities used cash of $27.1 million, $15.7 million and $11.7
million in 1997, 1996 and 1995, respectively. In 1997, the acquisition of
short-term investments of $52.1 million was partially offset by the sale of
short-term investments of $36.5 million. Otherwise the principal use of cash
for investing activities in each of the last three years has been property,
plant and equipment acquisitions. Major capital expenditures during 1997 were
acquisitions of production facilities for the RV segment, including
properties previously leased, and initiating the construction of a new
facility in Ohio for the housing segment. Major capital expenditures during
1996 included, the North Carolina expansion (financed in part by a $5.0
million industrial revenue bond) and the Oregon plant opening. Significant
capital expenditures in 1995 were primarily associated with the Tennessee
plant opening. During 1997, financing cash flows basically consisted of
payments of long-term debt, dividends and the purchases of common shares for
the treasury. These negative cash flows were partially offset by the
issuance of common shares under stock option and stock purchase plans.
Financing cash flows for 1996 included $48 million of proceeds from a public
sale of the Company's common shares and $5 million of proceeds from the
industrial revenue bond mentioned above. For a more detailed analysis of the
Company's cash flows for each of the last three years, see the Consolidated
Statements of Cash Flows. The Company's cash and temporary cash investments
at December 31, 1997 were $71.4 million, or an increase of $5.0 million over
1996. The Company anticipates that available funds, together with
anticipated cash flows generated from future operations and amounts available
under its line of credit will be sufficient to fund the Company's planned
capital expenditures and other operating cash requirements through the end of
1998.
In 1997, working capital increased $14.9 million, from $125.4 million to
$140.3 million. The $26.0 million increase in current assets at December 31,
1997 versus December 31, 1996, was primarily due to the current year's
profits, as well as, an increase in trade receivables. The $11.2 million
increase in current liabilities is substantially due to increases in trade
payables and other liabilities, principally warranty and income taxes.
15
<PAGE>
Other Matters
The Company has determined that certain of its computer software was
originally programmed using two digits rather than four to define the
applicable year. As a result, this software may be unable to process
transactions beyond December 31, 1999. The Company has undertaken to replace
the affected software and has established a timetable for completion of not
later than December 31, 1998. The total cost of the project, including
hardware, software and training costs is estimated to be $2.5 million, of
which $.5 million was incurred during 1997. Failure to successfully
implement the new systems, or delays in the implementation could cause
disruptions in operations, including, among other things, a temporary
inability to process transactions, send invoices or pay vendors and employees.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable.
16
<PAGE>
Item 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of
Coachmen Industries, Inc.:
We have audited the accompanying consolidated balance sheets of Coachmen
Industries, Inc. and subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of income and retained earnings and cash
flows for each of the three years in the period ended December 31, 1997.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Coachmen
Industries, Inc. and subsidiaries as of December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles.
As discussed in Note 2 to the consolidated financial statements, effective
January 1, 1996 the Company changed its method of accounting for its
investments in life insurance contracts.
COOPERS & LYBRAND L.L.P.
-----------------------------
COOPERS & LYBRAND L.L.P.
South Bend, Indiana
January 30, 1998
17
<PAGE>
Coachmen Industries, Inc. And Subsidiaries
Consolidated Balance Sheets
as of December 31, 1997 and 1996
ASSETS
1997 1996
CURRENT ASSETS
Cash and temporary cash investments $ 71,427,918 $ 66,448,901
Short-term investments 15,852,718 500,000
Trade receivables, less allowance for
doubtful receivables 1997 - $1,354,000
and 1996 - $919,000 25,212,595 20,575,048
Other receivables 2,980,257 2,103,168
Refundable income taxes 1,761,000 1,865,000
Inventories 68,416,006 68,311,038
Prepaid expenses and other 1,247,973 930,244
Deferred income taxes 3,040,000 3,180,000
Total current assets 189,938,467 163,913,399
PROPERTY AND EQUIPMENT, at cost
Land and improvements 9,041,817 6,640,920
Buildings and improvements 39,950,161 33,516,736
Machinery and equipment 16,874,788 14,563,955
Transportation equipment 10,159,168 9,619,667
Office furniture and fixtures 5,712,961 4,830,577
81,738,895 69,171,855
Less, Accumulated depreciation 35,137,268 29,314,413
46,601,627 39,857,442
OTHER ASSETS
Real estate held for sale 4,188,063 4,902,105
Rental properties 2,000,218 2,530,608
Intangibles, less accumulated amortization
1997 - $516,469 and 1996 - $380,363 4,927,807 5,063,913
Deferred income taxes 569,000 600,000
Other 10,836,844 10,580,105
22,521,932 23,676,731
TOTAL ASSETS $259,062,026 $227,447,572
The accompanying notes are a part of the consolidated financial statements.
18
<PAGE>
LIABILITIES AND SHAREHOLDERS' EQUITY
1997 1996
CURRENT LIABILITIES
Current maturities of long-term debt $ 2,258,519 $ 2,278,519
Accounts payable, trade 22,818,303 14,532,948
Accrued wages, salaries and commissions 4,876,790 4,410,925
Accrued dealer incentives 3,226,255 3,064,437
Accrued warranty expense 6,013,528 4,460,137
Accrued income taxes 1,529,543 628,051
Accrued insurance 2,319,518 3,697,709
Other accrued liabilities 6,633,762 5,449,270
Total current liabilities 49,676,218 38,521,996
LONG-TERM DEBT 12,591,144 14,841,262
OTHER 6,658,872 6,428,373
Total liabilities 68,926,234 59,791,631
COMMITMENTS AND CONTINGENCIES (Note 11)
SHAREHOLDERS' EQUITY
Common shares, without par value: authorized
60,000,000 shares; issued 1997 - 20,689,214
shares and 1996 - 20,527,644 shares 87,519,740 86,248,042
Additional paid-in capital 3,012,596 2,313,743
Retained earnings 115,984,289 94,670,593
206,516,625 183,232,378
Less, Cost of shares reacquired for the
treasury 1997 - 3,387,648 shares and
1996 - 3,340,996 shares 16,380,833 15,576,437
Total shareholders' equity 190,135,792 167,655,941
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $259,062,026 $227,447,572
19
<PAGE>
Coachmen Industries, Inc. And Subsidiaries
Consolidated Statements Of Income And Retained Earnings
for the years ended December 31, 1997, 1996 and 1995
1997 1996 1995
Net sales $661,591,185 $606,474,128 $515,862,065
Cost of goods sold 568,836,172 517,966,127 444,626,666
Gross profit 92,755,013 88,508,001 71,235,399
Operating expenses:
Selling and delivery 31,605,666 27,719,131 25,593,164
General and administrative 25,889,028 21,116,814 18,983,252
57,494,694 48,835,945 44,576,416
Operating income 35,260,319 39,672,056 26,658,983
Nonoperating income (expense):
Interest expense (2,544,021) (1,572,092) (3,141,763)
Interest income 4,975,360 1,615,442 1,306,148
Gain on sale of properties, net 137,246 726,023 793,412
Other, net 996,720 1,041,401 2,340,620
3,565,305 1,810,774 1,298,417
Income before income taxes
and cumulative effect
of accounting change 38,825,624 41,482,830 27,957,400
Income taxes 14,063,000 14,146,000 10,408,000
Income before cumulative effect
of accounting change 24,762,624 27,336,830 17,549,400
Cumulative effect of accounting
change for Company-owned life
insurance policies - 2,293,983 -
Net income 24,762,624 29,630,813 17,549,400
Retained earnings,
beginning of the year 94,670,593 67,824,816 52,359,629
Cash dividends (per common share:
1997 - $.20, 1996 - $.185 and
1995 - $.14) (3,448,928) (2,785,036) (2,084,213)
Retained earnings, end of year $115,984,289 $ 94,670,593 $ 67,824,816
Earnings per common share:
Income before cumulative
effect of accounting change:
Basic $ 1.44 $ 1.79 $ 1.18
Diluted 1.42 1.76 1.17
Net income:
Basic 1.44 1.94 1.18
Diluted 1.42 1.91 1.17
The accompanying notes are a part of the consolidated financial statements.
20
<PAGE>
Coachmen Industries, Inc. And Subsidiaries
Consolidated Statements Of Cash Flows
for the years ended December 31, 1997, 1996 and 1995
1997 1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 24,762,624 $ 29,630,813 $ 17,549,400
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 6,696,517 5,487,528 3,993,282
Amortization of intangibles 136,106 135,592 136,620
Provision for doubtful
receivables, net 1,616,801 158,024 291,564
Gain on sale of properties (137,246) (726,023) (793,412)
Gain on insurance settlement - (393,014) (2,124,539)
Cumulative effect of
accounting change - (2,293,983) -
Increase in cash surrender value
of life insurance policies (1,017,007) (1,087,678) -
Deferred income taxes 171,000 (240,000) (93,000)
Other 431,051 113,666 107,243
Changes in certain assets and
liabilities, net of effect of
acquisitions and dispositions:
Receivables, excluding
current portion of notes (7,280,485) (875,253) (2,577,413)
Inventories 394,046 (11,077,327) 1,361,916
Prepaid expenses and other (317,729) 640,248 (304,327)
Accounts payable, trade 8,285,355 (3,902,614) (4,188,586)
Income taxes - accrued
and refundable 1,005,492 (1,711,749) (1,408,039)
Other current liabilities 1,987,375 1,447,503 1,277,349
Net cash provided by
operating activities 36,733,900 15,305,733 13,228,058
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from:
Sale of short-term investments 36,534,842 - 263,888
Sale of properties 1,644,501 925,452 3,477,934
Insurance settlement - 2,821,014 846,463
Acquisitions of:
Short-term investments (52,082,223) - -
Property and equipment (14,202,539) (14,919,168) (15,222,794)
Real estate held for sale and
rental properties - (1,861,458) -
Acquisition of businesses net of
acquired cash - (1,852,596) (4,313,046)
(Advances) collections on notes
receivable, net 553,399 (1,136,340) 39,177
Unexpended industrial revenue bond
proceeds 254,463 (254,463) 3,337,122
Other 162,841 560,195 (130,153)
Net cash (used in)
investing activities (27,134,716) (15,717,364) (11,701,409)
21
<PAGE>
Consolidated Statements of Cash Flows (Concluded)
for the years ended December 31, 1997, 1996 and 1995
1997 1996 1995
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of short-term borrowings - - (900,000)
Proceeds from long-term debt - 5,000,000 -
Payments of long-term debt (2,270,118) (2,092,447) (1,833,892)
Sale of common stock, net of
offering expenses - 47,970,779 -
Issuance of common shares under stock
option and stock purchase plans 1,271,698 1,126,061 550,815
Tax benefit from stock
options exercised 654,681 620,431 227,000
Cash dividends paid (3,448,928) (2,785,036) (2,084,213)
Purchases of common shares
for treasury (827,500) - -
Net cash provided by
(used in) financing
activities (4,620,167) 49,839,788 (4,040,290)
Increase (decrease) in cash and
temporary cash investments 4,979,017 49,428,157 (2,513,641)
CASH AND TEMPORARY CASH INVESTMENTS
Beginning of year 66,448,901 17,020,744 19,534,385
End of year $71,427,918 $ 66,448,901 $ 17,020,744
Supplemental disclosures of cash flow
information:
Cash paid during the year for:
Interest $ 1,272,000 $ 2,018,439 $ 2,398,000
Income taxes 13,142,000 15,628,000 12,265,000
The accompanying notes are a part of the consolidated financial statements.
22
<PAGE>
Coachmen Industries, Inc. And Subsidiaries
Notes To Consolidated Financial Statements
1. NATURE OF OPERATIONS AND ACCOUNTING POLICIES.
Nature of Operations - Coachmen Industries, Inc. and its subsidiaries (the
"Company") manufacture a full line of recreationalvehicles and van
conversions through seven divisions with manufacturing facilities located
in Indiana, Georgia, Michigan and Oregon. These products are marketed
through a nationwide dealer network. The Company's housing divisions,
with locations in Indiana, Iowa, North Carolina and Tennessee, supply
modular housing to builder/dealers in eighteen adjoining states. The
Company's parts and supply divisions concentrate primarily on providing
parts and supplies to the recreational vehicle and van conversion
industries, and also have an important interest in the office furniture
market.
Principles of Consolidation - The accompanying consolidated financial
statements include the accounts of Coachmen Industries, Inc. and its
subsidiaries, all of which are wholly owned.
Use of Estimates in the Preparation of Financial Statements - The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Revenue Recognition, Concentrations of Credit Risk and Allowances for Credit
Losses - Sales are recognized as revenue upon shipment. The Company has a
concentration of credit risk in the recreational vehicle industry, although
there is no geographic concentration of credit risk. The Company performs
ongoing credit evaluations of its customers' financial condition and sales
to its recreational vehicle dealers are generally subject to preapproved
dealer floor plan financing whereby the Company is paid upon delivery or
shortly thereafter. The Company generally requires no collateral from its
customers. Future credit losses are provided for currently through the
allowance for doubtful receivables and actual credit losses are charged to
the allowance when incurred.
At December 31, 1997 and 1996, cash and temporary cash investments include
approximately $42.8 million and $45.2 million, respectively, invested in
variable rate demand notes with a seven-day put option. In addition, cash
and temporary cash investments include $28.1 million and $20.8 million
invested in a money market mutual fund at December 31, 1997 and 1996,
respectively.
Cash Flows and Noncash Activities - For purposes of the consolidated
statements of cash flows, cash and temporary cash investments include cash,
cash investments and any highly liquid investments purchased with an
original maturity of three months or less. The Company's acquisitions of
and dispositions of subsidiaries included certain noncash activities (see
Note 10). For each of the three years in the period ended December 31, 1997,
the Company issued common shares with a market value of $67,276, $55,665 and
$38,280, respectively, in lieu of cash compensation. The Company recognizes
a tax benefit in additional paid-in capital from exercise of stock options
(see Note 7).
23
<PAGE>
Coachmen Industries, Inc. And Subsidiaries
Notes To Consolidated Financial Statements, Continued
1. NATURE OF OPERATIONS AND ACCOUNTING POLICIES, Continued.
Short-Term Investments - The Company accounts for its short-term investments
under Statement of Financial Accounting Standards ("SFAS") No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" which
requires certain securities to be categorized as either trading, available-
for-sale or held-to-maturity. The Company's short-term investments at
December 31, 1997, which consist entirely of equity securities, are
classified as available-for-sale and, accordingly, are carried at fair value
with unrealized gains and losses recorded as a separate component of
shareholders' equity. At December 31, 1997, the cost of short-term
investments approximated their fair value. At December 31, 1996, short-term
investments consisted solely of a $500,000 certificate of deposit carried at
cost. Realized gains (losses) on sales of investments were $(194,663) in
1997 and $13,888 in 1995. The cost of securities sold is determined by the
specific identification method.
Fair Value of Financial Instruments - The carrying amounts of cash
equivalents, short-term investments, receivables and accounts payable
approximated fair value as of December 31, 1997 and 1996, because of the
relatively short maturities of these instruments. The carrying amount of
long-term debt, including current maturities, approximated fair value as of
December 31, 1997 and 1996, based upon terms and conditions currently
available to the Company in comparison to terms and conditions of the
existing long-term debt. The Company has investments in life insurance
contracts to fund obligations under deferred compensation agreements (see
Notes 2 and 8). At December 31, 1997 and 1996, the carrying amount of these
policies, which equaled their fair value, was $9.9 million and $8.9 million,
respectively (cash surrender values of $22.6 million and $20.3 million,
net of $12.7 million and $11.4 million of policy loans, respectively).
Inventories - Inventories are valued at the lower of cost (first-in, first-
out method) or market.
Property and Equipment - Depreciation is computed by the straight-line
method on the costs of the assets, at rates based on their estimated useful
lives as follows: land improvements 3-15 years; buildings and improvements
10-30 years; machinery and equipment 3-10 years; transportation equipment
2-7 years; and office furniture and fixtures 2-10 years.
Upon sale or retirement of property and equipment, including real estate
held for sale and rental properties, the asset cost and related accumulated
depreciation is removed from the accounts and any resulting gain or loss is
included in income.
Real Estate Held For Sale - Real estate held for sale represents real
properties which are carried at the lower of estimated realizable value or
cost less accumulated depreciation. As of December 31, 1997 and 1996, the
carrying value of real estate held for sale (and the related accumulated
depreciation) aggregated $4,451,596 ($263,533) and $5,269,155 ($367,050),
respectively.
24
<PAGE>
Coachmen Industries, Inc. And Subsidiaries
Notes To Consolidated Financial Statements, Continued
Rental Properties - Rental properties represent owned facilities which are
currently leased to others under lease agreements with expiring terms
through August 31, 2002. Certain of the lease agreements contain options
for the lessee to renew the lease or purchase the facilities. Lease income
for the years ended December 31, 1997, 1996 and 1995 aggregated $302,931,
$256,855 and $381,287, respectively. Future minimum annual lease income
under these lease agreements is as follows: 1998 - $441,000, 1999 -
$419,750, 2000 - $186,000, 2001 - $186,000 and 2002 - $124,000. The rental
properties are carried at cost less accumulated depreciation, which is not
in excess of net realizable value. The rental properties are depreciated by
the straight-line method over the estimated useful lives of the assets (15-
20 years). At December 31, 1997 and 1996, the cost of rental properties
(and the related accumulated depreciation) aggregated $2,859,991 ($859,773)
and $3,488,179 ($957,571), respectively.
Intangibles - Intangibles represent the excess of cost over the fair value
of net assets of businesses acquired, and are being amortized over a 40-year
period by the straight-line method.
Income Taxes - The provision for income taxes is based on income recognized
for financial statement purposes and includes the effects of temporary
differences between such income and that recognized for tax return purposes.
Deferred tax assets and liabilities are established for the expected future
tax consequences of events that have been included in the financial
statements or tax returns using enacted tax rates in effect for the years in
which the differences are expected to reverse.
Research and Development Expenses - Research and development expenses
charged to operations were approximately $3,521,000, $2,721,000 and
$2,240,000 for the years ended December 31, 1997, 1996 and 1995,
respectively.
Warranty Expense - The Company accrues an estimated warranty liability at
the time the warranted products are sold.
Stock-Based Compensation - The Company has adopted the disclosure only
provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," and,
accordingly, accounts for its stock option plan under the provisions of
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees."
New Accounting Pronouncements - In June 1997, the Financial Accounting
Standards Board issued SFAS No. 130, "Reporting Comprehensive Income," and
SFAS No. 131, "Disclosure about Segments of an Enterprise and Related
Information." SFAS No. 130 establishes standards for the reporting and
disclosure of comprehensive income and its components in a full set of
general purpose financial statements. SFAS No. 131 changes the manner in
which public companies report segment information in annual reports and
requires companies to report selected segment information in interim
financial reports. Companies will be required to report financial and
descriptive information about the Company's operating segments. Both these
statements are effective for fiscal years beginning after December 15, 1997,
with reclassification of the financial statements for earlier periods
required for comparative purposes. The Company plans to adopt these
statements for its year ending December 31, 1998.
25
<PAGE>
Coachmen Industries, Inc. And Subsidiaries
Notes To Consolidated Financial Statements, Continued
2. ACCOUNTING CHANGES.
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 $2.3 million noncash credit for
the cumulative effect of this accounting change ($.15 per share for both
basic and diluted earnings per share). This accounting method change also
increased income before cumulative effect of accounting change and net
income for the year ended December 31, 1996 by $1,087,678 or $.07 per share
for both basic and diluted earnings per share. If the cash surrender value
method had been applied during 1995, proforma net income would have been
$18,292,792 and proforma net income per share would have been $1.23 - basic
and $1.22 - diluted.
26
<PAGE>
Coachmen Industries, Inc. And Subsidiaries
Notes To Consolidated Financial Statements, Continued
3. OPERATIONS IN DIFFERENT INDUSTRIES.
The Company's business and operations are comprised of two segments:
Vehicles(recreational, vans, specialized and related parts and accessories)
and Housing (modular). Segment information is set forth in the following
table:
1997 1996 1995
Net sales:
Vehicles $547,540,761 $507,715,622 $432,612,786
Housing 114,050,424 98,758,506 83,249,279
Total $661,591,185 $606,474,128 $515,862,065
Operating income (loss):
Vehicles $ 26,663,164 $ 29,934,813 $ 18,136,796
Housing 9,699,814 9,674,894 8,644,906
General Corporate (1,102,659) 62,349 (122,719)
Total $ 35,260,319 $ 39,672,056 $ 26,658,983
Identifiable assets:
Vehicles $114,171,173 $109,701,864 $ 89,173,588
Housing 30,161,106 31,406,963 23,957,173
General Corporate 114,729,747 86,338,745 37,117,996
Total $259,062,026 $227,447,572 $150,248,757
Depreciation:
Vehicles $ 3,657,050 $ 2,931,270 $ 2,218,420
Housing 2,477,634 2,140,587 1,487,159
General Corporate 561,833 415,671 287,703
Total $ 6,696,517 $ 5,487,528 $ 3,993,282
Additions to property
and equipment(including
property and equipment
acquired in the acquisition
of businesses):
Vehicles $ 10,365,839 $ 11,421,971 $ 8,905,728
Housing 2,601,505 6,846,332 6,834,516
General Corporate 1,235,195 482,865 2,602,967
Total $ 14,202,539 $ 18,751,168 $ 18,343,211
4. INVENTORIES.
Inventories consist of the following:
1997 1996
Raw materials $ 19,437,977 $ 20,951,906
Work in process 9,327,308 6,467,066
Finished goods 39,650,721 40,892,066
Total $ 68,416,006 $ 68,311,038
27
<PAGE>
Coachmen Industries, Inc. And Subsidiaries
Notes To Consolidated Financial Statements, Continued
5. SHORT-TERM BORROWINGS.
At December 31, 1997 and 1996, the Company has an unsecured bank line of
credit aggregating $30 million with interest on outstanding borrowings
payable monthly at a formula rate, which approximates the bank's cost of
funds plus a mark-up, which generally results in a rate at least 2% below
the prime rate. There were no outstanding borrowings under this bank line
of credit during 1997 and 1996.
6: LONG-TERM DEBT.
Long-term debt consists of the following:
1997 1996
Obligations under industrial development
revenue bonds, variable rates, with
various maturities through 2011 $ 9,807,836 $10,832,781
Promissory notes payable, issued or
assumed in the acquisition of Georgie
Boy (see Note 10), principal payable
in annual installments through January
2001, interest payable monthly at the
prime rate, (8.5% at December 31, 1997),
unsecured 5,041,827 6,266,998
Other - 20,002
Total 14,849,663 17,119,781
Less, Current maturities 2,258,519 2,278,519
Long-term debt $12,591,144 $14,841,262
Aggregate maturities of long-term debt for each of the next five years
ending December 31 are as follows: 1998 - $2,258,519; 1999 - $2,258,519;
2000 - $1,966,323; 2001 - $1,766,302 and 2002 - $400,000.
In connection with four of its industrial development revenue bond
obligations, the Company obtained, as a credit enhancement for the
bondholders, irrevocable letters of credit in favor of the bond trustees.
The agreements relating to these letters of credit contain, among other
provisions, certain covenants relating to required amounts of working
capital and net worth and the maintenance of certain required financial
ratios.
7. COMMON STOCK MATTERS AND EARNINGS PER SHARE.
Stock Offering
In November 1996, the Company completed a public stock offering consisting
of 2,070,000 shares of its common stock at $24.50 per share. Net of
underwriting fees and offering expenses, proceeds to the Company aggregated
$48 million.
28
<PAGE>
Coachmen Industries, Inc. And Subsidiaries
Notes To Consolidated Financial Statements, Continued
7. COMMON STOCK MATTERS AND EARNINGS PER SHARE, CONTINUED
Stock Option Plan
The Company's stock option plan provides for the granting to eligible key
employees of options to purchase common shares. Under terms of the plan,
the Company may grant incentive stock options or non-qualified stock
options. The option price for options granted to key employees is an amount
per share of not less than the fair market value per share on the date of
granting the option. No such options may be exercised during the first
year after grant, and are exercisable cumulatively in four installments
of 25% each year thereafter.
The following table summarizes stock option activity:
Weighted
Average
Number Exercise
of Shares Price
Outstanding, January 1, 1995 458,800 $ 5.50
Granted 272,400 7.98
Canceled (33,150) 7.54
Exercised (123,150) 3.71
Outstanding, December 31, 1995 574,900 6.95
Granted 251,800 12.61
Canceled (14,100) 7.65
Exercised (165,500) 5.88
Outstanding, December 31, 1996 647,100 9.36
Granted 222,550 19.53
Canceled (47,700) 11.81
Exercised (147,425) 6.94
Outstanding, December 31, 1997 674,525 13.07
Options outstanding at December 31, 1997 are exercisable at prices ranging
from $6.44 to $27.13 and have a weighted average remaining contractual
life of 3.02 years. The following table summarizes information about stock
options outstanding at December 31, 1997.
Options Outstanding Options Exercisable
Weighted-
Number Average Weighted- Number Weighted-
Outstanding at Remaining Average Exercisable at Average
Range of December 31, Contractual Exercise December 31, Exercise
Exercise Price 1997 Life Price 1997 Price
$ 6.44 -$ 8.00 95,700 1.7 $ 7.02 67,050 $ 6.94
8.01 - 12.00 275,525 2.3 8.99 120,080 8.69
12.01 - 15.00 42,250 3.3 14.07 10,563 14.07
15.01 - 27.13 261,050 4.2 19.45 11,488 19.09
674,525 209,181
29
<PAGE>
Coachmen Industries, Inc. And Subsidiaries
Notes To Consolidated Financial Statements, Continued
7. COMMON STOCK MATTERS AND EARNINGS PER SHARE, Continued
At December 31, 1996 and 1995, there were exercisable options to purchase
178,638 and 153,623 shares at weighted-average exercise prices of $6.62 and
$5.14, respectively. The weighted-average grant-date fair value of options
granted during the years ended December 31, 1997, 1996 and 1995 was $4.81,
$3.08 and 2.08, respectively. As of December 31, 1997, 612,250 shares were
reserved for the granting of future stock options, compared with 787,100
shares at December 31, 1996.
Had the Company adopted the provisions SFAS No. 123, "Accounting for Stock-
Based Compensation," the Company's net income and net income per share would
have been:
1997 1996 1995
Pro forma net income $24,533,000 $29,512,000 $17,499,000
Pro forma net income per share:
Basic 1.42 1.93 1.18
Diluted 1.41 1.90 1.17
The pro forma amounts and the weighted-average grant-date fair-value of
options granted were estimated using the Black-Scholes option-pricing model
with the following assumptions:
1997 1996 1995
Risk free interest rate 6.00% 6.00% 6.87%
Expected life 2.75 years 2.75 years 2.75 years
Expected volatility 30.7% 30.7% 30.7%
Expected dividends 1.2% 1.2% 1.2%
Stock Purchase Plan
The Company has an employee stock purchase plan under which a total of
562,083 shares of the Company's common stock are reserved for purchase by
full-time employees through payroll deductions, cash payments, or a
combination of both at a price equal to 90% of the market price of the
Company's common stock on the purchase date. As of December 31, 1997, there
were 267 employees actively participating in the plan. Since its inception,
a total of 237,917 shares have been purchased by employees under the plan.
Certain restrictions in the plan limit the amount of payroll deductions and
cash payments an employee may make in any one quarter. There are also
limitations as to the amount of ownership in the Company an employee may
acquire under the plan.
Earnings Per Share
The Company has adopted the provisions of SFAS No. 128, "Earnings Per
Share," retroactively for all periods presented. SFAS No. 128 requires the
Company to present "basic" and "diluted" earnings per share. Basic earnings
per share is computed by dividing net income by the weighted average number
of shares of common stock outstanding during the period. Diluted earnings
30
<PAGE>
Coachmen Industries, Inc. And Subsidiaries
Notes To Consolidated Financial Statements, Continued
7. COMMON STOCK MATTERS AND EARNINGS PER SHARE, Continued
per share is computed by dividing net income by the weighted average number
of shares of common stock outstanding plus the dilutive effect of stock
options. The number of shares used in the computation of basic and diluted
earnings per share are as follows:
1997 1996 1995
Basic 17,238,353 15,280,578 14,881,968
Diluted 17,401,402 15,494,731 14,943,836
31
<PAGE>
Coachmen Industries, Inc. And Subsidiaries
Notes To Consolidated Financial Statements, Continued
7. COMMON STOCK MATTERS AND EARNINGS PER SHARE, Continued
Changes in Common Shares, Additional Paid-In Capital and Treasury Shares
Additional
Common Paid-in Treasury
Shares Capital Shares
Balance, January 1, 1995 $36,600,387 $ 1,431,055 $(15,635,125)
Issuance of 12,130 common
shares under employee
stock purchase plan 94,396 - -
Issuance of 4,638 common
shares from treasury - 6,834 31,446
Issuance of 123,150 common
shares upon the exercise
of stock options 456,419 - -
Tax benefit from exercise
of stock options - 227,000 -
Balance, December 31, 1995 37,151,202 1,664,889 (15,603,679)
Sale of 2,070,000 common shares,
net of offering expenses 47,970,779 - -
Issuance of 9,472 common
shares under employee
stock purchase plan 152,646 - -
Issuance of 4,008 common
shares from treasury - 28,423 27,242
Issuance of 165,500 common
shares upon the exercise
of stock options 973,415 - -
Tax benefit from exercise
of stock options - 620,431 -
Balance, December 31, 1996 86,248,042 2,313,743 (15,576,437)
Issuance of 14,145 common
shares under employee
stock purchase plan 249,144 - -
Issuance of 3,348 common
shares from treasury - 44,172 23,104
Issuance of 147,425 common
shares upon the exercise
of stock options 1,022,554 - -
Acquisition of 50,000 common
shares for treasury - - (827,500)
Tax benefit from exercise
of stock options - 654,681 -
Balance, December 31, 1997 $87,519,740 $ 3,012,596 $(16,380,833)
32
<PAGE>
Coachmen Industries, Inc. And Subsidiaries
Notes To Consolidated Financial Statements, Continued
7. COMMON STOCK MATTERS AND EARNINGS PER SHARE, Concluded.
Shareholder Rights Plan
On January 19, 1990, the Board of Directors adopted a shareholder rights
plan and declared a dividend distribution of one common share purchase right
on each outstanding common share. Such rights only become exercisable, or
transferable apart from the common shares, (i) ten days after a person or
group of persons ("Acquiring Person") acquires or obtains the right to
acquire beneficial ownership of 20% or more of the Company's common shares
or (ii) ten business days (or such later date established by the Board)
following the commencement of a tender offer or exchange offer for 20% or
more of the Company's common shares. Upon the occurrence of certain events
and after the rights become exercisable, each right would, subject to
certain adjustments and alternatives, entitle the rightholder to purchase
the number of common shares of the Company or the acquiring company having a
market value of twice the $15 exercise price of the right (except that the
Acquiring Person would not be able to purchase common shares of the Company
on these terms). The rights are nonvoting, may be redeemed by the Company
at a price of $.005 per right at any time prior to the date on which an
Acquiring Person acquires 20% or more of the Company's common shares and
expire February 15, 2000.
8. INCENTIVE AND DEFERRED COMPENSATION PLANS.
The Company has incentive compensation plans for its officers and other key
management personnel. The amounts charged to expense for the years ended
December 31, 1997, 1996 and 1995 aggregated $2,870,270, $2,662,668 and
$2,577,692, respectively.
The Company has established a deferred compensation plan for executives and
other key employees. The plan provides for benefit payments upon
termination of employment, retirement, disability, or death. The Company
recognizes the cost of this plan over the projected service lives of the
participating employees based on the present value of the estimated future
payments to be made. The plan is funded by insurance contracts on the
lives of the participants, and investments in insurance contracts (included
in other assets) aggregated $9.9 million and $8.9 million as of December
31, 1997 and 1996, respectively. The deferred compensation obligations,
which aggregated $6,913,896 and $6,500,123 as of December 31, 1997 and 1996,
respectively, are included in other non-current liabilities, with the
current portion ($341,514 and $186,559 at December 31, 1997 and 1996,
respectively) included in other accrued liabilities.
All full-time employees of the Company (subject to certain eligibility
restrictions) are eligible to participate in the Coachmen Assisted
Retirement For Employees (C.A.R.E.) program which provides a mechanism for
each eligible employee to establish an individual retirement account and
receive matching contributions from the Company based on the amount
contributed by the employee, the employee's years of service and the
profitability of the Company. Company matching contributions charged to
expense under the C.A.R.E. program aggregated $724,541, $704,173 and
$537,118 for the years ended December 31, 1997, 1996 and 1995, respectively.
33
<PAGE>
Coachmen Industries, Inc. And Subsidiaries
Notes To Consolidated Financial Statements, Continued
9. INCOME TAXES.
Income taxes are summarized as follows:
1997 1996 1995
Federal:
Current $12,765,000 $13,553,000 $ 9,530,000
Deferred 150,000 (210,000) (79,000)
12,915,000 13,343,000 9,451,000
State:
Current 1,127,000 833,000 971,000
Deferred 21,000 (30,000) (14,000)
1,148,000 803,000 957,000
Total $14,063,000 $14,146,000 $10,408,000
The following is a reconciliation of the provision for income taxes computed
at the federal statutory rate (35%) to the reported provision for income
taxes:
1997 1996 1995
Computed federal income tax
at federal statutory rate $13,589,000 $14,519,000 $ 9,785,000
Changes resulting from:
Increase in cash surrender
value of life insurance
contracts (356,000) (381,000) -
Foreign Sales Corporation
subject to lower tax rate (396,000) (310,000) (222,000)
State income taxes, net of
federal income tax benefit 746,000 522,000 622,000
Other, net 480,000 (204,000) 223,000
Total $14,063,000 $14,146,000 $10,408,000
The components of the net deferred tax assets are as follows:
1997 1996
Current deferred tax asset (liability):
Accrued warranty expense $2,455,000 $1,784,000
Receivables (126,000) 368,000
Other 711,000 1,028,000
Net current deferred
tax asset $3,040,000 $3,180,000
Noncurrent deferred tax
asset (liability):
Deferred compensation $2,765,000 $2,600,000
Property and equipment (1,584,000) (1,434,000)
Intangible assets (612,000) (566,000)
Net noncurrent deferred
tax asset $ 569,000 $ 600,000
34
<PAGE>
Coachmen Industries, Inc. And Subsidiaries
Notes To Consolidated Financial Statements, Continued
10. ACQUISITIONS AND DISPOSITIONS.
In September 1996, the Company acquired a recreational vehicle dealership
for $1.9 million cash, which approximated the fair value of the acquired
assets. The acquisition, which has been accounted for as a purchase, was
immaterial to the Company's consolidated financial statements.
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. In conjunction with the acquisition, the Company assumed
liabilities of $8,757,000. The acquisition was accounted for as a purchase
and the excess of the purchase price over the cost of acquired net assets
approximated $5.0 million.
11: COMMITMENTS AND CONTINGENCIES.
Lease Commitments
The Company leases various manufacturing and office facilities under
noncancelable agreements which expire at various dates through November
2006. Several of the leases contain renewal options and options to purchase
and require the payment of property taxes, normal maintenance and insurance
on the properties. Certain office and delivery equipment are also leased
under various noncancelable agreements. The above described leases are
accounted for as operating leases.
Future minimum annual lease commitments at December 31, 1997 aggregated
$1,405,000 and are payable as follows: 1998 - $584,000; 1999 - $280,000;
2000 - $196,000; 2001 - $128,000; 2002 - $78,000 and thereafter - $139,000.
Total rental expense for the years ended December 31, 1997, 1996 and 1995
aggregated $1,472,009, $1,754,272 and $1,222,156, respectively.
Obligation to Purchase Consigned Inventories
The Company obtains vehicle chassis for its recreational and specialized
vehicle products directly from automobile manufacturers under converter pool
agreements. The agreements generally provide that the manufacturer will
provide a supply of chassis at the Company's various production facilities
under the terms and conditions as set forth in the agreement. Chassis are
accounted for as consigned inventory until either assigned to a unit in the
production process or 90 days have passed. At the earlier of these dates,
the Company is obligated to purchase the chassis and it is recorded as
inventory. At December 31, 1997 and 1996, chassis inventory, accounted for
as consigned inventory, approximated $12.6 million and $11.0 million,
respectively.
35
<PAGE>
Coachmen Industries, Inc. And Subsidiaries
Notes To Consolidated Financial Statements, Continued
11: COMMITMENTS AND CONTINGENCIES, Concluded
Repurchase Agreements
The Company is contingently liable 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
financial institution in the event that they have repossessed them upon a
dealer's default. Although the total contingent liability approximated $190
million at December 31, 1997 ($171 million at December 31, 1996), 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.
Self-Insurance
The Company is self-insured for a portion of its product liability and
certain other liability exposures. Depending on the nature of the claim and
the date of occurrence, the Company's maximum exposure ranges from $250,000
to $500,000 per claim. The Company accrues an estimated liability based on
various factors, including sales levels and the amount of outstanding
claims. Management believes the liability recorded is adequate to cover the
Company's self-insured risk.
Litigation
The Company is involved in various legal proceedings which are ordinary
routine 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.
12. INSURANCE SETTLEMENT.
On August 14, 1995, a fire destroyed the Company's Prodesign production
facility. The loss was covered by insurance and estimated insurance
proceeds in excess of the net book value of destroyed assets and related
expenses resulted in a gain of $2.5 million which was included in other
nonoperating income ($.4 million in 1996 and $2.1 million in 1995).
36
<PAGE>
Coachmen Industries, Inc. And Subsidiaries
Notes To Consolidated Financial Statements, Concluded
13: UNAUDITED INTERIM FINANCIAL INFORMATION.
Certain selected unaudited quarterly financial information for the years
ended December 31, 1997 and 1996 is as follows:
1997
Quarter Ended
March 31 June 30 September 30 December 31
Net sales $158,105,811 $169,368,233 $174,885,358 $159,231,783
Gross profit 20,335,371 23,239,398 26,423,429 22,756,815
Net income 4,419,034 6,429,629 7,593,252 6,320,709
Net income per
common share:
Basic .26 .37 .44 .37
Diluted .25 .37 .44 .36
1996
Quarter Ended
March 31 June 30 September 30 December 31
Net sales $148,640,023 $166,715,051 $154,244,238 $136,874,816
Gross profit 19,151,520 24,961,977 24,156,880 20,237,624
Income before cumulative
effect of accounting
change 3,956,973 8,685,723 8,332,563 6,361,571
Net income 6,250,956 8,685,723 8,332,563 6,361,571
Income before cumulative
effect of accounting
change per common
share:
Basic .26 .58 .55 .40
Diluted .26 .57 .54 .39
37
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not Applicable
Part III.
Item 10. Directors and Executive Officers of the Registrant
(a) Identification of Directors
Information for Item 10(a) is contained on page 3 of the Company's Proxy
Statement dated March 23, 1998 and is incorporated herein by reference.
(b) Executive Officers of the Company
See "Executive Officers of the Registrant" on page 8.
Item 11. Executive Compensation
Information for Item 11 is contained under the heading "Compensation of
Executive Officers and Directors" in the Company's Proxy Statement dated
March 23, 1998 and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners
and Management
Information for Item 12 is contained on pages 2 and 3 of the Company's Proxy
Statement dated March 23, 1998 and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Not Applicable
38
<PAGE>
Part IV.
Item 14. Exhibits, Financial Statement
Schedules, and Reports on Form 8-K
(a) (1) Financial Statements Page
Reference
Financial statements included in Part II of the report:
Report of Independent Accountants 17
Consolidated Balance Sheets as of
December 31, 1997 and 1996 18-19
Consolidated Statements of Income and Retained Earnings
for the years ended December 31, 1997, 1996 and 1995 20
Consolidated Statements of Cash Flows for the years
ended December 31, 1997, 1996 and 1995 21-22
Notes to Consolidated Financial Statements for the years
ended December 31, 1997, 1996 and 1995 23-37
(a) (2) Financial Statement Schedules
Report of Independent Accountants on Financial
Statement Schedule 40
Schedule II - Valuation and Qualifying Accounts 41
All other financial statement schedules have been omitted
as they are not required, not applicable or because the
information is included in the Notes to Consolidated
Financial Statements.
(a) (3) Exhibits
See Index to Exhibits
(b) Reports on Form 8-K
No reports on Form 8-K were required to be filed during the last quarter
of the period covered by this report.
39
<PAGE>
Report of Independent Accountants
on Financial Statement Schedule
To the Board of Directors of
Coachmen Industries, Inc.:
Our report on the consolidated financial statements of Coachmen Industries,
Inc. and subsidiaries is included on page 17 of this Form 10-K. In
connection with our audits of such financial statements, we have also audited
the related financial statement schedule listed in Item 14(a)(2) of this
Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
----------------------------
COOPERS & LYBRAND L.L.P.
South Bend, Indiana
January 30, 1998
40
<PAGE>
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
Balance At Charged Balance
Beginning To Costs Deductions- At End
Description Of Period And Expenses Describe Of Period
Allowance for doubtful
receivables - deducted
from trade receivables
in the consolidated
balance sheets:
For the year ended
December 31, 1997 $ 919,000 $1,617,000 $(1,182,000) (A) $1,354.000
For the year ended
December 31, 1996 844,000 158,000 (83,000) (A) 919,000
For the year ended
December 31, 1995 986,000 292,000 (434,000) (A) 844,000
(A) Write-off of bad debts, less recoveries.
41
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
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.
Date: March 27, 1998 G. L. Groom
-----------------------------
G. L. Groom
(Chief Financial Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities as of March 27, 1998.
P. C. Barker K. D. Corson
- ------------------------------- ------------------------------
P. C. Barker K. D. Corson
(Director) (Director)
T. H. Corson G. L. Groom
- ------------------------------- ------------------------------
T. H. Corson G. L. Groom
(Director) (Director)
(Chief Financial Officer)
R. J. Harring W. P. Johnson
- ------------------------------- ------------------------------
R. J. Harring W. P. Johnson
(Director) (Director)
P. G. Lux W. G. Milliken
- ------------------------------- ------------------------------
P. G. Lux W. G. Milliken
(Director) (Director)
C. C. Skinner W. M. Angelo
- ------------------------------- ------------------------------
C. C. Skinner W. M. Angelo
(Director) (Chief Accounting Officer)
(Chief Executive Officer)
42
<PAGE>
INDEX TO EXHIBITS
Number Assigned
In Regulation
S-K, Item 601 Description of Exhibit
(3) No exhibit
(4) No exhibit
(9) No exhibit
(10) No exhibit
(11) No exhibit - See Consolidated Statements of
Income and Retained Earnings (on page 20
herein) and Note 7 of Notes to Consolidated
Financial Statements (on page 30-31 herein).
(12) No exhibit
(13) No exhibit
(16) No exhibit
(18) No exhibit
(21) Registrant and Subsidiaries of the Registrant
(22) No exhibit
(23) Consent of Independent Accountants
(24) No exhibit
(27) Financial Data Schedule (EDGAR filing only)
(99) No exhibit
Exhibit 21
Registrant and Subsidiaries of the Registrant
Percent of Voting
State of Securities Owned
Incorporation By the Registrant
Coachmen Industries, Inc. (Registrant) Indiana
The Lux Co., Inc. Indiana 100%
Michiana Easy Livin' Country, Inc. Indiana 100%
All American Homes, Inc. Indiana 100%
Clarion Motors Corporation Indiana 100%
Coachmen Foreign Sales Corporation U.S. Virgin Islands 100%
Viking Recreational Vehicles, Inc. Michigan 100%
Northwoods RV Country, Inc. Michigan 100%
Georgie Boy Mfg., Inc. Indiana 100%
Coachmen Industries of Texas, Inc. Texas 100%
Coachmen Industries of Oregon, Inc. Oregon 100%
Coachmen Industries of California, Inc. California 100%
Freeway Easy Livin' Country, Inc. California 100%
Gulf Coast Easy Livin' Country, Inc. Florida 100%
VFP Composites, Inc. Florida 100%
Rover, Inc. Ohio 100%
All American Homes of Iowa, Inc. Iowa 100%
Southern Ambulance Builders, Inc. Georgia 100%
Colfax Country RV, Inc. North Carolina 100%
All American Homes of
North Carolina, Inc. North Carolina 100%
All American Homes of Tennessee, Inc. Tennessee 100%
Exhibit 23
(LETTERHEAD OF COOPERS & LYBRAND L.L.P.)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements
of Coachmen Industries, Inc. on Form S-8 (File No. 33-59251, No. 2-45373,
No. 2-47923, No. 2-56027 and No. 2-64572) and in the related Prospectus of
our reports dated January 30, 1998, on our audits of the consolidated
financial statements and financial statement schedule of Coachmen Industries,
Inc. and subsidiaries as of December 31, 1997 and 1996, and for each of the
three years in the period ended December 31, 1997, which reports are included
in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
------------------------------
COOPERS & LYBRAND L.L.P.
South Bend, Indiana
March 27, 1998
<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> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996<F1> DEC-31-1995<F1>
<PERIOD-END> DEC-31-1997 DEC-31-1996 DEC-31-1995
<CASH> 71,428 66,449 17,021
<SECURITIES> 15,853 500 500
<RECEIVABLES> 31,308 25,462 25,395
<ALLOWANCES> 1,354 919 863
<INVENTORY> 68,416 68,311 55,434
<CURRENT-ASSETS> 189,938 163,913 101,722
<PP&E> 81,739 69,172 59,045
<DEPRECIATION> 35,137 29,314 27,298
<TOTAL-ASSETS> 259,062 227,448 150,249
<CURRENT-LIABILITIES> 49,676 38,522 41,135
<BONDS> 12,591 14,841 12,118
<COMMON> 71,139 70,672 21,548
0 0 0
0 0 0
<OTHER-SE> 118,997 96,984 69,490
<TOTAL-LIABILITY-AND-EQUITY> 259,062 227,448 150,249
<SALES> 661,591 606,474 515,862
<TOTAL-REVENUES> 661,591 606,474 515,862
<CGS> 568,836 517,966 444,627
<TOTAL-COSTS> 626,331 566,802 489,203
<OTHER-EXPENSES> 3,565 1,811 1,298
<LOSS-PROVISION> 1,617 158 292
<INTEREST-EXPENSE> 2,544 1,572 3,142
<INCOME-PRETAX> 38,826 41,483 27,957
<INCOME-TAX> 14,063 14,146 10,408
<INCOME-CONTINUING> 24,763 27,337 17,549
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 2,294 0
<NET-INCOME> 24,763 29,631 17,549
<EPS-PRIMARY> 1.44 1.94 1.18
<EPS-DILUTED> 1.42 1.91 1.17
<FN>
<F1>RESTATED.
</FN>
</TABLE>
