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, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OFTHE
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, 1998:
Common Shares, without par value 17,390,249 shares outstanding
including an equivalent number of common share purchase rights.
<PAGE> 1
COACHMEN INDUSTRIES, INC.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Financial Statements:
Condensed Consolidated Balance Sheets-
March 31, 1998 and December 31, 1997....................3-4
Condensed Consolidated Statements of Income-
Three Months Ended March 31, 1998 and 1997.............. 5
Condensed Consolidated Statements of Cash Flows-
Three Months Ended March 31, 1998 and 1997.............. 6
Notes to Condensed Consolidated Financial Statements.....7
Management's Discussion and Analysis of Financial
Condition and Results of Operations........................8-11
PART II. OTHER INFORMATION.................................... 12
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES..................................................... 12
This Report contains certain statements that are "forward-looking" statements
within the meaning of Section 27A of the Securities 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 occurrence 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.
<PAGE> 2
COACHMEN INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
1998 1997
ASSETS
CURRENT ASSETS
Cash and temporary cash investments $ 46,030,925 $71,427,918
Short-term investments 20,803,930 15,852,718
Trade receivables, less allowance for
doubtful receivables 1998 - $1,152,000
and 1997 - $1,354,000 35,816,166 25,212,595
Other receivables 3,678,693 2,980,257
Refundable income taxes 1,761,000 1,761,000
Inventories 84,978,233 68,416,006
Prepaid expenses and other 1,546,197 1,247,973
Deferred income taxes 3,040,000 3,040,000
Total current assets 197,655,144 189,938,467
PROPERTY AND EQUIPMENT, at cost
Land and improvements 10,640,807 9,041,817
Buildings and improvements 45,817,834 39,950,161
Machinery and equipment 17,630,309 16,874,788
Transportation equipment 12,496,782 10,159,168
Office furniture and fixtures 5,954,726 5,712,961
Total property and equipment, at cost 92,540,458 81,738,895
Less, Accumulated depreciation 36,731,636 35,137,268
Net property and equipment 55,808,822 46,601,627
OTHER ASSETS
Real estate held for sale 4,089,603 4,188,063
Rental properties 1,417,592 2,000,218
Intangibles, less accumulated amortization
1998 - $550,498 and 1997 - $516,469 4,893,778 4,927,807
Deferred income taxes 569,000 569,000
Other 10,171,431 10,836,844
Total other assets 21,141,404 22,521,932
TOTAL ASSETS $274,605,370 $259,062,026
The accompanying notes are part of the condensed
consolidated financial statements.
<PAGE> 3
COACHMEN INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (CONT'D)
MARCH 31, DECEMBER 31,
1998 1997
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 2,258,519 $ 2,258,519
Accounts payable, trade 28,342,350 22,818,303
Accrued wages, salaries and commissions 4,158,364 4,876,790
Accrued dealer incentives 4,252,197 3,226,255
Accrued warranty expense 6,059,666 6,013,528
Accrued income taxes 4,306,526 1,529,543
Accrued insurance 3,183,365 2,319,518
Other liabilities 7,977,433 6,633,762
Total current liabilities 60,538,420 49,676,218
LONG-TERM DEBT 11,032,632 12,591,144
OTHER 6,693,661 6,658,872
Total liabilities 78,264,713 68,926,234
SHAREHOLDERS' EQUITY
Common shares, without par value: authorized
60,000,000 shares; issued 1998 - 20,768,343
shares and 1997 - 20,689,214 shares 88,261,484 87,519,740
Additional paid-in capital 3,035,198 3,012,596
Retained earnings 121,416,613 115,984,289
Treasury shares, at cost: 1998 - 3,386,462
Shares and 1997 - 3,387,648 shares (16,372,638) (16,380,833)
Total shareholders' equity 196,340,657 190,135,792
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $274,605,370 $259,062,026
The accompanying notes are part of the condensed consolidated
financial statements.
<PAGE> 4
COACHMEN INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS
ENDED MARCH 31,
1998 1997
Net sales $175,637,459 $158,105,811
Cost of goods sold 152,261,070 137,770,440
Gross profit 23,376,389 20,335,371
Operating expenses:
Selling and delivery 9,066,279 8,330,879
General and administrative 6,775,098 6,007,899
15,841,377 14,338,778
Operating income 7,535,012 5,996,593
Nonoperating income (expense):
Interest expense (465,160) (356,256)
Investment income 1,128,083 992,464
Gain on sale of properties, net 5,034 9,456
Other, net 873,446 93,777
1,541,403 739,441
Income before income taxes 9,076,415 6,736,034
Income taxes 2,777,000 2,317,000
Net income $ 6,299,415 $ 4,419,034
Earnings per common share:
Basic $ .36 $ .26
Diluted $ .36 $ .25
Number of common shares used in the
computation of earnings per share:
Basic 17,339,620 17,202,020
Diluted 17,633,166 17,433,965
Cash dividends per common share $ .05 $ .05
The accompanying notes are part of the condensed consolidated
financial statements.
<PAGE> 5
COACHMEN INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS
ENDED MARCH 31,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash provided by (used in)
operating activities $(6,180,627) $ 11,269,442
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from:
Sale of short-term investments 31,291,922 -
Sale of properties 111,262 113,707
Acquisitions of:
Short-term investments (36,352,312) -
Property and equipment (4,365,594) (3,951,450)
Businesses (9,001,812) -
Other 322,705 410,906
Net cash (used in) investing
activities (17,993,829) (3,426,837)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of long-term debt (1,558,512) (1,557,610)
Issuance of common shares under stock
option and stock purchase plans 741,744 214,927
Tax benefit from stock options exercised 461,322 35,440
Cash dividends paid (867,091) (860,030)
Net cash (used in) financing activities (1,222,537) (2,167,273)
Increase (decrease) in cash and temporary
cash investments (25,396,993) 5,675,332
CASH AND TEMPORARY CASH INVESTMENTS
Beginning of period 71,427,918 66,448,901
End of period $ 46,030,925 $ 72,124,233
Noncash investing and financing
activities:
Liabilities assumed in acquisitions
of businesses $ 795,000 $ -
The accompanying notes are part of the condensed consolidated
financial statements.
<PAGE> 6
COACHMEN INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated balance sheet data as of December 31, 1997 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, 1998 are
not necessarily indicative of the results to be expected for the full year.
3. Inventories consist of the following:
March 31, December 31,
1998 1997
Raw material $ 24,779,920 $ 19,437,977
Work-in-process 9,754,803 9,327,308
Finished goods 50,443,510 39,650,721
Total $ 84,978,233 $ 68,416,006
4. The Company was contingently liable at March 31, 1998 to banks
and other financial institutions on repurchase agreements in
connection with financing provided by such institutions to most of
the Company's independent dealers in connection with their purchase
of the Company's recreational vehicle products. These agreements
provide for the Company to repurchase its products from the
financing institution in the event that they have repossessed them
upon a dealer's default. The risk of loss resulting from these
agreements is spread over the Company's numerous dealers and is
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.
5. On February 3, 1998, the Company acquired certain assets and the
operations of three retail recreational vehicle dealerships, two located
in Florida and one in Georgia. The assets acquired consisted of new and
used unit inventories, real and personal property, parts inventories,
tools and supplies and other miscellaneous items. The purchase price,
which aggregated $9.8 million and approximated the fair value of the
acquired assets, consisted of $9.0 million in cash and the balance in the
assumption of certain liabilities of the sellers. The acquisitions were
accounted for as a purchase and the operating results of the acquired
businesses are included in the Company's consolidated financial
statements from the date of acquisition. Pro forma financial information
has not been presented as it is not materially different from the
Company's historical results.
<PAGE> 7
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, 1998 and 1997
Increases (Decreases)
Amount Percentage
Net sales $ 17,531,648 11.1%
Cost of goods sold 14,490,630 10.5
Selling and
delivery expenses 735,400 8.8
General and
administrative expenses 767,199 12.8
Interest expense 108,904 30.6
Investment income 135,619 13.7
Gain on sale of
properties, net (4,422) *
Other, net 779,669 *
Income before income taxes 2,340,381 34.7
Income taxes 460,000 19.9
Net income 1,880,381 42.6
* Not meaningful
<PAGE> 8
NET SALES
Consolidated net sales for the quarter ended March 31, 1998 were
$175,637,459, an increase of 11.1% over $158,105,811 reported in the same
quarter of 1997. The Company's vehicle segment, which includes the parts and
supply businesses, experienced a sales increase of 12.2%. Although unit sales
of towable products increased from the 1997 period, unit sales of motorized
products posted the largest sales gains. The Company's housing segment
experienced a 4.9% increase in net sales for the quarter compared to last
year's first quarter. This increase would have been higher if weather
conditions had not delayed delivery of many sold homes. While the RV segment
was up in the number of units sold, the Housing segment was nearly unchanged
in the number of units sold compared to the first quarter of 1997. Both RV and
housing segments experienced increases in the average sales price per unit.
COST OF GOODS SOLD
Cost of goods sold increased 10.5% or $14,490,630 for the three months ended
March 31, 1998. The increase is substantially in line with the increase in
net sales. Cost of goods sold as a percentage of net sales was 86.7% for the
1998 quarter and 87.1% for the 1997 quarter. This percentage decrease is
attributable to the 1997 capacity start-up costs incurred in the RV segment
which were absorbed in the prior period. For both quarters, 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 in 1998 attributable to the implementation of a 7-day work week
production schedule at the Company's largest housing facility, though there has
been an improvement in the costs associated with this transition.
OPERATING EXPENSES
As a percentage of net sales, operating expenses, which include selling,
delivery, general and administrative expenses, were 9.0% and 9.1% for the
quarters ended March 31, 1998 and 1997, respectively. Selling expenses were
4.8% both periods, while delivery expenses decreased .1%. General and
administrative expenses were 3.9% of net sales for the first quarter of 1998
and 3.8% of net sales for the first quarter of 1997.
INTEREST EXPENSE
Interest expense was $465,160 and $356,256 for the quarters ended March 31,
1998 and 1997, respectively. The increase was primarily the result of a
smaller estimated increase in cash surrender value for the Company's
investment in life insurance contracts in 1998 than in 1997. These life
insurance contracts have been 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> 9
INVESTMENT INCOME
Investment income increased $135,619 for the 1998 quarter from 1997.
Investment income is indicative of the amounts of cash and temporary cash
investments, as well as, short-term investments in 1998 compared to 1997.
GAIN ON THE SALE OF PROPERTIES, NET
The net gain on the sale of properties for the quarter ended March 31, 1998
was $5,034 while the comparative quarter in 1997 was a gain of $9,456. This
classification represents the net result of the amount of gain or loss
recognized upon the disposition of various small properties.
OTHER, NET
Other income, net, represents income of $873,446 for the 1998 first quarter
and $93,777 for the 1997 first quarter. The larger amount in 1998 is
principally attributed to the recognition of $762,000 of key-man life
insurance proceeds during the quarter.
INCOME TAXES
For the first quarter ended March 31, 1998, the effective tax rate was 30.6%
compared to a first quarter tax rate of 34.4% in 1997. The Company's
effective tax rate fluctuates based upon the states where sales occur and
also with the level of export sales. The first quarter of 1998 was also
impacted by the amount of nontaxable income realized from the recognition of
key-man life insurance proceeds.
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, 1998, to meet its seasonal
working capital needs. At March 31, 1998, there were no borrowings against
this line of credit. For the three months ended March 31, 1998, the major
uses of cash were investing and operating activities. The significant
investing activities were purchases, net of sales, of short-term investments,
the acquisition of three businesses (recreational vehicle retail stores) and
capital expenditures. Property and equipment acquisitions consumed cash
during the quarter primarily from the construction of an All American Homes
manufacturing facility in the state of Ohio and the purchase of an existing
recreational vehicle manufacturing facility in Indiana. The significant uses
of cash in operating activities were the increase in receivables, due the
increase in net sales, and the increase in inventories. Inventories were
increased in anticipation of the seasonal selling patterns. The negative
cash flow from financing activities was primarily for cash dividends and
repayment of long-term debt.
<PAGE> 10
At March 31, 1998, working capital decreased to $137.1 million from $140.3
million at December 31, 1997. The $7.7 million increase in current assets at
March 31, 1998 versus December 31, 1997, was primarily due to increased
receivables and inventories. The larger increase in current liabilities of
$10.9 million is substantially due to increased trade payables, accrued
income taxes and other accrued liabilities, including insurance.
<PAGE> 11
PART II. OTHER INFORMATION
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, 1998 _______________________________
Gary L. Groom, Executive Vice
President - Finance (Principal
Financial Officer)
s/s: WILLIAM M. ANGELO
Date: May 13, 1998 _______________________________
William M. Angelo, Corporate
Controller (Principal Accounting
Officer)
<PAGE> 12
<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>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997<F1>
<PERIOD-END> MAR-31-1998 MAR-31-1997
<CASH> 46,031 72,124
<SECURITIES> 20,804 500
<RECEIVABLES> 42,408 37,205
<ALLOWANCES> 1,152 1,007
<INVENTORY> 84,978 61,300
<CURRENT-ASSETS> 197,655 176,040
<PP&E> 92,540 73,104
<DEPRECIATION> 36,732 30,664
<TOTAL-ASSETS> 274,605 241,828
<CURRENT-LIABILITIES> 60,538 50,483
<BONDS> 11,033 13,291
<COMMON> 71,889 70,904
0 0
0 0
<OTHER-SE> 124,452 100,578
<TOTAL-LIABILITY-AND-EQUITY> 274,605 241,828
<SALES> 175,637 158,106
<TOTAL-REVENUES> 175,637 158,106
<CGS> 152,261 137,771
<TOTAL-COSTS> 168,102 152,109
<OTHER-EXPENSES> (1,541) (739)
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<INTEREST-EXPENSE> 465 356
<INCOME-PRETAX> 9,076 6,731
<INCOME-TAX> 2,777 2,317
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<F1>RESTATED
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