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 September 30, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________to_____________________
Commission file number 1-7160
COACHMEN INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
INDIANA 35-1101097
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification number)
2831 DEXTER DRIVE, 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 October 31, 1999:
Common Shares, without par value 15,722,449 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-
September 30, 1999 and December 31, 1998.................. 3-4
Condensed Consolidated Statements of Income-
Three and Nine Months Ended September 30, 1999 and 1998... 5
Condensed Consolidated Statements of Cash Flows-
Nine Months Ended September 30, 1999 and 1998............. 6
Notes to Condensed Consolidated Financial Statements...... 7-8
Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................... 9-14
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K..................... 15
SIGNATURES........................................................ 16
This Form 10-Q 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. These forward looking statements involve risks and
uncertainties, and are dependent on factors which may include, but are
not limited 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; government laws and regulations, particularly related to
safety, distribution and franchising, which may affect the way
business is conducted; and also on the state of the recreational vehicle
and modular housing industries in the United States. Other factors
affecting forward-looking statements include competition in these
industries and the Company's ability to maintain or increase gross
margins which are critical to profitability whether there are or are
not increased sales; and the Company's ability to implement its new
enterprise-wide technology system or make its software and equipment
Year 2000 compliant.
At times, the Company's actual performance differs 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 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
(in thousands)
SEPTEMBER 30, DECEMBER 31,
1999 1998
ASSETS
CURRENT ASSETS
Cash and temporary cash investments $ 8,020 $ 23,009
Marketable securities 32,424 31,279
Trade receivables, less allowance for
doubtful receivables 1999 - $956
and 1998 - $1,032 53,171 27,585
Other receivables 2,215 1,838
Refundable income taxes 857 3,741
Inventories 108,791 93,350
Prepaid expenses and other 1,852 1,341
Deferred income taxes 3,268 3,268
Total current assets 210,598 185,411
PROPERTY AND EQUIPMENT, at cost
Land and improvements 11,698 11,017
Buildings and improvements 58,521 53,761
Machinery and equipment 22,374 19,713
Transportation equipment 12,239 11,176
Office furniture and fixtures 14,418 8,850
119,250 104,517
Less, Accumulated depreciation 45,064 41,445
Net property and equipment 74,186 63,072
OTHER ASSETS
Real estate held for sale 2,622 2,622
Rental properties 1,331 1,372
Intangibles, less accumulated amortization
1999 - $612 and 1998 - $517 4,458 4,553
Deferred income taxes 579 579
Other 11,799 10,867
Total other assets 20,789 19,993
TOTAL ASSETS $305,573 $268,476
The accompanying notes are part of the condensed consolidated
financial statements.
<PAGE> 3
COACHMEN INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (CONT'D)
(in thousands)
SEPTEMBER 30, DECEMBER 31,
1999 1998
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 1,825 $ 2,125
Accounts payable, trade 40,727 18,997
Accrued wages, salaries and commissions 7,939 4,358
Accrued dealer incentives 3,526 3,784
Accrued warranty expense 6,556 6,138
Accrued income taxes 3,082 1,509
Accrued insurance 554 1,863
Other liabilities 7,393 6,944
Total current liabilities 71,602 45,718
LONG-TERM DEBT 8,766 10,191
OTHER 6,592 7,109
Total liabilities 86,960 63,018
SHAREHOLDERS' EQUITY
Common shares, without par value: authorized
60,000 shares; issued 1999 - 20,946
shares and 1998 - 20,843 shares 90,168 89,105
Additional paid-in capital 3,960 3,867
Retained earnings 169,535 145,614
Treasury shares, at cost, 1999 - 4,984
shares and 1998 - 4,258 shares (45,050) (33,128)
Total shareholders' equity 218,613 205,458
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $305,573 $268,476
The accompanying notes are part of the condensed consolidated
financial statements.
<PAGE> 4
COACHMEN INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
1999 1998 1999 1998
Net sales $226,114 $202,593 $640,338 $579,300
Cost of goods sold 195,024 171,578 552,967 494,714
Gross profit 31,090 31,015 87,371 84,586
Operating expenses:
Selling and delivery 10,362 9,627 30,003 27,516
General and administrative 5,843 6,451 19,747 21,262
Total operating expenses 16,205 16,078 49,750 48,778
Operating income 14,885 14,937 37,621 35,808
Nonoperating income (expense):
Interest expense (531) (641) (1,508) (1,444)
Investment income 249 1,182 1,533 3,615
Gain (loss) on sale of
properties, net 37 (11) 1,432 (55)
Other income, net 81 192 1,130 1,127
Total nonoperating
Income (expense) (164) 722 2,587 3,243
Income before income taxes 14,721 15,659 40,208 39,051
Income taxes 5,196 5,472 13,797 13,242
Net income $ 9,525 $ 10,187 $ 26,411 $ 25,809
Earnings per common share:
Basic $ .58 $ .59 $ 1.59 $ 1.49
Diluted $ .58 $ .59 $ 1.59 $ 1.48
Number of common shares used in
the computation of earnings
per share:
Basic 16,496 17,199 16,595 17,312
Diluted 16,548 17,304 16,655 17,430
Cash dividends per common share $ .05 $ .05 $ .15 $ .15
The accompanying notes are part of the condensed consolidated
financial statements.
<PAGE> 5
COACHMEN INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
NINE MONTHS
ENDED SEPTEMBER 30,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash provided by operating activities $ 18,612 $ 24,240
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from:
Sale of marketable securities 134,703 104,023
Sale of properties 1,946 2,020
Acquisitions of:
Marketable securities (137,391) (113,652)
Property and equipment (17,491) (15,181)
Businesses - (9,002)
Other (637) 300
Net cash (used in) investing activities (18,870) (31,492)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of long-term debt (1,725) (2,125)
Issuance of common shares under stock
option and stock purchase plans 1,063 1,385
Tax benefit from stock options exercised 394 753
Purchases of common shares for the treasury (11,972) (14,612)
Cash dividends paid (2,491) (2,609)
Net cash (used in) financing activities (14,731) (17,208)
Decrease in cash and temporary
cash investments (14,989) (24,460)
CASH AND TEMPORARY CASH INVESTMENTS
Beginning of period 23,009 71,428
End of period $ 8,020 $ 46,968
Noncash investing and financing
activities:
Liabilities assumed in acquisitions
of businesses $ - $ 795
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 at December 31, 1998 was
derived from audited financial statements, but does not include all
disclosures required by generally accepted accounting principles.
2. In the opinion of management, the information furnished herein
includes all adjustments of a normal and recurring nature necessary
to reflect a fair statement of the interim periods reported. The
results of operations for the three and nine months ended
September 30, 1999 are not necessarily indicative of the results to
be expected for the full year.
3. Inventories consist of the following (in thousands):
September 30, December 31,
1999 1998
Raw material $ 45,395 $ 29,692
Work-in-process 19,704 11,512
Finished goods 43,692 52,146
Total $108,791 $ 93,350
4. The Company was contingently liable at September 30, 1999 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. In 1998, the Company adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." The Company
has determined that its reportable segments are those that are based
on the Company's method of internal reporting, which disaggregates
its business by product category. The Company's two reportable
segments are: Vehicles (recreational, vans and specialized),
including related parts and supplies, and Housing (modular). The
Company evaluates the performance of its segments and allocates
resources to them based on pretax income. Differences between
reported segment amounts and corresponding consolidated totals
represent corporate expenses for administrative functions and costs
or expenses relating to property and equipment that are not
allocated to segments.
<PAGE> 7
The table below presents information about segments used by the
chief operating decision maker of the Company for the nine months
ended September 30, 1999 and 1998 (in thousands):
1999 1998
Net sales:
Vehicles $525,736 $484,441
Housing 114,602 94,859
Consolidated total $640,338 $579,300
Pretax income:
Vehicles $ 25,365 $ 28,808
Housing 11,710 7,827
Other reconciling items 3,133 2,416
Consolidated total $ 40,208 $ 39,051
Total assets:
Vehicles $186,641 $149,336
Housing 41,244 41,399
Other reconciling items 77,688 92,952
Consolidated total $305,573 $283,687
6. Change in Accounting Principle
Effective January 1, 1999, the Company adopted SOP 98-1, Accounting
for Costs of Computer Software. For years beginning after December
15, 1998, SOP 98-1 requires internal and external costs incurred to
develop internal-use computer software during the application
development stage to be capitalized and amortized over the
software's useful life. During the quarter and nine months ended
September 30, 1999, the Company capitalized $609,000 and $2,272,000,
respectively, of internal costs which previously would have been
expensed under generally accepted accounting principles. These
capitalized internal costs are related to the Company's new
enterprise-wide technology system which is currently being
implemented. The effect of this change in accounting principle for
the quarter and nine months ended September 30, 1999 was to increase
net income by approximately $394,000 and $1,493,000, respectively,
or $.02 per share (basic and diluted) for the quarter and $.09 per
share (basic and diluted) for the nine months.
<PAGE> 9
COACHMEN INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors which have affected the Company's financial condition, results of
operations and cash flows during the periods included in the accompanying
condensed consolidated financial statements.
A summary of the changes in the principal items included in the
condensed consolidated statements of income is shown below.
Comparison of
Three Months Nine Months
Ended September 30, 1999 and 1998
($ in thousands)
Increases (Decreases)
Net sales $ 23,521 11.6% $61,038 10.5%
Cost of goods sold 23,446 13.7 58,253 11.8
Selling and
delivery expenses 735 7.6 2,487 9.0
General and
administrative expenses (608) (9.4) (1,515) (7.1)
Interest expense (110) (17.2) 64 4.4
Investment income (933) (78.9) (2,082) (57.6)
Gain (loss) on sale of
properties, net 48 * 1,487 *
Other income, net (111) (57.8) 3 *
Income before income taxes (938) (6.0) 1,157 3.0
Income taxes (276) (5.0) 555 4.2
Net income (662) (6.5) 602 2.3
* Not meaningful
<PAGE> 9
NET SALES
Consolidated net sales for the quarter ended September 30, 1999 were
$226.1 million, an increase of 11.6% over the $202.6 million reported
for the corresponding quarter last year. Net sales for the nine months
were $640.3 million, representing an increase of 10.5% over the $579.3
million reported for the same period in 1998. The Company's vehicle
segment experienced a net sales increase of 9.9% for the quarter and a
net sales increase of 8.5% for the nine months. The net sales increase
for the third quarter reflects a number of unit sales that were delayed
from the second quarter due to problems with the implementation of a new
enterprise-wide technology system in several of the Company's operations
and other unrelated supplier problems. The increase in net sales for the
nine months is attributed to the overall increases in the recreational
vehicle market. The Company's housing segment had a net sales increase
for the 1999 quarter of 19.7% and 20.8% for the nine months with growing
demand for the Company's modular housing products and also as the result
of increased capacity.
COST OF GOODS SOLD
Cost of goods sold increased 13.7% or $23.4 million for the three
months and 11.8% or $58.3 million for the nine months ended September
30, 1999. The increase for both periods is higher than the increase in
net sales. As a percentage of net sales, cost of goods sold increased
1.6% and 1.0% for the quarter and nine months, respectively, from the
comparable prior year periods. While the housing segment experienced a
decrease in the percentage of cost of goods sold to net sales, the
overall percentage increases are attributable to the RV segment. These
percentages reflect the impact of a sales mix with increased motorized
products, which has a higher cost of goods sold percentage due to the
chassis and also due to implementation related costs and inefficiencies
associated with the Company's investment in new enterprise-wide
technology and operating systems, as well as, the costs associated with
the start-up of a new Class A production facility in Indiana.
OPERATING EXPENSES
As a percentage of net sales, operating expenses, which include selling,
delivery, general and administrative expenses, were 7.2% for the 1999
quarter and 7.8% for the nine months while for the comparable periods
they were 7.9% for the 1998 quarter and 8.4% for the 1998 nine months.
Selling and delivery expenses, as a percentage of net sales, decreased
by .2% for the quarter with no change for the 1999 and 1998 nine months.
The change for the quarter is primarily due to a slight decrease in
selling expenses. General and administrative expenses were 2.6% of net
sales for the third quarter compared to 3.2% for the 1998 corresponding
quarter and 3.1% of net sales for the nine-month period compared to 3.7%
for 1998. These decreases in both the quarter and nine-month periods
primarily reflect the capitalization of compensation and related costs
with the implementation the new enterprise-wide technology systems. (see
Note 6 of Notes to Condensed Consolidated Financial Statements regarding
Change in Accounting Principle).
INTEREST EXPENSE
Interest expense was $531,000 and $1,508,000 for the three and nine-
month periods in 1999 compared to $641,000 and $1,444,000 in the same
periods last year. Interest expense varies with the amount of long-term
debt and the increase in cash surrender value for the Company's
investment in life insurance contracts. These life insurance contracts
<PAGE> 10
were purchased to fund obligations under deferred compensation
agreements with executives and other key employees. The interest costs
associated with deferred compensation obligations and with the
borrowings against the cash value of the insurance policies are
partially offset by the increases in cash surrender values.
INVESTMENT INCOME
Investment income decreased $933,000 and $2,082,000 respectively, for
the 1999 three and nine-month periods. This decrease in investment
income is principally due to the reduction in interest income as the
result of less funds being invested in the 1999 periods.
GAIN (LOSS) ON THE SALE OF PROPERTIES, NET
There was a net gain on the sale of properties for the third quarter of
1999 of $37,000 compared with a loss of $11,000 in the same quarter
of 1998. The net gain (loss) on the sale of properties was $1,432,000
and $(55,000) for the nine months ended September 30, 1999 and 1998,
respectively. The gain for the 1999 nine months was substantially due to
the sale of real estate in Indiana, including the corporate
administrative building. Assets are continually analyzed and every
effort is made to sell or dispose of properties that are determined to
be unproductive.
OTHER INCOME, NET
Other income, net, represents income of $81,000 for the third quarter
and $1,130,000 for the nine months compared to income of $192,000 and
$1,127,000 for the 1998 third quarter and nine months, respectively. The
most significant item of income for the nine months was from the sale of
a Company-owned dealership in the state of Georgia. The principal amount
in the 1998 nine months is attributed to the receipt of nontaxable
income realized from corporate owned life insurance proceeds.
INCOME TAXES
For the third quarter ended September 30, 1999, the effective tax rate
was 35.3% and a year-to-date rate of 34.3% compared with a 1998 third
quarter and year-to-date effective tax rate of 34.9% and 33.9%,
respectively. The Company's effective tax rate fluctuates based upon the
states where sales occur, with the level of export sales and also with
the level of nontaxable income recognized from investing activities.
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 September 30,
1999, to meet its seasonal working capital needs. At September 30,
1999, there were no borrowings against this line of credit. For the nine
months ended September 30, 1999, the major source of cash was from
operating activities. The significant items in operating activities
which generated positive cash flow were net income, depreciation and an
increase in trade accounts payable. The positive cash flow from these
items was partially offset by increases in trade receivables and
inventories. Investing activities reflected a net cash use of $18.9
million. The principal use of cash in investing activities was the
acquisition of property and equipment, including the acquisition of a
new corporate administration facility in Indiana, a new addition and
remodeling costs at an RV manufacturing facility in Georgia and the
<PAGE> 11
acquisition of machinery and equipment for the Company's parts &
supply group. Software and additional hardware requirements in connection
with the Company's implementation of its new enterprise-wide technology
system were also significant uses of cash for investing activities. The
negative cash flow from financing activities was primarily for purchases of
common shares for the treasury, cash dividends and repayment of long-term debt.
At September 30, 1999, there was a slight decrease in working capital,
to $139.0 million from $139.7 million at December 31, 1998. The $25.2
million increase in current assets at September 30, 1999 versus December
31, 1998, was primarily due to increased trade receivables and
inventories. The $25.9 million increase in current liabilities was
principally attributable to increased trade accounts payable. The
increases in trade receivables, inventories and trade accounts payable
are directly related to the increased sales activity and in part are
attributable to the implementation of the new enterprise-wide technology
system, i.e. the system has temporarily impacted the process for billing
and collecting receivables, as well as, monitoring inventory levels.
Year 2000
The Year 2000 issue relates to the way computer systems, software and
some equipment define calendar dates; they could fail or make
miscalculations due to interpreting a date including "00" to mean 1900,
not 2000. In 1997, the Company 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 could have been
unable to process transactions beyond December 31, 1999. If correction
or replacement of the software was not completed in a timely manner, the
Year 2000 issue could have a material impact on the Company's operations
and could result in an interruption in, or failure of, certain normal
business activities or operations.
The assessment phase of the Company's software, systems and equipment
began in 1997. It was initially determined that the systems most likely
to be affected by the Year 2000 issue were the general accounting
systems and payroll. To remedy the Year 2000 issue with regard to
these areas, the Company began devoting significant resources to replace
the affected software with a new enterprise-wide technology system. As
of September 30, 1999, the implementation status of general accounting
systems and payroll is 100% complete for the entire Company. The
implementation of the manufacturing and distribution portions of the
enterprise-wide technology system is complete for four divisions of the
RV segment. One additional division from this segment will be complete
for manufacturing and distribution systems as of November 1, 1999. The
implementation of these systems for the remaining divisions in the RV
and Housing segments will be halted or delayed until the year 2000. For
those divisions that will not be transferred to the new manufacturing
and distribution systems in 1999, the Company's existing software is
being reprogrammed to be Year 2000 compliant. The Company estimates that
this process is 80% complete at September 30, 1999. Testing and
implementation of the new enterprise-wide technology system and
reprogrammed legacy systems of the Company is occurring on an ongoing
basis throughout 1999 and is expected to be complete in adequate time to
enable proper processing of transactions throughout the Company before
January 1, 2000.
The Company also initiated a senior management focus team in 1998 to
identify and review other possible business system failures that could
occur and to assess the need for contingency plans. The focus team has
<PAGE> 12
determined that the Company's equipment with embedded systems is Year
2000 compliant. The focus team does not believe the Company's equipment
is, for the most part, calendar-date sensitive.
The Company believes the key risk factors associated with Year 2000 are
those from outside the Company that it cannot directly control, such as
the readiness of its key material suppliers, dealers, customers,
financial institutions and public infrastructure suppliers. The Company
relies on third parties to provide goods and services necessary for the
manufacture and distribution of its products. The focus team has
prioritized and communicated with third-party suppliers about the status
of their compliance with Year 2000 issues. The Company has been assured
by 100% of its high priority mission critical suppliers that they are
Year 2000 compliant. The Company sells its products to numerous
independent dealers. Management believes the risk associated with Year
2000 compliance by the dealers is minimized since the risk is spread
among the dealers. Despite their assurances, due to the uncertainty of
the Year 2000 readiness of third parties, the Company is unable to
determine whether the consequences of Year 2000 failures of third
parties will have a material impact on the Company's operations. The
worst case scenario could include halting of production due to the
inability of a single source supplier to deliver critical product or
component. The largest exposure appears to be the Company's interface
with chassis manufacturers for order processing. The Company believes
these order processing systems to be Year 2000 compliant based on
statements from representatives of the companies involved. The chassis
suppliers have also advised the Company that the chassis are Year 2000
compliant. While the Company has obtained assurance from its mission
critical third parties that they will be compliant, there can be no
assurance that the systems of any third party on which the Company's
operations rely will be timely compliant. Nevertheless, based on their
assurances, the Company does not anticipate a material impact on its
operations from direct interfaces with third parties.
The Company believes the worst case scenario for Year 2000 issues would
be the disruption or unavailability of utility services. This could
hinder or stop the performance of normal business functions, such as
manufacturing and selling, and might disrupt retail demand. However, due
to the multiple business locations of the Company, its manufacturing
facilities, and its owned and independent retail outlets, normal
business functions could continue at those locations where utility
disruptions or unavailability did not occur. If they do occur, it is
expected they will be temporary, and some utility services may be
available from remote locations, as through electric grids.
The focus team has developed contingency plans to protect the Company's
facilities from damage due to the disruption or unavailability of
utility services, from interruptions of the supply of components
critical to ongoing production, and to protect the electronic
information it relies upon to conduct its business. Steps necessary to
implement those plans are being taken and the Company believes that the
plans will be ready for implementation if necessary, before December 31,
1999.
Based on a review of its products by segment, vehicles and housing, the
Company has determined that the products it has sold and will continue
to sell should not require remediation to be Year 2000 compliant.
Accordingly, the Company does not believe that the Year 2000 presents a
material exposure as it relates to the Company's products.
The objective of the Company and each of its operating subsidiaries is
<PAGE> 13
to have all of their significant business systems, including those that
affect facilities and manufacturing activities, functioning properly
with respect to Year 2000, before January 1, 2000. At September 30,
1999, the total cost is currently estimated to be in excess of $11.9
million, exclusive of some uncapitalized internal labor costs.
Approximately $9.8 million has been incurred as of September 30, 1999.
Of the amount incurred, $1.9 million has been expensed and $7.9 million
has been capitalized for new systems and equipment. In addition, the
Company estimates it has incurred approximately $2.1 million in
uncapitalized internal labor costs during 1997 and 1998. (see Note 6 of
Notes to Condensed Consolidated Financial Statements regarding Change in
Accounting Principle.) All costs are being funded through operating cash
flows. These costs do not include any costs associated with the
implementation of contingency plans.
<PAGE> 14
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
<PAGE> 15
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/ JAMES E. JACK
Date: November 12, 1999 _______________________________
James E. Jack
Executive Vice President
Chief Financial Officer
/s/ WILLIAM M. ANGELO
Date: November 12, 1999 _______________________________
William M. Angelo
Vice President
Chief Accounting Officer
<PAGE 16>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated statement of income and consolidated balance sheet and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000021212
<NAME> COACHMEN INDUSTRIES, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 8,020
<SECURITIES> 32,424
<RECEIVABLES> 57,199
<ALLOWANCES> 956
<INVENTORY> 108,791
<CURRENT-ASSETS> 210,598
<PP&E> 119,250
<DEPRECIATION> 45,064
<TOTAL-ASSETS> 305,573
<CURRENT-LIABILITIES> 71,602
<BONDS> 8,766
<COMMON> 45,118
0
0
<OTHER-SE> 173,495
<TOTAL-LIABILITY-AND-EQUITY> 305,573
<SALES> 640,338
<TOTAL-REVENUES> 640,338
<CGS> 552,967
<TOTAL-COSTS> 602,717
<OTHER-EXPENSES> (2,587)
<LOSS-PROVISION> 303
<INTEREST-EXPENSE> 1,508
<INCOME-PRETAX> 40,208
<INCOME-TAX> 13,797
<INCOME-CONTINUING> 26,411
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,411
<EPS-BASIC> 1.59
<EPS-DILUTED> 1.59
</TABLE>
