COACHMEN INDUSTRIES, INC. REPORTS THIRD QUARTER EARNINGS;
PROGRESS ON STRATEGIC PLAN; $155 MILLION BANK CREDIT FACILITY
ELKHART, Ind., Oct. 26 /PRNewswire/ -- Coachmen Industries, Inc. (NYSE: COA -
news) today announced that sales for the third quarter ended September 30, 2000
were $182.7 million compared with last year's third quarter sales of $226.1
million. Net income for the quarter was $2.3 million compared with $9.5 million
reported last year. For the quarter, diluted earnings per share were $0.15
compared to $0.58 in the same period in 1999.
Sales for the first nine months were $565.8 million compared with sales in the
first nine months of 1999 of $640.3 million. Net income for the first nine
months was $10.0 million compared to $25.8 million recorded for the same period
in 1999. Diluted earnings per share for the first nine months were $0.64
compared to $1.55 for the same period in 1999.
The Recreational Vehicle (RV) Group:
The softening in the RV market that began earlier in the year intensified during
the third quarter and has impacted all product categories except travel
trailers, where unit sales were up by 5.0%. Year-to-date revenues from motorized
products were down 14.8% as compared to the results from the same period in 1999
and year-to-date revenues for all towable products combined were 4.7% below
revenues for the same period last year. The Company believes these market
conditions reflect consumer concerns about rising interest rates and fuel prices
and dealer concerns regarding inventory levels and financing. These factors,
together with aggressive discounting within the industry, were reflected in both
sales and earnings. It is anticipated that these conditions will continue at
least through the remainder of the year.
In response to these market conditions and as part of Coachmen's strategic plan,
during the third quarter, the administrative and support functions of Coachmen
Recreational Vehicle Company and Shasta Industries were combined. As a result,
one of Shasta's plants is no longer in operation and will be sold. While largely
transparent to Coachmen's dealers and customers, the consolidation will enable
the Company to eliminate redundant costs. This reorganization is expected to
bring about increased efficiencies and has already contributed to a reduction in
staffing.
A related change is that the sales, marketing and service support functions of
Coachmen Recreational Vehicle Company's camping trailers have been transferred
to Coachmen's Viking RV Company that specializes exclusively in camping
trailers. This will permit more focused marketing in this important entry-level
product type.
Most recently, the Company announced the consolidation of Georgie Boy
Manufacturing's (GBM) diesel motorhome production into GBM's Edwardsburg,
Michigan production complex. This will allow the company to reduce overhead and
maximize efficiencies during current market conditions.
<PAGE>
The Modular Group:
To improve efficiencies and achieve cost reductions, the Company made
investments in its Decatur, Indiana All American Homes manufacturing facility.
This will allow the Company to consolidate a second, less efficient facility in
Decatur into the newly improved plant.
Because of the enhanced growth and profit opportunities in the modular industry,
the Company intends to achieve more balance between the Company's RV and Modular
businesses. In furtherance of these plans, two acquisitions have been made this
year:
Mod-U-Kraf, Inc.
In June 2000, the Company completed the purchase of Mod-U-Kraf, a modular and
commercial building company in Rocky Mount, Virginia with projected annual sales
of $22 million. The Company is pleased with the progress of the integration of
this acquisition.
Miller Building Systems, Inc.
In August 2000, Coachmen entered into an agreement to acquire Miller Building
Systems Inc. As of the date of this release, the necessary number of shares to
complete the transaction have been tendered and management expects the
transaction to close within 30 days. Based in Elkhart, Indiana, with projected
annual sales of $75 million, Miller markets, designs, fabricates and distributes
commercial modular buildings including offices, banks, school buildings, and
telecommunications structures. As a leader in building modular structures for
the telecommunications industry, Miller customers include Nextel, AT&T, Motorola
and Bell Atlantic. Miller operates five manufacturing locations nationwide.
Miller meets Coachmen's acquisition criteria including financial returns,
management and growth potential. With the addition of Miller, Coachmen becomes a
full line modular company with important interests in the housing, commercial
and telecommunications industries.
Asset Rationalization and Utilization:
The Company continues its efforts to improve asset utilization.
Lux Company
During the third quarter, the Company exited the furniture business with its
sale of the Lux Company and related real estate. The gain on sale, principally
on the sale of real property, increased earnings per share by $0.05 in the third
quarter. The sale was part of the Company's continuing program of asset
rationalization to allow it to focus on its two core businesses.
RV Dealerships
As previously announced, with the exception of two stores that will be retained
for research and development and regional service purposes, the Company is
exiting the RV retailing business. During the quarter, one dealership was
liquidated, and three of the remaining five stores will be liquidated by the end
of the year. The Company anticipates additional operational losses from these
dealerships through the date of liquidation. Current market conditions in the RV
industry could result in additional losses if the dealerships' inventories have
to be significantly discounted in order to liquidate them. The decision to close
these dealerships will improve the Company's asset utilization and should have a
positive impact on earnings in 2001.
<PAGE>
Corporate Results:
During the quarter, gross profit was impacted by inefficiencies attributable to
reduced production volumes. Sales and administrative expenses during the quarter
increased by 20% due to several factors. The Company responded to discounting in
the RV marketplace with incentives and marketing programs designed to stimulate
retail sales. There was also increased depreciation related to investments the
Company made in plants, equipment, technology and future growth, as well as
related professional fees.
Financial Strength:
In September 2000, the Company completed a $155 million bank credit facility
with Banc One as the lead arranger and administrative agent. This credit
facility, coupled with the Company's strong balance sheet, provides the
flexibility to allow the implementation of the Company's strategic plan of
actively pursuing internal and external growth opportunities. "The Company's
financial condition is strong and with its bank credit facility, we will remain
focused on our plan to enhance shareholder value," said James E. Jack, Executive
Vice President and Chief Financial Officer.
Management:
The previously announced retirement plans of President Keith D. Corson became
effective during the quarter with Chairman and Chief Executive Officer Claire C.
Skinner assuming his responsibilities. At the same time, the senior management
team has been expanded with the formation of the Executive Management Committee
that replaces the previous Finance Committee. New members include William M.
Angelo, Controller and Chief Accounting Officer, Steven E. Kerr, President of
All American Homes, Inc., and Michael R. Terlep, President of Coachmen RV
Company.
To better align the interests of management with shareholders, the Company also
intends to implement a new compensation plan designed to more closely align
management compensation with the financial performance of the Company.
Outlook:
"While we have made significant progress in executing our overall strategic
plan, the softness in the RV market has, in effect, masked many of the
improvements. As it now appears that these market conditions may continue, our
focus in the fourth quarter is on reducing expenses in conjunction with
anticipated reduced revenues. These many actions, together with the introduction
of exciting new products, should allow us to realize improvements as market
conditions become more favorable," said Claire C. Skinner, Chairman, CEO and
President.
In order to assist the Company in complying with new SEC fair disclosure
regulations, this is a longer, more comprehensive earnings release than in the
past.
This release contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Investors are cautioned not to
place undue reliance on forward-looking statements, which are inherently
uncertain. Actual results may differ materially from that projected or suggested
due to certain risks and uncertainties including, but not limited to the
potential fluctuations in the Company's operating results, the implementation of
its enterprise-wide software, the availability and pricing of gasoline, the
Company's dependence on chassis suppliers, interest rates, competition,
government regulations, legislation governing the relationships of the Company
with its recreational vehicle dealers, the impact of economic uncertainty on
high-cost discretionary product purchases and other risks identified in the
Company's SEC filings.
<PAGE>
COACHMEN INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in thousands except per share data)
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
2000 1999 2000 1999
---- ---- ---- ----
Net sales $182,690 $226,114 $565,828 $640,338
Cost of sales 161,267 195,024 496,513 553,667
Gross profit 21,423 31,090 69,315 86,671
Selling, delivery and
general and admin.
expenses 19,506 16,205 55,472 50,050
-------- -------- -------- --------
Operating income 1,917 14,885 13,843 36,621
Nonoperating income
(expense), net 1,359 (164) 988 2,587
-------- -------- -------- --------
Income before income taxes 3,276 14,721 14,831 39,208
Income taxes 1,003 5,196 4,828 13,452
-------- -------- -------- --------
Net income $2,273 $9,525 $10,003 $25,756
======== ======== ======== ========
Earnings per common share:
Basic $.15 $.58 $.64 $1.55
Diluted $.15 $.58 $.64 $1.55
Number of common shares used in the computation of earnings per share:
Basic 15,574 16,496 15,566 16,595
Diluted 15,577 16,548 15,573 16,655
<PAGE>
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands)
SEPTEMBER 30,
2000 1999
---- ----
ASSETS
Cash and cash equivalents $26,084 $8,020
Marketable securities 21,458 32,424
Receivables 39,364 56,243
Inventories 98,301 108,791
Prepaid expenses and other 2,138 1,852
Deferred income taxes 4,743 4,205
-------- -------
Current assets 192,088 211,535
Property and equipment, net 78,406 74,186
Intangibles 4,331 4,458
Other assets 19,814 16,331
-------- --------
Total assets $294,639 $306,510
======== ========
LIABILITIES
Current maturities of long-term debt $550 $1,825
Accounts payable 28,224 40,727
Accrued income taxes 721 3,082
Other current liabilities 25,058 28,686
-------- -------
Current liabilities 54,553 74,320
Long-term debt 9,100 8,766
Other liabilities 9,112 6,592
-------- -------
Total liabilities 72,765 89,678
-------- -------
SHAREHOLDERS' EQUITY
Common shares 38,838 45,118
Additional paid-in capital 4,656 3,960
Retained earnings 178,380 167,754
-------- -------
Total shareholders' equity 221,874 216,832
-------- -------
Total liabilities and shareholders' equity $294,639 $306,510
======== ========
<PAGE>
SEGMENT INFORMATION (UNAUDITED)
(in thousands)
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
2000 1999 2000 1999
---- ---- ---- ----
Net sales
Vehicles $137,888 $182,885 $443,571 $525,736
Housing 44,802 43,229 122,257 114,602
-------- -------- -------- --------
Consolidated total $182,690 $226,114 $565,828 $640,338
======== ======== ======== ========
Pretax income (loss)
Vehicles $(651) $9,285 $8,312 $25,365
Housing 3,873 4,228 9,900 11,710
Other reconciling items 54 1,208 (3,381) 2,133
-------- -------- -------- --------
Consolidated total $3,276 $14,721 $14,831 $39,208
======== ======== ======== ========
AT
SEPTEMEMBER 30,
2000 1999
---- ----
Total assets
Vehicles $144,453 $186,641
Housing 57,389 41,244
Other reconciling items 92,797 78,625
-------- --------
Consolidated total $294,639 $306,510
======== ========
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
SEPTEMBER 30,
2000 1999
---- ----
Cash flows from operating activities $25,263 $18,612
Net cash provided by (used in)
investing activities 370 (18,870)
Net cash used in financing activities (3,818) (14,731)
-------- --------
Increase (decrease) in cash and
cash equivalents 21,815 (14,989)
Cash and cash equivalents:
Beginning of period 4,269 23,009
-------- --------
End of period $26,084 $8,020
======== ========
