FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(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, 1996
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 1-9593
COACHMAN INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 73-1244422
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
301 N.W. 63rd, Suite 500, Oklahoma City, OK 73116
(Address of principal executive offices) (Zip Code)
(405) 840-4667
Registrant's telephone number, including area code
Not applicable
(Former name, former address and former fiscal year,
changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) for 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 ____ No __X__
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at September 30, 1996
Common Stock, $.01 par value 21,452,642 shares
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The following financial statements, in the opinion of management, reflect
all adjustments (none of which was other than a normal recurring adjustment)
necessary for a fair presentation of results of operations for such periods.
Results for interim periods should not be considered indicative of results
for a full year.
THE FOLLOWING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS AND
SHOULD BE READ IN CONJUNCTION WITH THEM.
Note 1: On December 22, 1995, the Corporation purchased Olympic Mills
Corporation and Lutania Mills, Inc. The transaction is being accounted for
as an Acquisition in Progress.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Material Changes in Financial Position
September 30, 1996 and December 31, 1995
During the nine month period ended September 30, 1996; the Corporation
continued the process of purchasing Olympic Mills Corporation and its affiliate
Lutania Mills, Inc. (together "Olympic Mills"). The Olympic Mills purchase (the
"Acquisition") is being accounted for as an Acquisition in Progress. During the
period the Corporation and Olympic Mills paid $76,056.46 of interest on the
notes due to the sellers from internal sources of capital. At September 30,
1996 the Corporation and Olympic Mills were still indebted to the sellers in
the amount of $6,084,026. The notes originally matured on July 15, 1996;
however; they were extended until October 31, 1996.
On October 2, 1996 the Sellers and the Corporation agreed to the repayment of
these notes as follows: The Bridge Note, in the amount of $4,448,826, and the
Availability Note in the amount of $1,636,200 together with accrued interest of
$436,974; were repaid by the issuance of 6,521 shares of Series AA Redeemable
Preferred Stock of the Corporation.
In order to repay the Acquisition loans, on July 1, 1996, Olympic Mills
Corporation offered for sale shares of preferred stock in a private placement
being underwritten by Rizek Investments of Puerto Rico. On October 8, 1996,
57,000 shares were issued for $1,425,000 and on November 8, 1996 an
additional 11,400 shares were issued for 285,000. The Corporation also
issued 375,000 shares of Common Stock at $.40 per share, in an intrastate
issue in Puerto Rico.
In addition, the Corporation and the Sellers agreed to settle the price
protection clause in the Acquisition, whereby the Corporation might be
obligated to issue additional Common Stock on December 22, 1997. The
guarantee was settled for a cash payment of $1,250,000 in cash and the
agreement to issue an additional 5,000,000 shares of Common Stock to the
Sellers. In addition the Corporation granted to the Sellers warrants to
purchase 5,000,000 shares of Common Stock at a price of $.50 for five years.
The cash payment was made on October 8, 1996; from the proceeds of the sale
of the Preferred Stock of Olympic Mills Corporation. The Common Stock will
be issued during 1997.
During the period, Current assets decreased by $198,479 caused by a decrease in
Cash of $105,788, which was used to fund operations and for the Acquisition;
repayment by an affiliate of Note receivable of $50,849 and the sale of
Marketable securities. Current liabilities increased by $147,179; due
primarily to increases in Accounts payable of $99,876 and Accrued expenses of
$46,286. The Corporation still has a sizable negative current ratio, caused
primarily by the debts of Caribbean Outfitter's, Inc.; Caribbean Outfitters,
N.V. Aruba; Caribbean Outfitters, N.V. and Back Bay Outfitters, Inc.
(together "Retail Subsidiaries") and the $4,710,526 note due to the Sellers
of Olympic Mills. On October 2, 1996, the Corporation and the Sellers agreed
to convert the Seller notes to preferred stock of the Corporation, which will
cause a significant decrease in Current liabilities and increase in
Stockholders' equity. The Corporation will continue to try to settle the
debts of the Retail Subsidiaries or liquidate them. These Retail Subsidiaries
have no current business and are accounted for as Discontinued operations.
During the period, total Assets increased by $1,878,122. This increase was due
to an increase in Acquisition in progress of $2,095,516; caused by the Net
income of Olympic Mills and then additional investment in Olympic Mills by the
Corporation; offset by the decrease in Current assets and Notes receivable
affiliate. Total Liabilities increased by $136,770.
Stockholders' equity increased by $3,831,365. This was caused by the decrease
in Accumulated deficit of $1,641,065 (the Net income) and the sale of 1,187,500
shares of Common Stock in a Private Placement. The Corporation now has an
Accumulated deficit of $7,966,601.
Liabilities and expenses associated with the Retail Subsidiaries accounted for
$2,173,173 of the Corporation's Current liabilities and $2,195,726 of the
Corporation's Total liabilities. Additionally, the acquisition in progress of
Olympic Mills accounted for $10,420,744 of the Corporation's Current assets and
$5,110,526 of the Current liabilities.
Olympic Mills, the Corporation's un-consolidated subsidiary had Current
assets of $17,925,852; Total assets of $30,712,778; Current liabilities of
$10,977,363; Total liabilities of $16,066,568 and Stockholders' equity of
$14,646,210. Olympic Mills is accounted for by the Corporation as an
Acquisition in progress of $10,725,004.
Results of Operations
For three and nine month periods ended September 30, 1996 compared to the
same periods of 1995.
For the three months ended September 30, 1996 the Corporation had Net income
of $240,105 ($.01 per share), compared to a Net loss of $310,908 ($.02 per
share) for the same period of 1995. For the nine months ended September 30,
1996 the Corporation had Net income of $1,641,395 ($.08 per share), compared
to a net loss of $781,229 ($.07 per share) for the same period of 1995. The
Corporation had Operating losses of $57,090 and $261,440 for the three and
nine month periods ended September 30, 1996; compared to Operating losses of
$197,830 and $569,437 for the same periods of 1995. Revenues increased by
$915 and $7,345; caused by increases in Management fees of $915 and $9,638
and the ceasing of selling time share units. Operating expenses decreased by
$139,925 and $300,652. This was caused by the ceasing of selling time share
units, decreases in General and administrative costs of $121,098 and $236,142
and Depreciation of $18,727 and $58,138. The decreases in General and
administrative expenses would have been approximately $39,600 greater if
non-recurring charges and $33,000 of legal fees and $6,600 of accounting fees
associated with the Acquisition had not been charged. Management believes
that this decrease in General and administrative expenses is in part due to
the cost saving measures undertaken in our plan of action to mitigate the
explanatory paragraph in the auditors reports for 1994 and 1995. Also
included in General and administrative expenses were $65,607 of travel
expenses, primarily associated with the management of Olympic Mills.
Other Income and expense increased by $308,451 and $1,914,751, caused
primarily by the equity in the Income of Olympic Mills of $304,260 and
$1,945,516.
Olympic Mills had Net sales of $9,130,114 and $29,264,626 for the three and
nine month periods ended September 30, 1996 compared to $9,329,952 and
$24,449,135 for the same periods for 1995. Net earnings of Olympic Mills for
the corresponding periods were $304,260 and $1,949,380 for 1996 and $476,676
and $878,120 for 1995. Olympic Mills sales were increased partially due to
increased purchasing by the U.S. Military.
During the quarter the U.S. Military placed orders for the minimum purchases
under the 1997 tee-shirt contract totaling $11,000,000. Deliveries to the U.S.
Military under the 1996 contract were approximately $2,000,000 less than
expected due to quality problems at one of Olympic Mills' suppliers. These
problems have now been addressed.
Other sales remained reasonably constant for the first two months of the
quarter. However, during September, sales and deliveries were approximately
$2,000,000 less than expected. This decrease was due to the effects of
Hurricane Hortense. Although the hurricane caused only minor damage, losses
of power and water caused all of our facilities to be closed for nine days.
Also, the general retail sales for Puerto Rico during September and early
October were negatively impacted. Olympic Mills has filed a claim under its
business interruption insurance which should be settled during the fourth
quarter of 1996.
During the quarter, Olympic Mills also continued to increase its private label
manufacturing business. Olympic Mills is currently bidding on several
significant private label programs.
During the quarter, the Corporation continued its actions to mitigate the
situation which caused the independent auditors to add an explanatory
paragraph discussing conditions that raise doubt about the Corporation's
ability to continue as a going concern. During the year, the Corporation
ceased all operations of its subsidiaries, Caribbean Outfitters, Inc. and
Back Bay Outfitters, Inc. These account for a major portion of the
Corporation's negative earnings and liabilities. Liabilities of Caribbean
Outfitters, Inc. are Accounts payable of $950,719 and Note payable of
$993,615. Accounts payable of Back Bay Outfitters, Inc. are $109,211. These
are being accounted for as Discontinued operations. The Corporation is
seeking to work out these debts. With the exception of these Discontinued
operations, the Corporation was able to meet its commitments.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Corporation is not a party to any current, pending or threatened material
legal proceedings. The Corporation's subsidiary Caribbean Outfitters, Inc.
is a party to a number of suits related to the closing of all Florida
Operations and the scaling back of its retail operations. In the opinion of
management none of these will effect the Corporation directly.
SIGNATURES
FORM 10-Q
Pursuant to the requirements 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.
COACHMAN INCORPORATED
(Registrant)
November 13, 1996 By: /s/ Dennis D. Bradford
Dennis D. Bradford
Chairman of the Board
Chief Financial Officer
COACHMAN INCORPORATED
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
Sept. 30, Dec. 31,
1996 1995
----------- -----------
ASSETS
CURRENT ASSETS:
Cash and cash equiv. $ (5,942) $ 99,846
Accounts receivable:
Trade 922 922
Related parties 48,787 99,636
Notes receivable from affiliates 35,702 35,702
Marketable equity securities 68,625 108,000
Other current assets 3,332 5,795
----------- -----------
Total current assets $ 151,426 $ 349,901
Property and equipment, net of accumulated
depreciation of $245,199 in 1996 and
$244,626 in 1995 1,382 2,252
Notes receivable:
Officer 133,518 127,609
Affiliates 373,675 402,633
Acquisition in progress 10,725,004 8,629,488
Investments in affiliated entities 81,038 76,038
and other assets
----------- -----------
TOTAL ASSETS $11,466,043 $ 9,587,921
=========== ===========
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable: $ $
Trade 922,870 822,994
Related parties 2,857 1,822
Accrued liabilities:
Rent 149,670 138,870
Interest 374,281 301,491
Other 498,537 535,859
Notes payable:
Related parties 4,710,526 4,710,526
Other 125,000 125,000
Current maturities 596,912 596,912
----------- -----------
Total current liabilities 7,380,653 7,233,474
LONG-TERM DEBT 22,553 32,975
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; authorized
200,000 shares; issued and outstanding 73 73
7,250 shares in 1996
Common stock, $.01 par value; authorized 214,526 202,651
25,000,000 shares, issued and outstanding
21,452,142 shares in 1996 and
20,265,142 in 1995
Additional paid-in capital 11,791,214 11,411,589
Common stock subscribed, unissued 391,500
Common stock subscriptions receivable (100,000)
Accumulated deficit (7,966,601) (9,607,966)
Net unrealized gain on marketable sec 23,625 23,625
----------- ------------
Total stockholders' equity 4,062,837 2,321,472
----------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $11,466,043 $ 9,587,921
=========== ============
COACHMAN INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
AND THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
THREE MONTHS ENDED NINE MONTHS ENDED
Sept 30, Sept 30, Sept 30, Sept 30,
1996 1995 1996 1995
---------- ---------- ---------- ----------
Revenues:
Management fees $ 20,577 $ 19,662 $ 62,606 $ 52,968
Time share commissions 0 0 0 2,293
---------- ---------- ---------- ----------
20,577 19,662 62,606 55,261
Expenses:
Time share commission expenses 0 0 0 6,372
General and administrative 77,374 198,472 323,175 559,317
Depreciation & amortization 293 19,020 871 59,009
---------- ---------- ---------- ----------
77,667 217,492 324,046 624,698
---------- ---------- ---------- ----------
Loss From Operations (57,090) (197,830) (261,440) (569,437)
---------- ---------- ---------- ----------
Other Income (Expense):
Interest income 9,397 11,848 34,889 36,253
Interest expense (23,950) (22,684) (79,429) (69,613)
Other income 2,826 7,306 9,394 31,507
Gain on sale of marketable sec 4,597 (7,791) 12,046 9,518
Equity in income of Olympic 304,260 0 1,945,516 0
---------- ---------- ---------- ----------
297,130 (11,321) 1,922,416 7,665
---------- ---------- ---------- ----------
Income/(Loss) Continuing
operations 240,040 (209,151) 1,660,975 (561,772)
Discontinued Operations:
Loss from operations of
discontinued Retail
Activities 65 (101,757) (19,581) (219,457)
---------- ---------- ---------- ----------
Loss on Discontinued operations 65 (101,757) (19,581) (219,457)
---------- ---------- ---------- ----------
Net Income /Loss) $ 240,105 $ (310,908) $1,641,395 $ (781,229)
========== ========== ========== ==========
Avg. Outstanding common shares 21,413,637 8,382,944 21,413,637 8,382,944
Net Income/(Loss) Per avg. outstanding common
share from cont. operations 0.01 (0.02) 0.08 (0.07)
Net Income/(Loss) Per avg. outstanding common
share from discont. operations 0.00 (0.01) 0.00 (0.03)
Net Income/(Loss) Per avg. outstanding
common share 0.01 (0.04) 0.08 (0.09)
COACHMAN INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
NINE MONTHS ENDED
Sept 30, Sept 30,
1996 1995
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $1,641,395 $ (781,229)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities
Depreciation and amortization 871 59,009
Partnership loss
Gain on sale of marketable security (12,046)
Equity Income in Olympic Mills (1,945,516)
(Increase) Decrease in Accounts 150,849 14,003
receivable-trade
(Increase) Decrease in Inventory 0 99,395
(Increase) Decrease in Prepaids and Other 2,463 (267,652)
(Increase) Decrease in other assets (5,000)
Increase (Decrease) in Accounts payable and
Accrued liabilities 147,179 233,309
---------- ----------
Net Cash Provided by (Used in)
Operating Activities (19,805) (643,165)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net loan repayments from affiliates 28,958 (46,005)
Capital expenditures (1) (34,649)
Loans to officers (5,909) (5,041)
Sale of Security 51,391 112,500
Acquisition in progress (150,000) 0
---------- ----------
Net Cash Provided by (Used in)
Investing Activities (75,561) 26,805
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 0 583,227
Proceeds from note payable 0 50,000
Principal payments on note payable
and long-term debt (10,422) (25,098)
---------- ----------
Net Cash Provided by (Used in)
Financing Activities (10,422) 608,129
---------- ----------
Net Increase (Decrease) in Cash (105,788) (8,231)
CASH, beginning of period 99,846 32,777
---------- ----------
CASH, end of period $ (5,942) $ 24,546
========== ==========
<TABLE>
<CAPTION>
COACHMAN INCORPORATED
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPT 30, 1996
Net
Paid-in Common Common Unrealized
Capital Stock Stock Loss-Nonc Total
Preferred Common in Excess Subscribed, Subscript Marketable Accumulated Stockholders
Stock Stock of Par Unissued Receivable Securities Deficit Equity
--------- -------- ----------- ----------- ---------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance
Dec. 31, 1994 48 74,210 7,819,458 0 (8,311,646) (417,930)
Common stock issued 128,441 3,374,656 3,503,097
Pref. stock issued 25 217,475 217,500
Common stock
subscribed, unissued 391,500 391,500
Common stock
subscriptions receivable (100,000) (100,000)
Net unrealized gain on
marketable sec 23,625 23,625
Net income/loss for 1995 (1,296,320) (1,296,320)
--------- -------- ----------- ----------- ---------- ---------- ----------- ----------
73 202,651 11,411,589 391,500 (100,000) 23,625 (9,607,966) 2,321,472
Common stock issued 11,875 379,625 (391,500) 100,000 100,000
Net income\(loss) for the
nine months ended Sept 30, 1996 1,641,395 1,641,395
--------- -------- ----------- ----------- ---------- ---------- ----------- ----------
Balance Sept 30,
1996 73 $214,526 $11,791,214 $ 0 $ 0 $ 23,625 $(7,966,571) $4,062,867
========= ======== =========== =========== ========== ========== =========== ==========
</TABLE>
OLYMPIC MILLS CORPORATION, SUBSIDIARY AND AFFILIATE
COMBINED BALANCE SHEETS
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
Unaudited
Sept. 30, Dec. 31,
1996 1995
----------- -----------
Assets
Current assets:
Cash $ 800 $ 500
Accounts receivable:
Trade 5,149,744 5,087,883
Other 1,552,697 1,161,811
----------- -----------
6,703,240 6,250,194
Inventories 10,885,961 9,759,353
Prepaid expenses 319,556 198,512
Prepaid income taxes 17,095 17,094
----------- -----------
Total current assets 17,925,852 16,225,153
Equipment and improvements 4,630,131 4,599,815
Intangibles:
Leasehold rights 10,068 55,378
Trade names 1,437,817 1,548,930
Goodwill 5,226,018 5,504,706
Debt issue costs 416,077 255,900
Other assets 48,816 48,815
Deferred tax assets, net 1,018,000 731,785
----------- -----------
$30,712,778 $28,970,482
=========== ===========
Liabilities and stockholder's equity
Current liabilities:
Notes payable 6,527,626 8,545,880
Accounts payable 2,568,518 2,656,991
Accrued expenses 1,493,805 1,017,798
Income payable 387,414 101,198
----------- -----------
Total current liabilities 10,977,363 12,321,867
Long-term notes payable 5,089,205 3,465,000
----------- -----------
16,066,568 15,786,867
Stockholder's equity:
Common stock, $10 par value.
Authorized, issued and outstanding
100 shares 1,000 1,000
Additional paid-in capital 53,558 9,502,384
Paid in Capital 9,598,826
Retained earnings 4,992,826 3,680,231
----------- -----------
$30,712,778 $28,970,482
=========== ===========
OLYMPIC MILLS CORPORATION, SUBSIDIARY AND AFFILIATE
COMBINED STATEMENTS OF OPERATIONS
THREE MONTH PERIOD ENDED SEPTEMBER 30, 1996 AND 1995 AND
NINE MONTH PERIOD ENDED SEPTEMBER 30, 1996 AND 1995
Three Months Ended Nine Months Ended
Sept 30, Sept 30, Sept 30, Sept 30,
1996 1995 1996 1995
Unaudited Unaudited
----------- ----------- ----------- -----------
Net sales $ 9,130,114 $ 9,329,952 $29,264,626 $24,449,135
Cost of goods sold (7,526,848) (7,479,843) (23,196,497) (19,440,198)
----------- ----------- ----------- -----------
Gross profit 1,603,266 1,850,109 6,068,128 5,008,936
Selling & admin. exp. (1,405,689) (1,270,311) (3,997,818) (3,748,874)
----------- ----------- ----------- -----------
Operating income 197,577 579,798 2,070,310 1,260,063
Interest expenses (360,689) (258,130) (1,042,843) (623,031)
Other income 491,062 155,008 974,602 89,825
----------- ----------- ----------- -----------
Income before
Income taxes 327,950 476,676 2,002,070 887,620
Income tax 23,690 -- 52,690 9,500
----------- ----------- ----------- -----------
Net earnings 304,260 476,676 1,949,380 878,120
=========== =========== =========== ===========
Retained Earnings 5,321,494 8,456,364 3,680,231 8,279,210
at beginning
Dividends on Pre Stock 297,784 -- 297,784 --
Redemption of Pre Stocks
as established in the
stock purchases and
redemption agreement
as of 12/21/95,
Section 4(b3) 339,000 -- 339,000 --
----------- ----------- ----------- -----------
Retained Earning at End 4,988,970 8,933,040 4,992,827 9,157,330
=========== =========== =========== ===========
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> (5,942)
<SECURITIES> 68,625
<RECEIVABLES> 85,411
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 151,426
<PP&E> 246,878
<DEPRECIATION> 245,496
<TOTAL-ASSETS> 11,466,043
<CURRENT-LIABILITIES> 7,380,653
<BONDS> 0
0
73
<COMMON> 214,526
<OTHER-SE> 3,848,238
<TOTAL-LIABILITY-AND-EQUITY> 11,466,043
<SALES> 0
<TOTAL-REVENUES> 2,064,451
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 324,046
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 79,429
<INCOME-PRETAX> 1,660,976
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,660,976
<DISCONTINUED> (19,581)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,641,395
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
