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, 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 1-9593
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, 1997
Common Stock, $.01 par value 22,688,333 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 Condition.
September 30, 1997 Compared to December 31, 1996
On December 21, 1995, the Corporation acquired all of the outstanding stock of
OMC and LMI. During most of 1996, the transaction was accounted for as an
Acquisition in Progress. On October 3, 1996, the sellers of Olympic Mills
and the Corporation agreed to modify the terms of the acquisition agreement.
Under these new terms, the acquisition of Olympic Mills has been deemed to
have been consummated for financial reporting terms.
During the period, Current assets increased by $1,962,560 caused primarily by
a decrease in cash and Accounts receivable of $645,973, being offset by
increases in Accounts and Notes from affiliates, Inventories and Other assets
of $2,608,533. Current liabilities increased by $5,758,446 due primarily to
increases in Accounts payable of $3,587,145; Accrued liabilities of $845,314
and Current maturities of $1,006,172. The Corporation has a Current ratio
of 1.66 : 1.
During the period, Total assets increased by $1,161,31. Total liabilities
increased by $3,712,764.
Stockholders' equity decreased by $2,551,453. This was caused by the increase
in accumulated deficit of $2,695,603 ( the Net loss ). The Corporation now
has an Accumulated deficit of $10,235,374.
Results of Operations.
For three and nine month periods ended September 30, 1997 compared to the
same periods of 1996.
For the three months ended September 30, 1997 the Corporation had net loss of
$1,665,227( $.07 per share ), compared to a net income of $240,105
( $.01 per share ) for the same period of 1996. For the nine months ended
September 30, 1997 the Corporation had net loss of $3,670,596 ( $.16 per
share ), compared to a net income of $1,645,259 ( $.08 per share ) for the
same period of 1996. Revenues decreased by $298,859 and $1,316,116 caused
primarily by decreases in sales to the U. S. Military not compensated by sales
in the U.S. market as projected in the budget. During the second quarter the
corporation experienced a certain problem with U.S. sales which impaired its
liquidity forcing the Board of Directors to freeze these sales pending
adoption of adequate controls and negotiation of better terms. Operating
expenses increased by $1,773,422 and $4,074,522. This was caused by
increases in cost of goods of $1,527,152 and $3,029,766 and increases in
general and administrative costs of $246,270 and $1,044,756. Cost of goods
increases were due to increased labor cost created by increases in the
minimum wage. General and administrative expenses increased due to high
overhead expenses resulting from the cost of opening a new plant, while
operating the old facility.
Other income and expense increased by $143,259 and $101,620. Most of this
increase was due to the savings in interest created by converting the
Olympic Mills seller financing into Preferred Stock.
Projected Results of Operations
THE PROJECTIONS AND ANALYSIS WERE PREPARED BY MANAGEMENT OF THE CORPORATION
AND HAVE NOT BEEN REVIEWED BY INDEPENDENT SOURCES. THERE IS NO ASSURANCE
THAT THE RESULTS CAN OR WILL BE ACHIEVED.
In the Corporation's Form 10-K for the year ended December 31, 1996, the
Corporation made projections as to the business of the Corporation for 1997.
In order to evaluate the accuracy of such projections, the Corporation has
prepared the following analysis.
For the three month period ended September 30, 1997, the Corporation's
projected operating data compared to actual was as follows:
Projected Actual Variance
Sales $12,629,773 $8,831,255 ( $3,798,518 )
Cost of goods 10,275,101 9,054,000 ( 1,221,101 )
Selling, general
and administrative 1,985,883 1,723,216 ( 262,667 )
----------- ---------- ------------
Gross profit 368,789 ( 1,945,961 ) ( 2,314,750 )
Other income ( expense ) (20,383) 180,336 200,719
----------- ---------- -----------
Net income $348,406 ( $1,765,625 ) ( $2,114,031 )
During the period the Corporation continued to experience significant variances
from its plan. The Corporations sales fell short of projections by
$3,798,518; caused primarily by anticipated sales in the U.S. market due to
factors previously explained. Although Cost of goods were $1,221,101 less
than plan, they were considerably higher than plan as a percentage of sales.
These caused Gross profit to be $2,314,750 less than plan. For the period,
Net income fell short of projections by $2,114,031.
During the period, the Corporation made significant changes to the management
of Olympic Mills ( see Item 5. Other information. ) It was felt that these
changes and those planned in the future, will increase operation efficiencies
and position the Corporation for future growth and development.
The Corporation also began the process of changing its business strategies.
In the textile and apparel industries there are major consolidations
underway. These leave the opportunity for companies like Olympic Mills to
make strategic acquisitions to increase business and profitability. During
the period, the Corporation made one such acquisition ( See Item 5. Other
information. ) and it is now analyzing two others. These acquisitions will
further the Corporation's vertical integration and expand its product offering.
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.
Item 5. Other Information
Changes in Management of Olympic Mills
Coachman Incorporated has made major changes in the management of its wholly
owned subsidiary, Olympic Mills Corporation. The changes were made to
facilitate the growth and diversification of Olympic Mills. Dennis D.
Bradford, who has served as President and Chief Executive Officer of Olympic
Mills, will continue his duties as Chairman and Chief Executive Officer of
Coachman. He will focus on further expansion of both Coachman and Olympic
Mills in the US Mainland. He will no longer be enveloped in the day to day
operation of Olympic Mills.
Dr. Juan B. Aponte will become Chairman and Chief Executive Officer of Olympic
Mills. Dr. Aponte is a financial consultant who has been a Professor at the
University of Pennsylvania's Wharton School, the Dean of the University of
Puerto Rico School of Business and the President of First Bank of Puerto Rico.
Olympic Mills has begun the search for additional qualified industry
management. Dr. Aponte has been given the task of reorganizing the company
to provide flexibility needed to implement the Corporation's business plan,
expand operations and bolster the management.
As a part of the reorganization, Francisco Carvajal, the founder of Olympic
Mills, will step down as Chairman of the Board of Olympic Mills. He will
remain a Director of both the Corporation and Olympic Mills and become
"Chairman Emeritus" of Olympic Mills.
The Corporation and Olympic Mills plan to form a financial services subsidiary
and venture capital fund. Dr. Alejandro G. Asmar, founder and President of
AGA Business and Investment Group, and the former Chief Operating Officer of
Drexel Burnham Lambert PR, will head the Financial Services Company. The
company will concentrate its efforts in the merger and acquisition area,
looking for targets both in and out of Puerto Rico.
Election of Additional Directors
The Corporation has elected three new Directors. They are Francisco Carvajal,
founder of Olympic Mills; Dr. Juan B. Aponte, Chairman and Chief Executive
Officer of Olympic Mills and Luis Rivera-Siaca, a real estate developer.
They join Mr. Bradford, Dr. Alejandro G. Asmar, Ret. Gen. Jay T. Edwards and
Robert E. Swain on the Board of Directors of the Corporation.
Acquisition
On October 1, 1997, LMI purchased all of the assets, accounts receivable,
inventories and machinery of All On T-Shirts, Inc. Although reporting of
this acquisition was not required, due to size, management felt that it was
important to the understanding of the Corporation's current and future business
strategy.
The assets were purchased from All On T-Shirts, Inc., which was a customer of
Olympic Mills but not affiliated with the Corporation in any other way, by
All On Embellishment, Inc., a newly formed subsidiary of LMI. The price was
determined through arms length negotiation. The acquisition was made through
the assumption of Accounts payable of $260,688; a short term Note payable of
$300,000 and the issuance of 598,280 shares of the Common Stock of the
Corporation.
The assets purchased had been used in the operation of a screen printing
business. They will be used in the same business, with the addition of
embroidery, transfer and other forms of embellishment. The acquisition fits
into the Corporations plan to expand vertically in the textile and apparel
business. The management of All On T-Shirts, Inc. will be retained to
manage the new subsidiary.
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)
January 8, 1998 By: /s/ Dennis D. Bradford
Dennis D. Bradford
Chairman of the Board
Chief Financial Officer
COACHMAN INCORPORATED
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
September 30, December 31,
1997 1996
------------ -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 5,353 $ 5,541
Accounts Receivable:
Trade, Net of Allowance 4,070,674 4,676,459
Related parties 61,003 8,764
Other, Principally Govt Incentives 1,092,995 1,092,995
Notes receivable from affiliates 259,843 42,714
Inventories 12,869,151 12,246,108
Investment in equity securities 40,000
Other current assets 1,873,751 157,629
----------- -----------
Total Current Assets 20,232,770 18,270,210
Property & Equipment, Net 7,755,767 6,606,225
Intangibles 1,458,972 3,249,786
Notes receivable:
Officer 89,466 135,266
Affiliates 368,513 356,570
Investment in affiliated entities 60,315 76,038
Deferred Tax asset 1,653,000 1,653,000
Debt issue costs, Net 376,206 565,709
Other assets 127,951 48,845
----------- -----------
Total Other Assets 11,890,190 12,691,439
----------- -----------
TOTAL ASSETS $32,122,960 $30,961,649
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable:
Trade $ 7,076,759 $ 3,489,614
Related parties 33,471 3,734
Accrued liabilities 1,883,838 1,038,524
Current maturities 9,971,114 8,964,942
Income Tax Payable 439,448 149,370
----------- -----------
Total Current Liabilities 19,404,630 13,646,184
Deferred Tax Liability 412,642 800,475
Long Term Debt 2,584,321 2,482,080
Minority Interest in subsidiary 1,760,000
----------- -----------
22,401,503 18,688,739
STOCKHOLDERS' EQUITY:
Preferred Stock - $.01 Par Value;
200,000 authorized; 12,971 shares 130 130
outstanding in 1997 & 1996
Common Stock - $.01 Par Value; 228,459 226,708
25,000,000 shares authorized;
22,688,333 shares outstanding in 1997
and 22,670,833 shares outstanding in 1996
Additional paid-in capital 20,088,243 19,950,844
Accumulated deficit (10,235,374) (7,539,771)
Net unrealized gain on marketable sec -- (5,000)
Payments towards redemption of (360,001) (360,001)
Class AA Preferred Stock
----------- -----------
Total Stockholders' Equity 9,721,457 12,272,910
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $32,122,960 $30,961,649
=========== ===========
COACHMAN INCORPORATED
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
THREE MONTHS ENDED NINE MONTHS ENDED
Sept 30, Sept 30, Sept 30, Sept 30,
1997 1996 1997 1996
----------- ----------- ----------- -----------
Revenues:
Trade Sales $ 8,786,925 $ 9,130,114 $27,864,090 $29,264,626
Other 44,330 -- 84,420 --
----------- ----------- ----------- -----------
8,831,255 9,130,114 27,948,510 29,264,626
Costs & Expenses
Cost of Goods Sold 9,054,000 7,526,848 26,226,263 23,196,497
Selling, G&A Expenses 1,729,626 1,483,356 5,366,620 4,321,864
----------- ----------- ----------- -----------
10,783,626 9,010,204 31,592,883 27,518,361
Other Income (Expense):
Interest income 7,636 9,397 25,140 34,889
Interest expense (179,296) (384,639) (892,031) (1,122,272)
Other income 453,514 514,530 858,259 1,027,021
Gain on sale of assets 5,290 4,597 61,936 12,046
----------- ----------- ----------- -----------
287,144 143,885 53,304 (48,316)
----------- ----------- ----------- -----------
Income (Loss) before taxes (1,665,227) 263,795 (3,591,069) 1,697,949
Income Taxes 23,690 79,527 52,690
----------- ----------- ----------- -----------
Net Income/(Loss) $(1,665,227) $ 240,105 $(3,670,596) $ 1,645,259
=========== =========== ============ ===========
Avg outst common shares 22,688,333 21,413,637 22,688,333 21,413,637
Net income/(loss) per average
outstanding common share (0.07) 0.01 (0.16) 0.08
COACHMAN INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
NINE MONTHS ENDED
Sept 30, Sept 30,
1997 1996
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(3,670,596) $ (304,121)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization/non-cash 1,467,321 871
Gain on sale of assets (64,823) (12,046)
(Increase) Decrease in Accounts receivable 605,785 150,849
(Increase) Decrease in Inventory (623,043) --
(Increase) Decrease in Other assets (1,779,505) (2,537)
Increase (Decrease) in Accounts payable and
Accrued liabilities 4,364,441 147,179
----------- -----------
Net Cash Provided by (Used in)
Operating Activities 299,580 (19,805)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net loan repayments from affiliates 235,511 28,958
Capital expenditures -- (1)
Loans to officers -- (5,909)
Sale of marketable equity security 116,398 51,391
Acquisition in Progress -- (150,000)
----------- -----------
Net Cash Provided by (Used in)
Investing Activities 351,909 (75,561)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of Stock -- --
Proceeds from Note Pay & Long-Term Debt -- --
Principal repayments on note payable
and long-term debt (651,677) (10,422)
----------- -----------
Net Cash Provided by (Used in)
Financing Activities (651,677) (10,422)
----------- -----------
Net Increase (Decrease) in Cash (188) (105,788)
CASH, beginning of period 5,541 99,846
----------- -----------
CASH, end of period 5,353 (5,942)
=========== ===========
<TABLE>
COACHMAN INCORPORATED
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
Payments Net
Paid-in Common Toward Unrealized
Capital Stock Redemption Loss-Nonc Total
Preferred Common in Excess & Warrants of Class AA Marketable Accumulated Stockholders
Stock Stock of Par Capital Pref Stock Securities Deficit Equity
- --------- -------- ----------- ---------- ------------- ---------- ----------- ------------
<C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996
$130 $226,708 $18,514,965 $1,435,879 $(360,001) $(5,000) $(7,539,771) $12,272,910
Common Stock Issued
1,751 137,399 139,150
Change in Net Unrealized Loss
5,000 5,000
Net income for the nine months
ended Sept 30, 1997 (2,695,603) (2,695,603)
- --------- -------- ----------- ---------- ------------- ---------- ----------- -----------
Balance, September 30, 1997
$130 $228,459 $18,652,364 $1,435,879 $(360,001) 0 ($10,235,374) $ 9,721,457
========= ======== =========== ========== ============= ========== ============= ===========
</TABLE>
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 5,353
<SECURITIES> 0
<RECEIVABLES> 5,942,494
<ALLOWANCES> 0
<INVENTORY> 12,869,151
<CURRENT-ASSETS> 20,232,770
<PP&E> 7,755,767
<DEPRECIATION> 0
<TOTAL-ASSETS> 32,122,960
<CURRENT-LIABILITIES> 19,404,630
<BONDS> 0
0
130
<COMMON> 228,459
<OTHER-SE> 9,492,868
<TOTAL-LIABILITY-AND-EQUITY> 32,122,960
<SALES> 8,786,925
<TOTAL-REVENUES> 9,297,695
<CGS> 9,054,000
<TOTAL-COSTS> 10,783,626
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 179,296
<INCOME-PRETAX> (1,665,227)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,665,227)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> (1,665,227)
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