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, 2001
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 April 30, 2001:
Common Shares, without par value 15,780,399 shares outstanding
including an equivalent number of common share purchase rights.
COACHMEN INDUSTRIES, INC.
INDEX Page No.
PART I. FINANCIAL INFORMATION
Financial Statements:
Condensed Consolidated Balance Sheets-
March 31, 2001 and December 31, 2000 4-5
Condensed Consolidated Statements of Operations-
Three Months Ended March 31, 2001 and 2000 6
Condensed Consolidated Statements of Cash Flows-
Three Months Ended March 31, 2001 and 2000 7
Notes to Condensed Consolidated Financial Statements 8-10
Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-13
PART II. OTHER INFORMATION 13-14
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES 15
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 and price of gasoline and the impact of
economic uncertainty on high-cost discretionary product purchases, which
can hinder the 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; the functioning of the Company's enterprise-wide
technology system, which can impact the Company's day-to-day operations;
legislation governing the relationships of the Company with its
recreational vehicle dealers, which may affect the Company's options and
liabilities in the event of a general economic downturn; and also on the
state of the recreational vehicle and modular housing industries in the
United States. Other factors affecting forward-looking statements
include the cyclical and seasonal nature of the Company's businesses,
adverse weather, changes in property taxes and energy costs, changes in
federal income tax laws and federal mortgage financing programs, changes
in public policy, competition, government regulations 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.
At times, the Company's actual performance differs materially from its
projections and estimates regarding the economy, the recreational
vehicle and housing and building 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. For further discussion of the
elements involved in this report, see the Company's most recent Annual
Report on Form 10-K.
COACHMEN INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
MARCH 31, DECEMBER 31,
2001 2000
ASSETS
CURRENT ASSETS
Cash and temporary cash investments $ 17,229 $ 2,614
Marketable securities 17,100 18,737
Trade receivables, less allowance for
doubtful receivables 2001 - $1,154
and 2000 - $1,066 37,812 37,743
Other receivables 3,065 2,336
Refundable income taxes 2,779 4,600
Inventories 98,866 97,315
Prepaid expenses and other 2,007 2,221
Deferred income taxes 8,968 8,384
Total current assets 187,826 173,950
PROPERTY AND EQUIPMENT, at cost 141,335 139,029
Less, Accumulated depreciation 55,297 54,866
Property and equipment, net 86,038 84,163
INTANGIBLES, net of accumulated amortization
2001 - $1,129 and 2000 - $917 19,260 15,983
OTHER 28,960 22,350
TOTAL ASSETS $322,084 $296,446
The accompanying notes are part of the condensed consolidated financial
statements.
COACHMEN INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
(in thousands)
MARCH 31, DECEMBER 31,
2001 2000
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 865 $ 865
Accounts payable, trade 31,299 24,015
Accrued income taxes 359 845
Accrued expenses and other liabilities 43,572 31,988
Total current liabilities 76,095 57,713
LONG-TERM DEBT 25,295 11,795
DEFERRED INCOME TAXES 3,722 3,370
OTHER 8,202 8,619
TOTAL LIABILITIES 113,314 81,497
SHAREHOLDERS' EQUITY
Common shares, without par value: authorized
60,000 shares; issued 2001 - 21,026
shares and 2000 - 21,020 shares 90,915 90,861
Additional paid-in capital 5,648 5,563
Accumulated other comprehensive loss (1,016) -
Retained earnings 164,038 169,766
Treasury shares, at cost: 2001 - 5,253
Shares and 2000 - 5,317 shares (50,815) (51,241)
TOTAL SHAREHOLDERS' EQUITY 208,770 214,949
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $322,084 $296,446
The accompanying notes are part of the condensed consolidated financial
statements.
COACHMEN INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
THREE MONTHS
ENDED MARCH 31,
2001 2000
Net sales $154,807 $202,485
Cost of goods sold 136,802 171,062
Gross profit 18,005 31,423
Operating expenses:
Delivery 7,843 8,281
Selling 8,774 8,880
General and administrative 8,815 7,884
25,432 25,045
Operating income (loss) (7,427) 6,378
Nonoperating income (expense):
Interest expense (574) (363)
Investment income (loss) 152 (127)
Gain (loss) on sale of properties, net (5) 30
Other, net 62 282
(365) (178)
Income (loss) before income taxes (7,792) 6,200
Income taxes (2,852) 2,170
Net income (loss) $ (4,940) $ 4,030
Earnings (loss) per common share:
Basic $ (.31) $ .26
Diluted (.31) .26
Shares used in the computation
of earnings (loss) per common share:
Basic 15,746 15,551
Diluted 15,746 15,570
Cash dividends per common share $ .05 $ .05
The accompanying notes are part of the condensed consolidated financial
statements.
COACHMEN INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
THREE MONTHS
ENDED MARCH 31,
2001 2000
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash provided by
operating activities $ 15,737 $ 2,677
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from:
Sale of marketable securities 12,590 56,604
Sale of properties - 55
Sale of businesses - 2,351
Acquisitions of:
Marketable securities (12,759) (47,192)
Property and equipment (1,857) (3,316)
Businesses, net of cash acquired (7,103) -
Other (92) 207
Net cash provided by (used in)
investing activities (9,221) 8,709
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt 13,500 -
Payments of long-term debt (4,667) (143)
Issuance of common shares under stock
option and stock purchase plans 54 247
Tax benefit from stock options exercised - 67
Cash dividends paid (788) (782)
Net cash provided by (used in)
financing activities 8,099 (611)
Increase in cash and temporary
cash investments 14,615 10,775
CASH AND TEMPORARY CASH INVESTMENTS
Beginning of period 2,614 4,269
End of period $ 17,229 $ 15,044
The accompanying notes are part of the condensed consolidated financial
statements.
COACHMEN INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands)
1. BASIS OF PRESENTATION
The consolidated balance sheet data as of December 31, 2000 was
derived from audited financial statements, but does not include all
disclosures required by generally accepted accounting principles.
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, 2001 are
not necessarily indicative of the results to be expected for the
full year.
2. SEGMENT 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: Recreational vehicles, including related
parts and supplies, and modular housing and building. 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.
The table below presents information about segments used by the
chief operating decision maker of the Company for the three
months ended March 31, 2001 and 2000:
2001 2000
Net sales:
Recreational vehicles $107,230 $162,638
Modular housing
and building 47,577 39,847
Consolidated total $154,807 $202,485
Pretax income (loss):
Recreational vehicles $ (5,511) $ 5,867
Modular housing
and building 475 1,854
Other reconciling items _ (2,756) (1,521)
Consolidated total $ (7,792) $ 6,200
Total assets:
Recreational vehicles $117,631 $165,999
Modular housing
and building 116,799 41,918
Other reconciling items 87,654 87,423
Consolidated total $322,084 $295,340
3. INVENTORIES
Inventories consist of the following:
March 31, December 31,
2001 2000
Raw materials $ 31,183 $ 35,963
Work in process 9,350 8,244
Finished goods 58,333 53,108
Total $ 98,866 $ 97,315
4. EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income by the
weighted average number of shares of common stock outstanding during
the period. Diluted earnings per share is computed by dividing net
income by the weighted average number of shares of common stock
outstanding plus the dilutive effect of stock options and stock
awards. The dilutive effect of stock options and awards did not
enter into the computation of diluted earnings per share for the
quarter ended March 31, 2001, because their inclusion would have
been antidilutive.
5. COMPREHENSIVE INCOME
Other comprehensive loss includes unrealized depreciation of
available-for-sale securities, net of taxes. Other comprehensive
loss for the three months ended March 31, 2001 was $(1,016). There
was no other comprehensive income recorded for the quarter ended
March 31, 2000. Total comprehensive income (loss) combines reported
net income (loss) and other comprehensive income (loss). Total
comprehensive income (loss) for the three months ended March 31,
2001 and 2000 was $(5,956) and $4,030, respectively.
6. ACQUISITION OF A BUSINESS
On February 12, 2001, the Company acquired all the issued and
outstanding shares of capital stock of Kan Build, Inc. ("Kan
Build"), a manufacturer of modular buildings with facilities in
Osage City, Kansas; Loveland, Colorado; and a new plant under
construction in Millikin, Colorado. The purchase price aggregated
$21.5 million and consisted of $8.8 cash paid at closing and the
assumption of $12.7 of liabilities. The acquisition was accounted
for as a purchase.
Unaudited pro forma financial information as if this acquisition had
occurred at the beginning of each period is as follows:
THREE MONTHS
ENDED MARCH 31,
2001 2000
Net sales $158,330 $210,090
Net income (loss) (4,847) 4,440
Earnings (loss) per share:
Basic $ (.31) $ .29
Diluted (.31) .29
The unaudited pro forma financial information presented above,
including the historical results of Kan Build, is not considered by
management to be indicative of the consolidated results of
operations which might have been attained had Kan Build actually
been acquired at the beginning of these periods, nor is it
necessarily indicative of results that may occur in the future.
7. RECLASSIFICATIONS
Certain information in the accompanying condensed consolidated
statement of operations for the three months ended March 31, 2000 has
bee reclassified to conform to the 2001 presentation. The
reclassifications had no effect on net income as previously
reported.
8. COMMITMENTS AND CONTINGENCIES
The Company was contingently liable at March 31, 2001 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.
Historically, the Company has not experienced losses under these
agreements. However, in the fourth quarter of 2000 and continuing
during the first quarter of 2001, as a result of business conditions
affecting the recreational vehicle industry, the Company experienced
losses under repurchase agreements. Accordingly, the Company is
recording an accrual for estimated losses under repurchase
agreements.
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
the ultimate outcome of these matters and any liabilities in excess
of insurance coverage and self-insurance accruals will not have a
material adverse impact on the Company's consolidated financial
position or on its future business operations.
COACHMEN INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share data)
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, 2001 and 2000
Increases (Decreases)
Amount Percentage
Net sales $ (47,678) (23.5)%
Cost of goods sold (34,260) (20.0)
Delivery (438) (5.3)
Selling (106) (1.2)
General and administrative 931 11.8
Interest expense 211 58.1
Investment income 279 219.7
Loss on sale of
properties, net (35) (116.7)
Other, net (220) (78.0)
Loss before income taxes (13,992) (225.7)
Income taxes (5,022) (231.4)
Net loss (8,970) (222.6)
NET SALES
Consolidated net sales for the quarter ended March 31, 2001 were
$154,807, a decrease of 23.5% from the $202,485 reported in the same
quarter of 2000. The Company's recreational vehicle segment experienced
a sales decrease of 34.1%. Both the motorized and towable products,
reflected decreases in the number of units and sales dollars from the
2000 period. The Company's modular housing and building segment
experienced a 19.4% increase in net sales for the quarter compared to
last year's first quarter. This increase was principally attributable to
net sales of acquired businesses during the past eleven-month period.
COST OF GOODS SOLD
Cost of goods sold decreased 20.0% or $34,260 for the three months ended
March 31, 2001. As a percentage of net sales, cost of goods sold was
88.4% for the 2001 quarter and 84.5% for the 2000 quarter. The decrease
in the dollar amount of cost of goods sold in the current quarter is
attributable to lower variable expenses as a result of the decrease in
sales and production. The increase in the cost of goods sold percentage
to net sales for the 2001 quarter is primarily related to fixed overhead
costs, which could not be reduced in the same relationship as the
decrease in sales and production.
OPERATING EXPENSES
As a percentage of net sales, operating expenses, which include
delivery, selling, general and administrative expenses, were 16.4% and
12.4% for the quarters ended March 31, 2001 and 2000, respectively. For
the quarter ended March 31, 2001 compared to the prior year's first
quarter, the percentage of delivery expense to net sales increased 1.0%
and the percentage of selling expense to net sales increased 1.3%, while
total dollars spent in both categories were down. General and
administrative expenses were 5.7% of net sales for the first quarter of
2001 and 3.9% of net sales for the first quarter of 2000. The higher
administrative expense is primarily the result of administrative expenses
and goodwill amortization for companies acquired during the past eleven
month period, which were not included in last year's first quarter
results.
INTEREST EXPENSE
Interest expense was $574 and $363 for the quarters ended March 31, 2001
and 2000, respectively. The increase in interest expense reflects a
higher overall level of outstanding debt. This increase was the result
of borrowing for the Kan Build acquisition and Industrial Revenue Bonds
assumed in the acquisitions of the Mod-U-Kraf Homes, Inc. and Miller
Building Systems, Inc. during 2000.
INVESTMENT INCOME
Investment income was $152 for the 2001 quarter compared with an
investment loss of $127 for the 2000 comparable quarter. The increase
was principally attributable to unrealized gains on open U.S. Treasury
bond futures compared to unrealized losses on futures options in the
2000 quarter.
GAIN (LOSS) ON THE SALE OF PROPERTIES, NET
The loss on the sale of properties for the quarter ended March 31, 2001
was $5 while the comparative quarter in 2000 was a gain of $30. 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 $62 for the 2001 first quarter
and $282 for the 2000 first quarter. There were no significant variances
from the comparable quarters.
INCOME TAXES
For the first quarter ended March 31, 2001, the effective tax credit was
36.6% compared to a first quarter tax rate of 35.0% in 2000. The
Company's effective tax rate fluctuates based upon the states where
sales occur, the level of export sales and the amount of nontaxable
dividend income on investments.
LIQUIDITY AND CAPITAL RESOURCES
The Company generally relies on funds from operations as its primary
source of liquidity. In addition, the Company maintains a $50 million,
unsecured bank line of credit to meet its seasonal working capital
needs. At March 31, 2001, there was $13.5 million borrowed against this
bank line of credit. For the three months ended March 31, 2001, the
major source of cash was provided by operating activities. Net cash
provided by operating activities aggregated $15,737 and $2,277 for the
quarters ended March 31, 2001 and 2000, respectively. Increased
operating cash flows for the current quarter were favorably impacted
by an $18.9 million increase in accounts payable and accrued expenses
and other liabilities. The cash used in investing activities included
the purchase of Kan Build and the acquisition of property and equipment.
The cash provided by financing activities consisted of proceeds from
long-term debt (used to fund the purchase of Kan Build), partially
offset by a cash dividend.
At March 31, 2001, working capital decreased to $111.7 million from
$116.2 million at December 31, 2000. The $13.9 million increase in
current assets at March 31, 2001 versus December 31, 2000, was primarily
due to increased cash and temporary cash investments. The increase in
current liabilities of $13.3 million is substantially due to increased
trade payables and other accrued liabilities partially offset by a
decrease in accrued income taxes.
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 during the quarter ended March 31, 2001
Form 8-K filed on January 12, 2001, reporting an item 5 event
(a press release announcing a loss in the fourth quarter;
profit for the year).
Form 8-K filed on February 14, 2001, reporting an item 5 event
to the effect that the Company modified it's By-Laws and that
on February 9, 2001 the Company filed a press release
announcing final results for 2000 including nonrecurring
special charges and the third major acquisition in the last
nine months.
Form 8-K filed on February 16, 2001, reporting an item 5 event
(a press release announcing expansion of modular sector, cash
dividend and CFO change).
Form 8-K filed on March 9, 2001, reporting an item 9 event (a
press release announcing that on March 14, 2001, the Company
will be presenting its calendar year 2000 performance and
outlook for 2001 at the RedChip.com(TM) Investor Conference).
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)
Date: May 14, 2001 \Richard M. Lavers________________
Richard M. Lavers, Executive Vice
President, Interim Chief Financial
Officer, General Counsel and
Secretary
Date: May 14, 2001 \William M. Angelo_______________
William M. Angelo, Vice President
and Chief Accounting Officer