EXHIBIT 99.1
[LOGO]
COACHMEN INDUSTRIES, INC.
2831 Dexter Drive o P.O. Box 3300 o Elkhart, Indiana 46515
o 574/262-0123 o Fax 574/262-8823
NEWS RELEASE
For immediate release Monday, October 25, 2004
COACHMEN INDUSTRIES, INC. ANNOUNCES SOLID THIRD QUARTER RESULTS
O REVENUES INCREASE 17% TO RECORD $235.5 MILLION.
O NET INCOME IMPROVES 11% TO $5.9 MILLION.
O EPS IMPROVES 9% TO $0.38 FROM $0.35 PER SHARE.
O YTD EPS MORE THAN DOUBLES TO $0.76 FROM $0.35 PER SHARE.
ELKHART, IND. - Coachmen Industries, Inc. (NYSE: COA) today announced its
financial results for the third quarter ended September 30, 2004.
Sales for the third quarter increased 17.3% to $235.5 million versus $200.8
million during the same period last year. Net income posted a 10.6% improvement
to $5.9 million, or $0.38 per share for the quarter. This compares with net
income of $5.4 million or $0.35 per share in the third quarter of 2003, which
was itself a uniquely strong period. Coachmen's third quarter results were
driven by sales gains in both its Recreational Vehicle and Housing and Building
segments, together with lower operating expenses as a percent of sales. For the
first nine months of 2004, revenues have increased 28.9% to $671.7 million, from
$521.1 million in the same period last year. Net income for the first nine
months more than doubled, rising 119% to $11.8 million compared with $5.4
million in the first nine months of 2003.
Gross profit margin of 16.1% was a slight decline from the 16.5% gross profit
margin in the third quarter of 2003. The single largest factor affecting gross
margins was the Company's continued investment in new business initiatives in
both its Recreational Vehicle and Housing and Building Segments. In the third
quarter, start-up costs for the Coleman(R) line of RV products, the new West
Coast Service Center and All American Building Systems amounted to approximately
$1.7 million pre-tax, which reduced reported EPS by about $0.07 per share. GS&A
expense as a percent of sales for the third quarter improved to 12.4% versus
12.5% in 2003. The Company's third quarter
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Coachmen Industries, Inc. Announces Third Quarter Results
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October 25, 2004
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operating income improved by 9.8%, even with the inclusion of significant
expenses associated with the Company's growth initiatives in its two segments.
Year to date, gross margins are 14.8% compared with 14.9% in 2003, while GS&A
expenses as a percentage of sales improved to 12.4% from 13.2% last year. As a
result, year to date operating margins increased 0.9 percentage points to 2.6%
from 1.7% in 2003.
Claire C. Skinner, Chairman and Chief Executive Officer, remarked, "These
favorable results for the quarter continue to demonstrate the Company's steady
turnaround, and are consistent with management's earlier guidance. As expected,
earnings per share were impacted by approximately $0.07 due to the investments
we have been making in several important strategic initiatives, which will
better position the Company for revenue and earnings growth in the future. In
the near term, the RV industry has recently experienced a slowdown at both the
retail and wholesale levels, causing our inventories to increase. We have
responded by temporarily reducing production rates in some facilities. Even so,
we remain reasonably optimistic for the remainder of this year and 2005."
RECREATIONAL VEHICLE SEGMENT
The Company's Recreational Vehicle Segment reported sales of $160.9 million, up
18.1% from $136.2 million during the third quarter of 2003. Gross profit for the
quarter increased to $18.0 million, or 11.2% of sales from $15.9 million, or
11.7% of sales last year. Third quarter pre-tax income rose 13.2% to $3.3
million, from $2.9 million in 2003. Year to date, RV revenues of $481.3 million
are up 34.0% compared to $359.2 million in 2003. Year to date gross profit for
the segment was $51.6 million, or 10.7% of sales, compared with $36.7 million,
or 10.2% of sales last year. For the first nine months, RV Segment pre-tax
income increased 357% to $10.4 million compared with pre-tax income of $2.3
million last year.
As previously announced, Coachmen has embarked on two important growth
initiatives within the RV Segment. First, it has entered into an exclusive
licensing agreement with The Coleman Company to produce and market a line of
Coleman(R) brand recreational vehicles. During the quarter, the purchase of a
147,000 square foot dedicated production facility was completed, and tooling and
staffing of the facility progressed nicely throughout the quarter. The Company
is also opening a West Coast Service Center in Southern California to serve its
customers in the western states. The Company estimates that the expenses
surrounding these two initiatives impacted pre-tax income for the RV Group by
just over $900,000 in the third quarter.
RV Group wholesale unit shipments for the quarter increased by 3.4%. Shipments
of motorized products were up a solid 22.7%, with Class A motorhomes increasing
14.1% and Class C motorhomes increasing 35.6%. Within the Class A vehicle
category, shipments of Rear Diesel motorhomes increased 27.5%. Shipments of
non-motorized products decreased by 3.4%, with Travel Trailers up 1.4% and
Camping Trailers increasing 4.9%, while Fifth Wheels declined 31.1%. It is
important to note that the
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Coachmen Industries, Inc. Announces Third Quarter Results
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October 25, 2004
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change in Fifth Wheel shipments followed an exceptionally strong third quarter
of 2003, when the Company increased shipments by 107%. Year to date, wholesale
unit shipments have increased 11.6%, with motorized units increasing 40.9%.
Class A motorhome shipments have increased 34.6%, while Class C motorhome
shipments rose an impressive 49.4%. Non-motorized shipments have increased 1.7%
for the first nine months, with shipments of Camping trailers up 10.0%, while
Travel Trailer and Fifth-Wheel shipments have decreased 2.4% and 3.8%
respectively.
During the quarter, the RV industry experienced a slowdown in retail sales,
likely attributable to a variety of factors including economic and geopolitical
uncertainty, higher oil prices, and weaker consumer confidence. This was
exacerbated by the severe weather in Florida and the Southeastern United States.
Driven by the slowdown in retail activity, RV Group wholesale orders declined as
dealer inventories increased, which reduced backlog levels by 57.8% from
September 30, 2003. In response to current market conditions, production rates
have been reduced and the Company is focusing on further balancing its elevated
inventory levels while controlling marketing expenses.
HOUSING AND BUILDING SEGMENT
The Company's Housing and Building segment reported sales of $74.7 million, up
15.7% from $64.6 million during the third quarter of 2003. Gross profit for the
quarter increased to $19.9 million, or 26.6% of sales from $17.6 million, or
27.3% of sales in the same period last year. Third quarter pre-tax income fell
11.4% to $4.9 million, from $5.5 million in 2003. Year to date, Housing &
Building revenues are $190.4 million, up 17.5% from the $161.9 million reported
last year. Year to date gross profit for the segment was $47.3 million, or 24.8%
of sales, compared with $41.0 million, or 25.3% of sales in the same period last
year. The Housing and Building segment's pre-tax income has declined 8.6% to
$6.7 million compared with pre-tax income of $7.3 million in 2003.
A number of factors within the quarter affected the profitability of the Housing
and Building Group. The Company continues to incur development costs for the new
All American Building Systems (AABS) business unit, which is allowing the
Company to expand into larger commercial and multi-family projects. The
gestation period for these projects is much longer than the traditional
single-family business, in some cases taking six to twelve months from bid to
construction. As the AABS order pipeline and backlog fill, additional revenues
should offset current operating costs. The costs associated with AABS, coupled
with the Ameri-Log marketing costs, resulted in a reduction of the Housing and
Building Group's pretax profit of more than $800,000.
"We are pleased with the progress we've made in our AABS unit," noted President
and Chief Operating Officer Matthew J. Schafer. "Although we have incurred
additional expenses in the early phase of this business, we are confident that
the investments we are making now will pay future dividends in the form of
increased sales and earnings in non-traditional markets," added Schafer. In
addition, the Housing & Building segment
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Coachmen Industries, Inc. Announces Third Quarter Results
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October 25, 2004
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continued to work its way through its backlog of price protected orders, which
impacted margins due to raw material price inflation. This situation has now
resolved itself, and the Company should recognize higher selling prices on
orders shipped in the fourth quarter. Finally, a number of the Housing &
Building Segment's customers were negatively impacted by the series of
hurricanes that affected the Southeast, up through the Mid-Atlantic region. This
severe weather reduced total deliveries in the third quarter.
Despite all of these challenges, order flow remained strong during the quarter.
Wholesale unit shipments were up 2.5% and backlogs were 34.1% higher than the
comparable 2003 quarter.
BALANCE SHEET/CASH FLOW
As of September 30, 2004, the Company had cash and marketable securities of
$11.0 million and shareholders' equity of $221.3 million. However, with the
increase in working capital required to support the Company's considerable
revenue growth and the recent elevation in RV finished inventories, year-to-date
operating cash flow was a negative $11.0 million. Capital expenditures totaled
$6.8 million for the third quarter, while depreciation was $2.2 million.
Joseph P. Tomczak, Executive Vice President and Chief Financial Officer, said,
"We are pleased with the continued improvement in earnings we've seen so far in
2004. Despite the solid operating performance, the recent slowdown in the RV
industry has resulted in a high level of inventory. Consequently, reducing
working capital is a main priority, which we'll accomplish through speeding up
the cash conversion cycle and adjusting production levels to meet the current
business environment. As we focus on these fundamentals, we should see sustained
operating performance and improved cash flow in the periods ahead."
2004 OUTLOOK
"We've built upon the success of the first half of the year, and have achieved
third quarter results that were better than last year, which is impressive given
the strength of our business in the second half of 2003," said Chairman Skinner.
"Looking to the fourth quarter, we are faced with several challenges, including
a marked slowdown in retail demand for RVs with a corresponding reduction in RV
revenues and margins at lower production levels, and the continuing start-up
costs for our new Coleman product lines, the West Coast Service Center and the
Housing and Building Group marketing initiatives. The recent slowdown in the RV
industry underscores the merit of these initiatives, as they serve to strengthen
the Company's position by expanding our products and distribution opportunities,
as well as enhancing our brand value."
Skinner continued, "We are hopeful that the current retail trends in RVs will
begin to improve late in the fourth quarter, as uncertainties surrounding the
economy and elections subside and as the markets in the Southeast recover,
though we are mindful that
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October 25, 2004
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competitive measures may well place strong pressure on RV margins in response to
excess inventories industry-wide. Notwithstanding these challenges, we are
reiterating our earnings guidance for the year, with revenue growth for the year
projected to be in the range of 20% to 25%, or $850 million to $890 million,
upon which we expect to deliver earnings per share in the range of $0.88 to
$0.93, a dramatic improvement over the $0.48 in 2003."
Coachmen Industries, Inc., now celebrating its 40th anniversary, is one of
America's leading manufacturers of recreational vehicles with well-known brand
names including COACHMEN(R), GEORGIE BOY(TM), SPORTSCOACH(R) and VIKING(R). The
Company's subsidiary, ALL AMERICAN HOMES(R), is one of the nation's largest
producers of systems-built homes. Coachmen Industries is also a major builder of
commercial structures with its ALL AMERICAN BUILDING SYSTEMS(TM) and MILLER
BUILDING SYSTEMS(TM) products. Prodesign, LLC is a subsidiary that produces
custom composite and thermoformed plastic parts for numerous industries under
the PRODESIGN(R) brand. Coachmen Industries, Inc. is a publicly held company
listed on the New York Stock Exchange (NYSE) under the ticker COA.
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 CONDITION OF THE
TELECOMMUNICATIONS INDUSTRY WHICH PURCHASES MODULAR STRUCTURES, THE IMPACT OF
PERFORMANCE ON THE VALUATION OF INTANGIBLE ASSETS, THE AVAILABILITY AND THE
PRICE OF GASOLINE, THE COMPANY'S DEPENDENCE ON CHASSIS AND APPLIANCE SUPPLIERS,
INTEREST RATES, THE AVAILABILITY AND COST OF REAL ESTATE FOR RESIDENTIAL
HOUSING, THE ABILITY OF THE HOUSING AND BUILDING SEGMENT TO PERFORM IN NEW
MARKET SEGMENTS WHERE IT HAS LIMITED EXPERIENCE, ADVERSE WEATHER CONDITIONS
AFFECTING HOME DELIVERIES, COMPETITION, GOVERNMENT REGULATIONS, UNCERTAINTIES
RELATED TO LAUNCH OF A NEW BRAND PRODUCT LINE OF RECREATIONAL VEHICLES,
LEGISLATION GOVERNING THE RELATIONSHIPS OF THE COMPANY WITH ITS RECREATIONAL
VEHICLE DEALERS, CONSOLIDATION OF DISTRIBUTION CHANNELS IN THE RECREATIONAL
VEHICLE INDUSTRY, THE IMPACT OF CONSUMER CONFIDENCE AND ECONOMIC UNCERTAINTY ON
HIGH-COST DISCRETIONARY PRODUCT PURCHASES, UNCERTAINTY SURROUNDING THE 2004
ELECTIONS AND THEIR POSSIBLE IMPACT ON TAX POLICY ADVERSE TO DISCRETIONARY
INCOME AVAILABLE FOR PURCHASES OF HIGH-COST CONSUMER DURABLES, FURTHER
DEVELOPMENTS IN THE WAR ON TERRORISM AND RELATED INTERNATIONAL CRISES, OIL
SUPPLIES, AND OTHER RISKS IDENTIFIED IN THE COMPANY'S SEC FILINGS.
For more information:
Joseph P. Tomczak
Executive Vice President and Chief Financial Officer
574-262-0123
Jeffery A. Tryka
Director of Planning and Investor Relations
574-262-0123
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COACHMEN INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2004 2003 2004 2003
---- ---- ---- ----
Net Sales $ 235,536 $ 200,809 $ 671,684 $ 521,099
Gross Profit - $ 37,851 33,130 99,077 77,710
Gross Profit - % 16.1% 16.5% 14.8% 14.9%
GS&A - $ 29,228 25,159 83,184 69,020
GS&A - % 12.4% 12.5% 12.4% 13.2%
Gain on Sale of Property - $ (189) (57) (1,268) (96)
Gain on Sale of Property - % (0.1)% (0.0)% (0.2)% (0.0)%
Operating Income- $ 8,812 8,028 17,161 8,786
Operating Income- % 3.7% 4.0% 2.6% 1.7%
Other (Income)/Expense (216) (100) (687) 634
Pre-Tax Profit- $ 9,028 8,128 17,848 8,152
Pre-Tax Profit - % 3.8% 4.0% 2.7% 1.6%
Tax Expense 3,100 2,770 6,086 2,778
Net Income 5,928 5,358 11,762 5,374
Earnings per share -
Basic 0.38 0.35 0.76 0.35
Diluted 0.38 0.35 0.76 0.35
Weighted Average Shares Outstanding
Basic 15,527 15,427 15,436 15,436
Diluted 15,564 15,464 15,475 15,475
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COACHMEN INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
ASSETS 2004 2003
- ------ ---- ----
CURRENT ASSETS
Cash and temporary cash investments $ 7,616 $ 6,408
Marketable securities 3,415 5,667
Accounts receivable 50,212 46,232
Inventories 149,813 101,100
Prepaid expenses and other 10,298 7,170
Deferred income taxes 6,457 5,959
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TOTAL CURRENT ASSETS 227,811 172,536
Property, plant & equipment, net 83,930 79,225
Goodwill 18,212 18,954
Cash value of life insurance 39,486 36,506
Real estate held for sale 60 0
Other 4,696 3,467
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TOTAL ASSETS $ 374,195 $ 310,688
=============== ================
SEPTEMBER 30, DECEMBER 31,
LIABILITIES AND SHAREHOLDERS' EQUITY 2004 2003
---- ----
CURRENT LIABILITIES
ST borrowings & current portion of LT debt $ 26,560 $ 5,990
Accounts payable, trade 49,820 30,486
Accrued income taxes 3,846 2,511
Other accruals 43,104 37,586
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TOTAL CURRENT LIABILITIES 123,330 76,573
Long-term debt 15,872 9,419
Deferred income taxes 3,903 4,089
Postretirement deferred comp benefits 9,484 9,172
Other 346 284
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TOTAL LIABILITIES 152,935 99,537
SHAREHOLDERS' EQUITY 221,260 211,151
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 374,195 $ 310,688
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COACHMEN INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30,
2004 2003
---- ----
Net income $ 11,762 $ 5,374
Depreciation 6,973 7,112
Changes in current assets and liabilities (29,752) (8,870)
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NET CASH PROVIDED BY/(USED IN) OPERATIONS (11,017) 3,616
NET CASH USED IN INVESTING ACTIVITIES (12,442) (8,202)
Net borrowings 27,023 (43)
Issuance/(purchase) of stock 458 (4,085)
Dividends (2,814) (2,787)
---------- -----------
NET CASH PROVIDED BY/(USED IN) FINANCING ACTIVITIES 24,667 (6,915)
INCREASE/(DECREASE) IN CASH AND TEMPORARY CASH INVESTMENTS 1,208 (11,501)
Beginning of period cash and temporary cash investments 6,408 16,549
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END OF PERIOD CASH AND TEMPORARY CASH INVESTMENTS $ 7,616 $ 5,048
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COACHMEN INDUSTRIES, INC.
QUARTERLY SEGMENT DATA
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2004 2003 2004 2003
SALES
Recreational Vehicle $ 160,860 $ 136,241 $ 481,319 $ 359,153
Housing and Building 74,676 64,568 190,365 161,946
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Total $ 235,536 $ 200,809 $ 671,684 $ 521,099
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GROSS PROFIT
Recreational Vehicle $ 17,974 $ 15,892 $ 51,594 $ 36,745
Housing and Building 19,877 17,614 47,281 40,966
Other 0 (376) 202 (1)
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Total $ 37,851 $ 33,130 $ 99,077 $ 77,710
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GROSS MARGIN PERCENTAGE
Recreational Vehicle 11.2% 11.7% 10.7% 10.2%
Housing and Building 26.6% 27.3% 24.8% 25.3%
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Total 16.1% 16.5% 14.8% 14.9%
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OPERATING EXPENSES
Recreational Vehicle $ 14,709 $ 12,947 $ 41,194 $ 34,277
Housing and Building 15,201 12,167 40,985 33,661
Other (871) (12) (263) 986
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Total $ 29,039 $ 25,102 $ 81,916 $ 68,924
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OPERATING EXPENSE PERCENTAGE
Recreational Vehicle 9.1% 9.5% 8.6% 9.5%
Housing and Building 20.4% 18.8% 21.5% 20.8%
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Total 12.3% 12.5% 12.2% 13.2%
============= ============ ============= =============
OPERATING INCOME
Recreational Vehicle $ 3,265 $ 2,945 $ 10,400 $ 2,468
Housing and Building 4,676 5,447 6,296 7,305
Other 871 (364) 465 (987)
------------- ------------ ------------- ------------
Total $ 8,812 $ 8,028 $ 17,161 $ 8,786
============= ============ ============= ============
PRE-TAX INCOME/(LOSS)
Recreational Vehicle $ 3,252 $ 2,872 $ 10,363 $ 2,270
Housing and Building 4,899 5,528 6,655 7,284
Other 877 (272) 830 (1,402)
------------- ------------ ------------ -------------
Total $ 9,028 $ 8,128 $ 17,848 $ 8,152
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