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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark one)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995.
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 of incorporation (IRS Employer Identification No.)
or organization)
601 E. Beardsley Ave., Elkhart, Indiana 46514
(Address of principal executive offices) (Zip Code)
(219) 262-0123
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, Without Par Value New York Stock Exchange
(Title of each class) (Name of each exchange on
which registered)
Securities registered pursuant to Section 12(g) of the Act: None
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. (X) Yes ( ) No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-K or any amendment hereto. X
While it is difficult to determine the number of shares owned by
non-affiliates (within the meaning of such term under the applicable
regulations of the Securities and Exchange Commission), the registrant
estimates that the aggregate market value of the registrant's Common Stock on
March 11, 1996 held by non-affiliates was $170.68 million (based upon the
closing price on the New York Stock Exchange and an estimate that 88.6% of
such shares are owned by non-affiliates).
As of March 11, 1996, 7,503,178 shares of the registrant's Common
Stock were outstanding.
Documents Incorporated by Reference
Parts of Form 10-K into which
Document the Document is Incorporated
Portions of the Proxy Statement for
the Annual Meeting of Shareholders
to be held on May 2, 1996 Part III
COACHMEN INDUSTRIES, INC.
Part I.
Item 1. Business
Coachmen Industries, Inc. (the "Company" or the "Registrant") was
incorporated under the laws of the State of Indiana on December 31, 1964, as
the successor to a proprietorship established earlier that year. All
references to the Company include its wholly owned subsidiaries and divisions.
The Company is one of the largest full-line producers of recreational
vehicles and while it is primarily engaged in their production and sale, it
also has interests in the parts and supplies and modular housing industries.
The Company maintains approximately 52 trademarks, which are up for renewal
from 1996 through 2010, and approximately 5 patents due to expire between
1997 and 2006. There are no material licenses, franchises, or concessions
and no material foreign operations.
Coachmen Industries, Inc. operates primarily in two business segments,
vehicles and housing. The vehicle segment consists of the manufacture and
distribution of Class A and Class C motorhomes, travel trailers, fifth wheel
trailers, camping trailers, truck campers, van campers, van and truck
conversions and related parts and supplies. The housing segment consists of
factory produced modular homes.
The table below sets forth the contribution of each of the Company's product
lines to net sales in each of the last three years (dollar amounts
in thousands):
1995 1994 1993
Amount % Amount % Amount %
Vehicles:
Motorhomes $279,917 54 $177,583 45 $159,057 48
Travel Trailers 102,229 20 98,147 25 67,999 21
Camping Trailers 12,728 2 10,764 3 9,757 3
Truck Campers 3,748 1 3,117 1 3,512 1
Parts and Supplies 33,991 7 31,397 8 25,724 8
Ambulances - - 6,423 1 15,035 4
Total Vehicles 432,613 84 327,431 83 281,084 85
Housing 83,249 16 66,593 17 48,427 15
Total $515,862 100 $394,024 100 $329,511 100
Note: See Note 2 of Notes to Consolidated Financial Statements
regarding segment information on page 24.
1
Vehicles
Recreational vehicles are units which are driven or towed and serve as
temporary living quarters for camping, travel or other leisure activities.
Recreational vehicles may be categorized as motorhomes, travel trailers,
camping trailers or truck campers. A motorhome is a self-powered mobile
dwelling built on a special heavy duty chassis. A travel trailer is a mobile
dwelling designed to be towed behind another vehicle. Camping trailers are
smaller towed units constructed with sidewalls that may be raised up and
folded out. Truck campers are designed to be mounted on the bed of a pickup
truck.
The Company's principal brand names for its recreational vehicles are
Coachmen, Shasta, Viking, Travelmaster, Cruise Air, Encounter, Cruise Master,
Swinger, Pursuit, Custom Swinger, Dearborn, Jimmy, Greenbriar and Saratoga.
In 1988, the Company acquired various assets of The Bentley Corporation,
incorporated under the name of Transcoach, Inc. (d/b/a Good Times Van) and
expanded its van conversion business into the Southern market. During 1991,
the Company discontinued its Good Times Van manufacturing operation, sold a
minority interest in Transcoach, Inc. and began producing van, pickup and
suburban conversions under the name Luxury Conversions. In 1994, the
Company sold its remaining interest in Transcoach, Inc.
In January 1995, the Company acquired all of the issued and outstanding
capital stock of Georgie Boy Mfg., Inc., the nation's third largest
manufacturer of Class A motorhomes. All manufacturing facilities for
Georgie Boy are located in Edwardsburg, Michigan. (See Note 9 of Notes to
Consolidated Financial Statements on page 31 regarding acquisition
information.)
The Company currently produces recreational vehicles on an assembly line
basis in three states and has acquired a new manufacturing facility in the
State of Oregon to produce towable units. This plant is scheduled to be fully
operational in the Spring of 1996. Components used in the manufacture of
recreational vehicles are primarily purchased from outside sources. However,
in some cases (such as cushions, fiberglass products and furniture) where it
is profitable for the Company to do so, or where the Company has experienced
shortages of supplies, the Company has undertaken to manufacture its own
supplies. The Company depends on the availability of chassis from a small
number of manufacturers. Occasionally, chassis availability has limited the
Company's production.
The Company believes it has the ability to respond promptly to changes in
market conditions. Most of the manufacturing facilities can be changed over
to the assembly of other existing products in two to six weeks. In addition,
these facilities may be used for other types of light manufacturing or
assembly operations. This flexibility enables
2
the Company to adjust its manufacturing capabilities in response to changes
in demand for its products.
Recreational vehicles are generally manufactured against orders received from
the Company's dealers. Sales are seasonal with the highest level of sales
occurring during the spring and summer months. Coachmen's recreational
vehicles are distributed through more than 1,200 independent and five
Company-owned dealers throughout the United States. Agreements with most of
its dealers are cancelable on short notice, provide for minimum inventory
levels and establish sales territories. In line with its belief that a strong
dealer network is a major component of a successful marketing strategy,
Coachmen has continuing programs to strengthen its dealers by providing
specialized training classes in areas such as sales and service.
Most dealers' purchases of recreational vehicles from the Company are
financed through "floor plan" arrangements. Under these arrangements, a bank
or other financial institution agrees to lend the dealer all or most of the
purchase price of its recreational vehicle inventory, collateralized by a
lien on such inventory. The Company generally executes repurchase agreements
at the request of the financing institution. These agreements provide that,
for up to twelve months after a unit is financed, the Company will repurchase
a unit which has been repossessed by the financing institution for the amount
then due to the financing institution, which is usually less than 100% of
the dealer's cost. 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. In order to supplement local floor plan
financing, the Company has arranged for NationsCredit Commercial Corporation,
a subsidiary of NationsBank Corporation, to make such financing available to
approved dealers with provisions similar to those used in dealer-arranged
floor plan financing. (See Note 10 of Notes to Consolidated Financial
Statements on page 33.)
The Company does not finance retail consumer purchases of its products, nor
does it generally guarantee consumer financing.
Parts and Supplies: The Company produces a number of components used in
recreational vehicles for use in its own manufacturing operations and for
sale to other manufacturers. Such components include van tops, running
boards and furniture. In addition, the Company has established a successful
line of office furniture manufactured under the "Luxsteel" brand name.
In 1986, the Company acquired a 90% interest in Southern Ambulance Builders,
Inc., La Grange, Georgia and increased that interest to 100% in 1990. In
April 1994, the Company sold certain assets of this subsidiary consisting of
inventories, property and equipment and other miscellaneous assets. The
Company sold the land of Southern Ambulance in a separate transaction later
in the year. Southern Ambulance manufactured and sold ambulances and other
emergency vehicles. Also, during 1994, the Company sold all of the assets
of its wholly owned
3
subsidiary, Auranco, a steel fabricator and diversified supplier of parts
for the recreational vehicle, manufactured housing, and transportation
industries. (See Note 9 of Notes to Consolidated Financial Statements on
page 31 regarding disposition information.)
Housing
The Company's modular homes are designed to serve as permanent living
quarters and are built on a wooden frame similar to frames used for site-
built housing. The homes are transported on special carriers to a permanent
location where they are usually set by crane on a basement or crawl space
foundation. Modular housing is produced on an assembly line basis in plants
located in Indiana, Iowa, North Carolina and Tennessee and units are usually
sold to builder/developers.
In September 1994, the Company acquired substantially all of the operating
assets of the North Carolina division of Muncy Building Enterprises, L.P., a
manufacturer of modular homes. The assets acquired consisted principally of
property and equipment and inventories of modular homes. Also, during
1994 the Company began construction of a new 120,000 sq. ft. facility in
Springfield, Tennessee. This facility was operational in May of 1995.
Business Factors
Vehicles produced by Coachmen generally require gasoline for their operation.
Shortages of gasoline and significant increases in the price of gasoline have
had a substantial adverse effect on the demand for the recreational vehicle
products in the past and could adversely affect demand in the future. The
substantial contraction of the recreational vehicle industry and Coachmen
recreational vehicle sales during 1979, 1980, 1990 and 1991, as energy
concerns developed, and the subsequent improvement in sales as energy
concerns abated, are indicative of the sensitivity of the recreational
vehicle business to energy developments.
The vehicle and housing businesses are dependent upon the availability of and
terms of the financing used by dealers and retail purchasers. Consequently,
increases in interest rates and the tightening of credit through governmental
action or other means have adversely affected the Company's business in the
past and could do so in the future.
Competition and Regulation
The vehicle and housing industries are highly competitive, and the Company
has numerous competitors and potential competitors in each of its classes of
products, some of whom have greater financial and other resources. Initial
capital requirements for entry into the manufacture of recreational vehicles
or housing are comparatively small; however, codes, standards, and safety
requirements introduced in recent years are a deterrent to new competitors.
4
Recreational vehicles, the largest portion of the Company's business,
generally compete in the lower to mid-price range markets. The Company
believes it is a leader within the recreational vehicle industry in its focus
on quality. A quality product and a strong commitment to competitive pricing
are emphasized by the Company in the markets it serves. The Company estimates
that its current share of the recreational vehicle market is in excess of
seven percent.
The Company continues to recognize its obligations to protect the environment
insofar as its operations are concerned. To date, the Company has not
experienced any material adverse effect from existing federal, state, or
local environmental regulations.
Employees
At December 31, 1995, Coachmen employed 3,443 persons, of whom 640 were
employed in office and administrative capacities. The Company provides group
life, hospitalization, and major medical plans under which the employee pays
a portion of the cost. The Company considers its relations with employees
to be good.
Research and Development
During 1995, the Company spent approximately $2,240,000 on research related
to the development of new products and improvement of existing products. The
amounts spent in 1994 and 1993 were approximately $1,925,000 and $2,012,000,
respectively.
5
Item 2. Properties
The Registrant owns or leases 2,443,185 square feet of plant and office
space, located on 1,120 acres, of which 1,690,201 square feet are used for
manufacturing, 211,718 square feet are used for warehousing and distribution,
41,675 square feet are used for research and development, 69,180 square feet
are used for customer service and 124,850 square feet are offices. 92,078
square feet are leased to others and 213,483 square feet are available for
sale or lease. The Registrant believes that its present facilities,
consisting primarily of steel clad, steel frame or wood frame construction
and the machinery and equipment contained therein, are well maintained and in
good condition.
The following table indicates the location, number and size of the
Registrant's properties by segment as of December 31, 1995:
No. of Building Area
Location Acreage Buildings (Sq. Ft.)
Properties Owned and Used by Registrant:
Vehicles
Elkhart, Indiana 62 14 258,135
Middlebury, Indiana 584 32 729,580
Fitzgerald, Georgia 17 3 67,070
Centreville, Michigan 105 4 84,865
Edwardsburg, Michigan 83 12 303,254
Colfax, North Carolina 4 2 14,000
Subtotal 855 67 1,456,904
Housing
Decatur, Indiana 44 3 247,600
Dyersville, Iowa 20 1 107,400
Ellenboro, North Carolina 24 3 77,700
Springfield, Tennessee 45 1 121,800
Subtotal 133 8 554,500
Total owned 988 75 2,011,404
6
Properties (Continued)
Properties Leased and Used by Registrant:
Vehicles
Elkhart, Indiana 12 4 103,920
Banning, California 3 1 2,700
Ft. Myers, Florida 3 1 10,400
Mt. Morris, Michigan 8 1 9,200
Subtotal 26 7 126,220
Properties Owned by Registrant and Leased to Others:
Vehicles
Crooksville, Ohio 9 2 39,230
Grapevine, Texas 5 4 52,848
Subtotal 14 6 92,078
Properties Owned by Registrant and Available for Sale or Lease:
Vehicles
Perris, California 15 - -
Mt. Angel, Oregon 7 - -
Grapevine, Texas 4 - -
Longview, Texas 30 1 55,200
Housing
Montezuma, Georgia 36 2 158,283
Subtotal 92 3 213,483
Total 1,120 91 2,443,185
7
Item 3. Legal Proceedings
Other than ordinary routine litigation incidental to its business, the
Company is not a party to any material pending legal proceedings as defined
in the instructions to this item.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted during the quarter ended December 31, 1995 to a
vote of security holders.
Executive Officers of the Registrant
The following table shows the names and ages of the executive officers of the
Registrant and the positions and offices held by them on the date of this
report:
Name Age Office
*Thomas H. Corson 68 Chairman of the Board
and Chief Executive Officer
*Keith D. Corson 60 President
and Chief Operating Officer
*Gary L. Groom 50 Executive Vice President,
Finance and Secretary
*Claire C. Skinner 41 Vice Chairman of the Board
*Gene E. Stout 62 Executive Vice President,
Corporate Development
* Member of Finance Committee
The principal occupation during the past five years of Messrs. T. H. Corson,
G. L. Groom, G. E. Stout, and Ms. C. C. Skinner has been their employment
with the Company as an executive officer. Mr. K. D. Corson rejoined the
Company in June 1991 and was appointed President and Chief Operating Officer
in October 1991. He held the office of President and Chief Operating Officer
when he left the Company in May of 1982 to pursue other interests. Mr. K. D.
Corson was owner and President of Koszegi Products, Inc. (a manufacturer of
soft case products and other miscellaneous items) from August of 1983 to
March of 1989 when Koszegi was acquired by Forward Industries, Inc. After
the sale, he remained President of Koszegi until rejoining the Company in
1991.
8
Part II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters
The following table discloses the high and low sales prices for Coachmen's
common stock during the past two years as reported on the New York Stock
Exchange, along with information on dividends paid per share during the same
periods.
High & Low Prices Dividends Paid
1995 1994 1995 1994
1st Quarter 18 3/8 - 14 7/8 18 3/8 - 14 1/2 .07 .06
2nd Quarter 18 1/2 - 13 3/8 17 7/8 - 12 1/2 .07 .06
3rd Quarter 17 5/8 - 14 1/8 15 1/4 - 11 3/4 .07 .06
4th Quarter 23 5/8 - 16 1/8 15 5/8 - 11 3/4 .07 .06
The Company's common stock is traded on the New York Stock Exchange.
The number of shareholders of record as of January 31, 1996 was 1,626.
Item 6. Selected Financial Data
Five-Year Summary of Selected Financial Data
-Year Ended December 31-
1995 1994 1993 1992 1991
Net sales $515,862,065 $394,023,774 $329,511,226 $292,790,134 $231,367,713
Income (loss)
before income
taxes 27,957,400 22,812,094 12,695,727 8,261,793 (13,281,462)
Net income
(loss) 17,549,400 14,784,094 12,695,727 8,136,793 (13,434,462)
Earnings (loss)
per share 2.36 2.01 1.74 1.13 (1.88)
Cash dividends
per share .28 .24 .19 .08 .08
At year end:
Total assets 150,248,757 125,021,282 94,736,482 88,836,412 86,488,553
Long-term
debt 12,117,756 7,023,394 3,749,950 5,336,277 6,807,102
9
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
Comparison of 1995 to 1994
Consolidated net sales for 1995 were $515.9 million, an increase of 30.9%
over the $394.0 million reported in 1994. The Company's vehicle segment,
which includes the parts and supply group of companies, experienced a sales
increase of 32.1%, while the housing segment of the Company's business had an
increase of 25.0%. Vehicle segment sales were augmented by the sales of
Georgie Boy Mfg., Inc. ("Georgie Boy"), a manufacturer of Class A motor
homes, acquired January 3, 1995. In addition, 1994 included the sales of
Southern Ambulance Builders, Inc. which was sold April 29, 1994. After
eliminating the net sales of Georgie Boy from 1995 and Southern Ambulance
from 1994, the Company's vehicle segment still experienced a net sales
increase of 8.2%. Successful new product introductions and aggressive pricing
resulted in significant market share gains in most recreational vehicle
product categories, while the industry as a whole had a sales decline.
Increased capacity in the housing segment, resulting from the late 1994
acquisition of a plant in North Carolina and the 1995 start-up of a plant in
Tennessee, enabled continued growth and also a substantial gain of market
share in modular housing. Vehicles, as well as housing, experienced
increases in both the number of units sold and the average sales price per
unit. Historically, the Company's first and fourth quarters are the slowest
for sales in both the vehicle and housing segments. Strong sales volume
throughout 1995 allowed for more efficient production through the normally
slower winter months (see Note 12 of Notes to Consolidated Financial
Statements for unaudited interim financial information).
As a percentage of net sales, gross profit for 1995 was 13.8% compared to
14.8% reported for 1994. This slight decrease reflects an industry wide
sales decline in van conversions and intensified competition in camping
trailers, as well as an expected lower profitability level in the recently
added housing operations in North Carolina and Tennessee. As these plants
reach full capacity, inefficiencies associated with the plant openings should
be eliminated. The industry decline in sales of van conversions and
increased competition in camping trailers has led to strong pricing
competition and underutilized capacity. Also, contributing to a higher cost
of goods sold is the increase in motorized sales as a result of the
acquisition of Georgie Boy. Motorized products generally have a higher cost
of goods manufactured as a percentage of net sales due to the chassis cost.
Operating expenses as a percentage of net sales were less in 1995 compared
with 1994. Selling and delivery expenses were 5.0% in 1995 compared with
5.1% in 1994. Delivery expenses tend to fluctuate with sales mix, as well as
changes in geographical areas to which products are delivered. The overall
decrease in selling and delivery expenses as a percentage of net sales was
primarily the result of increased demand for the Company's products.
10
General and administrative expenses were $19.0 million or 3.7% of net sales
in 1995 compared with $15.9 million or 4.0% of net sales in 1994. Due to the
relatively fixed nature of the expenses in this category, some decrease in
the percentage usually accompanies an increase in net sales. The most
substantial portion of the increase in dollars is the administrative salaries
and payroll taxes of acquired businesses (Georgie Boy and All American Homes
in North Carolina) and the start-up of a new manufacturing facility for All
American Homes in Tennessee.
Consolidated operating income of $26.7 million was generated in 1995 compared
with operating income of $22.5 million in 1994. This favorable variance was
consistent with a $12.8 million increase in gross profit and an overall
decrease of .5% in operating expenses as a percentage of net sales. The
Company's vehicle segment produced operating income of $18.1 million compared
with operating income of $15.4 million in 1994, and the housing segment had
operating income of $8.6 million compared with operating income of $8.2
million in 1994 (see Note 2 of Notes to Consolidated Financial Statements).
The decrease in operating income as a percentage of net sales for the
Company's housing segment was attributable to the start-up of the additional
housing plants in North Carolina and Tennessee.
Interest expense increased in 1995 to $3.1 million from $1.5 million in the
prior year as a result of increases in long-term debt associated with the
acquisitions of Georgie Boy and the North Carolina division of Muncy Building
Enterprises, L.P. and the economic development bond obtained for construction
of the new All American Homes facility in Tennessee. There has also been a
general increase in interest rates subsequent to 1994. There were no
borrowings on the Company's short-term line of credit during 1995 or 1994.
Interest income increased 95.8%, from $.7 million in 1994 to $1.3 million in
1995. The amount is indicative of the cash and temporary investment activity
in 1995 compared with 1994, and a general rise in interest rates. As
indicated in the consolidated statements of cash flows, there was a
substantial increase in cash and temporary cash investments during 1994 which
were available for investing during 1995.
The net gain on the sale of property decreased $95,490 from 1994. The gain
in 1995 resulted from dispositions of investment and rental properties
located in Florida, Georgia and Indiana, while the net gain in 1994 reflected
the disposition of idle properties located in Georgia and Indiana.
A $2.1 million increase in other nonoperating income, from $.2 million to
$2.3 million, was experienced in 1995. This substantial increase consists
primarily of estimated insurance proceeds in excess of the net book value of
assets destroyed in a fire which consumed the Company's Prodesign production
facility in August 1995 (see Note 11 of Notes to Consolidated Financial
Statements). The assets were generally insured
11
at replacement value and the recognized gain offset the loss in profitability
incurred while the division was recovering.
The 1995 provision for income taxes represents an effective tax rate of 37.2%
compared to 35.2% in 1994. During the first quarter of 1994, the federal tax
provision was reduced by a deferred tax credit of approximately $.5 million,
resulting from the elimination of a remaining valuation allowance, and this
lowered the effective rate for 1994.
Comparison of 1994 to 1993
Consolidated net sales of $394.0 million for 1994 were $64.5 million or 19.6%
higher than in 1993. The Company's vehicle segment experienced a sales
increase of 16.5% while the housing segment increased 37.5%. The
introduction of innovative new products together with aggressive pricing
contributed to solid market share gains in recreational vehicles. Increased
capacity enabled continued growth and the gain of market share in modular
housing. Vehicles, as well as housing, experienced increases in both the
number of units sold and the average sales price per unit.
Gross profit increased $10.8 million or 22.6% due to the increased production
volume. As a percentage of net sales, gross profit for 1994 was 14.8%
compared to 14.5% reported for 1993. This favorable comparison also reflects
the elimination of lower margin operating results due to the divestiture of
the Company's ambulance manufacturing division during 1994.
As a percentage of net sales, there was a decrease in operating expenses of
1.5% when 1994 is compared with 1993. Selling and delivery expenses were
5.1% of net sales in 1994 and 5.8% in 1993. This decrease was primarily the
result of increased demand for recreational vehicles along with the Company's
continuing efforts to reduce selling expenses and focus on competitive
pricing. In addition, a portion of the decrease was due to the reduction of
delivery expenses from the increase in delivery and handling charges billed to
customers, as well as change in F.O.B. shipping points within the vehicle
group, which began in 1993.
General and administrative expenses were $15.9 million in 1994 and $15.8
million in 1993. As a percentage of net sales, general and administrative
expenses decreased .8% in 1994 compared to 1993. Due to the relatively fixed
nature of the expenses in this category, some decrease in the percentage
usually accompanies an upturn in net sales.
For 1994, the increased sales and decrease in operating expenses as a
percentage of net sales, resulted in operating income of $22.5 million, an
increase of $9.8 million over the $12.7 million achieved in 1993. The
vehicle segment experienced operating income of $15.4 million compared with
$7.4 million in 1993, and the housing segment had operating income of $8.2
million compared with operating income of $6.0 million in 1993.
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Interest expense was $1.5 million in 1994 compared with $2.0 million the
prior year. The most significant item contributing to the decrease was the
internal financing of the Company owned dealerships finished goods inventory
for the entire year in 1994. Most of the increase in long-term debt
resulting from the acquisition of the North Carolina division of Muncy and
the expansion of the housing segment occurred near the end of 1994 and had no
material effect on 1994 interest expense.
Interest income increased 40.7% in 1994 from 1993. This increase basically
reflected the changes in the amount of investments and outstanding notes
receivable during the comparable periods. As indicated in the consolidated
statements of cash flows, there was a substantial increase in cash and
temporary cash investments throughout 1994.
The net gain on sale of property was $.9 million in 1994 compared with $.2
million in 1993. Sales for both comparable periods basically represented the
disposition of either vacant or investment properties. Included in the
1994 property sales were dispositions of real estate belonging to Southern
Ambulance Builders, Inc. and Auranco.
Other nonoperating income was $.2 million in 1994 compared with $1.4 million
in 1993. The major component of this change was a 1993 gain associated with
the receipt of proceeds from a key-man life insurance policy. Also,
reflected in 1993 was the reversal of a portion of a valuation allowance
established in a prior year for an unrealized loss on a common stock
investment.
The 1994 provision for income taxes represented an effective tax rate of
35.2%. During the first quarter of 1994, the Company fully restored
approximately $526,000 of deferred tax assets by reducing the valuation
allowance established in 1992. For 1993 there were no provisions for federal
or state income taxes. During 1993, the Company used approximately $6.6
million of its federal net operating loss carryforward and approximately
$275,000 of alternative minimum tax credit carryforward to offset its federal
tax liability. In addition, the Company restored approximately $2.6 million
of net deferred tax assets by reducing the valuation allowance previously
established in 1992.
LIQUIDITY AND CAPITAL RESOURCES
The Company generally relies on funds from operations as its primary source
of liquidity. In addition, the Company maintains an unsecured committed
line of credit, which totaled $30 million at December 31, 1995, to meet its
seasonal working capital needs (see Note 4 of Notes to Consolidated Financial
Statements). There were no borrowings against this line of credit during
1995 or 1994. The major source of cash was from operating activities during
1995 and 1994. The most significant
13
items in this category were net income, depreciation, and in 1994, increases
in accounts payable and other accrued expenses. This was offset in 1995 by
increases in receivables and decreases in accounts payable, and in 1994 by
increases in receivables and inventories. The principal sources of cash flow
from investing activities in 1995 were proceeds from the sale of properties
and use of unexpended industrial revenue bond proceeds. At the same time, the
Company invested $15.2 million in property and equipment, primarily for the
expansion of capacity in the housing segment and $4.3 million of net cash for
the acquisition of Georgie Boy (see Note 9 of Notes to Consolidated Financial
Statements). In 1994 the principal sources of cash flow from investing
activities were proceeds from the sale of investments, the sale of
subsidiaries and collections of notes receivable. This was offset by the
investment in property and equipment of $5.1 million and $l.4 million for the
acquisition of Muncy. The negative cash flow in 1995 for financing
activities was primarily from cash dividends and payments of long-term debt.
In 1994, the Company experienced positive cash flow from financing activities
primarily from the increase in long-term debt from an economic development
bond.
The profitability of the Company during 1995 strengthened the Company's
financial position. Working capital increased $9.3 million, from $51.3
million to $60.6 million. The $12.6 million increase in current assets at
December 31, 1995 versus 1994, resulted from increased receivables and
inventories, both increases were primarily associated with the Georgie Boy
operations acquired in January 1995. The $3.3 million increase in current
liabilities is substantially the result of increases in other liabilities,
primarily insurance and warranty accruals.
OTHER MATTERS
The consolidated financial statements included in this report reflect
transactions in the dollar values in which they were incurred and,
therefore, do not attempt to measure the impact of inflation. Inflation and
changing prices have had a minimal direct impact on the Company in the past
in that selling prices and material costs have generally followed the
rate of inflation.
The Company expects to adopt the disclosure requirements of Statement of
Financial Accounting Standards No. 123 ("SFAS No. 123") in 1996 and,
accordingly, the implementation of SFAS No. 123 will not impact the Company's
consolidated balance sheet or income statement.
14
Item 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of
Coachmen Industries, Inc.:
We have audited the accompanying consolidated balance sheets of Coachmen
Industries, Inc. and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of income and retained earnings and cash
flows for each of the three years in the period ended December 31, 1995.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Coachmen
Industries, Inc. and subsidiaries as of December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
------------------------------
COOPERS & LYBRAND L.L.P.
Elkhart, Indiana
January 26, 1996
15
COACHMEN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, as of December 31, 1995 and 1994
ASSETS
1995 1994
CURRENT ASSETS
Cash and temporary cash investments $ 17,020,744 $19,534,385
Certificates of deposit 500,000 750,000
Trade receivables, less allowance for
doubtful receivables 1995 - $844,000
and 1994 - $986,000 19,780,160 15,410,757
Other receivables 4,244,387 2,121,910
Refundable income taxes 507,000 -
Inventories 55,434,497 48,152,342
Prepaid expenses and other 1,570,492 1,229,475
Deferred income taxes 2,665,000 1,954,000
Total current assets 101,722,280 89,152,869
PROPERTY AND EQUIPMENT, at cost
Land and improvements 5,537,033 4,646,331
Buildings and improvements 27,405,744 20,618,726
Machinery and equipment 10,524,486 8,316,127
Transportation equipment 11,307,747 6,978,543
Office furniture and fixtures 4,269,837 3,795,421
Total property and equipment 59,044,847 44,355,148
Less, Accumulated depreciation 27,297,851 25,144,558
Net property and equipment 31,746,996 19,210,590
OTHER ASSETS
Real estate held for sale 3,458,539 3,458,883
Rental properties 925,538 1,796,193
Unexpended industrial revenue bond
proceeds - 3,337,122
Intangibles, less accumulated amortization
1995 - $244,771 and 1994 - $108,151 5,199,505 327,121
Deferred income taxes 875,000 1,493,000
Other 6,320,899 6,245,504
Total other assets 16,779,481 16,657,823
TOTAL ASSETS $150,248,757 $125,021,282
The accompanying notes are part of the consolidated financial statements.
16
LIABILITIES AND SHAREHOLDERS' EQUITY
1995 1994
CURRENT LIABILITIES
Current maturities of long-term debt $ 2,094,472 $1,530,553
Accounts payable, trade 18,435,562 20,398,679
Accrued wages, salaries and commissions 3,583,423 3,075,622
Accrued dealer incentives 2,289,376 2,071,042
Accrued warranty expense 3,784,712 2,710,068
Accrued income taxes 981,800 1,728,200
Other accrued expenses 9,965,433 6,304,825
Total current liabilities 41,134,778 37,818,989
LONG-TERM DEBT 12,117,756 7,023,394
OTHER 5,958,995 5,422,953
Total liabilities 59,211,529 50,265,336
COMMITMENTS AND CONTINGENCIES (Note 10)
SHAREHOLDERS' EQUITY
Common shares, without par value: authorized
30,000,000 shares; issued 1995 - 9,141,336
shares and 1994 - 9,073,696 shares 37,151,202 36,600,387
Additional paid-in capital 1,664,889 1,431,055
Retained earnings 67,824,816 52,359,629
Total shareholders' equity before
treasury shares 106,640,907 90,391,071
Less, Cost of shares reacquired for the
treasury 1995 - 1,672,502 shares and
1994 - 1,674,821 shares 15,603,679 15,635,125
Total shareholders' equity 91,037,228 74,755,946
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $150,248,757 $125,021,282
The accompanying notes are part of the consolidated financial statements.
17
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
for the years ended December 31, 1995, 1994 and 1993
1995 1994 1993
Net sales $515,862,065 $394,023,774 $329,511,226
Cost of goods sold 444,626,666 335,566,707 281,822,135
Gross profit 71,235,399 58,457,067 47,689,091
Operating expenses:
Selling and delivery 25,593,164 20,080,353 19,231,613
General and administrative 18,983,252 15,877,111 15,789,485
Total operating expenses 44,576,416 35,957,464 35,021,098
Operating income 26,658,983 22,499,603 12,667,993
Nonoperating income (expense):
Interest expense (3,141,763) (1,480,784) (2,027,709)
Interest income 1,306,148 667,004 474,101
Gain on sale of properties, net 793,412 888,902 224,452
Other, net 2,340,620 237,369 1,356,890
Total nonoperating income 1,298,417 312,491 27,734
Income before income taxes 27,957,400 22,812,094 12,695,727
Income taxes 10,408,000 8,028,000 -
Net income 17,549,400 14,784,094 12,695,727
Retained earnings,
beginning of the year 52,359,629 39,345,043 28,037,418
Cash dividends (per common share:
1995 - $.28, 1994 - $.24, and
1993 - $.19) (2,084,213) (1,769,508) (1,388,102)
Retained earnings, end of year $67,824,816 $52,359,629 39,345,043
Net income per common share $ 2.36 $ 2.01 $ 1.74
The accompanying notes are part of the consolidated financial statements.
18
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 1995, 1994 and 1993
1995 1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $17,549,400 $ 14,784,094 $ 12,695,727
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 3,993,282 3,089,602 2,867,068
Amortization of intangibles 136,620 10,881 10,881
Gain on sale of properties (793,412) (888,902) (224,452)
Gain on insurance settlement (2,124,539) - -
Realized gain on sale of
investments (13,888) (142,373) (70,896)
Unrealized appreciation of
investments - (58,325) (267,025)
Deferred income taxes (93,000) (858,000) (2,450,000)
Other 121,131 (9,729) (703,062)
Changes in certain assets and
liabilities, net of effect of
acquisitions and dispositions:
Receivables, excluding
current portion of notes (2,792,849) (2,950,130) (277,581)
Inventories 1,361,916 (7,925,926) (4,656,603)
Prepaid expenses and other (304,327) (340,019) 244,623
Accounts payable, trade (4,188,586) 8,764,214 3,000,228
Accrued income taxes (674,039) 1,197,379 459,003
Other current liabilities 1,277,349 2,729,901 2,710,421
Net cash provided by
operating activities 13,455,058 17,402,667 13,338,332
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from:
Sale of properties 3,477,934 1,269,607 3,614,452
Sale of investments 263,888 1,629,661 427,258
Sale of subsidiaries - 3,364,848 -
Insurance settlement 846,463 - -
Acquisitions of:
Investments - - (500,000)
Property and equipment (15,222,794) (5,133,151) (4,676,321)
Real estate held for sale
and rental properties - - (93,561)
Acquisition of a business (4,313,046) (1,387,740) -
Collections on notes
receivable, net 39,177 1,537,170 641,295
Unexpended industrial revenue
bond proceeds 3,337,122 (3,337,122) -
Proceeds from life insurance
death benefit - - 981,987
Other (130,153) 73,313 305,738
Net cash provided by
(used in) investing
activities (11,701,409) (1,983,414) 700,848
19
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 1995, 1994 and 1993 (Continued)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term
borrowings - - 9,916,729
Payment of short-term
borrowings (900,000) - (20,816,200)
Proceeds from long-term debt - 4,000,000 -
Payments of long-term debt (1,833,892) (793,568) (1,727,329)
Cash dividends paid (2,084,213) (1,769,508) (1,388,102)
Proceeds from issuance of
common shares 550,815 477,297 654,661
Net cash provided by
(used in) financing
activities (4,267,290) 1,914,221 (13,360,241)
Increase in cash and temporary
cash investments (2,513,641) 17,333,474 678,939
CASH AND TEMPORARY CASH INVESTMENTS
Beginning of year 19,534,385 2,200,911 1,521,972
End of year $ 17,020,744 $ 19,534,385 $ 2,200,911
Supplemental disclosures of
cash flow information:
Cash paid during the year for:
Interest $ 2,398,105 $ 1,463,000 $ 2,203,000
Income taxes $ 12,265,000 $ 7,454,000 $ 2,447,000
The accompanying notes are a part of the consolidated financial statements.
20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the years ended December 31, 1995, 1994 and 1993
Note 1: NATURE OF OPERATIONS AND ACCOUNTING POLICIES.
Nature of Operations - Coachmen Industries, Inc. and its
subsidiaries (the "Company") manufacture a full line of
recreational vehicles and van conversions through eight
divisions with manufacturing facilities located in Indiana,
Georgia, Michigan and Oregon. These products are marketed
through a nationwide dealer network. The Company's housing
divisions, with locations in Indiana, Iowa, North Carolina and
Tennessee, supply modular housing to builder/dealers in
eighteen adjoining states. The Company's parts and supply
divisions concentrate primarily on providing parts and supplies
to the recreational vehicle and van conversion industries, and
also have an important interest in the office furniture market.
Principles of Consolidation - The accompanying consolidated
financial statements include the accounts of Coachmen
Industries, Inc. and its subsidiaries.
Use of Estimates in the Preparation of Financial Statements -
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Revenue Recognition, Concentrations of Credit Risk and
Allowances for Credit Losses - Sales are recognized as revenue
upon shipment. The Company has a concentration of credit risk
in the recreational vehicle industry, although there is no
geographic concentration of credit risk. The Company performs
ongoing credit evaluations of its customers' financial
condition and sales to its recreational vehicle dealers are
generally subject to preapproved dealer floor plan financing
whereby the Company is paid upon delivery or shortly
thereafter. The Company generally requires no collateral from
its customers. Future credit losses are provided for currently
through the allowance for doubtful receivables and actual
credit losses are charged to the allowance when incurred.
Cash and temporary cash investments at December 31, 1995 and
1994 include approximately $16,500,000 and $18,500,000,
respectively, which is invested in a money market mutual fund.
Cash Flows and Noncash Activities - For purposes of the
consolidated statements of cash flows, cash and temporary cash
investments include cash, cash investments and any highly
21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the years ended December 31, 1995, 1994 and 1993 (Continued)
liquid investments purchased with an original maturity of three
months or less. The Company's acquisitions of and dispositions
of subsidiaries included certain noncash activities (see Note
9). During 1994, the Company sold certain real property in
exchange for notes receivable of $312,000. For each of the
three years in the period ended December 31, 1995, the Company
issued common shares with a market value of $38,280, $17,163
and $20,747, respectively, in lieu of cash compensation. The
Company recognizes a tax benefit in additional paid-in capital
from exercise of stock options (see Note 6).
Fair Value of Financial Instruments - The carrying amounts of
cash equivalents, certificates of deposit, receivables, and
accounts payable approximated fair value as of December 31,
1995, because of the relatively short maturities of these
instruments. The carrying amount of long-term debt, including
current maturities, approximated fair value as of December 31,
1995, based upon terms and conditions currently available to
the Company in comparison to terms and conditions of the
existing long-term debt. The Company has investments in life
insurance contracts to fund obligations under deferred
compensation agreements (see Note 7). At December 31, 1995,
the cash surrender values of these policies, net of policy
loans of $10.2 million, aggregated $7.9 million which exceeded
the $5.6 million carrying amount of the investments in insurance
contracts.
Inventories - Inventories are valued at the lower of cost
(first-in, first-out method) or market.
Property and equipment - Depreciation is computed by the
straight-line method on the costs of the assets, at rates based
on their estimated useful lives as follows: land improvements
3-15 years; buildings and improvements 10-30 years; machinery
and equipment 3-10 years; transportation equipment 2-7 years;
and office furniture and fixtures 2-10 years.
Upon sale or retirement of property and equipment, including
real estate held for sale and rental properties, the asset cost
and related accumulated depreciation is removed from the
accounts and any resulting gain or loss is included in income.
Real Estate Held For Sale - Real estate held for sale
represents real properties which are carried at the lower of
estimated realizable value or cost less accumulated depreciation.
As of December 31, 1995 and 1994, the carrying value of real estate
held for sale (and the related accumulated
22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the years ended December 31, 1995, 1994 and 1993 (Continued)
depreciation) aggregated $3,682,007 ($223,468) and $3,682,007
($223,124), respectively.
Rental Properties - Rental properties represent owned
facilities which are currently leased to others under lease
agreements with expiring terms through August 31, 1997.
Certain of the lease agreements contain options for the lessee
to renew the lease or purchase the facilities. Lease income
for the years ended December 31, 1995, 1994 and 1993 aggregated
$381,287, $570,955 and $539,919, respectively. Future minimum
annual lease income under these lease agreements is as follows:
1996 - $237,600 and 1997 - $158,400. The rental properties are
carried at cost less accumulated depreciation, which is not in
excess of net realizable value. The rental properties are
depreciated by the straight-line method over the estimated
useful lives of the assets (15-20 years). At December 31, 1995
and 1994, the cost of rental properties (and the related
accumulated depreciation) aggregated $1,795,504 ($869,966) and
$2,944,062 ($1,147,869), respectively.
Intangibles - Intangibles represent the excess of cost over the
fair value of net assets of businesses acquired, and are being
amortized over a 40-year period by the straight-line method.
Income Taxes - The provision for income taxes is based on
income recognized for financial statement purposes and includes
the effects of temporary differences between such income and
that recognized for tax return purposes. Deferred tax assets
and liabilities are established for the expected future tax
consequences of events that have been included in the
financial statements or tax returns using enacted tax rates in
effect for the years in which the differences are expected to
reverse.
Research and Development Expenses - Research and development
expenses charged to operations were approximately $2,240,000,
$1,925,000 and $2,012,000 for the years ended December 31,
1995, 1994 and 1993, respectively.
Warranty Expense - The Company accrues an estimated warranty
liability at the time the warranted products are sold.
23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the years ended December 31, 1995, 1994 and 1993 (Continued)
Note 2: OPERATIONS IN DIFFERENT INDUSTRIES.
The Company's business and operations are comprised of two
segments: Vehicles (recreational, vans, specialized and
related parts and accessories) and Housing (modular). Segment
information is as follows:
1995 1994 1993
Net sales:
Vehicles $432,612,786 $327,430,404 $281,084,221
Housing 83,249,279 66,593,370 48,427,005
Total $515,862,065 $394,023,774 $329,511,226
Operating income (loss):
Vehicles $ 18,136,796 $ 15,434,057 $ 7,404,742
Housing 8,644,906 8,192,322 6,043,283
General Corporate (122,719) (1,126,776) (780,032)
Total $ 26,658,983 $ 22,499,603 $ 12,667,993
Identifiable assets:
Vehicles $ 89,173,588 $ 71,153,298 $ 65,084,605
Housing 23,957,173 20,907,090 12,544,448
General Corporate 37,117,996 32,960,894 17,107,429
Total $150,248,757 $125,021,282 $ 94,736,482
Depreciation:
Vehicles $ 2,218,420 $ 1,814,505 $ 1,795,676
Housing 1,487,159 965,627 764,494
General Corporate 287,703 309,470 306,898
Total $ 3,993,282 $ 3,089,602 $ 2,867,068
Additions to property
and equipment
(including property and
equipment acquired in the
acquisition of businesses):
Vehicles $ 8,905,728 $ 2,714,736 $ 3,130,908
Housing 6,834,516 3,740,864 1,418,231
General Corporate 2,602,967 224,791 127,182
Total $ 18,343,211 $ 6,680,391 $ 4,676,321
24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the years ended December 31, 1995, 1994 and 1993 (Continued)
Note 3: INVENTORIES.
Inventories consist of the following:
1995 1994
Raw materials $ 16,580,013 $ 15,751,077
Work in process 7,268,705 5,053,551
Finished goods 31,585,779 27,347,714
Total $ 55,434,497 $ 48,152,342
Note 4: SHORT-TERM BORROWINGS.
At December 31, 1995, the Company has an unsecured bank line of
credit aggregating $30 million ($20 million at December 31,
1994) with interest on outstanding borrowings payable monthly
at a formula rate, which approximates the bank's cost of funds
plus a mark-up, which generally results in a rate below the
prime rate. There were no outstanding borrowings under this
bank line of credit at December 31, 1995 and 1994.
Note 5: LONG-TERM DEBT.
Long-term debt consists of the following:
1995 1994
Obligations under industrial development
revenue bonds, variable rates, with
various maturities through 2009 $ 6,666,125 $ 7,591,006
Promissory notes payable, issued or
assumed in the acquisition of Georgie
Boy (see Note 9), payable in annual
installments through January 2001,
interest payable monthly
at the prime rate, unsecured 7,492,173 -
Real estate mortgages, paid in full
in 1995 - 873,491
Other 53,930 89,450
Total 14,212,228 8,553,947
Less, Current maturities 2,094,472 1,530,553
Long-term debt $12,117,756 $ 7,023,394
Aggregate maturities of long-term debt for each of the next
five years ending December 31 are as follows: 1996 -
$2,094,472; 1997 - $2,076,496; 1998 - $2,058,519; 1999 -
$2,058,519 and 2000 - $1,757,924.
25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the years ended December 31, 1995, 1994 and 1993 (Continued)
In connection with three of its industrial development revenue
bond obligations, the Company obtained, as a credit enhancement
for the bondholders, irrevocable letters of credit in favor of
the bond trustees. The agreements relating to these letters of
credit contain, among other provisions, certain covenants
relating to required amounts of working capital and net worth
and the maintenance of certain required financial ratios.
Note 6: COMMON STOCK MATTERS AND EARNINGS PER SHARE.
The Company's stock option plan provides for the granting to
eligible key employees of options to purchase common shares.
Under terms of the plan, the Company may grant incentive stock
options or non-qualified stock options. In the case of options
granted to an employee of the Company who is a 10% or more
shareholder, the option price is an amount per share of not
less than 110% of the fair market value per share on the date
of granting the option. The option price for options granted
to all other key employees is an amount per share of not less
than the fair market value per share on the date of granting
the option. No such options may be exercised during the first
year after grant, and are exercisable cumulatively in four
installments of 25% each year thereafter.
The transactions for shares under options for each of the two
years in the period ended December 31, 1995 were as follows:
Number Per Share
of Shares Option Price
Outstanding, January 1, 1994 207,825 $ 3.875 -$16.750
Granted 87,300 12.875 - 16.875
Canceled (2,725) 3.875 - 16.875
Exercised (63,000) 3.875 - 16.750
Outstanding, December 31, 1994 229,400 3.875 - 16.875
Granted 136,200 14.875 - 16.875
Canceled (16,575) 3.875 - 16.875
Exercised (61,575) 3.875 - 16.875
Outstanding, December 31, 1995 287,450 4.375 - 16.875
Exercisable, December 31, 1995 76,631 4.375 - 16.875
As of December 31, 1995, 512,400 shares were reserved for the
granting of future stock options, compared with 632,025 shares
at December 31, 1994.
26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the years ended December 31, 1995, 1994 and 1993 (Continued)
The Company has an employee stock purchase plan under which a
total of 292,850 shares of the Company's common stock are
reserved for purchase by full-time employees through
payroll deductions, cash payments, or a combination of both at
a price equal to 90% of the market price of the Company's
common stock on the purchase date. As of December 31, 1995,
there were 157 employees actively participating in the plan.
Since its inception, a total of 107,150 shares have been
purchased by employees under the plan. Certain restrictions in
the plan limit the amount of payroll deductions and cash
payments an employee may make in any one quarter. There are
also limitations as to the amount of ownership in the Company
an employee may acquire under the plan.
In October 1995, Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" ("SFAS
No.123"), was issued. This statement requires the fair value
of stock options and other stock-based compensation issued to
employees to either be included as compensation expense in the
income statement, or the pro forma effect on net income and
earnings per share of such compensation expense to be disclosed
in the notes to the financial statements. The Company expects
to adopt SFAS No. 123 on a disclosure basis only, and the
disclosure requirements are effective for fiscal years
beginning after December 15, 1995. As such, implementation of
SFAS No. 123 will not impact the Company's consolidated balance
sheet or income statement.
A summary of the changes in common shares, additional paid-in
capital and treasury shares for each of the three years in the
period ended December 31, 1995 follows:
Additional
Common Paid-in Treasury
Shares Capital Shares
Balance, January 1, 1993 $35,468,429 $752,397 $(15,669,377)
Sale of 1,277 common
shares under employee
stock purchase plan 17,333 - -
Issuance of 1,356 common
shares from treasury - 2,360 18,387
Issuance of 81,250 common
shares upon the exercise
of stock options 637,328 - -
27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the years ended December 31, 1995, 1994 and 1993 (Continued)
Tax benefit from current
and prior years' exercise
of stock options - 434,000 -
Balance, December 31, 1993 36,123,090 1,188,757 (15,650,990)
Sale of 3,263 common
shares under employee
stock purchase plan 42,315 - -
Issuance of 1,170 common
shares from treasury - 1,298 15,865
Issuance of 63,000 common
shares upon the exercise
of stock options 434,982 - -
Tax benefit from current
and prior years' exercise
of stock options - 241,000 -
Balance, December 31, 1994 36,600,387 1,431,055 (15,635,125)
Sale of 6,065 common
shares under employee
stock purchase plan 94,396 - -
Issuance of 2,319 common
shares from treasury - 6,834 31,446
Issuance of 61,575 common
shares upon the exercise
of stock options 456,419 - -
Tax benefit from current year
exercise of stock options - 227,000 -
Balance, December 31, 1995 $37,151,202 $1,664,889 ($15,603,679)
On January 19, 1990, the Board of Directors adopted a
shareholder rights plan and declared a dividend distribution of
one common share purchase right on each outstanding common
share. Such rights only become exercisable, or transferable
apart from the common shares, (i) ten days after a person or
group of persons ("Acquiring Person") acquires or obtains the
right to acquire beneficial ownership of 20% or more of the
Company's common shares or (ii) ten business days (or such
later date established by the Board) following the commencement
of a tender offer or exchange offer for 20% or more of the
Company's common shares. Upon the occurrence of certain events
and after the rights become exercisable, each right would,
28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the years ended December 31, 1995, 1994 and 1993 (Continued)
subject to certain adjustments and alternatives, entitle the
rightholder to purchase the number of common shares of the
Company or the acquiring company having a market value of twice
the $30 exercise price of the right (except that the Acquiring
Person would not be able to purchase common shares of the
Company on these terms). The rights are nonvoting, may be
redeemed by the Company at a price of $.01 per right at any
time prior to the date on which an Acquiring Person acquires
20% or more of the Company's common shares and expire February
15, 2000.
Earnings per share are based on the weighted average number of
common shares outstanding (1995 - 7,440,984, 1994 - 7,371,963
and 1993 - 7,304,196). The common share equivalents (employee
stock options) have not entered into the computation of
earnings per share because their inclusion in each year
reported would have been immaterial. Fully-diluted earnings
per share do not differ materially from primary earnings per
share.
Note 7: INCENTIVE AND DEFERRED COMPENSATION PLANS.
The Company has incentive compensation plans for its officers
and other key management personnel. The amounts charged to
expense for the years ended December 31, 1995, 1994 and 1993
aggregated $2,577,692, $2,146,905 and $1,760,967,
respectively.
The Company has established a deferred compensation plan for
executives and other key employees. The plan provides for
benefit payments upon termination of employment, retirement,
disability, or death. The Company recognizes the cost of this
plan over the projected service lives of the participating
employees based on the present value of the estimated future
payments to be made. The plan is funded by insurance contracts
on the lives of the participants, and investments in insurance
contracts (included in other assets) aggregating $5,623,123 as
of December 31, 1995 and 1994. The deferred compensation
obligations, which aggregated $5,952,958 and $5,460,677 as of
December 31, 1995 and 1994, respectively, are included in other
non-current liabilities, with the current portion ($186,854 and
$180,207 at December 31, 1995 and 1994, respectively) included
in other accrued expenses.
The Company adopted the Coachmen Assisted Retirement For
Employees (C.A.R.E.) program effective January 1, 1994. All
full-time employees of the Company (subject to certain
eligibility restrictions) are eligible to participate.
C.A.R.E. provides a mechanism for each eligible employee to
29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the years ended December 31, 1995, 1994 and 1993 (Continued)
establish an individual retirement account and receive matching
contributions from the Company based on the amount contributed
by the employee, the employee's years of service and the
profitability of the Company. Company matching contributions
charged to expense under the C.A.R.E. program aggregated
$537,118 and $546,984 for the years ended December 31, 1995 and
1994, respectively.
Note 8: INCOME TAXES.
Income taxes are summarized as follows:
1995 1994 1993
Federal:
Current $ 9,530,000 $ 7,918,000 $2,000,000
State (79,000) (730,000) (2,000,000)
Subtotal 9,451,000 7,188,000 -
State:
Current 971,000 968,000 450,000
Deferred (14,000) (128,000) (450,000)
Subtotal 957,000 840,000 -
Total $10,408,000 $ 8,028,000 $ -
The following is a reconciliation of the provision for income
taxes computed at the federal statutory rate (35% in 1995, 35%
in 1994 and 34% in 1993) to the reported provision for income
taxes:
1995 1994 1993
Computed federal income tax
at federal statutory rate $ 9,785,000 $ 7,984,000 $ 4,344,000
Changes resulting from:
Nontaxable life insurance
proceeds - - (285,000)
Foreign Sales Corporation
subject to lower tax rate (222,000) (186,000) (230,000)
State income taxes, net of
federal income tax benefit 622,000 546,000 -
Alternative minimum tax
credit - - (275,000)
Tax benefit of utilization
of net operating loss
carryforward - - (2,233,000)
Valuation allowance - (526,000) (1,519,000)
Other, net 223,000 210,000 198,000
Total $10,408,000 $ 8,028,000 $ -
30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the years ended December 31, 1995, 1994 and 1993 (Continued)
The components of the net deferred tax assets as of December 31,
1995 and 1994 are as follows:
1995 1994
Current deferred tax asset:
Accrued warranty expense $1,321,000 $1,084,000
Allowance for doubtful
receivables 317,000 394,000
Other 1,027,000 476,000
Net current deferred
tax asset $2,665,000 $1,954,000
Noncurrent deferred tax
asset (liability):
Deferred compensation $2,400,000 $2,220,000
Operating loss carry-
forwards, primarily
state - 600,000
Property and equipment (1,441,000) (727,000)
Intangible assets (84,000) -
Net noncurrent deferred
tax asset 875,000 2,093,000
Less, valuation
allowance - 600,000
Total $875,000 $1,493,000
Note 9: ACQUISITIONS AND DISPOSITIONS.
On January 3, 1995, the Company acquired all of the issued and
outstanding capital stock of Georgie Boy Mfg., Inc. ("Georgie
Boy") a manufacturer of Class A motorhomes. The purchase price
aggregated $12.8 million and consisted of $6.7 million in cash
and a $6.1 million promissory note payable to the seller. In
conjunction with the acquisition, the Company assumed
liabilities of $8,757,000.
The acquisition was accounted for using the purchase method,
and the operating results of Georgie Boy have been included in
the Company's 1995 consolidated financial statements from the
date of acquisition. The excess of the purchase price over the
cost of acquired net assets ("goodwill") of $5.0 million is
31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the years ended December 31, 1995, 1994 and 1993 (Continued)
being amortized on a straight-line basis over forty years.
Unaudited pro forma financial information for 1994, as if this
acquisition had occurred on January 1, 1994,is as follows:
Year Ended
December 31, 1994
(Unaudited)
Net sales $483,870,000
Net income 15,896,000
Net income per share 2.16
On September 23, 1994, the Company acquired substantially all
of the operating assets of the North Carolina division of Muncy
Building Enterprises, L.P. ("Muncy"), a manufacturer of modular
homes. The assets acquired consisted principally of property
and equipment and inventories of modular homes. The purchase
price of $2,761,740 was allocated to the assets acquired and
consisted of $1,387,740 in cash and $1,374,000 of assumed
liabilities, including long-term debt of $843,917. The
acquisition was accounted for as a purchase and, accordingly,
the operating results of Muncy are included in the Company's
consolidated financial statements from the date of acquisition.
Pro forma results of operations for 1993 and 1994 are not
presented herein as the amounts would not be materially
different from the Company's historical results.
On April 29, 1994, the Company sold certain assets of its
wholly owned subsidiary, Southern Ambulance Builders, Inc., for
$1,589,809 consisting of $789,809 in cash and a promissory note
for $800,000, which was subsequently collected. The assets
sold consisted of inventories, property and equipment
(excluding land) and other miscellaneous assets. The sales
price equaled the net book value of the assets sold. In a
separate transaction, the Company sold certain land of Southern
Ambulance Builders, Inc. for $611,998 in cash, resulting in a
pre-tax gain of $170,129.
In addition, during 1994, the Company sold its 52% ownership
interest in Luxury Conversions for $133,721, and substantially
all the assets of its wholly owned subsidiary, Auranco, for
$1,129,320. The Auranco transaction resulted in a pre-tax gain
of $143,907. There was no gain or loss on the Luxury
Conversions sale.
32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the years ended December 31, 1995, 1994 and 1993 (Continued)
Note 10: COMMITMENTS AND CONTINGENCIES.
Lease Commitments
The Company leases various manufacturing and office facilities
under noncancelable agreements which expire at various dates
through November 2006. Several of the leases contain renewal
options and options to purchase and require the payment of
property taxes, normal maintenance and insurance on the
properties. Certain office and delivery equipment are also
leased under various noncancelable agreements. The above
described leases are accounted for as operating leases.
Future minimum annual lease commitments at December 31, 1995
aggregated $3,476,300 and are payable as follows: 1996 -
$1,037,600; 1997 - $1,008,700; 1998 - $834,900; 1999 -
$374,500; 2000 - $123,000 and thereafter - $97,600.
Total rental expense for the years ended December 31, 1995,
1994 and 1993 aggregated $1,222,156, $1,396,183 and $1,604,576,
respectively.
Obligation to Purchase Consigned Inventories
The Company obtains vehicle chassis for its recreational and
specialized vehicle products directly from automobile
manufacturers under converter pool agreements. The agreements
generally provide that the manufacturer will provide a supply
of chassis at the Company's various production facilities under
the terms and conditions as set forth in the agreement.
Chassis are accounted for as consigned inventory until either
assigned to a unit in the production process or 90 days have
passed. At the earlier of these dates, the Company is obligated
to purchase the chassis and it is recorded as inventory. At
December 31, 1995 and 1994, chassis inventory, accounted for as
consigned inventory, approximated $18.0 million and $14.0
million, respectively.
Repurchase Agreements
The Company is contingently liable 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 financial institution in the event that they have
repossessed them upon a dealer's default. Although the total
contingent liability approximated $129 million at December 31,
33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the years ended December 31, 1995, 1994 and 1993 (Continued)
1995 ($90 million at December 31, 1994), 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.
Self-Insurance
The Company is self-insured for a portion of its product
liability and certain other liability exposures. Depending on
the nature of the claim and the date of occurrence the
Company's maximum exposure ranges from $250,000 to $500,000 per
claim. The Company accrues an estimated liability based on
various factors, including sales levels and the amount of
outstanding claims. Management believes the liability recorded
is adequate to cover the Company's self-insured risk.
Litigation
The Company is involved in various legal proceedings which are
ordinary routine litigations incidental to the industry and
which are covered in whole or in part by insurance. Management
believes that any liability which may result from these
proceedings will not be significant.
Note 11: INSURANCE SETTLEMENT.
On August 14, 1995, a fire destroyed the Company's Prodesign
production facility. The loss was covered by insurance and
estimated insurance proceeds in excess of the net book value of
destroyed assets and related expenses resulted in a gain of
$2.1 million which is included in other nonoperating income.
Other receivables at December 31, 1995 include $2.4 million of
estimated insurance recoveries.
34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the years ended December 31, 1995, 1994 and 1993 (Concluded)
Note 12: UNAUDITED INTERIM FINANCIAL INFORMATION.
Certain selected unaudited quarterly financial information for
the years ended December 31, 1995 and 1994 is as follows:
1995
Quarter Ended
March 31 June 30 September 30 December 31
Net sales $131,770,379 $128,192,670 $130,973,395 $124,925,621
Gross profit 16,562,112 17,960,958 18,661,458 18,050,871
Income before
income taxes 5,086,464 6,709,086 7,458,426 8,703,424
Net income 3,203,464 4,212,086 4,683,426 5,450,424
Net income per
common share .43 .57 .63 .73
1994
Quarter Ended
March 31 June 30 September 30 December 31
Net sales $ 93,635,237 $100,320,091 $102,974,854 $ 97,093,592
Gross profit 12,111,138 15,592,188 15,345,676 15,408,065
Income before
income taxes 3,313,785 6,584,343 6,140,566 6,773,400
Net income 2,620,785 4,118,343 3,808,566 4,236,400
Net income per
common share .36 .56 .52 .57
The fourth quarter of 1995 includes a $2.1 million pre-tax gain
on insurance settlements (see Note 11).
The common share equivalents described in Note 6 did not enter
into the computations of net income per common share for any of
the quarters during 1995 and 1994 because their inclusion was
immaterial.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not Applicable
35
Part III.
Item 10. Directors and Executive Officers of the Registrant
(a) Identification of Directors
Information for Item 10(a) is contained on page 3 of the Company's Proxy
Statement dated March 25, 1996 and is incorporated herein by reference.
(b) Executive Officers of the Company
See "Executive Officers of the Registrant" on page 8.
Item 11. Executive Compensation
Information for Item 11 is contained under the heading "Compensation of
Executive Officers and Directors" in the Company's Proxy Statement dated
March 25, 1996 and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information for Item 12 is contained on pages 2 and 3 of the Company's Proxy
Statement dated March 25, 1996 and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Not Applicable
36
Part IV.
Item 14. Exhibits, Financial Statement
Schedules, and Reports on Form 8-K
(a) (1) Financial Statements Page
Reference
Financial statements included in Part II of the report:
Report of Independent Accountants 15
Consolidated Balance Sheets as of
December 31, 1995 and 1994 16-17
Consolidated Statements of Income and Retained Earnings
for the years ended December 31, 1995, 1994 and 1993 18
Consolidated Statements of Cash Flows for the years
ended December 31, 1995, 1994 and 1993 19-20
Notes to Consolidated Financial Statements for the years
ended December 31, 1995, 1994 and 1993 21-35
(a) (2) Financial Statement Schedules
Report of Independent Accountants on Financial
Statement Schedule 38
Schedule II - Valuation and Qualifying Accounts 39
All other financial statement schedules have been omitted
as they are not required, not applicable or because the
information is included in the Notes to Consolidated
Financial Statements.
(a) (3) Exhibits
See Index to Exhibits
(b) Reports on Form 8-K
No reports on Form 8-K were required to be filed during the
last quarter of the period covered by this report.
37
Report of Independent Accountants
on Financial Statement Schedule
To the Board of Directors of
Coachmen Industries, Inc.:
Our report on the consolidated financial statements of Coachmen
Industries, Inc. and subsidiaries is included on page 15 of this Form
10-K. In connection with our audits of such financial statements, we
have also audited the related financial statement schedule listed in
Item 14(a)(2) of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a
whole, presents fairly, in all material respects, the information
required to be included therein.
COOPERS & LYBRAND L.L.P.
----------------------------
COOPERS & LYBRAND L.L.P.
Elkhart, Indiana
January 26, 1996
38
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
Balance At Charged Balance
Beginning To Costs Deductions- At End
Description Of Period And Expenses Describe Of Period
Allowance for doubtful
receivables - deducted
from trade receivables
and notes receivable
in the consolidated
balance sheets:
For the year ended
December 31, 1995 $ 986,000 $ 292,000 $ 434,000 (A) $844,000 (B)
For the year ended
December 31, 1994 1,059,000 (121,000) (48,000) (A) 986,000 (B)
For the year ended
December 31, 1993 933,000 477,000 351,000 (A)1,059,000 (B)
Allowance for decline
in market value of
common stock invest-
ment - deducted from
investments in the
consolidated balance
sheets:
For the year ended
December 31, 1995 $ - - - -
For the year ended
December 31, 1994 58,325 - 58,325 (c) -
For the year ended
December 31, 1993 325,350 - 267,025 (d) 58,325
(A) Write-off of bad debts, less recoveries.
(B) Reflected in the consolidated balance sheets as deducted from trade
receivables and current portion of notes receivable.
(C) Reversal of the balance of the allowance for unrealized security
losses upon disposition of related common stock investment in 1994.
(D) Reversal of a portion of the allowance for unrealized security
losses established in 1990.
39
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
COACHMEN INDUSTRIES, INC.
Date: March 26, 1996 G. L. Groom
-----------------------------
G. L. Groom
(Chief Financial Officer)
W. M. Angelo
-----------------------------
W. M. Angelo
(Controller)
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated.
P. C. Barker K. D. Corson
- ------------------------------- ------------------------------
P. C. Barker K. D. Corson
(Director) (Director)
T. H. Corson G. L. Groom
- ------------------------------- ------------------------------
T. H. Corson G. L. Groom
(Director) (Director)
(Chief Executive Officer)
W. P. Johnson
- ------------------------------- ------------------------------
R. J. Harring W. P. Johnson
(Director) (Director)
P. G. Lux W. G. Milliken
- ------------------------------- ------------------------------
P. G. Lux W. G. Milliken
(Director) (Director)
C. C. Skinner
------------------------
C. C. Skinner
(Director)
40
INDEX TO EXHIBITS
Number Assigned
In Regulation
S-K, Item 601 Description of Exhibit
(3) 3(i) Articles of Incorporation of the Company
as ammended on May 30, 1995
3(ii) By-laws of the Company
(4) Shareholder Rights Plan (Filed as an exhibit to
the Company's Form 10-K for the year ended
December 31, 1989 and incorporated herein by
reference)
(9) No exhibit
(10) No exhibit
(11) No exhibit - See Consolidated Statements of
Income and Retained Earnings (on page 18
herein) and Note 6 of Notes to Consolidated
Financial Statements (on page 26 herein).
(13) No exhibit
(16) No exhibit
(18) No exhibit
(21) Subsidiaries of the Registrant
(22) No exhibit
(23) Consent of Independent Accountants
(24) No exhibit
(27) Financial Data Schedule
(28) No exhibit