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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, 1996.
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____ to _____.
Commission file number 1-7160
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 14, 1997
held by non-affiliates was $316.97 million (based upon the closing price on
the New York Stock Exchange and an estimate that 90.4% of such shares are
owned by non-affiliates).
As of March 14, 1997, 17,208,905 shares of the registrant's Common Stock were
outstanding.
Documents Incorporated by Reference
Parts of Form 10-K into which
Document the Document isIncorporated
Portions of the Proxy Statement for
the Annual Meeting of Shareholders
to be held on May 1, 1997 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 ("RVs") and is the largest builder of modular homes in the country.
The Company's RVs are marketed under various brand names including Coachmen,
Shasta, and Viking through approximately 1,200 independent dealers located in
49 states and internationally and six Company-owned dealerships. Modular
homes are manufactured by the Company's All American Homes operation which
sells homes through approximately 300 builder/dealers.
The Company maintains approximately 52 trademarks, which are up for renewal
from 1998 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.
The Company 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 composition of the Company's net sales for
each of the last three years (dollar amounts in thousands):
1996 1995 1994
Amount % Amount % Amount %
Vehicles:
Motorhomes $327,802 54 $279,917 54 $177,583 45
Travel Trailers 119,268 20 102,229 20 98,147 25
Camping Trailers 19,013 3 12,728 2 10,764 3
Truck Campers 2,306 1 3,748 1 3,117 1
Parts and Supplies 39,327 6 33,991 7 31,397 8
Ambulances - - - - 6,423 1
Total Vehicles 507,716 84 432,613 84 327,431 83
Housing 98,758 16 83,249 16 66,593 17
Total $606,474 100 $515,862 100 $394,024 100
Note: See Note 3 of Notes to Consolidated Financial Statements
regarding segment information on page 25.
1
Vehicles Segment
The Vehicles Segment consists of two groups of businesses, recreational
vehicles and parts and supplies. The RV group is comprised of five
divisions: Coachmen Recreational Vehicle Company, Georgie Boy Mfg., Inc.,
Shasta Industries, Coachmen Vans and Viking Recreational Vehicles, Inc.
Recreational vehicles are either driven or towed and serveas temporary living
quarters for camping, travel and 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.
Other brand names the Company has protected and used and anticipates using in
the future include Sportscoach, Normandy, Cross Country, Pathfinder and Frolic.
The parts and supplies group is composed of Viking Formed Products and
The Lux Company, Inc. which provide a variety of products to the recreational
vehicle and automotive industries, as well as other industries. Viking Formed
Products is a diversified manufacturer of fiberglass and thermoplastic parts,
including fiberglass van camper tops and raised roofs for van conversions,
and conducts ground effects production through its Prodesign operations. Types
of products produced include plastic and fiberglass flared fenders, running
boards and lower front and rear moldings. The Lux Company, Inc. manufactures
seating products for the RV, office and healthcare industries. The largest
portion of Lux's sales are in the RV seating category, including sofa beds,
convertible pit groups, swivel chairs and ergonomic pilot seats. Lux also
manufactures office managerial, conference, guest and high-back executive
chairs. Lux healthcare products encompass end-opening sofas and task chairs
for laboratory and emergency care workers.
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 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
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manufactured and sold ambulances and other emergency vehicles. Also, during
1994, the Company sold all of the assets of its wholly owned subsidiary,
Auranco, a steel fabricator and diversified supplier of parts for the
recreational vehicle, manufactured housing, and transportation industries.
(See Note 10 of Notes to Consolidated Financial Statements on page 34
regarding disposition information.)
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 10 of Notes to
Consolidated Financial Statements on page 33 regarding acquisition information.)
The Company currently produces recreational vehicles on an assembly line
basis in Indiana, Michigan, Georgia and Oregon. 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 limited number of manufacturers. Occasionally, chassis
availability has limited the Company's production. (See Note 11 of Notes to
Consolidated Financial Statements on page 35 for information concerning the
use of converter pool agreements to purchase vehicle chassis.)
The Company considers itself as being customer driven. Sales and service
representatives regularly visit dealers in their regions, and respond quickly
to questions and suggestions. Divisions host dealer advisory groups and
conduct informative dealer seminars and specialized training classes in areas
such as sales and service. Open forum meetings with owners are held at
campouts, providing ongoing focus group feedback for product improvements.
Engineers and product development team members are encouraged to travel and
vacation in Company RVs to gain a complete understanding and appreciation for
the products.
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 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. Agreements with most of its
dealers are cancelable on short notice, provide for minimum inventory levels
and establish sales territories. No dealer accounts for more than 5% of the
Company's net sales.
3
Most dealers' purchases of RVs 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
RV 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. (See Note 11 of Notes to Consolidated Financial Statements on
page 34.) In addition, the Company guarantees certain obligations of some
dealers to a financial institution for purchases of the Company's products.
The Company's annual aggregate obligations under this arrangement are limited
to 2% of the average annual outstanding floor plan obligations to the
financial institution which currently approximate $36 million. Over the past
three years, the Company has not reported any significant losses from the
repurchase agreements or the guarantee arrangement. The Company does not
finance retail consumer purchases of its products, nor does it generally
guarantee consumer financing.
Housing Segment
The Company's housing group, which is the largest producer of modular homes
in the country, is composed of four All American Homes ("All American")
operations strategically located in Indiana, Iowa, North Carolina and
Tennessee. Together these plants serve more than 300 builder/dealers in
18 states.
All American's modular homes are built to the same local building codes as
site-built homes by skilled craftsmen in a factory environment unaffected by
weather conditions. Nearly complete when they leave the plant, modular homes
are delivered to their final location, typically in two to five sections, and
are crane set onto a waiting basement or crawl space foundation. Production
takes place on an assembly line, with components moving from workstation to
workstation for framing, electrical, plumbing, drywall, roofing, and cabinet
setting, among other operations. An average two-module home can be produced
in just a few days.
All American regularly conducts builder meetings to review the latest in new
design options and component upgrades. These meetings provide an opportunity
for valuable builder input and suggestions from their customers at the
planning stage.
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. (See Note 10 of
Notes to Consolidated Financial Statements on page 34 regarding disposition
information.)
4
Business Factors
Many RVs produced by the Company require gasoline for their operation.
Gasoline has, at various times in the past, been difficult to obtain, and
there can be no assurance that the supply of gasoline will continue
uninterrupted, that rationing will not be imposed or that the price of, or tax
on, gasoline will not significantly increase in the future. Shortages of
gasoline and significant increases in gasoline prices have had a substantial
adverse effect on the demand for RV's in the past and could have a material
adverse effect on demand in the future.
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 RV 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 may deter potential competitors.
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 in the RV 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 eight 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, 1996, Coachmen employed 3,813 persons, of whom 716 were
employed in office and administrative capacities. The Company provides group
life, dental, hospitalization, and major medical plans under which the
employee pays a portion of the cost. In addition, employees can participate
in a stock purchase plan and certain employees can participate in a stock
option plan. The Company considers its relations with employees to be good.
5
Research and Development
During 1996, the Company spent approximately $2,721,000 on research related
to the development of new products and improvement of existing products. The
amounts spent in 1995 and 1994 were approximately $2,240,000 and $1,925,000,
respectively.
Item 2. Properties
The Registrant owns or leases 2,808,679 square feet of plant and office
space, located on 1,115 acres, of which 1,886,641 square feet are used for
manufacturing, 213,618 square feet are used for warehousing and distribution,
41,675 square feet are used for research and development, 92,138 square feet
are used for customer service and 137,450 square feet are offices. 145,974
square feet are leased to others and 291,183 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, 1996:
No. of Building Area
Location Acreage Buildings (Sq. Ft.)
Properties Owned and Used by Registrant:
Vehicles
Elkhart, Indiana 62 14 258,135
Middlebury, Indiana 503 33 759,178
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
Grants Pass, Oregon 10 1 62,400
Subtotal 784 69 1,548,902
Housing
Decatur, Indiana 44 3 247,600
Dyersville, Iowa 20 1 107,400
Springfield, Tennessee 45 1 121,800
Rutherfordton, North Carolina 38 1 125,000
Subtotal 147 6 601,800
Total owned 931 75 2,150,702
6
Properties (Continued)
Properties Leased and Used by Registrant:
Vehicles
Elkhart, Indiana 12 5 108,920
Goshen, Indiana 17 1 80,000
Banning, California 3 1 2,700
Ft. Myers, Florida 3 1 10,400
Mt. Morris, Michigan 8 1 9,200
Marietta, Georgia 5 1 9,600
Subtotal 48 10 220,820
Properties Owned by Registrant and Leased to Others:
Vehicles
Winter Garden, Florida 5 1 42,176
Lake Park, Georgia 8 1 11,720
Crooksville, Ohio 9 2 39,230
Grapevine, Texas 5 4 52,848
Subtotal 27 8 145,974
Properties Owned by Registrant and Available for Sale or
Lease:
Vehicles
Perris, California 15 - -
Grapevine, Texas 4 - -
Longview, Texas 30 1 55,200
Housing
Ellenboro, North Carolina 24 3 77,700
Montezuma, Georgia 36 2 158,283
Subtotal 109 6 291,183
Total 1,115 99 2,808,679
7
Item 3. Legal Proceedings
From time to time, the Company is involved in certain litigation arising out
of its operations in the normal course of business. The Company believes
that there are no claims or litigation pending, the outcome of which will have
a material adverse effect on the financial position of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted during the quarter ended December 31, 1996 to a
vote of security holders.
Executive Officers of the Registrant
The following table sets forth the executive officers of the Company, as of
December 31, 1996:
Name Position
*Thomas H. Corson.....Chairman of the Board and Chief Executive Officer
*Claire C. Skinner....Vice Chairman of the Board
*Keith D. Corson......President and Chief Operating Officer and Director
*Gary L. Groom........Executive Vice President, Finance, Secretary and
Director
*Gene E. Stout........Executive Vice President, Corporate Development
* Member of Finance Committee
Thomas H. Corson (age 69) has served as Chairman of the Company since it was
incorporated in 1964 and has been actively involved in the management and
direction of the Company since that date.
Claire C. Skinner (age 42) has served as Vice Chairman of the Company since
May 1995, and served as Executive Vice President from 1990 to 1995. Since
1987 through the present, Ms. Skinner has been the President of Coachmen RV,
the Company's largest division. Prior to that, she held several management
positions in operations and marketing since 1983.
Keith D. Corson (age 61) has served as President and Chief Operating Officer
of the Company since November 1991. From June 1991 to November 1991 he
served in the position of Office of the President after rejoining the
Company. Mr. Corson was owner and President of Koszegi Products, a soft case
manufacturer for the eight years prior to June 1991. He was a co-founder of
the Company in 1964, and served in several senior management positions from
1964 until 1982, including President of the Company from 1978 until 1982.
Gary L. Groom (age 51) has served as Executive Vice President, Finance and
Secretary of the Company since May 1983 and served as Senior Vice President,
Finance and Secretary from 1980 to 1983. He was Corporate Controller from
1975 through 1980. From 1972 to 1975 he was Assistant Controller.
8
Gene E. Stout (age 63) has served as Executive Vice President, Corporate
Development of the Company since May 1983. From April 1982 to May 1983 he was
Senior Vice President Corporate Planning and Industry Relations. Between 1971
and 1982 he held various management positions with the Company.
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
1996 1995 1996 1995
1st Quarter $13.875 -$ 9.4375 $ 9.1875 -$7.4375 $.035 $.035
2nd Quarter 19.5625 - 12.875 9.25 - 6.6875 .05 .035
3rd Quarter 26.75 - 15.375 8.8125 - 7.0625 .05 .035
4th Quarter 29.00 - 24.125 11.8125 - 8.0625 .05 .035
The Company's common stock is traded on the New York Stock Exchange.
The number of shareholders of record as of January 31, 1997 was 1,537.
9
Item 6. Selected Financial Data
Five-Year Summary of Selected Financial Data
-Year Ended December 31-
1996 1995 1994 1993 1992
Net sales $606,474,128 $515,862,065 $394,023,774 $329,511,226 $292,790,134
Net income 29,630,813* 17,549,400 14,784,094 12,695,727 8,136,793
Earnings
per share 1.94* 1.18 1.00 .87 .57
Cash dividends
per share .185 .14 .12 .095 .04
At year end:
Total
assets 227,447,572 150,248,757 125,021,282 94,736,482 88,836,412
Long-term
debt 14,841,262 12,117,756 7,023,394 3,749,950 5,336,277
*Net income and net income per share for 1996 include $2,293,893 and $.15,
respectively, for the cumulative effect of an accounting change (see Note 2
of Notes to Consolidated Financial Statements).
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion should be read in conjunction with the Selected
Financial Data and the Consolidated Financial Statements.
OVERVIEW
The Company was founded in 1964 as a manufacturer of RVs and began
manufacturing modular homes in 1982. Since that time, the Company has
evolved into a market leader in both business segments through a combination
of internal growth and strategic acquisitions. As part of its continuing
effort to focus on its two core businesses, the Company acquired in January
1995 the third largest Class A motorhome producer, Georgie Boy Mfg., Inc.
(the "Georgie Boy Acquisition"), which more than doubled the Company's market
share in this sector of the motorized RV market. In September 1994, the
Company acquired the assets of a modular home business, the North Carolina
Division of Muncy Building Enterprises, L.P. (the "North Carolina
Acquisition"), which enabled the Company to enter a new geographic market,
resulting in an increase in overall market share.
The Company's new plant openings have been an important component of its
internal growth strategy. In May 1995, the Company opened a new modular
housing plant in Tennessee (the "Tennessee Plant Opening"). In addition, the
Company further expanded its modular housing production
10
capacity with the late 1996 construction of a new facility for the North
Carolina housing operation (the "North Carolina Expansion"). In February
1996, the Company increased its RV production capacity by opening a new
fifth wheel and conventional travel trailer plant in Oregon (the "Oregon
Plant Opening"). An additional travel trailer plant in Indiana also became
operational in December 1996 to capitalize on the growing market share of the
value-priced travel trailer segment of its RV business.
The Company's business segments are cyclical and subject to certain seasonal
demand cycles and changes in general economic and political conditions.
Demand in the RV and modular housing industries generally declines during the
winter season, while sales and profits are generally highest during the
spring and summer months. Inflation and changing prices have had minimal
direct impact on the Company in the past in that selling prices and material
costs have generally followed the rate of inflation.
RESULTS OF OPERATIONS
Comparison of 1996 to 1995
Consolidated net sales increased $90.6 million, or 17.6% to $606.5 million in
1996 from $515.9 million in 1995. The Company's vehicle segment, which
includes the parts and supply group of companies, experienced a net sales
increase of 17.4% while the housing segment had a net sales increase of
18.6%. The vehicle segment continued its 1995 trend by outpacing the
industry with market share gains in most of its product categories. Both
vehicles and housing experienced increases in unit sales and in the average
sales price per unit during 1996. Historically, the Company's first and
fourth quarters are the slowest for sales in both segments. See Note 13 of
Notes to Consolidated Financial Statements for unaudited interim financial
information.
Gross profit for the year increased to $88.5 million, or 14.6% of net sales,
from $71.2 million, or 13.8% of net sales in 1995. The increase in gross
profit for 1996 was primarily attributable to the increase in net sales in
1996. The increase in the gross profit percentage represents the spreading of
fixed costs over higher production volume. The housing segment continued
experiencing lower gross margins associated with the North Carolina Expansion
and the Tennessee Plant Opening. As these plants better utilize their
capacity, inefficiencies associated with the plant expansion and opening
should be reduced and eventually eliminated.
Operating expenses, which include selling, delivery, general and
administrative expenses, were $48.8 million and $44.6 million, or as a
percentage of net sales, 8.1% and 8.6% for 1996 and 1995, respectively.
Selling expenses for 1996 decreased .4% as a percentage of net sales,
primarily as a result of increased demand for the Company's products. As a
percentage of net sales, delivery expenses remained relatively unchanged.
General and administrative expenses were $21.1 million or
11
3.5% of net sales compared with $19.0 million and 3.7% in 1995 and decreased
as a percentage of sales due to the increase in net sales. The increase in
general and administrative expenses during 1996 in absolute dollars was
principally the result of increased administrative requirements and related
salaries and payroll taxes associated with the Company's growth.
Operating income was $39.7 million in 1996 compared with $26.7 million in
1995, an increase of 48.8%. This increase was consistent with the $17.3
million increase in gross profit and the overall decrease of .5% in operating
expenses as a percentage of net sales. The Company's vehicle segment
produced operating income of $29.9 million, or 5.9% of vehicle net sales,
compared with operating income of $18.1 million, or 4.2% of vehicle net sales
in 1995. The modular housing segment generated 1996 operating income of $9.7
million, or 9.8% of housing net sales, compared with 1995 operating income of
$8.6 million, or 10.4% of housing net sales. The decrease in operating income
as a percentage of net sales for the Company's housing segment was
attributable to the North Carolina Expansion and Tennessee Plant Opening.
Interest expense for 1996 decreased to $1.6 million, or .3% of net sales,
from $3.1 million, or .6% of net sales in 1995 primarily as a result of a
change to the cash surrender value method of accounting for the Company's
investment in life insurance contracts. These life insurance contracts were
purchased to fund obligations under deferred compensation agreements with
executives and other key employees. The interest costs associated with
deferred compensation obligations and with the borrowings against the cash
value of the insurance policies are now partially offset by the increases in
cash surrender values each accounting period. Previously, the increases in
cash surrender values were not recognized, since the investment in life
insurance contracts consisted only of the capitalized insurance premiums.
Interest income for 1996 increased to $1.6 million from $1.3 million for
1995, primarily due to the amounts of cash and temporary cash investments in
1996 versus 1995. Increases in cash and temporary cash investments were
primarily generated from operating activities throughout the year and the
sale of 2,070,000 shares of common stock in November 1996.
The gain on sales of properties decreased to $726,000 for 1996 from $793,000
for 1995. This variance is the result of the amount of gain recognized upon
the disposition of various small properties. Assets are continually analyzed
and every effort is made to sell or dispose of properties that are determined
to be unproductive.
Other income, net, represents income of $1.0 million for 1996 compared to
income of $2.3 million for 1995. The 1996 income was primarily from a final
determination of insurance proceeds from assets destroyed in a fire which
consumed the Company's Prodesign production facility in August 1995 and
interest participation in finance company transactions. The 1995 income was
primarily from the Prodesign fire. See Note 12 of Notes to Consolidated
Financial Statements.
12
Income taxes for 1996 increased to $14.1 million, or 2.3% of net sales, from
$10.4 million, or 2.0% of net sales in 1995. The effective tax rate was 34.1%
compared to 37.2% in 1995. The decrease in the effective tax rate for 1996 is
attributable to an increase in nontaxable income and the reversals of
federal and state income tax accruals of $250,000 and $550,000, respectively,
resulting from favorable settlements of tax examinations.
Net income for 1996 was $29.6 million compared to $17.5 million in 1995,
which includes the $2.3 million cumulative effect of an accounting change for
Company-owned life insurance. See Note 2 of Notes to Consolidated Financial
Statements.
Comparison of 1995 to 1994
Consolidated net sales for 1995 were $515.9 million, an increase of 30.9%
over $394.0 million reported in 1994. The Company's vehicle segment, which
includes the parts and supply businesses, experienced a sales increase of
32.1%, while the housing segment of the Company's business increased by
25.0%. Vehicle segment sales in 1995 were augmented by the sales resulting
from the Georgie Boy Acquisition. Also, 1994 included the net sales of
Southern Ambulance Builders, Inc., which was sold on April 29, 1994. After
eliminating the net sales of Georgie Boy from 1995 and Southern Ambulance
from 1994, the Company's vehicle segment experienced a net sales increase of
8.2%. New product introductions and aggressive pricing resulted in
significant market share gains in most RV product categories, while the
industry as a whole experienced a sales decline. The Company's increased
capacity in the housing segment, resulting from the North Carolina
Acquisition and the Tennessee Plant Opening, enabled continued growth and
contributed to a substantial gain of market share. The Company's RV and
modular housing segments experienced increases in both the number of units
sold and the average sales price per unit.
Gross profit was $71.2 million and was 13.8% of net sales in 1995 compared to
$58.5 million and 14.8% reported for 1994. The decline in the gross profit
percentage reflects an industry wide sales decline in van conversions and
intensified competition in camping trailers, as well as lower profitability
levels attributable to the North Carolina Acquisition and Tennessee Plant
Opening. The industry decline in sales of van conversions and increased
competition in camping trailers led to strong pricing competition and
underutilized capacity. The increase in motorized product sales resulting
from the Georgie Boy Acquisition contributed to a higher cost of goods sold
since motorized products generally have a higher cost of goods manufactured
as a percentage of net sales due to the chassis cost.
Operating expenses, consisting of selling, delivery and general and
administrative expenses, were $44.6 million or 8.6% of net sales in 1995
compared with $36.0 million or 9.1% of net sales in 1994. Selling and
13
delivery expenses were $25.6 million, or 5.0% of net sales, in 1995 compared
with $20.1 million, or 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. 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. The .3% reduction in general and administrative expenses as a
percentage of net sales was caused by the spreading of the Company's expenses
in this category over increased net sales. The increase in general and
administrative expenses in absolute dollars was due to increases in the
administrative salaries and payroll taxes associated with the Georgie Boy
Acquisition, the North Carolina Acquisition and the Tennessee Plant Opening.
Interest expense increased in 1995 to $3.1 million from $1.5 million in 1994
as a result of increases in long-term debtassociated with the Georgie Boy
Acquisition, the North Carolina Acquisition and the economic development bond
used to finance the Tennessee Plant Opening, as well as a general increase in
interest rates from 1994 to 1995. Interest income increased from $.7 million
in 1994 to $1.3 million in 1995 due to the Company's cash and temporary
investment activity in 1995 compared with 1994, and a general rise in
interest rates from 1994 to 1995.
The net gain on the sales of properties decreased to $793,000 in 1995 from
$889,000 in 1994. The net gain in 1995 resulted from the disposition 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.
Other nonoperating income increased $2.1 million in 1995 from $.2 million in
1994 to $2.3 million in 1995. This increase consisted 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. The assets were generally insured at replacement value and the
recognized gain offset the loss in profitability suffered while the division
was recovering.
The 1995 provision for income taxes was $10.4 million and represented an
effective tax rate of 37.2% compared to $8.0 million and 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.
Net income for the year ended December 31, 1995 was $17.5 million compared to
$14.8 million for the prior period.
14
Liquidity and Capital Resources
The Company generally relies on funds from operations as its primary source
of working capital and liquidity. In addition, the Company maintains an
unsecured committed line of credit, which totaled $30 million at December 31,
1996, to meet its seasonal working capital needs. There were no borrowings
against this line of credit during 1996, 1995 and 1994. The Company's
operating activities have been a principal source of cash flows in each of
the last three years. Operating cash flows were $15.9 million, $13.5 million
and $17.4 million for 1996, 1995 and 1994, respectively. For each of these
years, net income, adjusted by certain noncash items such as depreciation,
was the significant factor in generating operating cash flows. In 1996, net
income was utilized to fund the increased inventory levels associated with
higher sales and production. Investing activities used cash of $15.7
million, $11.7 million and $2.0 million in 1996, 1995 and 1994, respectively.
The principal use of cash for investing activities in each of the last three
years has been property, plant and equipment acquisitions. Major capital
expenditures during 1996 included, the North Carolina Expansion (financed in
part by a $5.0 million industrial revenue bond) and the Oregon Plant Opening.
Significant capital expenditures in 1995 were primarily associated with the
Tennessee Plant Opening. Financing cash flows for 1996 included $48 million
of proceeds from a public sale of the Company's common shares and $5 million
of proceeds from the industrial revenue bond mentioned above. In 1994,
financing cash flows included $4 million proceeds from an industrial revenue
bond to finance the construction of the Tennessee plant. The principal uses
of cash by financing activities in all three years are generally the payment
of long-term debt and cash dividends. For a more detailed analysis of the
Company's cash flows for each of the last three years, see the Consolidated
Statements of Cash Flows. The Company's cash and temporary cash investments
at December 31, 1996 were $66.4 million, or an increase of $49.4 million
over 1995, which is principally attributable to the proceeds from the public
offering. The Company anticipates that available funds, together with
anticipated cash flows generated from future operations and amounts available
under its line of credit will be sufficient to fund the Company's planned
capital expenditures and other operating cash requirements through the end
of 1997.
In 1996, working capital increased $64.8 million, from $60.6 million to
$125.4 million. The $62.2 million increase in current assets at December 31,
1996 versus December 31, 1995, was primarily due to increased cash and
temporary cash investments from the proceeds of the public offering and
increases in inventories associated with increased sales volumes. The $2.6
million decrease in current liabilities is substantially due to decreases in
accounts payable and other liabilities, principally payroll taxes and accrued
insurance.
15
Forward Looking Statements
Some matters set forth herein are forward looking statements that are
dependent on certain risks and uncertainties including such factors, among
others, as the availability of gasoline, which can impact sales of
recreational vehicles; availability of chassis, which are used in the
production of many of the Company's recreational vehicle products; interest
rates, which affect the affordability of the Company's products; and also on
the state of the recreational vehicle and modular housing industries in the
United States. Other factors affecting forward looking statements include
competition in these industries and the Company's ability to maintain or
increase gross margins which are critical to profitability whether there are
or are not increased sales. At times, the Company's actual performance
differs materially from its projections and estimates regarding the economy,
the recreational vehicle and housing industries and other key performance
indicators. The Company's actual results could vary significantly from the
performance projected in the forward looking statements.
Other Matters
In February 1997, Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS No. 128") was issued by the Financial Accounting
Standards Board. The Company is required to adopt this pronouncement in its
financial statements for the year ended December 31, 1997. SFAS No. 128 will
require the Company to make a dual presentation of basic and diluted earnings
per share on the face of its consolidated statements of income. The Company
does not anticipate SFAS No. 128 will have a significant impact on the
Company's consolidated statements of income.
16
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, 1996 and 1995, 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, 1996.
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, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
As discussed in Note 2 to the consolidated financial statements, effective
January 1, 1996 the Company changed its method of accounting for its
investments in life insurance contracts.
COOPERS & LYBRAND L.L.P.
------------------------------
COOPERS & LYBRAND L.L.P.
South Bend, Indiana
January 31, 1997
17
Coachmen Industries, Inc. And Subsidiaries
Consolidated Balance Sheets
as of December 31, 1996 and 1995
ASSETS
1996 1995
CURRENT ASSETS
Cash and temporary cash investments $ 66,448,901 $ 17,020,744
Certificate of deposit 500,000 500,000
Trade receivables, less allowance for
doubtful receivables 1996 - $919,000
and 1995 - $844,000 20,575,048 19,780,160
Other receivables 2,103,168 4,244,387
Refundable income taxes 1,865,000 507,000
Inventories 68,311,038 55,434,497
Prepaid expenses and other 930,244 1,570,492
Deferred income taxes 3,180,000 2,665,000
Total current assets 163,913,399 101,722,280
PROPERTY AND EQUIPMENT, at cost
Land and improvements 6,640,920 5,537,033
Buildings and improvements 33,516,736 27,405,744
Machinery and equipment 14,563,955 10,524,486
Transportation equipment 9,619,667 11,307,747
Office furniture and fixtures 4,830,577 4,269,837
69,171,855 59,044,847
Less, Accumulated depreciation 29,314,413 27,297,851
39,857,442 31,746,996
OTHER ASSETS
Real estate held for sale 4,902,105 3,458,539
Rental properties 2,530,608 925,538
Intangibles, less accumulated amortization
1996 - $380,363 and 1995 - $244,771 5,063,913 5,199,505
Deferred income taxes 600,000 875,000
Other 10,580,105 6,320,899
23,676,731 16,779,481
TOTAL ASSETS $227,447,572 $150,248,757
The accompanying notes are part of the consolidated
financial statements.
18
LIABILITIES AND SHAREHOLDERS' EQUITY
1996 1995
CURRENT LIABILITIES
Current maturities of long-term debt $ 2,278,519 $ 2,094,472
Accounts payable, trade 14,532,948 18,435,562
Accrued wages, salaries and commissions 4,410,925 3,583,423
Accrued dealer incentives 3,064,437 2,289,376
Accrued warranty expense 4,460,137 3,784,712
Accrued income taxes 628,051 981,800
Accrued insurance 3,697,709 4,487,548
Other accrued liabilities 5,449,270 5,477,885
Total current liabilities 38,521,996 41,134,778
LONG-TERM DEBT 14,841,262 12,117,756
OTHER 6,428,373 5,958,995
Total liabilities 59,791,631 59,211,529
COMMITMENTS AND CONTINGENCIES (Note 11)
SHAREHOLDERS' EQUITY
Common shares, without par value: authorized
60,000,000 shares; issued 1996 - 20,527,644
shares and 1995 - 18,282,672 shares 86,248,042 37,151,202
Additional paid-in capital 2,313,743 1,664,889
Retained earnings 94,670,593 67,824,816
183,232,378 106,640,907
Less, Cost of shares reacquired for the
treasury 1996 - 3,340,996 shares and
1995 - 3,345,004 shares 15,576,437 15,603,679
Total shareholders' equity 167,655,941 91,037,228
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $227,447,572 $150,248,757
19
Coachmen Industries, Inc. And Subsidiaries
Consolidated Statements Of Income And Retained Earnings
for the years ended December 31, 1996, 1995 and 1994
1996 1995 1994
Net sales $606,474,128 $515,862,065 $394,023,774
Cost of goods sold 517,966,127 444,626,666 335,566,707
Gross profit 88,508,001 71,235,399 58,457,067
Operating expenses:
Selling and delivery 27,719,131 25,593,164 20,080,353
General and administrative 21,116,814 18,983,252 15,877,111
48,835,945 44,576,416 35,957,464
Operating income 39,672,056 26,658,983 22,499,603
Nonoperating income (expense):
Interest expense (1,572,092) (3,141,763) (1,480,784)
Interest income 1,615,442 1,306,148 667,004
Gain on sale of properties, net 726,023 793,412 888,902
Other, net 1,041,401 2,340,620 237,369
1,810,774 1,298,417 312,491
Income before income taxes
and cumulative effect
of accounting change 41,482,830 27,957,400 22,812,094
Income taxes 14,146,000 10,408,000 8,028,000
Income before cumulative effect
of accounting change 27,336,830 17,549,400 14,784,094
Cumulative effect of accounting
change for Company-owned life
insurance policies 2,293,983 - -
Net income 29,630,813 17,549,400 14,784,094
Retained earnings,
beginning of the year 67,824,816 52,359,629 39,345,043
Cash dividends (per common share:
1996 - $.185, 1995 - $.14, and
1994 - $.12) (2,785,036) (2,084,213) (1,769,508)
Retained earnings, end of year $ 94,670,593 $67,824,816 $ 52,359,629
Earnings per common share:
Income before cumulative
effect of accounting change $ 1.79 $ 1.18 $ 1.00
Cumulative effect of accounting
change .15 - -
Net income $ 1.94 $ 1.18 $ 1.00
The accompanying notes are part of the consolidated financial statements.
20
Coachmen Industries, Inc. And Subsidiaries
Consolidated Statements Of Cash Flows
for the years ended December 31, 1996, 1995 and 1994
1996 1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $29,630,813 $ 17,549,400 $ 14,784,094
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 5,487,528 3,993,282 3,089,602
Amortization of intangibles 135,592 136,620 10,881
Gain on sale of properties (726,023) (793,412) (888,902)
Gain on insurance settlement (393,014) (2,124,539) -
Realized gains on sale of
investments - (13,888) (142,373)
Cumulative effect of
accounting change (2,293,983) - -
Increase in cash surrender value
of life insurance policies (1,087,678) - -
Deferred income taxes (240,000) (93,000) (858,000)
Other 113,666 121,131 (68,054)
Changes in certain assets and
liabilities, net of effect of
acquisitions and dispositions:
Receivables, excluding
current portion of notes (717,229) (2,285,849) (3,350,130)
Inventories (11,077,327) 1,361,916 (7,925,926)
Prepaid expenses and other 640,248 (304,327) (340,019)
Accounts payable, trade (3,902,614) (4,188,586) 8,764,214
Income taxes - accrued and
refundable (1,091,318) (1,181,039) 1,597,379
Other current liabilities 1,447,503 1,277,349 2,729,901
Net cash provided by
operating activities 15,926,164 13,455,058 17,402,667
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from:
Sale of properties 925,452 3,477,934 1,269,607
Sale of investments - 263,888 1,629,661
Sale of subsidiaries - - 3,364,848
Insurance settlement 2,821,014 846,463 -
Acquisitions of:
Property and equipment (14,919,168) (15,222,794) (5,133,151)
Real estate held for sale
and rental properties (1,861,458) - -
Acquisition of businesses net of
acquired cash (1,852,596) (4,313,046) (1,387,740)
(Advances) collections on notes
receivable, net (1,136,340) 39,177 1,537,170
Unexpended industrial revenue bond
proceeds (254,463) 3,337,122 (3,337,122)
Other 560,195 (130,153) 73,313
Net cash (used in)
investing activities (15,717,364) (11,701,409) (1,983,414)
21
Consolidated Statements of Cash Flows (Continued)
for the years ended December 31, 1996, 1995 and 1994
1996 1995 1994
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of short-term borrowings - (900,000) -
Proceeds from long-term debt 5,000,000 - 4,000,000
Payments of long-term debt (2,092,447) (1,833,892) (793,568)
Sale of common stock, net of
offering expenses 47,970,779 - -
Issuance of common shares under
stock option and stock
purchase plans 1,126,061 550,815 477,297
Cash dividends paid (2,785,036) (2,084,213) (1,769,508)
Net cash provided by
(used in) financing
activities 49,219,357 (4,267,290) 1,914,221
Increase (decrease) in cash and
temporary cash investments 49,428,157 (2,513,641) 17,333,474
CASH AND TEMPORARY CASH INVESTMENTS
Beginning of year 17,020,744 19,534,385 2,200,911
End of year $ 66,448,901 $ 17,020,744 $ 19,534,385
Supplemental disclosures of
cash flow information:
Cash paid during the year for:
Interest $ 2,018,439 $ 2,398,000 $ 1,463,000
Income taxes 15,628,000 12,265,000 7,454,000
The accompanying notes are a part of the consolidated financial statements.
22
Coachmen Industries, Inc. And Subsidiaries
Notes To Consolidated Financial Statements
for the years ended December 31, 1996, 1995 and 1994
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 manufacturingfacilities 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, all of which are wholly owned.
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.
At December 31, 1996 cash and temporary cash investments include
approximately $45.2 million invested in variable rate demand notes with a
seven-day put option. In addition, cash and temporary cash investments
include $20.8 million and $16.5 million invested in a money market mutual
fund at December 31, 1996 and 1995, respectively.
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 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 10). 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, 1996, the Company issued common shares with a
market value of $55,665, $38,280 and $17,163, respectively, in lieu of
cash compensation. The Company recognizes a tax benefit in additional paid-
in capital from exercise of stock options (see Note 7).
23
Coachmen Industries, Inc. And Subsidiaries
Notes To Consolidated Financial Statements, Continued
for the years ended December 31, 1996, 1995 and 1994
1. NATURE OF OPERATIONS AND ACCOUNTING POLICIES, Continued.
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, 1996 and 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, 1996 and 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
Notes 2 and 8). At December 31, 1996, the carrying amount of these
policies, which equaled their fair value, was $8.9 million (cash
surrender value of $20.3 million net of $11.4 million of policy loans).
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, 1996 and 1995, the
carrying value of real estate held for sale (and the related accumulated
depreciation) aggregated $5,269,155 ($367,050) and $3,682,007 ($223,468),
respectively.
Rental Properties - Rental properties represent owned facilities which are
currently leased to others under lease agreements with expiring terms
through December 1, 1999. 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, 1996, 1995 and 1994 aggregated
$256,855, $381,287 and $570,955, respectively. Future minimum annual
lease income under these lease agreements is as follows: 1997 -
$413,400, 1998 - $255,000 and 1999 - $233,750. 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, 1996 and 1995, the cost of rental properties
(and the related accumulated depreciation) aggregated $3,488,179
($957,571) and $1,795,504 ($869,966), respectively.
24
Coachmen Industries, Inc. And Subsidiaries
Notes To Consolidated Financial Statements, Continued
for the years ended December 31, 1996, 1995 and 1994
1. NATURE OF OPERATIONS AND ACCOUNTING POLICIES, Continued.
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 $2,721,000, $2,240,000 and
$1,925,000 for the years ended December 31, 1996, 1995 and 1994,
respectively.
Warranty Expense - The Company accrues an estimated warranty liability at
the time the warranted products are sold.
Stock-Based Compensation - The Company has adopted the disclosure only
provisions of Statement of Financial Standards No. 123, "Accounting for
Stock-Based Compensation," and accordingly accounts for its stock option
plan under the provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees."
2. ACCOUNTING CHANGES.
Effective January 1, 1996, the Company changed its method of accounting
for its investments in life insurance contracts which were purchased to
fund liabilities under deferred compensation agreements with executives
and other key employees. Prior to January 1, 1996, the Company accounted
for its investments in life insurance contracts by capitalizing premiums
under the ratable charge method (a method of accounting which was
acceptable when the insurance contracts were originally acquired and
continued to be acceptable for contracts acquired prior to November 14,
1985). Effective January 1, 1996, the Company changed to the cash
surrender value method of accounting which is the preferred method under
generally accepted accounting principles, as this method more accurately
reflects the economic value of the contracts.
On January 1, 1996, the Company recorded a $2.3 million noncash credit for
the cumulative effect of this accounting change. This accounting method
change also increased net income for the year ended December 31, 1996 by
$1,087,678 or $.07 per share. Pro forma net income and net income per
share, assuming the cash surrender value method had been applied during
the years ended December 31, 1995 and 1994 along with actual results are
presented below:
25
Coachmen Industries, Inc. And Subsidiaries
Notes To Consolidated Financial Statements, Continued
for the years ended December 31, 1996, 1995 and 1994
2. ACCOUNTING CHANGES, Concluded.
1995 1994
Net income
As reported $17,549,400 $14,784,094
Pro forma 18,292,792 15,254,749
Net income per share
As reported 1.18 1.00
Pro forma 1.23 1.03
Also effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of." This Statement
requires that long-lived assets and certain identifiable intangibles to
be held and used by an entity be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. During 1996, the Company determined that no
impairment losses need be recognized for applicable assets.
3. 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 set forth in
the following table:
1996 1995 1994
Net sales:
Vehicles $507,715,622 $432,612,786 $327,430,404
Housing 98,758,506 83,249,279 66,593,370
Total $606,474,128 $515,862,065 $394,023,774
Operating income (loss):
Vehicles $ 29,934,813 $ 18,136,796 $ 15,434,057
Housing 9,674,894 8,644,906 8,192,322
General Corporate 62,349 (122,719) (1,126,776)
Total $ 39,672,056 $ 26,658,983 $ 22,499,603
Identifiable assets:
Vehicles $109,701,864 $ 89,173,588 $ 71,153,298
Housing 31,406,963 23,957,173 20,907,090
General Corporate 86,338,745 37,117,996 32,960,894
Total $227,447,572 $150,248,757 $125,021,282
Depreciation:
Vehicles $ 2,931,270 $ 2,218,420 $ 1,814,505
Housing 2,140,587 1,487,159 965,627
General Corporate 415,671 287,703 309,470
Total $ 5,487,528 $ 3,993,282 $ 3,089,602
25
Coachmen Industries, Inc. And Subsidiaries
Notes To Consolidated Financial Statements, Continued
for the years ended December 31, 1996, 1995 and 1994
3. OPERATIONS IN DIFFERENT INDUSTRIES, Concluded.
1996 1995 1994
Additions to property
and equipment(including
property and equipment
acquired in the acquisition
of businesses):
Vehicles $ 11,421,971 $ 8,905,728 $ 2,714,736
Housing 6,846,332 6,834,516 3,740,864
General Corporate 482,865 2,602,967 224,791
Total $ 18,751,168 $ 18,343,211 $ 6,680,391
4. INVENTORIES.
Inventories consist of the following:
1996 1995
Raw materials $ 20,951,906 $ 16,580,013
Work in process 6,467,066 7,268,705
Finished goods 40,892,066 31,585,779
Total $ 68,311,038 $ 55,434,497
5. SHORT-TERM BORROWINGS.
At December 31, 1996 and 1995, the Company has an unsecured bank line of
credit aggregating $30 million 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, 1996 and 1995.
6: LONG-TERM DEBT.
Long-term debt consists of the following:
1996 1995
Obligations under industrial development
revenue bonds, variable rates, with
various maturities through 2011 $10,832,781 $ 6,666,125
Promissory notes payable, issued or
assumed in the acquisition of Georgie
Boy (see Note 10), principal payable
in annual installments through January
2001, interest payable monthly at the
prime rate, (8.25% at December 31, 1996),
unsecured 6,266,998 7,492,173
Other 20,002 53,930
Total 17,119,781 14,212,228
Less, Current maturities 2,278,519 2,094,472
Long-term debt $14,841,262 $12,117,756
26
Coachmen Industries, Inc. And Subsidiaries
Notes To Consolidated Financial Statements, Continued
for the years ended December 31, 1996, 1995 and 1994
6. LONG-TERM DEBT, Concluded.
Aggregate maturities of long-term debt for each of the next five years
ending December 31 are as follows: 1997 - $2,278,519; 1998 - $2,258,519;
1999 - $2,258,519; 2000 - $1,957,924 and 2001 - $1,766,298.
In connection with four 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.
7. COMMON STOCK MATTERS AND EARNINGS PER SHARE.
Stock Split
On July 17, 1996, the Board of Directors declared a two-for-one stock
split of the Company's common shares, which was paid on August 28, 1996 to
shareholders of record on August 7, 1996. All share and per share data in
the accompanying consolidated financial statements have been retroactively
restated to reflect this stock split. Also on July 17, 1996, the Board of
Directors adopted a resolution to amend the Company's Articles of
Incorporation to increase the authorized common shares from 30,000,000
shares to 60,000,000 shares.
Stock Offering
In November 1996, the Company completed a public stock offering
consisting of 2,070,000 shares of its common stock at $24.50 per share.
Net of underwriting fees and offering expenses, proceeds to the Company
aggregated $48 million.
Stock Option Plan
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. The option price for options granted to 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.
27
Coachmen Industries, Inc. And Subsidiaries
Notes To Consolidated Financial Statements, Continued
for the years ended December 31, 1996, 1995 and 1994
7. COMMON STOCK MATTERS AND EARNINGS PER SHARE, Continued.
The following table summarizes stock option activity:
Weighted
Average
Number Exercise
Of Shares Price
Outstanding, January 1, 1994 415,650 $ 4.40
Granted 174,600 7.46
Canceled (5,450) 3.93
Exercised (126,000) 3.45
Outstanding, December 31, 1994 458,800 5.50
Granted 272,400 7.98
Canceled (33,150) 7.54
Exercised (123,150) 3.71
Outstanding, December 31, 1995 574,900 6.95
Granted 251,800 12.61
Canceled (14,100) 7.65
Exercised (165,500) 5.88
Outstanding, December 31, 1996 647,100 9.36
Options outstanding at December 31, 1996 are exercisable at prices ranging
from $2.94 to $27.125 and have a weighted average remaining contractual
life of 3.17 years. The following table summarizes information about
stock options outstanding at December 31, 1996.
Outstanding Exercisable
Weighted-
Number Average Weighted- Number Weighted-
Range of Outstanding at Remaining Average Exercisable at Average
Exercise December 31, Contractual Exercise December 31, Exercise
Price 1996 Life Price 1996 Price
$ 2.94 - $ 4.00 25,450 .3 $ 3.21 25,450 $3.21
4.01 - 8.00 193,100 2.2 6.87 107,600 6.68
8.01 - 12.00 330,250 3.6 9.11 45,588 8.39
12.01 - 15.00 48,800 4.3 14.07 - -
15.01 - 27.125 49,500 4.5 19.08 - -
647,100 178,638
At December 31, 1995 and 1994, there were exercisable options to purchase
153,623 and 164,613 shares at weighted-average exercise prices of $5.14
and $3.64, respectively. The weighted-average grant-date fair value of
options granted during the year ended December 31, 1996 and 1995 was
$3.08 and $2.08, respectively. As of December 31, 1996, 787,100 shares
were reserved for the granting of future stock options, compared with
1,024,800 shares at December 31, 1995.
28
Coachmen Industries, Inc. And Subsidiaries
Notes To Consolidated Financial Statements, Continued
for the years ended December 31, 1996, 1995 and 1994
7. COMMON STOCK MATTERS AND EARNINGS PER SHARE, Continued
Had the Company adopted the provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation,"
the Company's net income and net income per share would have been:
1996 1995
Pro forma net income $29,512,000 $17,499,000
Pro forma net income per share 1.93 1.18
The pro forma amounts shown above and the weighted-average grant-date fair-
value of options granted are estimated using the Black-Scholes option-
pricing model with the following assumptions:
1996 1995
Risk free interest rate 6.00% 6.87%
Expected life 2.75 years 2.75 years
Expected volatility 30.7% 30.7%
Expected dividends 1.2% 1.2%
Stock Purchase Plan
The Company has an employee stock purchase plan under which a total of
576,228 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, 1996,
there were 233 employees actively participating in the plan. Since its
inception, a total of 223,772 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.
29
Coachmen Industries, Inc. And Subsidiaries
Notes To Consolidated Financial Statements, Continued
for the years ended December 31, 1996, 1995 and 1994
7. COMMON STOCK MATTERS AND EARNINGS PER SHARE, Continued.
Changes in Common Shares, Additional Paid-In Capital and Treasury Shares
Additional
Common Paid-in Treasury
Shares Capital Shares
Balance, January 1, 1994 $36,123,090 $ 1,188,757 $(15,650,990)
Issuance of 6,526 common
shares under employee
stock purchase plan 42,315 - -
Issuance of 2,340 common
shares from treasury - 1,298 15,865
Issuance of 126,000 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)
Issuance of 12,130 common
shares under employee
stock purchase plan 94,396 - -
Issuance of 4,638 common
shares from treasury - 6,834 31,446
Issuance of 123,150 common
shares upon the exercise
of stock options 456,419 - -
Tax benefit from current
year's exercise
of stock options - 227,000 -
Balance, December 31, 1995 37,151,202 1,664,889 (15,603,679)
Sale of 2,070,000 common shares,
net of offering expenses 47,970,779 - -
Issuance of 9,472 common
shares under employee
stock purchase plan 152,646 - -
Issuance of 4,008 common
shares from treasury - 28,423 27,242
Issuance of 165,500 common
shares upon the exercise
of stock options 973,415 - -
Tax benefit from current year's
exercise of stock options - 620,431 -
Balance, December 31, 1996 $86,248,042 $ 2,313,743 $(15,576,437)
30
Coachmen Industries, Inc. And Subsidiaries
Notes To Consolidated Financial Statements, Continued
for the years ended December 31, 1996, 1995 and 1994
7. COMMON STOCK MATTERS AND EARNINGS PER SHARE, Concluded.
Shareholder Rights Plan
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, 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 $15
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 $.005
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
Earnings per share are based on the weighted average number of common
shares outstanding (1996 - 15,280,578, 1995 - 14,881,968 and 1994 -
14,743,926). 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.
8. 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, 1996, 1995 and 1994 aggregated $2,662,668, $2,577,692
and $2,146,905, 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 $8.9 million as of December 31,
1996. The carrying value of the investment in life insurance contracts
aggregated $5.6 million at December 31, 1995 (see Note 2). The deferred
compensation obligations, which aggregated $6,500,123 and $5,952,958 as
of December 31, 1996 and 1995, respectively, are included in other non-
current liabilities, with the current portion ($186,559 and $186,854 at
December 31, 1996 and 1995, respectively) included in other accrued
expenses.
31
Coachmen Industries, Inc. And Subsidiaries
Notes To Consolidated Financial Statements, Continued
for the years ended December 31, 1996, 1995 and 1994
8. INCENTIVE AND DEFERRED COMPENSATION PLANS, Concluded.
All full-time employees of the Company (subject to certain eligibility
restrictions) are eligible to participate in the Coachmen Assisted
Retirement For Employees (C.A.R.E.) program which provides a mechanism
for each eligible employee to 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 $704,173, $537,118 and
$546,984 for the years ended December 31, 1996, 1995 and 1994,
respectively.
9. INCOME TAXES.
Income taxes are summarized as follows:
1996 1995 1994
Federal:
Current $13,553,000 $ 9,530,000 $ 7,918,000
Deferred (210,000) (79,000) (730,000)
13,343,000 9,451,000 7,188,000
State:
Current 833,000 971,000 968,000
Deferred (30,000) (14,000) (128,000)
803,000 957,000 840,000
Total $14,146,000 $10,408,000 $ 8,028,000
The following is a reconciliation of the provision for income taxes
computed at the federal statutory rate (35%) to the reported provision
for income taxes:
1996 1995 1994
Computed federal income tax
at federal statutory rate $14,519,000 $ 9,785,000 $ 7,984,000
Changes resulting from:
Increase in cash surrender
value of life insurance
contracts (381,000) - -
Foreign Sales Corporation
subject to lower tax rate (310,000) (222,000) (186,000)
State income taxes, net of
federal income tax benefit 522,000 622,000 546,000
Valuation allowance - - (526,000)
Other, net (204,000) 223,000 210,000
Total $14,146,000 $10,408,000 $ 8,028,000
32
Coachmen Industries, Inc. And Subsidiaries
Notes To Consolidated Financial Statements, Continued
for the years ended December 31, 1996, 1995 and 1994
9. INCOME TAXES, Concluded.
The components of the net deferred tax assets are as
follows:
1996 1995
Current deferred tax asset:
Accrued warranty expense $1,784,000 $1,321,000
Allowance for doubtful
receivables 368,000 317,000
Other 1,028,000 1,027,000
Net current deferred
tax asset $3,180,000 $2,665,000
Noncurrent deferred tax
asset (liability):
Deferred compensation $2,600,000 $2,400,000
Property and equipment (1,434,000) (1,441,000)
Intangible assets (566,000) (84,000)
Net noncurrent deferred
tax asset $ 600,000 $ 875,000
10. ACQUISITIONS AND DISPOSITIONS.
In September 1996, the Company acquired a recreational vehicle dealership
for $1.9 million cash, which approximated the fair value of the acquired
assets. The acquisition, which has been accounted for as a purchase, was
immaterial to the Company's consolidated financial statements.
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 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 1.08
33
Coachmen Industries, Inc. And Subsidiaries
Notes To Consolidated Financial Statements, Continued
for the years ended December 31, 1996, 1995 and 1994
10. ACQUISITIONS AND DISPOSITIONS, Concluded.
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 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.
11: 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, 1996 aggregated
$3,383,000 and are payable as follows: 1997 - $1,167,700; 1998 -
$1,043,500; 1999 - $735,300; 2000 - $309,000; 2001 - $82,500 and
thereafter - $45,000.
Total rental expense for the years ended December 31, 1996, 1995 and 1994
aggregated $1,754,272, $1,222,156 and $1,396,183, respectively.
34
Coachmen Industries, Inc. And Subsidiaries
Notes To Consolidated Financial Statements, Continued
for the years ended December 31, 1996, 1995 and 1994
11. COMMITMENTS AND CONTINGENCIES, Concluded.
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, 1996 and 1995, chassis
inventory, accounted for as consigned inventory, approximated $11.0
million and $18.0 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 $171 million at December 31, 1996 ($129 million at
December 31, 1995), 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.
35
Coachmen Industries, Inc. And Subsidiaries
Notes To Consolidated Financial Statements, Continued
for the years ended December 31, 1996, 1995 and 1994
12. 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 $2.5 million which was included in other
nonoperating income ($.4 million in 1996 and $2.1 million in 1995).
Other receivables at December 31, 1995 include $2.4 million of estimated
insurance recoveries.
13: UNAUDITED INTERIM FINANCIAL INFORMATION.
Certain selected unaudited quarterly financial information for the years
ended December 31, 1996 and 1995 is as follows:
1996
Quarter Ended
March 31 June 30 September 30 December 31
Net sales $148,640,023 $166,715,051 $154,244,238 $136,874,816
Gross profit 19,151,520 24,961,977 24,156,880 20,237,624
Income before cumulative
effect of accounting
change 3,956,973 8,685,723 8,332,563 6,361,571
Net income 6,250,956 8,685,723 8,332,563 6,361,571
Income before cumulative
effect of accounting
change per common
share .26 .58 .55 .40
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
Net income 3,203,464 4,212,086 4,683,426 5,450,424
Net income per
common share .22 .28 .31 .37
The fourth quarter of 1996 was favorably impacted by reversals of federal
and state income tax accruals of $250,000 and $550,000, respectively,
resulting from favorable settlements of tax examinations.
The fourth quarter of 1995 includes a $2.1 million pre-tax gain on
insurance settlements (see Note 12).
The common share equivalents described in Note 7 did not enter into the
computations of net income per common share for any of the quarters during
1996 and 1995 because their inclusion was immaterial.
36
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not Applicable
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 24, 1997 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 24, 1997 and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Not Applicable
37
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 17
Consolidated Balance Sheets as of
December 31, 1996 and 1995 18-19
Consolidated Statements of Income and Retained Earnings
for the years ended December 31, 1996, 1995 and 1994 20
Consolidated Statements of Cash Flows for the years
ended December 31, 1996, 1995 and 1994 21-22
Notes to Consolidated Financial Statements for the years
ended December 31, 1996, 1995 and 1994 23-36
(a) (2) Financial Statement Schedules
Report of Independent Accountants on Financial
Statement Schedule 39
Schedule II - Valuation and Qualifying Accounts 40
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.
38
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 17 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.
South Bend, Indiana
January 31, 1997
39
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, 1996 $ 844,000 $ 158,000 $ (83,000) (A) $919,000 (B)
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)
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, 1996 $ - - - -
For the year ended
December 31, 1995 - - - -
For the year ended
December 31, 1994 58,325 - 58,325 (C) -
(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.
40
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 27, 1997 G. L. Groom
-----------------------------
G. L. Groom
(Chief Financial Officer)
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 as of March 27, 1997.
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) (Chief Financial Officer)
R. J. Harring 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 W. M. Angelo
- ------------------------------- ------------------------------
C. C. Skinner W. M. Angelo
(Director) (Chief Accounting Officer)
41
INDEX TO EXHIBITS
Number Assigned
In Regulation
S-K, Item 601 Description of Exhibit
(9) No exhibit
(10) No exhibit
(11) No exhibit - See Consolidated Statements of
Income and Retained Earnings (on page 20
herein) and Note 7 of Notes to Consolidated
Financial Statements (on page 27 herein).
(13) No exhibit
(16) No exhibit
(18) No exhibit
(21) Registrant and Subsidiaries of the Registrant
(22) No exhibit
(23) Consent of Independent Accountants
(24) No exhibit
(27) Financial Data Schedule (EDGAR filing only)
(28) No exhibit