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1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
(MARK ONE)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002
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
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification number)
2831 Dexter Drive, Elkhart, Indiana 46514
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 574-262-0123
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No _
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date:
At July 31, 2002:
Common Shares, without par value 16,134,359 shares outstanding including an
equivalent number of common share purchase rights.
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COACHMEN INDUSTRIES, INC. AND SUBSIDIARIES
FORM 10-Q
INDEX
PAGE NO.
PART I. FINANCIAL INFORMATION
Financial Statements:
Consolidated Balance Sheets-
June 30, 2002 and December 31, 2001 3-4
Consolidated Statements of Operations-
Three and Six Months Ended June 30, 2002 and 2001 5
Consolidated Statements of Cash Flows-
Six Months Ended June 30, 2002 and 2001 6
Notes to Consolidated Financial Statements 7-10
Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-15
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 6. Exhibits and Reports on Form 8-K 16-17
Signatures 18
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COACHMEN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, December 31,
2002 2001
---- ----
(Unaudited)
ASSETS
Current assets:
Cash and temporary cash investments $ 52,699 $ 28,416
Marketable securities 11,181 12,180
Trade receivables, less allowance for
doubtful receivables 2002 - $1,004
and 2001 - $972 33,953 23,756
Other receivables 1,958 2,162
Refundable income taxes 558 2,241
Inventories 77,155 80,477
Prepaid expenses and other 5,377 4,656
Deferred income taxes 7,115 7,319
-------- --------
Total current assets 189,996 161,207
-------- --------
Property, plant and equipment, at cost 141,166 141,040
Less, Accumulated depreciation 63,680 60,807
-------- --------
Property, plant and equipment, net 77,486 80,233
-------- --------
Goodwill, net of accumulated amortization
2002 and 2001 - $2,096 18,954 18,954
Cash value of life insurance 13,926 13,454
Real estate held for sale 5,259 11,129
Other 5,218 3,583
-------- --------
Total assets $310,839 $288,560
======== ========
See Notes to Consolidated Financial Statements.
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COACHMEN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, December 31,
2002 2001
---- ----
(Unaudited)
LIABILITIES
Current liabilities:
Accounts payable, trade $ 33,153 $ 18,944
Accrued income taxes 2,194 494
Accrued expenses and other liabilities 41,213 38,846
Current maturities of long-term debt 914 917
-------- --------
Total current liabilities 77,474 59,201
Long-term debt 10,777 11,001
Deferred income taxes 2,158 1,257
Other 8,636 8,461
-------- --------
Total Liabilities 99,045 79,920
-------- --------
SHAREHOLDERS' EQUITY
Common shares, without par value: authorized
60,000 shares; issued 2002 - 21,054
shares and 2001 - 21,046 shares 91,176 91,072
Additional paid-in capital 5,884 5,755
Accumulated other comprehensive loss (524) (931)
Retained earnings 164,011 162,646
Treasury shares, at cost: 2002 - 4,924
shares and 2001 - 5,110 shares (48,753) (49,902)
-------- --------
Total shareholders' equity 211,794 208,640
-------- --------
Total liabilities and shareholders' equity $310,839 $288,560
======== ========
See Notes to Consolidated Financial Statements.
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COACHMEN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
2002 2001 2002 2001
---- ---- ---- ----
Net sales $172,705 $162,359 $327,162 $315,283
Cost of sales 144,283 134,300 278,760 271,102
-------- -------- -------- --------
Gross profit 28,422 28,059 48,402 44,181
-------- -------- -------- --------
Operating expenses:
Delivery 8,200 8,500 15,418 16,343
Selling 7,186 7,210 13,701 14,101
General and administrative 8,121 8,870 15,779 17,685
-------- -------- -------- --------
Total operating expenses 23,507 24,580 44,898 48,129
-------- -------- -------- --------
Operating income (loss) 4,915 3,479 3,504 (3,948)
-------- -------- -------- --------
Nonoperating (income) expense:
Interest expense 421 977 961 1,551
Investment (income) loss 190 41 (42) (111)
Gain on sale of
properties, net (684) (67) (1,349) (62)
Other (income) expense, net (419) 281 (577) 219
-------- -------- -------- --------
Total nonoperating (income)
expense, net (492) 1,232 (1,007) 1,597
-------- -------- -------- --------
Income (loss) before
income taxes 5,407 2,247 4,511 (5,545)
Income taxes (benefit) 1,844 823 1,538 (2,029)
-------- -------- -------- --------
Net income (loss) $ 3,563 $ 1,424 $ 2,973 $ (3,516)
======== ======== ======== ========
Earnings (loss) per common share:
Basic $ .22 $ .09 $ .19 $ (.22)
Diluted $ .22 $ .09 $ .18 $ (.22)
Number of common shares used in the computation of earnings (loss) per common
share:
Basic 16,112 15,778 16,065 15,733
------ ------ ------ ------
Diluted 16,228 15,855 16,188 15,773
------ ------ ------ ------
Cash dividends per common share $ .05 $ .05 $ .10 $ .10
See Notes to Consolidated Financial Statements.
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COACHMEN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Six Months
Ended June 30,
2002 2001
---- ----
Cash flows from operating activities:
Net income (loss) $ 2,973 $ (3,516)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 4,947 5,584
Amortization and write-off of intangibles - 557
Provision for doubtful receivables 85 110
Provision for write-down of property to
net realizable value - 400
Gain on sale of properties, net (1,349) (62)
Increase in cash surrender value of
life insurance policies (701) (400)
Net realized and unrealized losses on
marketable securities and derivatives 641 1,339
Deferred income taxes 1,105 (1,494)
Other 573 57
Changes in certain assets and liabilities, net
of effects of acquisitions and dispositions:
Receivables (10,078) 10,254
Inventories 3,322 15,328
Prepaid expenses and other (721) (944)
Accounts payable, trade 14,209 (4,378)
Income taxes - accrued and refundable 2,367 2,817
Accrued expenses and other liabilities 3,383 1,916
-------- --------
Net cash provided by
operating activities 20,756 27,568
-------- --------
Cash flows from investing activities:
Proceeds from sales of marketable securities 20,399 30,251
Proceeds from sale of properties 5,894 105
Proceeds from payments received on notes receivable - 3,244
Investments in marketable securities (19,634) (27,993)
Purchases of property and equipment (2,300) (3,093)
Acquisition of businesses, net of cash acquired - (7,273)
Other 226 490
-------- --------
Net cash provided by (used in)
investing activities 4,585 (4,269)
-------- --------
Cash flows from financing activities:
Proceeds from long-term debt - 13,500
Payments of long-term debt (227) (13,261)
Issuance of common shares under stock
incentive plans 684 525
Tax benefit from stock options exercised 110 -
Purchases of common shares for treasury (17) -
Cash dividends paid (1,608) (1,579)
-------- --------
Net cash provided by (used in)
financing activities (1,058) (815)
-------- --------
Increase in cash and temporary
cash investments 24,283 22,484
Cash and temporary cash investments
Beginning of period 28,416 2,614
-------- --------
End of period $ 52,699 $ 25,098
======== ========
See Notes to Consolidated Financial Statements.
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COACHMEN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands)
1. BASIS OF PRESENTATION
The consolidated balance sheet data as of December 31, 2001 was derived
from audited financial statements, but does not include all disclosures
required by accounting principles generally accepted in the United States.
In the opinion of management, the information furnished herein includes
all adjustments of a normal and recurring nature necessary to reflect a
fair statement of the interim periods reported. The results of operations
for the three and six month periods ended June 30, 2002 are not
necessarily indicative of the results to be expected for the full year.
2. SEGMENT INFORMATION
The Company has determined that its reportable segments are those that are
based on the Company's method of internal reporting, which disaggregates
its business by product category. The Company's two reportable segments
are recreational vehicles, including related parts and supplies, and
modular housing and building. The Company evaluates the performance of its
segments and allocates resources to them based on pretax income.
Differences between reported segment amounts and corresponding
consolidated totals represent corporate expenses for administrative
functions; and costs, income or expenses relating to property and
equipment that are not allocated to segments.
The table below presents information about segments used by the chief
operating decision maker of the Company for the three and six month
periods ended June 30, 2002 and 2001:
Three Months Six Months
Ended June 30, Ended June 30,
2002 2001 2002 2001
---- ---- ---- ----
Net sales:
Recreational vehicles $111,382 $ 93,914 $220,903 $200,178
Modular housing and building 61,323 68,445 106,259 115,105
-------- -------- -------- --------
Consolidated total $172,705 $162,359 $327,162 $315,283
======== ======== ======== ========
Pretax income (loss):
Recreational vehicles $ 1,110 $ (1,998) $ 537 $ (7,509)
Modular housing and building 3,970 5,723 3,458 6,198
Other reconciling items 327 (1,478) 516 (4,234)
-------- -------- -------- --------
Consolidated total $ 5,407 $ 2,247 $ 4,511 $ (5,545)
======== ======== ======== ========
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2. SEGMENT INFORMATION, Continued.
As of As of
June 30, December 31,
2002 2001
---- ----
Total assets:
Recreational vehicles $ 93,207 $ 88,629
Modular housing and building 99,441 97,578
Other reconciling items 118,191 102,353
-------- --------
Consolidated total $310,839 $288,560
======== ========
3. INVENTORIES
Inventories consist of the following:
June 30, December 31,
2002 2001
---- ----
Raw materials $ 27,160 $ 24,224
Work in process 11,437 7,866
Finished goods 38,558 48,387
-------- --------
Total $ 77,155 $ 80,477
======== ========
4. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities at year-end consist of the
following:
June 30, December 31,
2002 2001
---- ----
Wages, salaries and commissions $ 3,538 $ 3,860
Dealer incentives 2,786 4,443
Warranty 9,197 8,391
Insurance-products and general liability,
workers compensation, group health and
other 7,740 7,148
Customer deposits and unearned revenues 8,359 7,318
Other current liabilities 9,593 7,686
------- -------
Total $41,213 $38,846
======= =======
5. EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income by the
weighted average number of shares of common stock outstanding during the
period. Diluted earnings per share is computed by dividing net income by
the weighted average number of shares of common stock outstanding plus
the dilutive effect of stock options and stock awards. The dilutive
effect of stock options and awards did not enter into the computation of
diluted earnings per share for the six months ended June 30, 2001,
because their inclusion would have been antidilutive.
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6. OTHER COMPREHENSIVE INCOME (LOSS)
Other comprehensive income (loss) represents unrealized depreciation of
available-for-sale securities, net of taxes. Other comprehensive income
(loss) for the quarter and six months ended June 30, 2002 was $353 and
$407, respectively and $(190) and $(1,206) for the quarter and six months
ended June 30, 2001, respectively. Total comprehensive income (loss)
combines reported net income (loss) and other comprehensive income (loss).
Total comprehensive income (loss) for the quarter and six months ended
June 30, 2002 was $3,916 and $3,380, respectively and $1,234 and $(4,722)
for the quarter and six months ended June 30, 2001, respectively.
7. ACQUISITION OF A BUSINESS
On February 12, 2001, the Company acquired all of the issued and
outstanding shares of capital stock of Kan Build, Inc. ("Kan Build"), a
manufacturer of modular buildings. The purchase price aggregated $21.6
million and consisted of $8.9 million cash paid at closing and the
assumption of $12.7 million of liabilities. The excess of purchase price
over fair value of assets acquired ("goodwill"), approximated $4.1
million. The acquisition was accounted for as a purchase and the operating
results of Kan Build are included in the Company's consolidated financial
statements from the date of acquisition.
Unaudited pro forma financial information as if this acquisition had
occurred at the beginning of each period is as follows:
Six Months
Ended June 30,
2002 2001
---- ----
Net sales $327,162 $318,806
Net income (loss) 2,973 (3,494)
Earnings (loss) per share:
Basic $ .19 $ (.22)
Diluted .18 (.22)
8. COMMITMENTS AND CONTINGENCIES
The Company was contingently liable at June 30, 2002 to banks and other
financial institutions on repurchase agreements in connection with
financing provided by such institutions to most of the Company's
independent dealers in connection with their purchase of the Company's
recreational vehicle products. These agreements provide for the Company to
repurchase its products from the financing institution in the event that
they have repossessed them upon a dealer's default. The risk of loss
resulting from these agreements is spread over the Company's numerous
dealers and is further reduced by the resale value of the products
repurchased. Historically, the Company has experienced losses under these
agreements and accordingly, is recording an accrual for estimated losses
under repurchase agreements.
The Company is involved in various legal proceedings, which are ordinary
disputes incidental to the industry and which are covered in whole or in
part by insurance. Management believes that the ultimate outcome of these
matters and any liabilities in excess of insurance coverage and self-
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8. COMMITMENTS AND CONTINGENCIES, Continued.
insurance accruals will not have a material adverse impact on the
Company's consolidated financial position or on its future business
operations.
9. NEW ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 141, "Business
Combinations", which eliminates the pooling of interests method of
accounting for business acquisitions and Statement No. 142, "Goodwill and
Other Intangible Assets", which revised the standards for accounting for
goodwill and other intangible assets. SFAS No. 142 requires that goodwill
and indefinite lived identifiable intangible assets no longer be
amortized, but be tested for impairment at least annually based on their
estimated fair market values. The provisions of SFAS No. 142 became
effective on January 1, 2002 and require full implementation of the
impairment measurement provisions by December 31, 2002. Effective January
1, 2002, the Company is not recording goodwill amortization expense. Based
on the estimated fair values of the Company's reporting units using a
discounted cash flows valuation, it does not appear that any goodwill for
any unit is impaired. Application of the nonamortizaton provisions of
Statement No. 142 would have resulted in an increase in 2001 second
quarter net earnings of $218 ($.01 per diluted share) and an increase in
2001 year-to-date earnings of $353 ($.02 per diluted share).
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets", which addresses financial
accounting and reporting for the impairment or disposal of long-lived
assets and supersedes SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of", and the
accounting and reporting provisions of APB Opinion No. 30, "Reporting the
Results of Operations" for a disposal of a segment of a business. The
Company was required to adopt Statement No. 144 as of January 1, 2002 and
it did not have a significant impact on operations or financial position
of the Company.
The Company is actively marketing certain real property, which is no
longer being used in the operations of the business. The Company expects
that disposition of such property will be completed within the next year
given current market conditions and the location and condition of the
properties. Under the provisions of SFAS No. 144, such property is being
classified as real estate held for sale in the accompanying consolidated
balance sheets at the lower of cost or estimated net selling price. The
property is no longer being depreciated pending their sale. However, under
the transition rules contained in SFAS No. 144, should these assets no
longer qualify as assets held for sale at December 31, 2002 under the
definition contained in the statement, such assets would be reclassified
as assets held and used at that date and re-measured to the lower of its
original carrying amount adjusted for depreciation had the asset been in
continuous use or fair value.
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COACHMEN INDUSTRIES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis
Of Financial Condition and Results of Operations
(in thousands, except per share amounts)
The following is management's discussion and analysis of certain significant
factors which have affected the Company's financial condition, results of
operations and cash flows during the periods included in the accompanying
condensed consolidated financial statements.
A summary of the changes in the principal items included in the condensed
consolidated statements of income is shown below.
Comparison of
Three Months Six Months
Ended June 30, 2002 and 2001
Increases (Decreases)
---------------------
Amount Percentage Amount Percentage
------ ---------- ------ ----------
Net sales $ 10,346 6.4 % $ 11,879 3.8 %
Cost of sales 9,983 7.4 7,658 2.8
Delivery expense (300) (3.5) (925) (5.7)
Selling expenses (24) (.3) (400) (2.8)
General and
administrative expenses (749) (8.4) (1,906) (10.8)
Interest expense (556) (56.9) (590) (38.0)
Investment (income) loss 149 363.4 (69) (62.2)
Gain on sale of
properties, net 617 920.9 1,287 2075.8
Other income, net 700 n/m 796 n/m
Income before income taxes 3,160 140.6 10,056 181.4
Income taxes 1,021 124.1 3,567 175.8
Net income 2,139 150.2 6,489 184.6
n/m - not meaningful
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NET SALES
Consolidated net sales for the quarter ended June 30, 2002 were $172.7 million,
an increase of 6.4% from the $162.4 million reported for the corresponding
quarter last year. Net sales for the six months were $327.2 million,
representing an increase of 3.8% from the $315.3 million reported for the same
period in 2001. The Company's recreational vehicle segment experienced a net
sales increase of 18.6% for the quarter and an increase of 10.4% for the six
months. Both the motorized and towable products had increases in the number of
units and sales dollars from the 2001 periods reflecting a continuing recovery
from the softness that occurred in the recreational vehicle industry during the
three and six month comparable periods. The Company's modular housing and
building segment experienced a net sales decrease for the 2002 quarter of 10.4%
and 7.7% for the six months. This decrease was principally attributable to
decreased demand for commercial structures in the telecommunications industry.
However, incoming orders for housing and non-telecom structures started
strengthening during the second quarter, giving some reasonable optimism about
the prospects for this segment during the second half of the year.
COST OF SALES
Cost of sales increased 7.4% or $10.0 million for the three months and 2.8% or
$7.7 million for the six months ended June 30, 2002. The increase in cost of
sales of 7.4% was slightly greater than the 6.4% increase in net sales. For the
six month period, the increase in cost of sales of 2.8% was less than the 3.8%
increase in net sales. Cost of sales for the most recent quarter was affected by
a higher sales contribution from the recreational vehicle segment, which
accounted for 64.5% of total net sales in 2002 as compared to 57.8% in the
comparable period for 2001. The recreational vehicle segment typically operates
on smaller profit margins than the modular housing and building segment.
However, for the six month period, overall cost of sales was 85.2% of net sales
in 2002 as compared to 86.0% in 2001. This improvement was directly related to
cost cutting efforts initiated during 2001, which included manufacturing
consolidations to address excess overhead in the recreational vehicle segment.
OPERATING EXPENSES
As a percentage of net sales, operating expenses, which include delivery,
selling, general and administrative expenses, were 13.6% and 13.7% for the 2002
quarter and six months compared to 15.1% and 15.3% for the quarter and six
months of 2001. As a percentage of net sales, delivery expenses decreased by .5
percentage points for both the three and six month periods as compared to the
prior year three and six month periods. Selling expenses, at 4.2% of net sales
for both the quarter and six months ended June 30, 2002, were .2 and .3
percentage points less than the comparable periods of the previous year. Dollars
spent were down in both categories, as well, when compared to the previous
periods. The decrease in selling expenses was primarily related to reductions in
sales programs that were necessary in the 2001 periods due to the challenging
sales environment caused by a downturn in the economy. General and
administrative expenses were 4.7% of net sales for the second quarter compared
to 5.5% for the 2001 corresponding quarter and 4.8% of net sales for the six
month period compared to 5.6% for 2001. These decreases in both the quarter and
six month periods were primarily the result of the discontinuation of goodwill
amortization in 2002 resulting from the adoption of SFAS No. 142 as previously
discussed.
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INTEREST EXPENSE
Interest expense was $421 and $961 for the three and six month periods in 2002
compared to $977 and $1,551 in the same periods last year. Interest expense
varies with the amount of long-term debt and the increase in cash surrender
value 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 partially offset by the
increases in cash surrender values. The decrease in interest expense reflects a
reduction in debt and lower rates on variable rate loans. During the first
quarter of 2001, the Company borrowed $13.5 million from its bank line of credit
to finance the acquisition of Kan Build, Inc. Those borrowings were subsequently
paid in full by the third quarter of 2001.
INVESTMENT INCOME (LOSS)
There was an investment loss of $190 for the quarter ended June 30, 2002
compared to an investment loss of $41 for the second quarter of 2001. For the
six month period, investment income in 2002 was $42 compared to investment
income of $111 the previous year. The investment losses are principally
attributable to realized losses incurred from the sale of preferred stocks held
by the Company.
GAIN ON THE SALE OF PROPERTIES, NET
There was a net gain on the sale of properties for the second quarter of 2002 of
$684 compared with a gain of $67 in the same quarter of 2001. The net gain on
the sale of properties for the first six months of 2002 and 2001 was $1,349 and
$62, respectively. During the quarter ended June 30, 2002, the Company sold an
idle manufacturing facility located in Elkhart, Indiana and undeveloped land
located in Perris, California. The Company continues to actively market those
properties included in the balance sheet as real estate held for sale.
OTHER INCOME, NET
Other income, net, represents income of $419 for the second quarter of 2002 and
an expense of $281 for the same period of the previous year. For the six month
period, other income, net for 2002 was $577 compared to an expense of $219 in
2001. The most significant item of income for the 2002 quarter was a gain of
$208 on the redemption of a life insurance policy. In the 2001 quarter, there
was a $400 charge to write-down the carrying value of property held for sale to
estimated fair value less cost to sell.
INCOME TAXES
For the second quarter and six months ended June 30, 2002, the effective tax
rate was 34.1% compared with a 2001 second quarter and year-to-date rate of
36.6%. The Company's effective tax rate fluctuates based upon the states where
sales occur, with the level of export sales and also with the amount of
nontaxable dividend income on investments.
LIQUIDITY AND CAPITAL RESOURCES
The Company generally relies on funds from operations as its primary source of
liquidity. In addition, the Company maintains a $30 million secured bank line of
credit to meet its seasonal working capital needs. The loan agreement contains
covenants whereby the Company must maintain certain financial ratios. At June
30, 2002, there were no borrowings against this bank line of credit.
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At June 30, 2001, there was $8.5 million remaining of $13.5 million borrowed
under credit facilities to finance the cash purchase price of Kan Build, Inc.
For the six months ended June 30, 2002, the major source of cash was from
operating activities. Net cash provided by operating activities aggregated
$20,756 and $27,568 for the six months ended June 30, 2002 and 2001,
respectively. The significant items in operating activities for the six months
ended June 30, 2002 were net income, depreciation, a decrease in inventories and
increases in trade accounts payable and accrued expenses. The positive cash flow
from these items was partially offset by an increase in trade receivables. The
cash provided by investing activities was primarily related to proceeds from the
sale of properties. The cash used in financing activities consisted principally
of cash dividends paid and the repayment of long-term debt offset by the
issuance of common shares under stock incentive plans.
At June 30, 2002, working capital increased to $112.5 million from the $102.0
million at December 31, 2001. The $28.8 million increase in current assets at
June 30, 2002 versus December 31, 2001 was primarily due to increases in cash
and marketable securities of $23.3 million and an increase in net trade
receivables of $10.2 million during the six month period. This was partially
offset by decreases in inventories and refundable income taxes. The increase in
current liabilities of $18.3 million was primarily due to increases in accounts
payable, customer deposits and accrued expenses.
FORWARD-LOOKING STATEMENTS
This Form 10-Q contains certain statements that are "forward-looking" statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934, as amended. These forward-looking
statements involve risks and uncertainties, and are dependent on factors, which
may include, but are not limited to, the availability and price of gasoline,
which can impact the sale of recreational vehicles; availability of chassis,
which are used in the production of many of the Company's recreational vehicle
products; interest rates, which affect the affordability of the Company's
products; the condition of the telecommunications industry which purchases
modular structures; changing government regulations, such as those covering
accounting standards, environmental matters or product warranties and recalls,
which may affect costs of operations, revenues, product acceptance and
profitability; legislation governing the relationships of the Company with its
recreational vehicle dealers, which may affect the Company's options and
liabilities in the event of a general economic downturn; the impact of economic
uncertainty on high-cost discretionary product purchases, which can hinder the
sales of recreational vehicles; the demand for commercial structures in the
various industries that the modular housing and building segment serves; and
also on the state of the recreational vehicle and modular housing industries in
the United States. Other factors affecting forward-looking statements include
the cyclical and seasonal nature of the Company's businesses, adverse weather,
changes in property taxes and energy costs, changes in federal income tax laws
and federal mortgage financing programs, changes in public policy, competition
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
modular housing and building industries and other key performance indicators.
Readers of this Report are cautioned that reliance on any forward-looking
statements involves risks and uncertainties. Although the Company believes that
the assumptions on which the forward-looking statements contained herein are
reasonable, any of those assumptions could prove to be inaccurate given the
inherent uncertainties as to the occurrence or nonoccurrence of future events.
There can be no assurance that the forward-looking statements
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contained in this Report will prove to be accurate. The inclusion of a
forward-looking statement herein should not be regarded as a representation by
the Company that the Company's objectives will be achieved. For further
discussion of the elements involved in this report, see the notes and other
materials included with the Company's latest Annual Report on Form 10-K.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In the normal course of business, operations of the Company are exposed to
fluctuations in interest rates. These fluctuations can vary the costs of
financing and investing yields. Because the Company has not utilized its
short-term credit facilities during 2002, changes in interest rates would
primarily impact the Company's long-term debt. At June 30, 2002, the Company had
$11.7 million of long-term debt, including current maturities. Long-term debt
consists mainly of industrial development revenue bonds that have variable or
floating rates. At June 30, 2002, the Company had $11.2 million invested in
marketable securities. The Company's marketable securities consist of public
utility preferred stocks which typically pay quarterly fixed rate dividends.
These financial instruments are subject to market risk in that available energy
supplies and changes in available interest rates would impact the market value
of the preferred stocks. The Company utilizes U.S. Treasury bond futures options
as a protection against the impact of increases in interest rates on the fair
value of the Company's investments in these fixed rate preferred stocks.
Outstanding options are marked to market with market value changes recognized in
current earnings. The U.S. Treasury bond futures options generally have terms
ranging from 90 to 180 days. Based on the Company's overall interest rate
exposure at June 30, 2002, including variable or floating rate debt and
derivatives used to hedge the fair value of fixed rate preferred stocks, a
hypothetical 10 percent change in interest rates applied to the fair value of
the financial instruments as of June 30, 2002, would have no material impact on
earnings, cash flows or fair values of interest rate risk sensitive instruments
over a one-year period.
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PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The annual meeting of the shareholders of Coachmen Industries,
Inc. was held on May 2, 2002.
(b) The following nominees were elected Directors for the following terms:
One-year term expiring in 2003:
Claire C. Skinner
Donald W. Hudler
Philip G. Lux
Two-year term expiring in 2004:
Keith D. Corson
Robert J. Deputy
Edwin W. Miller
Three-year term expiring in 2005:
Thomas H. Corson
Geoffrey B. Bloom
William P. Johnson
Fredrick M. Miller*
(c) The tabulation of votes for each Director nominee was as
follows:
For Withheld
---- --------
Election of Directors:
Claire C. Skinner 15,305,769 137,977
Donald W. Hudler 15,307,136 136,610
Philip G. Lux 15,305,197 138,549
Keith D. Corson 15,304,823 138,923
Robert J. Deputy 15,307,784 135,962
Edwin W. Miller 15,271,787 171,959
Thomas H. Corson 15,305,023 138,723
Geoffrey B. Bloom 15,306,842 136,904
William P. Johnson 15,307,143 136,603
Fredrick M. Miller* 13,004,771 2,438,975
*Deceased July 30, 2002
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
See Index to Exhibits
(b) Reports on Form 8-K during the quarter ended September 30,
2001
Form 8-K, dated May 2, 2002, reporting an Item 5 event (a
press release announcing expected continued improvement
in the first quarter).
Form 8-K, dated May 2, 2002, reporting an Item 5 event (a
press release announcing first quarter results).
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Form 8-K, dated May 6, 2002, reporting an Item 5 event(a
press release announcing the declaration of the 79th
consecutive quarterly dividend).
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COACHMEN INDUSTRIES, INC.
(Registrant)
Date: August 14, 2002 By: /S/ CLAIRE C. SKINNER
------------------------------------------
Claire C. Skinner, Chairman of the
Board and Chief Executive Officer
Date: August 14, 2002 By: /S/ JOSEPH P. TOMCZAK
------------------------------------------
Joseph P. Tomczak, Executive Vice
President and Chief Financial Officer
Date: August 14, 2002 By: /S/ GARY L. NEAR
------------------------------------------
Gary L. Near, Vice President
and Controller
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INDEX TO EXHIBITS
Number Assigned
In Regulation
S-K, Item 601 Description of Exhibit
10 Amendment No. 2 to Amended and Restated Credit Agreement dated
as of June 28, 2002 (filed herewith).
99.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350
99.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350
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