Coachmen Industries Reports Final Results for 2000
ELKHART, Ind., Feb. 9 Coachmen Industries, Inc.
, a leading full line manufacturer of recreational vehicles and the
nation's largest modular home builder, announced that net sales for the year
ended December 31, 2000 were $710.0 million compared to 1999's record net
sales of $847.0 million. Net income for the year was $2.2 million compared to
$29.5 million last year. For the year, diluted earnings per share were $0.14
compared to $1.80 for the same period last year.
For the fourth quarter ended December 31, 2000, net sales were $144.1
million, compared with last year's fourth quarter net sales of $206.7 million.
The Company incurred a net loss of $7.8 million or $0.50 per share compared to
net income of $3.7 million or $0.24 per share for the same period last year.
During the fourth quarter the Company recorded non-recurring pretax special
charges for plant consolidation, closing and liquidation of four retail
locations and write-downs of certain real estate held for sale. The aggregate
effect of the special charges was a reduction of pretax earnings of
approximately $2.7 million, which reduced earnings per share by approximately
$0.11. Further, the Company increased accruals for excess inventory
quantities, warranty liabilities and estimated losses under repurchase
agreements during the fourth quarter. In addition, the net pretax loss for
2000 attributable to liquidated and disposed of businesses, excluding the
special charges, was approximately $3.9 million, which further reduced
earnings by approximately $0.15 per share for the year ended December 31,
2000.
The Company also announced that the due diligence phase of its of
KanBuild, Inc. acquisition is complete and the transaction should be completed
this month. KanBuild is an established modular home producer with year 2000
revenues of $30 million and pretax earnings of $1.8 million. KanBuild, with
plants in Kansas and Colorado, will become part of the Company's modular
housing and building segment and represents a strategic westward expansion of
its distribution.
Coachmen Industries' Chairman, Chief Executive Officer and President
Claire C. Skinner said, "This has been a challenging year made even more so by
the economic and business environment for recreational vehicles. Although
these results are clearly not acceptable, continued implementation of our
strategic plan has enabled the Company to remain profitable for the year and
better positioned the Company for improved performance in the competitive
environments in which we operate."
Recreational Vehicle Segment
Operating results for the fourth quarter and the year were significantly
impacted by the Company's recreational vehicle segment that continued to
struggle with market conditions affecting the recreational vehicle (RV)
industry as a whole. Increases in interest rates, high fuel prices, dealer
inventory adjustments and reduced consumer confidence began to negatively
impact RV industry shipments in mid-2000, and continued to do so through the
fourth quarter.
Recreational vehicle segment sales for the fourth quarter were $94.8
million, compared to $165.4 million for the same period in 1999. For the
year, RV segment sales were $538.4 million, compared to $691.1 million in
1999. The soft market conditions that led to the Company's decline in sales
also significantly impacted earnings as a result of sales incentives and
discounting driven by competitive pressures, and costs associated with reduced
production and excess capacity.
In response to market conditions and strategic plan initiatives, the
Company has taken the following actions, some of which adversely impacted
earnings in the short-term:
* During the fourth quarter, Coachmen RV Company consolidated production
from its Grants Pass, Oregon towable plant into its two Indiana
facilities and also consolidated production of its class A motorhomes
into one facility in Middlebury, Indiana. The special charge associated
with the closing of the Oregon plant and consolidation of facilities was
approximately $0.7 million.
* The Company completed its previously announced plans to close and
liquidate four of its six remaining RV retailing facilities.
Historically, these now closed dealerships have been a drain on both
profits and the balance sheet. Due to market conditions, the cost of
these closings was higher than anticipated, resulting in a special
charge of $1.3 million.
* The Company wrote down the carrying value of certain real estate held
for sale or not currently used in production and such special charge was
approximately $0.7 million.
* Earlier in the year, Shasta Industries was consolidated into Coachmen RV
and the recreational vehicle group was reorganized to leverage
operational and marketing efficiencies. Also in the fourth quarter,
Georgie Boy Manufacturing completed a consolidation of its Indiana
diesel motorhome production into its Michigan complex.
* When evaluating the downturn in its businesses, market conditions for
its products and current and future anticipated economic factors along
with consolidation of its various operations, the Company increased
accruals for warranty claims, reserves for inventory valuation, and
accruals for estimated losses under agreements to repurchase units under
dealer floorplan financing.
"All of these actions are appropriate in the current economic environment.
At the same time, we are well positioned to respond quickly as the market
improves. We are focused on building quality products to meet our customer
needs and allow our recreational vehicle subsidiaries and brands to build
market share while meeting our corporate objectives," noted Ms. Skinner.
In spite of challenging market conditions, the Company has been
aggressively pursuing product development activities. At the National Trade
Show held in Louisville, Kentucky during November 2000, over 50 percent of the
products showcased by Coachmen RV Company were either brand new or
dramatically changed from the previous year. Coachmen RV also introduced two
new towable product lines. The Cascade(TM), targeted to entry-level buyers and
the Ultra-Lite(TM), positioned to capture the lightweight market. The Company
also introduced two innovative new class A motorhome lines: the Aurora(TM), a
mid-range gas-powered product and the Cross Country(TM), an affordable diesel-
powered motorhome positioned to appeal to the important and growing segment of
diesel buyers. As a result of the strong acceptance of these new product
offerings, dealer orders were measurably higher than a year ago.
The Company is also encouraged by recent decisions by the Federal Reserve
Board to lower interest rates and is hopeful these actions will help reduce
the cost of borrowing for dealers and consumers and will help reverse the
recent declines in consumer confidence that will, in turn, lead to improved RV
sales.
In further support of its dealers and distribution system, during the
fourth quarter, the Company introduced a wholesale financing program with
Transamerica Distribution Finance exclusively for dealers of Coachmen
Industries RV products. This new program offers Coachmen's qualifying dealers
a competitive finance package including preferred wholesale finance rates on
new products, preferred trade-in finance programs, a competitive rental
finance program, expanded dealer services and marketing programs along with
the dedicated credit facilities.
Modular Housing and Building Segment
Despite a slight decrease in revenues related to interest rate pressures,
this segment continued its profitable performance. Modular segment sales for
the quarter ended December 31, 2000 were $33.5 million, excluding the impact
of acquisitions. For the year, sales were $151.0 million, excluding
acquisitions. Including acquisitions, modular segment sales for the quarter
ended December 31, 2000 were $49.3 million and sales for the year were $171.6
million. This compares to 1999 fourth quarter and year-end of $41.3
million and $155.9 million, respectively. Favorable sales and profit
opportunities in the modular housing and building segment underscore the
Company's strategic plan to continue growing this core business.
Product development activities at the Company's All American Homes group
include innovative new home designs introduced during All American's November
2000 builder meetings. The Willow Ridge series includes ranch, Cape Cod and
two-story homes designed for the first time homebuyer desiring a quality home
at an affordable price. The Cambridge series offers quality and luxury in a
mid-market 3,000 sq. ft., two-story home with a first floor master suite and
vaulted ceilings. These new offerings expand the Company's reach to include
almost every conventional market segment.
While modular homes currently comprise under five percent of the new
single family home starts nationwide, as the advantages of modular
construction become more widely recognized, the potential exists for growth
rates that exceed those of site-built homes. Since all homes are built to
order, there is no unsold inventory accumulation at builder locations.
New products from Miller Building Systems, Inc. include solid concrete
portable classroom structures that will enable school systems nationwide to
add flexible space as student numbers increase and classroom-to-teacher ratios
decline.
Coachmen's strategy to balance the recreational vehicle and modular
segments with organic growth and immediately accretive acquisitions was
significantly advanced in 2000 with the acquisition of Mod-U-Kraf Homes, Inc.
in the second quarter. Mod-U-Kraf, which is located in Rocky Mount, Virginia,
is a manufacturer of modular homes, modular multi-family housing and other
special modular structures. Then, in the fourth quarter, the Company
completed its acquisition of Miller Building Systems, Inc., which is
headquartered in Elkhart, Indiana and has manufacturing locations in Indiana,
New York, Pennsylvania, South Dakota and Vermont. Miller Building Systems
designs and manufactures factory-built modular structures for use as
commercial modular buildings and telecommunications shelters.
These acquisitions, plus the imminent acquisition of KanBuild, Inc.,
represented annual net sales of approximately $123 million during their most
recent fiscal years prior to acquisition.
Financial Strength and Shareholder Value
The Company continues to maintain a strong balance sheet with a working
capital ratio of 3.0 to 1.0, shareholders' equity of $214 million compared to
total liabilities of $83 million and a net book value of $13.63 per share.
During the 2000 business year, the Company's strategic plan called for a
review of its compensation and benefits to ensure a closer alignment with
shareholder interests.
* Working with external professional compensation advisors, a new annual
performance-based bonus plan for senior managers has been implemented
for 2001. Under the new plan, management's compensation will be directly
connected to achieving targeted revenue, return on assets, earnings per
share and EBITDA. This change is intended to specifically reward
performance that will increase shareholder value.
* To increase employee investment in the Company through stock ownership,
the Company expanded its employee stock purchase program and established
stock ownership guidelines for senior executives. Also, matching
contributions to the 401-K plan were increased, adding Company stock to
the contribution.
* Through asset rationalization, including the selling of non-core assets,
improved utilization of manufacturing facilities, and capital
investments in its core businesses, the Company has been able to realign
and reduce its employment base before acquisitions, by nearly 1,000.
"These actions demonstrate our Board of Directors' and management's
commitment to our strategic plan, one that will position Coachmen for improved
performance in the future. We continue a rigorous review of all assets to
determine their value in achieving current and long-term earnings growth.
All of these efforts will help provide a solid framework for improved
profitability as market conditions improve," said Chairman Skinner.
Outlook
Coachmen plans to continue its strategic transition to a company with more
balanced revenues derived from each of its two core businesses: recreational
vehicles and modular housing and building. In furtherance of this strategy,
the Company successfully completed more acquisitions in 2000 than during any
year in its 36-year history. More importantly, these acquisitions were
immediately accretive to earnings.
The Company has made significant progress on its strategic plan and it has
taken proactive steps anticipating changing market conditions that should
improve profitability. These include a careful rationalization of capital
expenditures, a continued focus on operational excellence and customer
experience and the close management of operating expenses.
"Coachmen has an excellent balance sheet and is well-positioned for
improvements in both financial performance and long-term growth," stated James
E. Jack, Executive Vice President and Chief Financial Officer. "All of the
steps outlined here demonstrate that the Company has taken and will continue
to take the necessary measures consistent with its strategic plan to increase
its returns on investment and increase shareholder value."
The Company sees long term growth in both its recreational vehicle and
modular housing and building segment. The Company anticipates that the
fundamental economic and demographic factors that have driven these industries
will continue to do so well into the future.
"Every day, 12,000 'baby boomers' turn 50, the median age of our primary
RV buyer. Recreational vehicles offer families a cost efficient, independent,
flexible way to travel that addresses many of the needs and desires of this
generation," says Ms. Skinner.
"Furthermore, our internal data indicates that the appeal of RVs is not
limited to 'baby boomers,' as many young families are now becoming
enthusiasts. Unlike many of our competitors, Coachmen is positioned to meet
the broad range of RV consumer preferences because it produces every
traditional recreational vehicle type at multiple price points. Our modular
housing and building segment is also positioned for growth offering a variety
of factory built modular housing and other specialized modular structures."
Looking to 2001, the Company anticipates improvement in the recreational
vehicle market later in the year. The Company sees sustainable growth in the
modular housing and building segment. Based on economic and market
conditions, the Company currently anticipates that the first quarter may show
financial improvement over the fourth quarter of 2000 although it may not
return to profitability. However, as the Company begins to realize the
financial benefits and returns from the actions taken during 2000, and as
market conditions recover, a much-improved performance in 2001 is anticipated.
Chairman Skinner concludes, "In light of the challenging conditions in the
RV market and anticipated continuing softness during the first half of 2001,
Coachmen has taken numerous proactive steps to reduce expenses, improve
efficiencies and gain market share. And, we have actively increased our
penetration of the modular housing and building market. While we must
continue to be responsive to changing market conditions, we are clearly
focused on our stakeholders and increasing shareholder value."
COACHMEN INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in thousands except per share data)
THREE MONTHS YEAR
ENDED DECEMBER 31, ENDED DECEMBER 31,
2000 1999 2000 1999
Net sales $144,147 $206,686 $709,975 $847,024
Cost of sales 134,831 185,231 631,344 739,034
Gross profit 9,316 21,455 78,631 107,990
Selling, delivery and general and
admin. expenses 20,643 17,433 76,115 67,347
Operating income (loss) (11,327) 4,022 2,516 40,643
Nonoperating income (expense), net (617) 1,811 371 4,398
Income (loss) before income
taxes (11,944) 5,833 2,887 45,041
Income taxes (4,105) 2,087 723 15,539
Net income (loss) $(7,839) $3,746 $2,164 $29,502
Earnings (loss) per common share:
Basic $(.50) $.24 $.14 $1 .80
Diluted $(.50) $.24 $.14 $1 .80
Number of common shares used in
the computation of earnings per
share:
Basic 15,635 15,702 15,584 16,370
Diluted 15,717 15,740 15,639 16,421
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands)
DECEMBER 31,
2000 1999
ASSETS
Cash and cash equivalents $2,708 $4,269
Marketable securities 18,643 32,550
Receivables 45,379 47,038
Inventories 97,315 100,008
Prepaid expenses and other 2,221 2,214
Deferred income taxes 8,696 4,743
Current assets 174,962 190,822
Property and equipment, net 84,163 74,678
Intangibles 15,026 4,426
Other assets 22,350 15,840
Total assets $296,501 $285,766
LIABILITIES
Current maturities of long-term debt $865 $1,543
Accounts payable 24,015 25,041
Accrued income taxes 830 1,096
Other current liabilities 31,988 28,039
Current liabilities 57,698 55,719
Long-term debt 11,795 8,346
Other liabilities 13,016 8,055
Total liabilities 82,509 72,120
SHAREHOLDERS' EQUITY
Common shares 39,620 38,307
Additional paid-in capital 4,606 4,623
Retained earnings 169,766 170,716
Total shareholder s' equity 213,992 213,646
Total liabilities and
shareholders' equity $296,501 $285,766
