Coachmen Industries, Inc. Reports First Quarter Results
* Low consumer confidence levels/weather negatively impact both business segments
-- first quarter loss of $2.8 million versus loss of $0.6 million in previous year period.
* RV retail market share increases.
ELKHART, Ind., April 28 -- Coachmen Industries, Inc. today announced its financial results for the first quarter ended March 31, 2003.
Coachmen reported a loss of $2.8 million, or $0.18 per share for the quarter, compared with a loss of $0.6 million or $0.04 per share in the year- earlier period. Sales for the first quarter were $146.4 million versus $152.8 million in the same period of 2002. Due to the seasonal nature of the business, the Company anticipated a relatively weak first quarter. However, the results were adversely impacted by negative consumer sentiment regarding the economy and the military action in Iraq, which resulted in slower RV and housing sales. Inclement weather during the quarter also had a significant impact on the Company's housing operations due to lost production days and the inability of builders to accept delivery of finished homes.
Gross profit declined 0.4 percentage points from the first quarter of 2002 caused by the decline in year-over-year sales, lower production rates in the Modular Housing and Building segment, and the consequent unabsorbed labor and overhead. GS&A expenses as a percent of sales increased 1.7 percentage points while the Company's operating loss increased 2.1 percentage points as a percent of sales.
Claire C. Skinner, Chairman, Chief Executive Officer and President, remarked, "The challenges in the marketplace increased during the first quarter as a result of both the economy and military action in Iraq. The resulting consumer confidence levels were near historic lows, which affected demand in both our business segments. While we managed through those factors, we were unable to circumvent the impact of poor weather conditions in the geographic areas where we operate our housing units. In our housing subsidiaries, we estimate that weather alone caused just short of $7 million of sales to be held up in finished goods inventory during the quarter, with a corresponding disappointment in profits. Accordingly, while these first quarter results fall short of our expectations, a significant part of the shortfall should be realized during the upcoming months."
Three Months Ended
March 31,
2003 2002
Sales
Recreational Vehicle $107,396 $108,333
Modular Housing/Building 38,991 44,513
Total $146,387 $152,846
Pre-Tax Income/(Loss)
Recreational Vehicle $(1,521) $(573)
Modular Housing/Building (2,038) (512)
Other (738) 189
Total $(4,297) (896)
Recreational Vehicle Segment
During a period when the recreational vehicle industry as a whole was plagued with plummeting consumer confidence and concerns over the Gulf conflict, the Company's RV Group reported sales essentially level with one year ago. On sales of $107.4 million, the segment's pre-tax loss of $1.5 million was $0.9 million higher than the first quarter of 2002. This variance was primarily due to higher delivery costs than in prior periods, plus increased resources to support motorized sales and product development, and heightened marketing and promotional activity.
The Company is pleased to report that it posted gains in retail market share during the first quarter. According to the February 2003 data published by Statistical Surveys, Inc., Industry retail unit sales were down 1.1%, while Coachmen's RV sales were up 2.0%. Coachmen Industries increased its retail market share in Class A motorhomes by 4.6%, Class C mini-motorhomes by 3.7% and Travel Trailers by 8.5%. Importantly, the Coachmen RV brand re-claimed the #1 position of Travel Trailers alone, and Travel Trailer/Fifth Wheels combined. In the month of February, Coachmen RV's Class C market share rose to 16.0%, which compares to 14.7% for 2003 year-to-date, and 12.3% for the same year to date period last year.
Despite the economic challenges felt throughout the industry, Coachmen's production rate actually increased over the first quarter of last year, based on the strength of dealer orders. Backlogs remained comparable to last year for both motorized and travel trailer/fifth wheel product types.
Based on its ability to outperform the market at the retail and wholesale levels, the successful enrollment of new dealers, and the continuing healthy level of backlogs, the previously announced capacity-expansion plans were implemented during the first quarter. Coachmen's new state-of-the-art Class C motorhome plant at its Middlebury, Ind. complex is expected to be operational by early August and its newly acquired additional facility in Fitzgerald, Ga. will be operational by June. The increased manufacturing capacity will help Coachmen meet demand for its popular Travel Trailer, Fifth Wheel and Class C Motorhome product lines.
Modular Housing and Building Segment
The Company's Modular Housing and Building segment's first quarter sales of $39.0 million were down 12.4% from the first quarter of 2002. On these reduced sales, the segment had a pre-tax loss of $2.0 million compared to a loss of $0.5 million during the same period one year ago. The troubled Miller Building Systems unit, still recovering from the telecommunication industry woes, accounted for $1.2 million of the segment's combined loss.
Though weather issues typically cause the first quarter to be one of the most difficult for the housing group, weather conditions were unusually severe this year. Bad weather had a major impact on total new single-family home sales and commercial construction, especially in the Midwest and Mid-Atlantic regions where the company operates, affecting both production and shipments. While most all of the segment's homes are pre-sold, the company's builder affiliates must be able to prepare the site and foundations before the homes can be delivered. Snow, sleet, and heavy rain can all delay this crucial site work, which in turn prevents the ability to complete the sales process.
Production for the combined residential and commercial units was down 8.8%, while shipments were down 16.1% compared to the first quarter of 2002. Delayed shipments resulted in increased finished goods inventories. Backlogs at quarter-end were up 3.7% compared to year-end levels. With improved weather and the wind-down of military activity in Iraq, early second quarter order flow has improved considerably, resulting in increased backlogs and scheduled increases to daily production levels at most housing plants.
The outlook for Miller Building Systems is also improving, where telecom orders have increased recently, creating higher backlogs than have been seen in over a year. The Company's marketing efforts in the non-cellular telecommunications market are beginning to show results, having obtained substantial orders for specialized shelters to be used as components of statewide emergency services radio networks.
The Company is continuing to pursue higher growth markets for the segment in 2003, as well as focusing on governmental applications for Miller's concrete products and new applications for their proprietary steel-framing technology.
Finally, the Company's All American Homes subsidiary has just completed negotiating terms on a modular hotel project in North Carolina, as well as a multi-unit assisted living center project in Ohio. Contracts on a number of other major building projects should be finalized within the next ninety days.
Balance Sheet/Cash Flow
As of March 31, 2003, the Company had cash and marketable securities of $11.9 million and shareholders' equity of $202.0 million. Cash flow from operations was an outflow of $9.8 million for the quarter, largely due to the build-up in inventory. Capital expenditures totaled $1.4 million for the first quarter. Coachmen repurchased 272 thousand shares totaling $4.1 million during the first quarter.
Joseph P. Tomczak, Executive Vice President and Chief Financial Officer, said, "Our focus is on increasing our production to meet the existing and anticipated second quarter demand while delivering the inventory that built up in the first quarter. Executing on those two fronts, and controlling our expenses, will allow us to achieve positive earnings and cash flow throughout the remainder of the year. With a capital structure containing just 7.3% debt, our balance sheet remains strong. The changes we made over the last several years in our RV's have improved our product mix and are resulting in increased market share. Given that fact, and as concerns over the economy and military conflict stabilize, the investments we are making to efficiently increase our RV production rates will ensure that we can meet the returning, previously demonstrated levels of demand."
Outlook
Chairman Skinner said, "During the second quarter, we expect significantly improved performance from both our Miller Building Systems and All American Homes companies, with the delivery of the homes we could not ship during the first quarter and increased production schedules supported by stronger backlogs. Further, our special projects business is gaining strength, as is the recently launched Ameri-Log home series.
"Our recreational vehicles are continuing to gain momentum with growth at both the retail and wholesale levels. We are very confident that these trends will continue, which would result in increased sales and production volumes with corresponding improvements in profitability," Skinner added.
In summary, Chairman Skinner said, "Though we clearly are not yet operating in a 'reasonably stable business climate', as the military action in Iraq draws to a favorable conclusion, we believe that consumer confidence could rebound rather quickly, which in turn should translate into healthy demand for our products during the balance of this year. If these conditions improve rapidly, we continue to believe that we could achieve our sales and earnings growth goals for 2003."
Coachmen Industries, Inc., founded in 1964, is one of the nation's leading manufacturers of recreational vehicles with well-known brand names including COACHMEN(R), GEORGIE BOY(R), SHASTA(R) and VIKING(R). Coachmen Industries is also one of the largest systems-built home producers in the nation with its ALL AMERICAN HOMES(R) subsidiary. Modular commercial structures are manufactured by the Company's Miller Building Systems subsidiary. Prodesign, LLC is a subsidiary that custom thermoforms composite and plastic parts for numerous industries under the PRODESIGN(R) brand. Coachmen Industries, Inc. is a publicly held company with stock listed on the New York Stock Exchange (NYSE) under the COA ticker symbol.
Coachmen Industries, Inc.
Consolidated Statements of Operations
(In Thousands, Except Per Share Data)
(Unaudited)
Three Months Ended
March 31,
2003 2002
Net Sales $146,387 $152,846
Gross Profit - $ 17,034 18,270
Gross Profit - % 11.6% 12.0%
GS&A - $ 21,431 19,681
GS&A - % 14.6% 12.9%
Operating Income/(Loss) - $ (4,397) (1,411)
Operating Income/(Loss) - % (3.0)% (0.9)%
Other (Income)/Expense (100) (515)
Pre-Tax Profit/(Loss) - $ (4,297) (896)
Pre-Tax Profit/(Loss) - % (2.9)% (0.6)%
Tax Expense/(Benefit) (1,477) (306)
Net Income/(Loss) (2,820) (590)
Earning/(Loss) per share -
Basic & Diluted (0.18) (0.04)
Weighted Average Shares Outstanding
Basic 15,473 16,040
Diluted 15,473 16,040
Coachmen Industries, Inc.
Condensed Consolidated Balance Sheets
(In Thousands)
(Unaudited)
ASSETS 3/31/03 12/31/02
Current Assets
Cash and temporary cash investments $4,933 $16,549
Marketable securities 6,925 7,641
Accounts receivable 35,443 29,408
Inventories 101,658 85,010
Prepaid expenses and other 8,257 8,862
Deferred income taxes 6,902 6,885
Total Current Assets 164,118 154,355
Property & equipment, net 77,968 78,889
Goodwill 18,954 18,954
Cash value of life insurance 34,711 33,155
Real estate held for sale 276 276
Other 7,706 7,566
Total Assets $303,733 $293,195
LIABILITIES AND SHAREHOLDERS' EQUITY 3/31/03 12/31/02
Current Liabilities
ST borrowings & current portion of LT debt $5,896 $902
Accounts payable, trade 32,619 18,801
Accrued income taxes 239 1,222
Other accruals 39,398 39,856
Total Current Liabilities 78,152 60,781
Long-term debt 10,090 10,097
Deferred income taxes 4,123 4,123
Other 9,391 8,768
Total liabilities 101,756 83,769
Shareholders' Equity 201,977 209,426
Total Liabilities and Shareholders' Equity $303,733 $293,195
Coachmen Industries, Inc.
Condensed Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
Three Months Ended
March 31,
2003 2002
Cash Flow from/(used in) Operations $(9,825) $11,442
Cash Flow from/(used in) Acquisition &
Investing Activities (1,846) 797
Net Borrowings 4,987 (14)
Issuance/Purchase of Stock (4,007) 380
Dividends (925) (802)
Cash Flow from/(used in) Financing Activities 55 (436)
Increase/(Decrease) in Cash and Temporary
Cash Investments (11,616) 11,803
Beginning of Period Cash and Temporary
Cash Investments 16,549 28,416
Ending Cash and Temporary Cash Investments $4,933 $40,219
