Coachmen Industries, Inc. Announces 2007 Fourth Quarter and Full Year Results
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ELKHART, Ind. January 28, 2008; Coachmen Industries, Inc. announced its financial results for the fourth quarter and full year ended December 31, 2007.
“As we experience some of the worst housing market conditions in the last 25 years, 2007 will be marked as one of the most challenging years for our company,” commented Richard M. Lavers, President and Chief Executive Officer. “The problems with sub-prime lending which began last summer as an isolated phenomenon, have expanded and are now affecting the entire housing market and even the broader economy. Nationwide, total single-family housing starts were down 28.6% in 2007 and it appears the long-awaited rebound may not emerge in 2008. Fortunately, we have taken decisive steps to mitigate the weakness in the traditional housing market by pursuing major project opportunities, with a focus on military construction. In the RV market, total industry wholesale unit shipments through November fell by 9.9%, marking the worst performance for the industry since 2003. In addition, the Conference Board’s Consumer Confidence Index fell to 88.6 in December, down from 110.2 at the beginning of the year, which confirms that consumers are becoming increasingly apprehensive about the economy.”
“Coachmen’s results for the fourth quarter were directly impacted by the bleak conditions prevailing in our core markets. Even so, our results reveal the strength of our efforts throughout 2007 to reduce our operating costs and create the foundation to return our Company to profitability. In the first half of the year, we generated revenues of $280 million resulting in a pre-tax loss of $21.6 million, while in the second half we reduced our pre-tax loss to just under $19.0 million in spite of revenues falling to $200.8 million. That this $2.6 million improvement in pre-tax results occurred in the face of a 28% decrease in revenues is a testament to the impact of our efforts to reduce costs, improve quality and increase efficiency, setting the stage for significantly improved financial results in the future when our markets rebound,” concluded Lavers.
Sales for the fourth quarter were $77.0 million, vs. $115.8 million reported for the same period last year. Gross profits decreased to a loss of $2.5 million, or (3.2)% of revenues from a loss of $0.2 million, or (0.2)% of revenues in the fourth quarter of 2006. Selling, general and administrative expenses decreased $1.3 million from last year, due primarily to reduced selling expenses resulting from lower sales commissions on the lower revenue levels. The total gain on the sale of assets for the quarter was $0.4 million compared with a gain of $2.3 million in the fourth quarter of 2006. Combined, these items drove a $3.0 million increase in pre-tax loss from continuing operations to $14.6 million from $11.6 million in the fourth quarter of 2006. At the bottom line, the Company reported a net loss from continuing operations of $13.8 million, or $0.87 per share, versus a net loss from continuing operations of $31.4 million, or $2.01 per share in the fourth quarter of 2006. The difference in net loss from continuing operations was due primarily to the write down of deferred tax assets in the fourth quarter of 2006.
For the full year, revenues decreased 14.8% to $480.8 million from $564.4 million in 2006. Net loss from continuing operations for the year was $38.8 million, or $2.46 per share compared with $33.2 million or $2.12 per share last year. Results for 2007 include an impairment charge relating to goodwill at the RV Group of approximately $3.9 million and $1.0 million in gains on the sale of assets, while comparable results for 2006 include gains on the sale of assets of $8.7 million and legal recoveries of $3.6 million which combined to reduce the 2006 loss by approximately $12.3 million.
Recreational Vehicle Group
“During the fourth quarter, we faced significant challenges in the RV Group as overall retail demand remained tepid, resulting in a very weak wholesale market as many dealers became reluctant to take on new inventory,” said Michael R. Terlep, President of the Coachmen RV Group. “Although the bottom line does not yet show the results we want and need, we have accomplished meaningful gains in margin improvement, increased capacity utilization as a result of consolidation activities and overhead reductions from the cost cutting that we diligently managed throughout 2007. Despite the sales weakness we experienced in December, based on the favorable response to our new models introduced at the Louisville show and our current backlogs and sales activity, we are optimistic that our sales will rebound in the first quarter from their fourth quarter levels.”
The Company’s Recreational Vehicle Group reported sales of $54.5 million during the fourth quarter of 2007, down 34.5% from the $83.3 million reported for the same period last year. Despite the significant decrease in revenues, gross margins for the RV Group improved 5.7% to a loss of $2.7 million from a loss of $2.9 million last year. The improvement in gross profit was the result of margin improvements, increased capacity utilization as the result of consolidation activities and overhead reductions from the continuing cost-cutting activities the Group has pursued throughout 2007. The RV Group generated a pre-tax loss from continuing operations for the quarter of $9.4 million compared with a pre-tax loss of $10.4 million for the year-ago quarter, representing an 9.6% improvement. For the full year, the RV Group reported revenues of $361.7 million, down 10.6% from the $404.7 million reported in 2006. The Group’s pre-tax loss for the year increased to $33.9 million from $25.4 million, however results for 2007 included a goodwill impairment charge of $3.9 million, while last year’s results included the benefit of a legal recovery amounting to $3.6 million.
Housing Group
“The continued nationwide slump in the housing market, the expanding influence of sub-prime lending problems on the availability of mortgage financing and a general hesitancy on the part of consumers to make major purchase decisions all adversely affected the Housing Group’s performance in the fourth quarter,” commented Housing Group President Rick Bedell. “As we’ve mentioned previously, we are focused on diversifying our revenue base in an effort to mitigate our dependence on these troubled housing markets. We have been successful in our pursuit of major project business, particularly with military housing, starting with the barracks projects for Ft. Bliss in 2006 and 2007 and now with the project at Ft. Carson which we began shipping in 2008. Although we had anticipated that shipments of units for this latest project would begin late in the fourth quarter, they were delayed into the first quarter which contributed to the depressed sales for the Housing Group in the fourth quarter. To continue our expansion beyond our traditional single-family housing markets, we continue to look for new and innovative ways to stimulate demand, which was recently illustrated with our agreement to produce the mkSolaire™ home for the Smart Home: Green + Wired exhibit for Chicago’s Museum of Science and Industry. We believe this effort will allow us to expand our offerings of environmentally conscious options to our core home designs while developing the growing market for ‘green’ housing. We expect to pursue additional strategies in 2008 and beyond to differentiate our products within a housing market currently characterized by swollen inventories and increasing price competition,” concluded Bedell.
For the quarter, the Housing Group reported sales of $22.5 million, down 30.9% from $32.5 million in the fourth quarter of 2006 due entirely to the continued weakness in the single-family housing market. This decrease in sales is comparable to the 28.6% industry decline in single-family housing starts in 2007. With the lower sales level, gross profit margin decreased to $0.2 million, or 1.0% of sales from $2.6 million, or 8.0% of sales in the fourth quarter of 2006. The lower gross margin resulted from reduced operating efficiencies associated with lower capacity utilization rates. Operating expenses increased to $5.3 million from $2.9 million last year due in large part to a gain on the sale of assets of $2.3 million which reduced overall operating expenses in 2006. On the dramatically reduced revenues, for the fourth quarter the Housing Group generated a pre-tax loss of $5.2 million, compared with a pre-tax loss of $0.2 million for the year-ago quarter. For the full year, the Housing Group reported revenues of $119.2 million, down 25.4% from the $159.7 million reported in 2006. The Group’s pre-tax loss for the year was $7.4 million compared with a pre-tax profit of $2.7 million last year. Results for 2006 included gains on the sale of assets of $2.5 million, while results for the current year included gains of less than $0.1 million.
Coachmen Industries will conduct a conference call to discuss its financial results in this release at 10:00 a.m. (Eastern Time), Tuesday, January 29, 2008. Members of the news media, investors and the general public are invited to access a live broadcast of the conference call over the internet at www.earnings.com. The online replay will be available at approximately 12:00 p.m. (Eastern Time) and continue for 30 days.
Coachmen Industries, Inc. is one of America’s leading manufacturers of recreational vehicles, systems-built homes and commercial buildings, with prominent subsidiaries in each industry. The Company’s well-known RV brand names include COACHMEN®, GEORGIE BOY™, SPORTSCOACH® and VIKING®. Through ALL AMERICAN HOMES® and MOD-U-KRAF®, Coachmen is one of the nation’s largest producers of systems-built homes, and also a major builder of commercial structures with its ALL AMERICAN BUILDING SYSTEMS™ products. Coachmen Industries, Inc. is a publicly held company with stock listed on the New York Stock Exchange (NYSE) under the ticker COA.
Coachmen Industries, Inc. Consolidated Statements of Operations (In Thousands, Except Per Share Data) (Unaudited) Three Months Ended Twelve Months Ended December 31, December 31, 2007 2006 2007 2006 Net sales $ 76,979 $ 115,792 $ 480,840 $ 564,382 Gross profit - $ (2,462 ) (248 ) 12,717 20,216 Gross profit - % (3.2 )% (0.2 )% 2.7 % 3.6 % GS&A - $ 11,928 13,208 49,022 44,558 GS&A - % 15.5 % 11.4 % 10.2 % 7.9 % Goodwill impairment - $ - - 3,872 - Goodwill impairment - % 0.0 % 0.0 % 0.8 % 0.0 % Gain on sale of property - $ (427 ) (2,349 ) (1,037 ) (8,689 ) Gain on sale of property - % (0.6 )% (2.0 )% (0.2 )% (1.5 )% Operating loss - $ (13,963 ) (11,107 ) (39,140 ) (15,653 ) Operating loss - % (18.1 )% (9.6 )% (8.1 )% (2.8 )% Other expense 670 494 1,403 1,047 Pre-tax loss from continuing operations - $ (14,633 ) (11,601 ) (40,543 ) (16,700 ) Pre-tax loss from continuing operations- % (19.0 )% (10.0 )% (8.4 )% (3.0 )% Tax expense/(credit) (796 ) 19,765 (1,791 ) 16,515 Net loss from continuing operations (13,837 ) (31,366 ) (38,752 ) (33,215 ) Loss from discontinued operations (net of taxes) - (137 ) - (795 ) Gain on sale of discontinued operations (net of taxes) - - - 2,205 Net loss (13,837 ) (31,503 ) (38,752 ) (31,805 ) Earnings/(loss) per share - basic and diluted Continuing operations (0.87 ) (2.01 ) (2.46 ) (2.12 ) Discontinued operations 0.00 (0.01 ) 0.00 0.09 Net loss per share (0.87 ) (2.02 ) (2.46 ) (2.03 ) Weighted average shares outstanding Basic 15,784 15,660 15,769 15,633 Diluted 15,784 15,660 15,769 15,633 Coachmen Industries, Inc. Condensed Consolidated Balance Sheets (In Thousands) (Unaudited) December 31, December 31, ASSETS 2007 2006 Current Assets Cash and cash equivalents $ 1,549 $ 2,651 Accounts receivable 9,122 25,874 Inventories 79,268 83,511 Refundable income taxes 1,628 10,820 Prepaid expenses and other 7,623 6,289 Assets held for sale - 288 Total Current Assets 99,190 129,433 Property, plant & equipment, net 52,932 57,018 Goodwill 12,993 16,865 Cash value of life insurance, net of loans 33,936 31,119 Note receivable 6,158 6,269 Other 2,459 2,430 Total Assets $ 207,668 $ 243,134 December 31, December 31, LIABILITIES AND SHAREHOLDERS' EQUITY 2007 2006 Current Liabilities ST borrowings & current portion of LT debt $ 20,925 $ 10,361 Accounts payable, trade 15,042 16,998 Floor plan notes payable 4,116 4,156 Accrued income taxes 536 18 Other accruals 33,235 35,116 Total Current Liabilities 73,854 66,649 Long-term debt 3,010 3,862 Postretirement deferred comp benefits 7,632 7,768 Deferred income taxes 1,990 4,524 Other 49 - Total Liabilities 86,535 82,803 Shareholders' Equity 121,133 160,331 Total Liabilities and Shareholders' Equity $ 207,668 $ 243,134 Coachmen Industries, Inc. Condensed Consolidated Statements of Cash Flows (In Thousands) (Unaudited) Twelve Months Ended December 31, 2007 2006 Net loss $ (38,752 ) $ (31,805 ) Depreciation 5,790 6,533 Deferred income tax provision (benefit) (2,534 ) 20,224 Goodwill impairment charge 3,872 - Changes in current assets and liabilities 23,729 15 Net Cash Used in Operations (7,895 ) (5,033 ) Net Cash Provided by/(Used in) Investing Activities (2,090 ) 20,391 Net borrowings (repayments) 9,672 (13,394 ) Net issuance of stock 155 725 Dividends paid (944 ) (2,818 ) Net Cash Provided by/(Used in) Financing Activities 8,883 (15,487 ) Decrease in Cash and Cash Equivalents (1,102 ) (129 ) Beginning of period cash and cash equivalents 2,651 2,780 End of Period Cash and Cash Equivalents $ 1,549 $ 2,651 Coachmen Industries, Inc. Quarterly Segment Data (In Thousands) (Unaudited) Three Months Ended Twelve Months Ended December 31, December 31, 2007 2006 2007 2006 Sales Recreational Vehicle $ 54,497 $ 83,256 $ 361,654 $ 404,710 Housing 22,482 32,536 119,186 159,672 Total $ 76,979 $ 115,792 $ 480,840 $ 564,382 Gross Profit Recreational Vehicle $ (2,696 ) $ (2,858 ) $ (130 ) $ 283 Housing 234 2,610 12,847 19,933 Total $ (2,462 ) $ (248 ) $ 12,717 $ 20,216 Gross Profit Percentage Recreational Vehicle (4.9 )% (3.4 )% 0.0 % 0.1 % Housing 1.0 % 8.0 % 10.8 % 12.5 % Total (3.2 )% (0.2 )% 2.7 % 3.6 % Operating Expenses Recreational Vehicle $ 6,760 $ 7,569 $ 33,772 $ 25,659 Housing 5,257 2,905 20,200 17,284 Other (516 ) 385 (2,115 ) (7,074 ) Total $ 11,501 $ 10,859 $ 51,857 $ 35,869 Operating Expense Percentage Recreational Vehicle 12.4 % 9.1 % 9.3 % 6.3 % Housing 23.4 % 8.9 % 16.9 % 10.8 % Total 14.9 % 9.4 % 10.8 % 6.4 % Operating Income/(Loss) Recreational Vehicle $ (9,456 ) $ (10,427 ) $ (33,902 ) $ (25,376 ) Housing (5,023 ) (294 ) (7,353 ) 2,649 Other 516 (386 ) 2,115 7,074 Total $ (13,963 ) $ (11,107 ) $ (39,140 ) $ (15,653 ) Pre-Tax Income/(Loss) from Continuing Operations Recreational Vehicle $ (9,437 ) $ (10,356 ) $ (33,908 ) $ (25,383 ) Housing (5,163 ) (178 ) (7,434 ) 2,665 Other (33 ) (1,067 ) 799 6,018 Total $ (14,633 ) $ (11,601 ) $ (40,543 ) $ (16,700 )