Coachmen Industries, Inc. Reports Third Quarter Earnings
26 October 2000
Coachmen Industries, Inc. Reports Third Quarter Earnings; Progress on Strategic Plan; $155 Million Bank Credit Facility
ELKHART, Ind., Oct. 26 Coachmen Industries, Inc.
today announced that sales for the third quarter ended
September 30, 2000 were $182.7 million compared with last year's third quarter
sales of $226.1 million. Net income for the quarter was $2.3 million compared
with $9.5 million reported last year. For the quarter, diluted earnings per
share were $0.15 compared to $0.58 in the same period in 1999.
Sales for the first nine months were $565.8 million compared with sales in
the first nine months of 1999 of $640.3 million. Net income for the first nine
months was $10.0 million compared to $25.8 million recorded for the same
period in 1999. Diluted earnings per share for the first nine months were
$0.64 compared to $1.55 for the same period in 1999.
The Recreational Vehicle (RV) Group:
The softening in the RV market that began earlier in the year intensified
during the third quarter and has impacted all product categories except travel
trailers, where unit sales were up by 5.0%. Year-to-date revenues from
motorized products were down 14.8% as compared to the results from the same
period in 1999 and year-to-date revenues for all towable products combined
were 4.7% below revenues for the same period last year. The Company believes
these market conditions reflect consumer concerns about rising interest rates
and fuel prices and dealer concerns regarding inventory levels and financing.
These factors, together with aggressive discounting within the industry, were
reflected in both sales and earnings. It is anticipated that these conditions
will continue at least through the remainder of the year.
In response to these market conditions and as part of Coachmen's strategic
plan, during the third quarter, the administrative and support functions of
Coachmen Recreational Vehicle Company and Shasta Industries were combined. As
a result, one of Shasta's plants is no longer in operation and will be sold.
While largely transparent to Coachmen's dealers and customers, the
consolidation will enable the Company to eliminate redundant costs. This
reorganization is expected to bring about increased efficiencies and has
already contributed to a reduction in staffing.
A related change is that the sales, marketing and service support
functions of Coachmen Recreational Vehicle Company's camping trailers have
been transferred to Coachmen's Viking RV Company that specializes exclusively
in camping trailers. This will permit more focused marketing in this
important entry-level product type.
Most recently, the Company announced the consolidation of Georgie Boy
Manufacturing's (GBM) diesel motorhome production into GBM's Edwardsburg,
Michigan production complex. This will allow the company to reduce overhead
and maximize efficiencies during current market conditions.
The Modular Group:
To improve efficiencies and achieve cost reductions, the Company made
investments in its Decatur, Indiana All American Homes manufacturing facility.
This will allow the Company to consolidate a second, less efficient facility
in Decatur into the newly improved plant.
Because of the enhanced growth and profit opportunities in the modular
industry, the Company intends to achieve more balance between the Company's RV
and Modular businesses. In furtherance of these plans, two acquisitions have
been made this year:
Mod-U-Kraf, Inc.
In June 2000, the Company completed the purchase of Mod-U-Kraf, a modular
and commercial building company in Rocky Mount, Virginia with projected annual
sales of $22 million. The Company is pleased with the progress of the
integration of this acquisition.
Miller Building Systems, Inc.
In August 2000, Coachmen entered into an agreement to acquire Miller
Building Systems Inc. As of the date of this release, the necessary number of
shares to complete the transaction have been tendered and management expects
the transaction to close within 30 days. Based in Elkhart, Indiana, with
projected annual sales of $75 million, Miller markets, designs, fabricates and
distributes commercial modular buildings including offices, banks, school
buildings, and telecommunications structures. As a leader in building modular
structures for the telecommunications industry, Miller customers include
Nextel, AT&T, Motorola and Bell Atlantic. Miller operates five manufacturing
locations nationwide. Miller meets Coachmen's acquisition criteria including
financial returns, management and growth potential. With the addition of
Miller, Coachmen becomes a full line modular company with important interests
in the housing, commercial and telecommunications industries.
Asset Rationalization and Utilization:
The Company continues its efforts to improve asset utilization.
Lux Company
During the third quarter, the Company exited the furniture business with
its sale of the Lux Company and related real estate. The gain on sale,
principally on the sale of real property, increased earnings per share by
$0.05 in the third quarter. The sale was part of the Company's continuing
program of asset rationalization to allow it to focus on its two core
businesses.
RV Dealerships
As previously announced, with the exception of two stores that will be
retained for research and development and regional service purposes, the
Company is exiting the RV retailing business. During the quarter, one
dealership was liquidated, and three of the remaining five stores will be
liquidated by the end of the year. The Company anticipates additional
operational losses from these dealerships through the date of liquidation.
Current market conditions in the RV industry could result in additional losses
if the dealerships' inventories have to be significantly discounted in order
to liquidate them. The decision to close these dealerships will improve the
Company's asset utilization and should have a positive impact on earnings in
2001.
Corporate Results:
During the quarter, gross profit was impacted by inefficiencies
attributable to reduced production volumes. Sales and administrative expenses
during the quarter increased by 20% due to several factors. The Company
responded to discounting in the RV marketplace with incentives and marketing
programs designed to stimulate retail sales. There was also increased
depreciation related to investments the Company made in plants, equipment,
technology and future growth, as well as related professional fees.
Financial Strength:
In September 2000, the Company completed a $155 million bank credit
facility with Banc One as the lead arranger and administrative agent. This
credit facility, coupled with the Company's strong balance sheet, provides the
flexibility to allow the implementation of the Company's strategic plan of
actively pursuing internal and external growth opportunities. "The Company's
financial condition is strong and with its bank credit facility, we will
remain focused on our plan to enhance shareholder value," said James E. Jack,
Executive Vice President and Chief Financial Officer.
Management:
The previously announced retirement plans of President Keith D. Corson
became effective during the quarter with Chairman and Chief Executive Officer
Claire C. Skinner assuming his responsibilities. At the same time, the senior
management team has been expanded with the formation of the Executive
Management Committee that replaces the previous Finance Committee. New
members include William M. Angelo, Controller and Chief Accounting Officer,
Steven E. Kerr, President of All American Homes, Inc., and Michael R. Terlep,
President of Coachmen RV Company.
To better align the interests of management with shareholders, the Company
also intends to implement a new compensation plan designed to more closely
align management compensation with the financial performance of the Company.
Outlook:
"While we have made significant progress in executing our overall
strategic plan, the softness in the RV market has, in effect, masked many of
the improvements. As it now appears that these market conditions may
continue, our focus in the fourth quarter is on reducing expenses in
conjunction with anticipated reduced revenues. These many actions, together
with the introduction of exciting new products, should allow us to realize
improvements as market conditions become more favorable," said Claire C.
Skinner, Chairman, CEO and President.
COACHMEN INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in thousands except per share data)
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
2000 1999 2000 1999
Net sales $182,690 $226,114 $565,828 $640,338
Cost of sales 161,267 195,024 496,513 553,667
Gross profit 21,423 31,090 69,315 86,671
Selling, delivery and
general and admin.
expenses 19,506 16,205 55,472 50,050
Operating income 1,917 14,885 13,843 36,621
Nonoperating income
(expense), net 1,359 (164) 988 2,587
Income before income taxes 3,276 14,721 14,831 39,208
Income taxes 1,003 5,196 4,828 13,452
Net income $2,273 $9,525 $10,003 $25,756
Earnings per common share:
Basic $.15 $.58 $.64 $1.55
Diluted $.15 $.58 $.64 $1.55
Number of common shares used
in the computation of
earnings per share:
Basic 15,574 16,496 15,566 16,595
Diluted 15,577 16,548 15,573 16,655
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands)
SEPTEMBER 30,
2000 1999
ASSETS
Cash and cash equivalents $26,084 $8,020
Marketable securities 21,458 32,424
Receivables 39,364 56,243
Inventories 98,301 108,791
Prepaid expenses and other 2,138 1,852
Deferred income taxes 4,743 4,205
Current assets 192,088 211,535
Property and equipment, net 78,406 74,186
Intangibles 4,331 4,458
Other assets 19,814 16,331
Total assets $294,639 $306,510
LIABILITIES
Current maturities of long-term debt $550 $1,825
Accounts payable 28,224 40,727
Accrued income taxes 721 3,082
Other current liabilities 25,058 28,686
Current liabilities 54,553 74,320
Long-term debt 9,100 8,766
Other liabilities 9,112 6,592
Total liabilities 72,765 89,678
SHAREHOLDERS' EQUITY
Common shares 38,838 45,118
Additional paid-in capital 4,656 3,960
Retained earnings 178,380 167,754
Total shareholders' equity 221,874 216,832
Total liabilities and shareholders' equity $294,639 $306,510
SEGMENT INFORMATION (UNAUDITED)
(in thousands)
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
2000 1999 2000 1999
Net sales
Vehicles $137,888 $182,885 $443,571 $525,736
Housing 44,802 43,229 122,257 114,602
Consolidated total $182,690 $226,114 $565,828 $640,338
Pretax income (loss)
Vehicles $(651) $9,285 $8,312 $25,365
Housing 3,873 4,228 9,900 11,710
Other reconciling items 54 1,208 (3,381) 2,133
Consolidated total $3,276 $14,721 $14,831 $39,208
AT
SEPTEMEMBER 30,
2000 1999
Total assets
Vehicles $144,453 $186,641
Housing 57,389 41,244
Other reconciling items 92,797 78,625
Consolidated total $294,639 $306,510
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
SEPTEMBER 30,
2000 1999
Cash flows from operating activities $25,263 $18,612
Net cash provided by (used in)
investing activities 370 (18,870)
Net cash used in financing activities (3,818) (14,731)
Increase (decrease) in cash and
cash equivalents 21,815 (14,989)
Cash and cash equivalents:
Beginning of period 4,269 23,009
End of period $26,084 $8,020