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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark one)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000.
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
(State of incorporation (IRS Employer Identification No.)
or organization)
2831 Dexter Drive, Elkhart, Indiana 46514
(Address of principal executive offices) (Zip Code)
(219) 262-0123
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, Without Par Value New York Stock Exchange
(Title of each class) (Name of each exchange on
which registered)
Securities registered pursuant to Section 12(g) of the Act: None
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. X Yes _ No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of
this Form 10-K or any amendment hereto. _
While it is difficult to determine the number of shares owned by non-
affiliates (within the meaning of such term under the applicable
regulations of the Securities and Exchange Commission), the registrant
estimates that the aggregate market value of the registrant's Common
Stock on March 20, 2001 held by non-affiliates was $133.6 million
(based upon the closing price on the New York Stock Exchange and an
estimate that 89.6% of such shares are owned by non-affiliates).
As of March 20, 2001, 15,762,026 shares of the registrant's Common Stock
were outstanding.
Page 1
Documents Incorporated by Reference
Parts of Form 10-K into which
Document the Document is Incorporated
Portions of the Proxy Statement for
the Annual Meeting of Shareholders
to be held on May 3, 2001 Part III
Page 2
Part I
Item 1. Business
Coachmen Industries, Inc. (the "Company" or the "Registrant") was incorporated
under the laws of the State of Indiana on December 31, 1964, as the successor
to a proprietorship established earlier that year. All references to the
Company include its wholly owned subsidiaries and divisions.
The Company is one of the largest full-line producers of recreational vehicles
in the United States and is a major manufacturer of modular housing/buildings.
The Company's All American Homes subsidiary is the largest manufacturer of
Modular homes in the United States. The Company's recreational vehicles are
marketed under various brand names including Coachmen, Georgie Boy, Shasta,
and Viking. Modular buildings are marketed by All American Homes, Miller
Building Systems, Mod-U-Kraf Homes, and the newly acquired KanBuild.
The Company operates in two primary business segments, recreational vehicles
and modular housing and buildings. The Recreational Vehicle ("RV") Segment
consists of the manufacture and distribution of Class A and Class C
motorhomes, travel trailers, fifth wheels, camping trailers, truck campers and
related parts and supplies. The Modular Housing and Building Segment ("Housing
and Building") consists of the manufacture and distribution of factory-built
homes, commercial buildings and telecommunication shelters.
Recreational Vehicle Segment
Products
The RV Segment consists of recreational vehicles and parts and supplies. This
group consists of five companies: Coachmen RV Company, LLC; Georgie Boy
Manufacturing, LLC; Shasta Industries, LLC; Viking Recreational Vehicles, LLC;
and Prodesign, LLC (a producer of composite and plastic parts) and two
Company-owned retail dealerships.
The pricipal brand names for the RV group are Catalina, Royal, Prospera,
Futura, Catalina Sport, Leprechaun, Santara, Mirada, Sportscoach, Sport,
Ranger, Flyte, Phoenix, Travelmaster, Cheyenne, Sprite, Pursuit, Landau,
Cruise Air, Cruise Master, Maverick, Suite, Viking and Clipper. Other brand
names that have been protected, used and are available for use in the future
include Normandy, Roadmaster, Frolic, Cross Country and Pathfinder.
Recreational vehicles are either driven or towed and serve as temporary living
quarters for camping, travel and other leisure activities. Recreational
vehicles may be categorized as motorhomes, travel trailers, camping trailers
or truck campers. A motorhome is a self-powered mobile dwelling built on a
special heavy-duty chassis. A travel trailer is a mobile dwelling designed to
be towed behind another vehicle. Camping trailers are smaller towed units
constructed with sidewalls that may be raised up and folded out. Truck
campers are designed to be mounted on the bed of a pickup truck.
The RV group currently produces recreational vehicles on an assembly line
basis in Indiana, Michigan, and Georgia. Components used in the manufacturing
of recreational vehicles are primarily purchased from outside sources.
However, in some cases (such as fiberglass products) where it is profitable
for the RV group to do so, or where it has experienced shortages of supplies,
the RV group has undertaken to manufacture its own supplies. The RV group
depends on the availability of chassis from a limited number of manufacturers.
Occasionally, chassis availability has limited the group's production (see
Note 13 of Notes to Consolidated Financial Statements for information
concerning the use of converter pool agreements to purchase vehicle chassis).
Prodesign, LLC, located in Indiana, is a custom manufacturer of diversified
thermoformed and composite products for the automotive, marine, recreational
vehicle, afterlife, medical and heavy truck industries.
Page 3
On January 4, 2000, the Company disposed of its Coachmen Automotive Division,
which produced and sold van campers, van and truck conversions. The principal
brand names sold with the Coachmen Automotive Division included Starflyte,
Dearborn, Greenbriar and Saratoga. On October 2, 2000, the Company sold the
business operations and assets of its Lux Company subsidiary which
manufactured a variety of seating products for the recreational vehicle,
office and healthcare industries. In addition, during the third and fourth
quarters of 2000, the Company completed the closing and liquidation of four of
its Company-owned dealerships pursuant to its previously announced plan to
exit this line of business with the exception of two Company-owned stores
which were retained for research and development and regional service
purposes. The Company previously sold the business operations and certain
assets of two other Company-owned dealerships during 1999. See Note 12 of
Notes to Consolidated Financial Statements for additional information
regarding disposal of business operations within the RV Segment.
Marketing
The RV group considers itself as being customer driven. Sales and service
representatives regularly visit dealers in their regions, and respond quickly
to questions and suggestions. Divisions host dealer advisory groups and
conduct informative dealer seminars and specialized training classes in areas
such as sales and service. Open forum meetings with owners are held at
campouts, providing ongoing focus group feedback for product improvements.
Engineers and product development team members are encouraged to travel and
vacation in Company recreational vehicles to gain a complete understanding and
appreciation for the products.
The RV group believes it has the ability to respond promptly to changes in
market conditions. Most of the manufacturing facilities can be changed over
to the assembly of other existing products in two to six weeks. In addition,
these facilities may be used for other types of light manufacturing or
assembly operations. This flexibility enables the RV group to adjust its
manufacturing capabilities in response to changes in demand for its products.
Recreational vehicles are generally manufactured against orders received from
RV dealers. These products are marketed through approximately 1,300
independent dealers located in 49 states and internationally and through the
two Company-owned dealerships. Agreements with most of its dealers are
cancelable on short notice, provide for minimum inventory levels and establish
sales territories. No dealer accounts for more than 5% of the Company's net
sales.
Most dealers' purchases of RVs from the RV group are financed through "floor
plan" arrangements. Under these arrangements, a bank or other financial
institution agrees to lend the dealer all or most of the purchase price of its
recreational vehicle inventory, collateralized by a lien on such inventory.
The RV group generally executes repurchase agreements at the request of the
financing institution. These agreements provide that, for up to twelve months
after a unit is financed, the Company will repurchase a unit that has been
repossessed by the financing institution for the amount then due to the
financing institution. This is usually less than 100% of the dealer's cost.
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 (see Note 13 of Notes to Consolidated Financial Statements).
Historically, the Company has not reported any significant losses from the
repurchase agreements. However, in 2000 as a result of business conditions
negatively affecting the recreational industry, the Company has experienced
losses under repurchase agreements. Accordingly, at December 31, 2000, the
Company has recorded an accrual for estimated losses under repurchase
agreements. In addition, at December 31, 2000, the group was contingently
liable under guarantees to a financial institution of their loans to
independent dealers for amounts totaling approximately $15.1 million. The RV
group does not finance retail consumer purchases of its products, nor does it
generally guarantee consumer financing.
Page 4
Business Factors
Many recreational vehicles produced by the RV group require gasoline for their
operation. Gasoline has, at various times in the past, been difficult to
obtain, and there can be no assurance that the supply of gasoline will
continue uninterrupted, that rationing will not be imposed or that the price
of, or tax on, gasoline will not significantly increase in the future.
Shortages of gasoline and significant increases in gasoline prices have had a
substantial adverse effect on the demand for recreational vehicles in the past
and could have a material adverse effect on demand in the future.
Recreational vehicle businesses are dependent upon the availability and terms
of financing used by dealers and retail purchasers. Consequently, increases in
interest rates and the tightening of credit through governmental action or
other means have adversely affected recreational vehicle business in the past
and could do so in the future.
Competition and Regulation
The RV industry is highly competitive, and the RV group has numerous
competitors and potential competitors in each of its classes of products, some
of which have greater financial and other resources. Initial capital
requirements for entry into the manufacture of recreational vehicles are
comparatively small; however, codes, standards, and safety requirements
introduced in recent years may deter potential competitors.
The RV group's recreational vehicles generally compete in the lower to mid-
price range markets. The RV group believes it is a leader in the RV industry
in its focus on quality. The RV group emphasizes a quality product and a
strong commitment to competitive pricing in the markets it serves. The RV
group estimates that its current share of the recreational vehicle market is
approximately eight percent.
The recreational vehicle industry is highly regulated. NHTSA, state lemon law
statutes and state legislation protecting motor vehicle dealerships all impact
the way the RV group conducts its recreational vehicle business.
The RV group continues to recognize its obligations to protect the environment
insofar as its operations are concerned. To date, the RV group has not
experienced any material adverse effect from existing federal, state, or local
environmental regulations.
Modular Housing and Building Segment
Products
The Modular Housing and Building Segment consists of housing, commercial
buildings and telecommunication shelters. The Company's modular housing and
building subsidiaries (All American Homes, LLC; Mod-U-Kraf Homes, LLC;
KanBuild, Inc., acquired in February 2001; and Miller Building Systems, Inc.)
produce single-family residences, multi-family duplexes and apartments,
specialized structures for municipal and commercial use and telecommunication
shelters.
All American Homes, Mod-U-Kraf and KanBuild design, manufacture and market
factory-built modular housing. All American Homes is the largest producer of
modular homes in the United States and has five operations strategically
located in Indiana, Iowa, North Carolina, Ohio and Tennessee. Mod-U-Kraf,
acquired in June 2000, operates from a plant in Virginia. KanBuild, acquired
in February 2001, operates from locations in Kansas and Colorado. Together
these plants serve approximately 450 builders in 29 states. Modular homes are
built to the same local building codes as site-built homes by skilled
craftsmen in a factory environment unaffected by weather conditions. Nearly
complete when they leave the plant, modular homes are delivered to their final
Page 5
locations, typically in two to five sections, and are crane set onto a waiting
basement or crawl space foundation. Production takes place on an assembly
line, with components moving from workstation to workstation for framing,
electrical, plumbing, drywall, roofing, and cabinet setting, among other
operations. An average two-module home can be produced in just a few days. The
housing group regularly conduct meetings to review the latest in new design
options and component upgrades. These meetings provide an opportunity for
valuable builder input and suggestions from their customers at the planning
stage.
Miller Building Systems, Inc. ("Miller Building") designs, manufactures and
markets factory-built modular buildings for use as commercial buildings and
telecommunication shelters. Miller Building specializes in the education and
medical fields with its commercial modular buildings. It is also a major
supplier of shelters to house sophisticated telecommunications equipment for
cellular and digital telephones, data transmission systems and two-way
wireless communications. Miller Building also offers site construction
services, which range from site management to full turnkey operations.
Depending on the specific requirements of its customers, Miller Building uses
wood, wood and steel, concrete and steel, cam-lock panels or all concrete to
fabricate it structures. Miller Building manufactures its buildings in a
factory, and the assembled modules are delivered to the site location for
final installation.
Marketing
The Housing and Building group participates in an expanding market for the
factory-built housing, commercial buildings and telecommunication shelters.
This group does not sell their housing and commercial buildings directly to
the end-user. Their customers will sell, rent or lease the buildings to the
end-user. Housing is marketed directly to approximately 450 builders in 29
states. Commercial buildings are marketed to approximately 75 companies in 31
states. The telecommunication shelters are sold directly to approximately 75
customers in 36 states, who are the end-users of the buildings. These
customers have been principally telecommunication and utility companies.
Customers may be national, regional or local in nature. The Housing and
Building group believes its success is the result of innovative designs that
are created by listening to customer needs and taking advantage of
advancements in technology. While price is often a key factor in the potential
customer's purchase decision, other factors may also apply, including,
delivery time, quality and prior experience with a certain manufacturer. A
significant benefit to the customer is the speed with which factory-built
buildings can be made available for use compared to on-site construction, and
the ability to relocate the building to another location if the end-user's
utilization requirements change. The sales staff calls on prospective
customers in addition to maintaining continuing contact with existing
customers and assists its customers in developing building specifications to
facilitate the preparation of a quotation. The sales staff, in conjunction
with the engineering staff, maintains ongoing contact with the customer for
the duration of the building project.
Business Factors
As a result of transportation costs, the effective distribution range of
factory built homes and commercial buildings is limited. The shipping area
from each manufacturing facility is approximately 200 to 300 miles for modular
homes and 600 miles for commercial buildings. The potential shipping radius
of the telecommunication shelters is not as restrictive as that of factory
built homes and commercial buildings; however, the marketing of these shelters
is concentrated in geographic areas where there is a freight advantage over a
large portion of its competitors.
The overall strength of the economy and the availability and terms of
financing used by builders, dealers and end-users have a direct impact on the
sales of the Housing and Building group. Consequently, increases in interest
rates and the tightening of credit through government action or other means
Page 6
have adversely affected the group's business in the past and could do so in
the future.
Competition and Regulation
Competition in the factory-built building industry is intense and the Housing
and Building group competes with a number of entities, some of which may have
greater financial and other resources. To the extent that factory-built
buildings become more widely accepted as an alternative to conventional on-
site construction, competition from local contractors and manufacturers of
other pre-engineered building systems may increase. In addition to the
competition from companies designing and constructing on-site buildings, the
Housing and Building group competes with numerous factory-built building
manufactures that operate in particular geographical regions.
The Housing and Building group competes for orders from its customers
primarily on the basis of price, quality, timely delivery, engineering
capability and reliability. The group believes that the principal basis on
which it competes with on-site construction is the combination of: the
timeliness of factory versus on-site construction, the cost of its products
relative to on-site construction, the quality and appearance of its buildings,
its ability to design and engineer buildings to meet unique customer
requirements, and reliability in terms of completion time. Manufacturing
efficiencies, quantity purchasing and generally lower wage rates of factory
construction, even with the added transportation expense, result in the cost
of factory-built buildings being equal to or lower than the cost of on-site
construction of comparable quality. With manufacturing facilities
strategically located throughout the country, the Housing and Building group
provides a streamlined construction process. This process of manufacturing
the building in a weather-free, controlled environment, while the site is
prepared, significantly reduces the time to completion on a customer's
project.
Customers of the Housing and Building group are generally required to obtain
building installation permits from applicable governmental agencies.
Buildings completed by the group are manufactured and installed in accordance
with applicable building codes set forth by the particular state or local
regulatory agencies.
State building code regulations applicable to factory-built buildings vary
from state to state. Many states have adopted codes that apply to the design
and manufacture of factory-built buildings, even if the buildings are
manufactured outside the state and delivered to a site within that state's
boundaries. Generally, obtaining state approvals is the responsibility of the
manufacturer. Some states require certain customers to be licensed in order to
sell or lease factory-built buildings. Additionally, certain states require a
contractor's license from customers for the construction of the foundation,
building installation, and other on-site work. On occasion, the Housing and
Building group has experienced regulatory delays in obtaining the various
required building plan approvals. In addition to some of its customers, the
group actively seeks assistance from various regulatory agencies in order to
facilitate the approval process and reduce the regulatory delays.
Page 7
General
(Applicable to all of the Company's principal markets)
Business Segment
The table below sets forth the composition of the Company's net sales for each
of the last three years (dollar amounts in millions):
2000 1999 1998
Amount % Amount % Amount %
Recreational Vehicles
Motorhomes $331.7 46.7 $455.1 53.7 $401.0 53.1
Travel Trailers
and Fifth Wheels 145.3 20.4 160.5 18.9 150.6 19.9
Camping Trailers 24.0 3.4 26.1 3.1 25.7 3.4
Truck Campers 1.8 .3 2.2 .3 3.7 .5
Parts and Supplies 35.6 5.0 47.2 5.6 44.7 5.9
Total RV 538.4 75.8 691.1 81.6 625.7 82.8
Modular Housing
and Buildings 171.6 24.2 155.9 18.4 130.3 17.2
Total $710.0 100.0 $847.0 100.0 $756.0 100.0
Note: See Note 3 of Notes to Consolidated Financial Statements
regarding segment information.
Seasonality
Historically, the Company has experienced greater sales during the second and
third quarters with lesser sales during the first and fourth quarters. This
reflects the seasonality of RV sales for products used during the summer
camping season and also the adverse impact of weather on general construction
for the modular building applications.
Employees
At December 31, 2000, Coachmen employed 4,149 persons, of whom 929 were
employed in office and administrative capacities. The Company provides group
life, dental, vision services, hospitalization, and major medical plans under
which the employee pays a portion of the cost. In addition, employees can
participate in a 401(k) plan and a stock purchase plan. Certain employees can
participate in a stock option plan (see Notes 9 and 10 of Notes to
Consolidated Financial Statements). The Company considers its relations with
employees to be good.
Patents and Trademarks
The Company maintains approximately 60 trademarks, which are up for renewal
from 2001 through 2013, and approximately 10 patents due to expire between
2001 and 2016.
Research and Development
During 2000, the Company spent approximately $5,959 on research related to
the development of new products and improvement of existing products. The
amounts spent in 1999 and 1998 were approximately $5,727 and $4,706,
respectively.
Page 8
Item 2. Properties
The Registrant owns or leases 3,769,223 square feet of plant and office
space, located on 1,261.3 acres, of which 3,035,892 square feet are used
for manufacturing, 384,533 square feet are used for warehousing and
distribution, 46,024 square feet are used for research and development,
70,844 square feet are used for customer service and 231,930 square feet
are offices. Included in these numbers are 138,854 square feet leased to
others and 646,107 square feet available for sale or lease. The Registrant
believes that its present facilities, consisting primarily of steel clad,
steel frame or wood frame construction and the machinery and equipment
contained therein, are well maintained and in good condition.
The following table indicates the location, number and size of the
Registrant's properties by segment as of December 31, 2000:
No. of Building Area
Location Acreage Buildings (Sq. Ft.)
Properties Owned and Used by Registrant:
Recreational Vehicles
Elkhart, Indiana 35.0 9 281,811
Middlebury, Indiana 518.6 34 863,593
Fitzgerald, Georgia 17.0 3 67,070
Centreville, Michigan 105.0 4 84,865
Edwardsburg, Michigan 83.1 12 303,254
Colfax, North Carolina 7.0 3 15,200
Goshen, Indiana 18.0 1 80,000
Subtotal 783.7 66 1,695,793
Modular Housing and Building
Decatur, Indiana 40.0 1 210,184
Elkhart, Indiana 20.0 3 132,300
Dyersville, Iowa 20.0 1 168,277
Leola, Pennsylvania 20.0 2 113,100
Springfield, Tennessee 45.0 1 131,453
Rutherfordton, North Carolina 37.8 1 169,177
Zanesville, Ohio 23.0 1 129,753
Bennington, Vermont 5.0 1 28,900
Rocky Mount, Virginia 39.6 2 105,325
Subtotal 250.4 13 1,188,469
Total owned and used 1,034.1 79 2,884,262
Properties Leased and Used by Registrant:
Recreational Vehicles
Elkhart, Indiana 1.6 1 8,000
Grants Pass, Oregon 9.4 - -
Subtotal 11.0 1 8,000
Page 9
Properties (Continued)
Properties Leased and Used by Registrant
Modular Housing and Building
Binghamton, New York 11.0 1 55,900
Sioux Falls, South Dakota 5.0 2 36,100
Subtotal 16.0 3 92,000
Total leased and used 27.0 4 100,000
Properties Owned by Registrant and Leased to Others:
Recreational Vehicles
Lake Park, Georgia 8.0 1 11,720
Winter Garden, Florida 5.0 1 42,176
Crooksville, Ohio 10.0 2 39,310
Grapevine, Texas 4.8 3 45,648
Total owned and leased 27.8 7 138,854
Properties Owned by Registrant and Available for Sale or Lease:
Recreational Vehicles
Adelanto, California 1.1 - -
Perris, California 15.5 - -
Melbourne, Florida 8.1 1 32,000
Marietta, Georgia 5.2 1 17,400
Elkhart, Indiana 44.9 8 256,065
Grants Pass, Oregon 24.5 1 62,563
Grapevine, Texas 4.0 - -
Longview, Texas 9.2 - -
Subtotal 112.5 11 368,028
Modular Housing and Building
Decatur, Indiana 3.3 2 78,996
Montezuma, Georgia 42.6 2 158,283
Rocky Mount, Virginia 14.0 2 40,800
Subtotal 59.9 6 278,079
Total owned and available
For sale or lease 172.4 17 646,107
Total Company 1,261.3 107 3,769,223
Item 3. Legal Proceedings
From time to time, the Company is involved in certain litigation
arising out of its operations in the normal course of business. The
Company believes that there are no claims or litigation pending, the
outcome of which will have a material adverse effect on the financial
position of the Company.
Page 10
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted during the quarter ended December 31, 2000 to
a vote of security holders.
Executive Officers of the Registrant
The following table sets forth the executive officers of the Company, as
of December 31, 2000:
Name Position
Claire C. Skinner Chairman of the Board, Chief Executive Officer and
President
James E. Jack (a) Executive Vice President and Chief Financial Officer
Richard M. Lavers Executive Vice President and General Counsel and
Secretary
Gene E. Stout Executive Vice President, Corporate Development
(a) Resigned effective February 13, 2001
Claire C. Skinner (age 46) assumed the Presidency of the Company in September
2000 and has served as Chairman of the Board and Chief Executive Officer
since August 1997. Before that, Vice Chairman of the Company since May 1995,
and served as Executive Vice President from 1990 to 1995. From 1987 through
July 1997, Ms. Skinner served as the President of Coachmen RV, the Company's
largest division. Prior to that, she held several management positions in
operations and marketing since 1983.
James E. Jack (age 59) served as Executive Vice President and Chief
Financial Officer of the Company from October 1999 to February 2001. From 1997
to September 1999 he served as a Managing Consultant at Towers Perrin and
prior to that he held various positions beginning in 1963 at Associates First
Capital Corporation, including Director, Senior Executive Vice President and
Chief Financial Officer.
Richard M. Lavers (age 53) assumed the position of Secretary of the Company in
May 2000 and has served as Executive Vice President and General Counsel of the
Company since October 1997. From 1994 through 1997 Mr. Lavers was Vice
President, Secretary and General Counsel of RMT, Inc. and Heartland
Environmental Holding Company.
Gene E. Stout (age 67) has served as Executive Vice President, Corporate
Development of the Company since May 1983. From April 1982 to May 1983
he was Senior Vice President Corporate Planning and Industry Relations.
Between 1971 and 1982 he held various management positions with the
Company.
Page 11
Part II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters
The following table discloses the high and low sales prices for
Coachmen's common stock during the past two years as reported on the New
York Stock Exchange, along with information on dividends paid per share
during the same periods.
High & Low Sales Prices Dividends Paid
2000 1999 2000 1999
1st Quarter $16.63 - $10.56 $26.88 - $17.88 $.05 $.05
2nd Quarter 17.50 - 11.13 24.00 - 18.13 .05 .05
3rd Quarter 11.69 - 9.50 24.00 - 15.38 .05 .05
4th Quarter 10.75 - 7.50 17.63 - 13.25 .05 .05
The Company's common stock is traded on the New York Stock Exchange: Stock
symbol COA. The number of shareholders of record as of January 31, 2000 was
2,011.
Item 6. Selected Financial Data
Five-Year Summary of Selected Financial Data
-Year Ended December 31-
(in thousands, except per share amounts)
2000 1999 1998 1997 1996
Net sales $709,975 $847,024 $756,030 $661,591 $606,474
Net income 2,164 29,502 33,063 24,763 28,505
Net income per share:
Basic .14 1.80 1.93 1.44 1.87
Diluted .14 1.80 1.92 1.42 1.84
Cash dividends per share .20 .20 .20 .20 .185
At year end:
Total assets 296,446 285,766 269,341 259,654 228,040
Long-term debt 11,795 8,346 10,191 12,591 14,841
*Net income and net income per share for 1996 includes $2,294 and $.15,
respectively, for the cumulative effect of an accounting change.
Page 12
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion should be read in conjunction with the Selected
Financial Data and the Consolidated Financial Statements.
OVERVIEW
The Company was founded in 1964 as a manufacturer of recreational vehicles
and began manufacturing modular homes in 1982. Since that time, the Company
has evolved into a leading manufacturer in both the recreational vehicle ("RV")
and modular housing and building business segments through a combination of
internal growth and strategic acquisitions.
The Company's new plant openings have been an important component of its
internal growth strategy. In 1995, the Company opened a new modular housing
plant in Tennessee and in 1996, the Company expanded its modular housing
production capacity with the construction of a new facility for the North
Carolina housing operation. The construction of a new modular housing facility
in Ohio became fully operational in 1998. Increases in production capacity
also included additions to the modular housing plant in Iowa with an addition
completed in 1998. In 2000 new additions to expand the North Carolina and Iowa
modular housing production facilities were completed. Additional travel
trailer plants in Indiana became operational in 1996 and 1997. These
additional plants helped capitalize on the growing market share of value-
priced travel trailers. In 1999, a new service building was constructed at the
RV production facility in Georgia. In addition, construction was completed in
1999 for a new manufacturing facility in Indiana for Class A motorhomes.
During 2000, the Company significantly expanded its modular housing and
building segment with the acquisitions of Mod-U-Kraf Homes, Inc. ("Mod-U-Kraf
Homes") on June 30, 2000 and Miller Building Systems, Inc. ("Miller Building")
on October 31, 2000 (see Note 12 of Notes to Consolidated Financial Statements
for further details, including unaudited pro forma financial information). In
addition, during 2000 and 1999, the Company sold or liquidated its Company-
owned dealerships, with the exception of two Company-owned stores which will
be retained for research and development and regional service purposes.
The Company's business segments are cyclical and subject to certain seasonal
demand cycles and changes in general economic and political conditions. Demand
in the RV and certain portions of the housing and building segment generally
declines during the winter season, while sales and profits are generally
highest during the spring and summer months. Inflation and changing prices
have had minimal direct impact on the Company in the past in that selling
prices and material costs have generally followed the rate of inflation.
RESULTS OF OPERATIONS
Comparison of 2000 to 1999
Consolidated net sales decreased $137.0 million, or 16.2% to $710.0 million in
2000 from $847.0 million in 1999. The Company's recreational vehicle segment
experienced a net sales decrease of 22.1%. The RV segment's net sales in 2000
and 1999 included $60.7 million and $122.5 million, respectively, of net sales
attributable to RV segment business units which were sold or liquidated during
2000 and 1999 (see Note 12 of Notes to Consolidated Financial Statements). The
modular housing and building segment had a net sales increase of $15.7
million, or 10.1%. The Company's existing modular business had a $4.9 million
decrease in net sales in 2000 compared to 1999, which when combined with the
$20.6 million of sales from Mod-U-Kraf Homes and Miller Building resulted in
the $15.7 million increase in net sales. Sales decreases in the RV segment are
attributable to a decline in overall market conditions affecting the
recreational vehicle industry as a whole. Increases in interest rates, high
fuel prices, dealer inventory adjustments and reduced consumer confidence
Page 13
negatively impacted RV industry shipments. While the RV segment experienced a
slight increase in the average sales price per unit the modular housing and
building segment experienced increases in both unit sales, including unit
sales of acquired businesses, and in the average sales price per unit during
2000. Historically, the Company's first and fourth quarters are the slowest
for sales in both segments.
Gross profit was $78.6 million, or 11.1% of net sales, in 2000 compared to
$108.0 million, or 12.7% of net sales, in 1999. While the modular housing and
building segment experienced a small decrease in gross profit as a percentage
of net sales, the majority of the gross profit percentage decrease is
attributable to the RV segment. The decrease in the gross profit percentage
for this segment reflects the impact of significantly lower production volume
accompanying a decrease in total net sales and the impact from nonrecurring
special pretax charges recorded in the fourth quarter of 2000. Nonrecurring
special charges affecting gross profit were related to plant consolidation,
losses on the closing and liquidation of four retail dealerships and write-
downs of certain real estate held for sale. In addition, during the fourth
quarter of 2000, the Company increased accruals for excess inventory
quantities, warranty liabilities and estimated losses under repurchase
agreements.
Operating expenses, consisting of selling, delivery, general and
administrative expenses, were $76.1 million and $67.3 million, or as a
percentage of net sales, 10.7% and 8.0% for 2000 and 1999, respectively.
Selling and delivery expenses were $42.5 million in 2000, or 6.0% of net
sales, compared with $39.0 million, or 4.6% of net sales in 1999. Selling
expenses increased in 2000 as a result of overall increases in dealer
incentives in both segments of the Company's business. During 2000, the
Company responded to discounting in the RV marketplace with strong incentives
and marketing programs in an effort to stimulate retail sales. General and
administrative expenses were $33.6 million in 2000, or 4.7% of net sales,
compared with $28.4 million, or 3.3% of net sales, in 1999. The general and
administrative percentage increase in 2000 reflects increased internal costs
for compensation and related expenses which were capitalized in 1999 in
connection with the implementation of the new enterprise-wide technology
systems (see Note 2 of Notes to Consolidated Financial Statements).
Operating income was $2.5 million in 2000 compared with $40.6 million in 1999,
a decrease of 93.8%. This decrease is consistent with the $29.4 million
decrease in gross profit and the overall increase of $8.8 million in operating
expenses.
Interest expense for 2000 and 1999 was $2.2 million and $1.8 million,
respectively. 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 increase in cash surrender value.
Interest expense also increased as a result of assumed debt obligations in the
acquisitions of Mod-U-Kraf Homes and Miller Building. Investment income for
2000 decreased to $1.4 million from $2.7 million in 1999. The decrease in the
investment income was principally due to less funds being invested in 2000
than in 1999. Cash and temporary cash investments were used in investing
activities during 2000, including the acquisitions of Mod-U-Kraf Homes and
Miller Building.
The gain on sale of properties decreased $1.1 million in 2000. The larger
amount in 1999 was substantially due to the sale of real estate in Indiana,
which included the previous corporate administrative building and various
other miscellaneous properties. In 2000, the major gain on property was from
the sale of the Lux Company facility in Indiana, which approximated $1.2
Page 14
million. Assets are continually analyzed and every effort is made to sell or
dispose of properties that are determined to be excess or unproductive.
Pretax income for 2000 was $2.9 million compared with $45.0 million for 1999.
The Company's RV segment incurred a pretax loss of $5.8 million, or (1.1)% of
vehicle net sales in 2000, compared with pretax income of $28.1 million, or
4.1% of the RV segment's net sales in 1999. The modular housing and building
segment generated 2000 pretax income of $11.6 million and in 1999, $14.9
million, or 6.7% and 9.5%, respectively, of modular net sales. The pretax
income (loss) of the two segments does not include an allocation of additional
depreciation expense of $1.8 million associated with the enterprise-wide
technology systems which were placed in service during 1999. This corporate
expense is included in "other reconciling items" in the segment disclosures
(see Note 3 of Notes to Consolidated Financial Statements).
The provision for income taxes was $.7 million for 2000 and $15.5 million for
1999, representing an effective tax rate of 25.0% and 34.5%, respectively. The
Company's effective tax rate fluctuates based upon the states where sales
occur, the level of export sales, with the mix of nontaxable investment income
and other factors (see Note 11 of Notes to Consolidated Financial Statements).
Net income for the year ended December 31, 2000 was $2.2 million compared to
$29.5 million for 1999.
Comparison of 1999 to 1998
Consolidated net sales for 1999 were $847.0 million, an increase of 12.0% over
the $756.0 million reported in 1998. The Company's RV segment experienced a
sales increase of 10.5%, while the modular housing and building segment's
sales increased by 19.6%. The increase in sales for the RV segment was
attributed to increased capacity, increased sales of Class A motorhomes and
the overall growth in the recreational vehicle market. The Company's modular
segment experienced sales growth due to increased capacity and increased
penetration into the respective markets served. The Company's RV segment
experienced an increase in the average sales price per unit, while the
Company's modular segment experienced increases in both unit sales and the
average sales price per unit.
Gross profit for 1999 decreased to $108.0 million, or 12.8% of net sales, from
$109.9 million, or 14.5% of net sales, in 1998. The decrease in gross profit
for 1999 was primarily attributable to the change in the sales mix for
recreational vehicles and the Company's investment in new enterprise-wide
technology and operating systems. In addition, the Company experienced higher
costs associated with the start-up of a new Class A production facility in
Indiana. Also affecting gross profit for 1999 was the additional accrual of
$1.5 million resulting from increased losses under the Company's self-
insurance programs for general liability, product liability and workers'
compensation and increased costs associated with the Company's self-insured
group medical plan.
Operating expenses, which include selling, delivery, general and
administrative expenses, were $67.3 million, or 8.0% of net sales in 1999,
compared with $64.0 million, or 8.5% of net sales in 1998. Selling and
delivery expenses were $39.0 million, or 4.6% of net sales, in 1999 compared
with $36.0 million, and 4.8% in 1998. The increase in selling and delivery
expenses was primarily due to increased sales. General and administrative
expenses were $28.4 million, or 3.3% of net sales in 1999, compared with $28.0
million, or 3.7% of net sales in 1998. The administrative cost percentage
decrease was primarily the result of capitalization of compensation and
related costs with the implementation of the new enterprise-wide technology
systems.
Operating income was $40.6 million in 1999 compared with $45.9 million in
1998, a decrease of 11.5%. This decrease was consistent with the $1.9 million
decrease in gross profit and the overall increase of $3.4 million in operating
expenses.
Page 15
Interest expense increased in 1999 to $1.8 million from $1.7 million in 1998.
Investment income decreased to $2.7 million from $4.8 million in 1998. The
decrease in investment income was principally due to less funds being invested
in 1999 than in 1998. During 1999, cash and temporary cash investments were
used in investing activities and for the open market purchase of common shares
for the treasury.
The net gain on the sales of properties increased $1.9 million in 1999. This
increase was substantially due to the sale of real estate in Indiana, which
included the corporate administration building subsequent to the move to a
larger facility.
Pretax income was $45.0 million in 1999 compared with $50.3 million in 1998.
The Company's RV segment produced $28.1 million and $36.2 million of pretax
income in 1999 and 1998, respectively. The modular housing and building
segment produced pretax income of $14.9 million in 1999 and $11.2 million in
1998 (see Note 3 of Notes to Consolidated Financial Statements).
The provision for income taxes was $15.5 million for 1999 and $17.2 million
for 1998, representing an effective tax rate of 34.5%, and 34.3%,
respectively.
Net income for the year ended December 31, 1999 was $29.5 million compared
with $33.1 million for the prior year.
Liquidity and Capital Resources
The Company generally relies on funds from operations as its primary source of
working capital and liquidity. In addition, the Company maintains credit
facilities to meet its seasonal working capital needs (see Note 6 of Notes to
Consolidated Financial Statements). During 2000, there were short-term
borrowings of $30 million under the credit facilities to finance the cash
purchase price of Miller Building and such borrowings were subsequently
repaid. There were no short-term borrowings outstanding at December 31, 2000,
1999 or 1998.
The Company's operating activities have been the principal source of cash
flows in each of the last three years. Operating cash flows were $29.9
million, $22.2 million and $14.0 million for 2000, 1999 and 1998,
respectively. For the year 2000, net income, depreciation and the decreases
in receivables and inventories, offset by decreases in accounts payable,
trade were the major sources of cash flows. The decrease in receivables was
directly related to the decrease of 30.3% in total net sales for the fourth
quarter of 2000 compared to 1999's fourth quarter. For the years 1999 and
1998, net income, adjusted by certain noncash items such as depreciation, was
a significant factor in generating operating cash flows. In 1999 increases in
trade accounts payable and, accrued expenses and other liabilities were
significantly offset by increases in receivables and inventories. This
increase in receivables was related to the 12.0% increase in annual sales and
the 11.6% increase in fourth quarter sales volume. In 1998, cash flows from
net income and depreciation were partially offset by an $18.8 million increase
in inventories. This increase in inventories was directly related to the 1998
increase in sales over 1997, as well as, the acquisition of three retail
dealerships during 1998.
Investing activities used cash of $25.0 million, $17.9 million and $42.1
million in 2000, 1999 and 1998, respectively. In 2000, the sale of marketable
securities, net of purchases, provided cash flows of $12.7 million and these
proceeds were used in part to fund the acquisition of Mod-U-Kraf Homes. In
1999 and 1998, purchases of marketable securities, net of sales, used $2.1
million and $16.3 million of cash flows. Proceeds from the sale of businesses
provided cash of $4.8 million in 2000 and $3.3 million in 1999 while
acquisitions of businesses consumed cash of $34.4 million in 2000 and $9.0
Page 16
million in 1998 (see Note 12 of Notes to Consolidated Financial Statements).
Otherwise the principal use of cash for investing activities in each of the
last three years has been property, plant and equipment acquisitions. Major
capital expenditures during 2000 included expanding production facilities in
North Carolina and Iowa for the modular housing and building segment. In 1999,
major capital expenditures included expanding production facilities for the RV
segment, as well as capitalization of internal costs associated with the
enterprise-wide technology system. Major capital expenditures during 1998
included acquisitions, construction of and additions to production facilities
for both the recreational vehicle and modular housing and building segments,
as well as the capitalized cost of hardware and software associated with the
enterprise-wide technology system.
In 2000, cash flows reflected short-term borrowings and repayment of $30
million, which was used for the purchase of Miller Building. In 1999 and 1998
the principal use of cash flows from financing activities was the $19.1
million and $16.8 million, respectively, used to purchase common shares under
the Company's share repurchase programs. Other financing activities for 2000,
1999 and 1998, which used cash in each of the years, were payments of long-
term debt and cash dividends. These negative cash flows were partially offset
by the issuance of common shares under stock option and stock purchase plans.
For a more detailed analysis of the Company's cash flows for each of the last
three years, see the Consolidated Statements of Cash Flows.
The Company's cash and temporary cash investments at December 31, 2000 were
$2.6 million, or a decrease of $1.7 million from 1999. The Company
anticipates that available funds, together with anticipated cash flows
generated from future operations and amounts available under its credit
facilities will be sufficient to fund the Company's acquisition of KanBuild,
Inc. on February 12, 2001 (see Note 14 of Notes to Consolidated Financial
Statements), planned capital expenditures and other operating cash
requirements through the end of 2001. In addition, the Company has $18.7
million of marketable securities, which are invested in public utility
preferred stocks under a dividend capture program.
A downturn in the U.S. economy, lack of consumer confidence and other factors
adversely impact the RV industry. This has a negative impact on the Company's
sales of recreational vehicles and also increases the Company's loss exposure
under repurchase agreements with lenders to the Company's independent dealers
(See Note 13 of Notes to Consolidated Financial Statements).
In 2000, working capital decreased $18.9 million, from $135.1 million to
$116.2 million. The $16.9 million decrease in current assets at December 31,
2000 versus December 31, 1999 was primarily due to the decrease in marketable
securities. The $2.0 million increase in current liabilities is substantially
due to increases in accrued expenses and other liabilities.
Forward-Looking Statements
This Annual Report 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 and the impact of economic uncertainty on high-cost discretionary
product purchases, which can hinder the sales 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 functioning of the Company's
enterprise-wide technology system, which can impact the Company's day-to-day
operations; 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; and also on the state
of the recreational vehicle and modular housing and building industries in
the United States. Other factors affecting forward-looking statements include
the cyclical and seasonal nature of the Company's businesses, adverse weather,
Page 17
changes in property taxes and energy costs, changes in federal income tax laws
and federal mortgage financing programs, changes in public policy,
competition, government regulations and the Company's ability to maintain or
increase gross margins which are critical to the 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
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.
Item 7A. 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. The Company utilized its short-term credit
facility in 2000 in connection with the acquisition of Miller Building and
such borrowings were repaid within sixty days. The Company had not utilized
its short-term credit facilities during 1999 or 1998. Accordingly, changes in
interest rates would primarily impact the Company's long-term debt. At
December 31, 2000, the Company had $12.7 million of long-term debt, including
current maturities. Long-term debt consists of industrial development revenue
bonds that have variable or floating rates. The Company's marketable
securities consist of public utility preferred stocks which pay quarterly
fixed rate dividends. These financial instruments are subject to market risk
in that changes in interest rates would impact the market value of the
preferred stocks. As discussed in Note 1 of the Notes to Consolidated
Financial Statements, the Company utilizes U.S. Treasury bond future 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 December 31, 2000, 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 December 31, 2000, would have no material
impact on earnings, cash flows or fair values of interest rate risk sensitive
instruments over a one-year period.
Page 18
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements Page
Financial Statements:
Report of Independent Accountants 20
Consolidated Balance Sheets at December 31, 2000 and 1999 21
Consolidated Statements of Income
for the years ended December 31, 2000, 1999 and 1998 22
Consolidated Statement of Shareholders' Equity
for the years ended December 31, 2000, 1999 and 1998 23
Consolidated Statements of Cash Flows for the years
ended December 31, 2000, 1999 and 1998 24-25
Notes to Consolidated Financial Statements 26-44
Financial Statement Schedule:
II - Valuation and Qualifying Accounts for the years
ended December 31, 2000, 1999 and 1998 46
All other schedules are omitted because they are not applicable
or the required information is shown in the financial statements
or notes thereto.
Page 19
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Coachmen Industries, Inc.:
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Coachmen Industries, Inc. and its subsidiaries at December 31,
2000 and 1999, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 2000, in conformity
with accounting principles generally accepted in the United States of America.
In addition, in our opinion, the financial statement schedule listed in the
accompanying index presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related consolidated
financial statements. These financial statements and financial statement
schedule are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits. We conducted our audits of
these statements in accordance with auditing standards generally accepted in
the United States of America, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
As more fully described in Note 2 to the consolidated financial statements,
effective January 1, 1999, the Company adopted Statement of Position No. 98-1,
"Accounting for Costs of Computer Software Developed or Obtained for Internal
Use."
PricewaterhouseCoopers LLP
------------------------------
PricewaterhouseCoopers LLP
South Bend, Indiana
February 2, 2001, except for the information
in Note 6, for which the date is
February 9, 2001, and Note 14,
for which the date is February 12, 2001
Page 20
Coachmen Industries, Inc. and Subsidiaries
Consolidated Balance Sheets
December 31, 2000 and 1999
(in thousands)
Assets
2000 1999
CURRENT ASSETS
Cash and temporary cash investments $ 2,614 $ 4,269
Marketable securities 18,737 32,550
Trade receivables, less allowance for
doubtful receivables 2000 - $1,066
and 1999 - $550 37,743 39,398
Other receivables 2,336 2,892
Refundable income taxes 4,600 4,748
Inventories 97,315 100,008
Prepaid expenses and other 2,221 2,214
Deferred income taxes 8,384 4,743
Total current assets 173,950 190,822
Property and equipment, net 84,163 74,678
Intangibles, less accumulated amortization
2000 - $917 and 1999 - $644 15,983 4,426
Cash value of life insurance 12,378 11,291
Other 9,972 4,549
TOTAL ASSETS $296,446 $285,766
Liabilities and Shareholders' Equity
CURRENT LIABILITIES
Current maturities of long-term debt $ 865 $ 1,543
Accounts payable, trade 24,015 25,041
Accrued income taxes 845 1,096
Accrued expenses and other liabilities 31,988 28,039
Total current liabilities 57,713 55,719
Long-term debt 11,795 8,346
Deferred income taxes 3,370 1,489
Other 8,619 6,566
Total liabilities 81,497 72,120
COMMITMENTS AND CONTINGENCIES (Note 13)
SHAREHOLDERS' EQUITY
Common shares, without par value: authorized
60,000 shares; issued 2000 - 21,020
shares and 1999 - 20,971 shares 90,861 90,405
Additional paid-in capital 5,563 4,623
Retained earnings 169,766 170,716
Treasury shares, at cost, 2000 - 5,317
shares and 1999 - 5,443 shares ( 51,241) (52,098)
Total shareholders' equity 214,949 213,646
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $296,446 $285,766
The accompanying notes are a part of the consolidated financial statements.
Page 21
Coachmen Industries, Inc. and Subsidiaries
Consolidated Statements of Income
for the years ended December 31, 2000, 1999 and 1998
(in thousands, except per share amounts)
2000 1999 1998
Net sales $709,975 $847,024 $756,030
Cost of sales 631,344 739,034 646,119
Gross profit 78,631 107,990 109,911
Operating expenses:
Selling and delivery 42,478 38,972 35,974
General and administrative 33,637 28,375 28,009
76,115 67,347 63,983
Operating income 2,516 40,643 45,928
Nonoperating income (expense):
Interest expense (2,152) (1,829) (1,738)
Investment income 1,401 2,747 4,831
Gain on sale of properties, net 891 1,962 46
Other income, net 231 1,518 1,224
371 4,398 4,363
Income before income taxes 2,887 45,041 50,291
Income taxes 723 15,539 17,228
Net income $ 2,164 $ 29,502 $33,063
Earnings per common share:
Basic $ .14 $ 1.80 $ 1.93
Diluted .14 1.80 1.92
Shares used in the computation of
earnings per common share:
Basic 15,584 16,370 17,132
Diluted 15,639 16,421 17,261
The accompanying notes are a part of the consolidated financial statements.
Page 22
Coachmen Industries, Inc. and Subsidiaries
Consolidated Statements of Shareholders' Equity
for the years ended December 31, 2000, 1999 and 1998
(in thousands, except per share amounts)
Additional Total
Common Shares Paid-In Retained Treasury Shares Shareholders'
Number Amount Capital Earnings Number Amount Equity
Balance,
January 1,
1998 20,689 $87,520 $3,013 $114,858 (3,388) $(16,381) $189,010
Net income - - - 33,063 - - 33,063
Issuance of common
shares upon the
exercise of stock
options 139 1,272 - - - - 1,272
Issuance of common
shares under
employee stock
purchase plan 15 313 - - - - 313
Issuance of common
shares from treasury - - 40 - 3 17 57
Acquisition of common
shares for treasury - - - - (873) (16,674) (16,674)
Tax benefit from
exercise of stock
options - - 814 - - - 814
Cash dividends of
$.20 per common
share - - - (3,433) - - (3,433)
Balance,
December 31,
1998 20,843 89,105 3,867 144,488 (4,258) (33,128) 204,332
Net income - - - 29,502 - - 29,502
Issuance of common
shares upon the
exercise of stock
options 107 981 - - - - 981
Issuance of common
shares under
employee stock
purchase plan 21 319 - - - - 319
Issuance of common
shares from
treasury - - 318 - 21 151 469
Acquisition of common
shares for treasury - - - - (1,206) (19,121) (19,121)
Tax benefit from
exercise of stock
options - - 438 - - - 438
Cash dividends of
$.20 per common
share - - - (3,274) - - (3,274)
Balance,
December 31,
1999 20,971 90,405 4,623 170,716 (5,443) (52,098) 213,646
Net income - - - 2,164 - - 2,164
Issuance of common
shares upon the
exercise of stock
options 21 173 (308) - 109 748 613
Issuance of common
shares under
employee stock
purchase plan 28 283 - - - - 283
Issuance of common
shares from
treasury - - 200 - 17 109 309
Conversion of stock
options of acquired
business to stock
options of the
Company - - 957 - - - 957
Tax benefit from
exercise of stock
options - - 91 - - - 91
Cash dividends of
$.20 per common
share - - - (3,114) - - (3,114)
Balance,
December 31,
2000 21,020 $90,861 $5,563 $169,766 (5,317) $(51,241) $214,949
The accompanying notes are a part of the consolidated financial statements.
Page 23
Coachmen Industries, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
for the years ended December 31, 2000, 1999 and 1998
(in thousands)
2000 1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,164 $ 29,502 $ 33,063
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 10,941 9,146 7,574
Amortization and write-off of
intangibles 273 127 374
Provision for (recovery of) doubtful
receivables 435 117 (175)
Net realized and unrealized losses on
marketable securities and derivatives 1,112 825 902
Gain on sale of properties, net (891) (1,962) (46)
Increase in cash surrender value of
life insurance policies (903) (750) (956)
Deferred income taxes (1,758) 559 388
Other 976 175 (203)
Changes in certain assets and liabilities,
net of effects of acquisitions and
dispositions:
Receivables 14,631 (13,199) (1,545)
Inventories 12,420 (9,908) (18,848)
Prepaid expenses and other 955 (873) (93)
Accounts payable, trade (8,237) 6,044 (3,821)
Income taxes - accrued and refundable (942) (794) (2,626)
Accrued expenses and other liabilities(1,244) 3,234 16
Net cash provided by
operating activities 29,932 22,243 14,004
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from:
Sale of marketable securities 134,673 186,794 152,126
Sale of properties 1,931 2,596 4,104
Sale of businesses 4,826 3,298 -
Acquisitions of:
Marketable securities (121,972) (188,890) (168,455)
Property and equipment (8,222) (21,400) (22,196)
Businesses, net of acquired cash of $2,675
in 2000 (34,351) - (9,002)
Other (1,898) (297) 1,331
Net cash (used in)
investing activities (25,013) (17,899) (42,092)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term borrowings 30,000 - -
Payments of short-term borrowings (30,000) - -
Payments of long-term debt (4,447) (2,427) (2,533)
Issuance of common shares 896 1,300 1,586
Tax benefit from stock options exercised 91 438 814
Cash dividends paid (3,114) (3,274) (3,433)
Purchases of common shares for treasury - (19,121) (16,764)
Net cash (used in)
financing activities (6,574) (23,084) (20,330)
Page 24
Consolidated Statements of Cash Flows, Concluded
for the years ended December 31, 2000, 1999 and 1998
(in thousands)
2000 1999 1998
Decrease in cash and temporary cash
investments ( 1,655) (18,740) (48,418)
CASH AND TEMPORARY CASH INVESTMENTS
Beginning of year 4,269 23,009 71,427
End of year $ 2,614 $ 4,269 $ 23,009
Supplemental disclosures of cash flow
information:
Cash paid during the year for:
Interest $ 2,192 $ 1,305 $ 1,709
Income taxes 3,770 15,716 19,071
The accompanying notes are a part of the consolidated financial statements.
Page 25
Coachmen Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except per share amounts)
1. NATURE OF OPERATIONS AND ACCOUNTING POLICIES.
Nature of Operations - Coachmen Industries, Inc. and its subsidiaries (the
"Company") manufacture a full line of recreational vehicles with manufacturing
facilities located in Indiana, Georgia, Michigan and Oregon (closed during
2000). These products are marketed through a nationwide dealer network. The
Company's modular housing and building segment manufactures modular homes and
other specialized modular structures and has locations in Indiana, Iowa, New
York, North Carolina, Ohio, Pennsylvania, South Dakota, Tennessee, Vermont and
Virginia. The modular products (modular homes, townhouses and specialized
structures) are sold to builders/dealers or directly to the end user for certain
of the specialized modular structures.
Principles of Consolidation - The accompanying consolidated financial statements
include the accounts of Coachmen Industries, Inc. and its subsidiaries, all of
which are wholly owned.
Use of Estimates in the Preparation of Financial Statements - The preparation of
financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue Recognition - For the vehicle segment, the shipping terms are free on
board ("FOB") shipping point and title and risk of ownership are transferred to
the independent dealers at that time. Accordingly, sales are recognized as
revenue at the time the products are shipped. For the modular housing and
building segment, the shipping terms are generally FOB destination. Title and
risk of ownership are transferred when the Company completes installation of the
product. The Company recognizes the revenue at the time delivery and
installation are completed. Revenue from final set-up procedures, which are
perfunctory, is deferred and recognized when such set-up procedures are
completed.
Cash Flows and Noncash Activities - For purposes of the consolidated statements
of cash flows, cash and temporary cash investments include cash, cash
investments and any highly liquid investments purchased with original maturities
of three months or less.
Noncash investing and financing activities are as follows:
2000 1999 1998
Issuance of common shares, at
market value, in lieu of cash
compensation $ 309 $469 $ 57
Liabilities assumed in business
acquisitions 21,926 - 800
Liabilities assumed by buyers in the
disposition of businesses 1,414 - -
Promissory note receivable received
in the disposition of a business - - 650
Page 26
Coachmen Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements, Continued
(in thousands, except per share amounts)
1. NATURE OF OPERATIONS AND ACCOUNTING POLICIES, Continued.
Concentrations of Credit Risk - Financial instruments which potentially subject
the Company to credit risk consist primarily of cash and temporary cash
investments and trade receivables.
At December 31, 2000 and 1999, cash and temporary cash investments include $.2
million and $3.8 million, respectively, invested in a money market mutual fund.
The Company has a concentration of credit risk in the recreational vehicle
industry, although there is no geographic concentration of credit risk. The
Company performs ongoing credit evaluations of its customers' financial
condition and sales to its recreational vehicle dealers are generally subject to
preapproved dealer floor plan financing whereby the Company is paid upon
delivery or shortly thereafter. The Company generally requires no collateral
from its customers. Future credit losses are provided for currently through the
allowance for doubtful receivables and actual credit losses are charged to the
allowance when incurred.
Marketable Securities - Marketable securities consist of public utility
preferred stocks which pay quarterly cash dividends. The preferred stocks are
part of a dividend capture program whereby preferred stocks are bought and held
for the purpose of capturing the quarterly preferred dividend. The securities
are then sold and the proceeds reinvested again in preferred stocks. The
Company's dividend capture program is a tax planning strategy to maximize
dividend income which is 70% excludable from taxable income under the Internal
Revenue Code and related state tax provisions. As a result, a dividend capture
program generally provides a higher after-tax return than other short-term
investment alternatives. The Company accounts for its marketable securities
under Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting
for Certain Investments in Debt and Equity Securities," which requires certain
securities to be categorized as either trading, available-for-sale or held-to-
maturity. The Company's marketable securities at December 31, 2000 and 1999 are
classified as available-for-sale and, accordingly, are carried at fair value
with net unrealized appreciation (depreciation) recorded as a separate component
of shareholders' equity. At December 31, 2000 and 1999, the cost of marketable
securities approximated their fair value and, accordingly, the Company
recognized no unrealized appreciation (depreciation). The cost of securities
sold is determined by the specific identification method.
The Company utilizes U.S. Treasury bond futures options as protection against
the impact of increases in interest rates on the fair value of the Company's
investments in marketable securities (fixed rate preferred stocks). The options
are marked to market with market value changes recognized in the statements of
income in the period of change.
Page 27
Coachmen Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements, Continued
(in thousands, except per share amounts)
1. NATURE OF OPERATIONS AND ACCOUNTING POLICIES, Continued.
Investment income consists of the following:
2000 1999 1998
Interest income $ 836 $1,029 $3,184
Dividend income on
preferred stocks 1,677 2,543 2,549
Net realized (losses) on sale
of preferred stocks (189) (1,220) (120)
Net realized gains (losses) on
closed U.S. Treasury bond
futures options (821) 314 (597)
Unrealized gains (losses) on
open U.S. Treasury bond
futures options _ (102) _ 81 (185)
Total $1,401 $2,747 $4,831
Fair Value of Financial Instruments - The carrying amounts of cash and temporary
cash investments, receivables and accounts payable approximated fair value as of
December 31, 2000 and 1999, because of the relatively short maturities of these
instruments. The carrying amount of long-term debt, including current
maturities, approximated fair value as of December 31, 2000 and 1999, based upon
terms and conditions currently available to the Company in comparison to terms
and conditions of the existing long-term debt. The Company has investments in
life insurance contracts to fund obligations under deferred compensation
agreements (see Note 10). At December 31, 2000 and 1999, the carrying amount of
these policies, which equaled their fair value, was $12.4 million and $11.3
million, respectively (cash surrender values of $28.6 million and $26.2 million,
net of $16.2 million and $14.9 million of policy loans, respectively).
At December 31, 2000 and 1999, the carrying amounts of U.S. Treasury
bond futures options aggregated $71 and $558, respectively. The
carrying amounts represented fair value since these futures options are
marked to market at the end of each reporting period.
Inventories - Inventories are valued at the lower of cost (first-in, first-out
method) or market.
Property and Equipment - Property and equipment are carried at cost less
accumulated depreciation. Depreciation is computed by the straight-line method
on the costs of the assets, at rates based on their estimated useful lives as
follows: land improvements 3-15 years; buildings and improvements 10-30 years;
machinery and equipment 3-10 years; transportation equipment 2-7 years; and
office furniture and fixtures, including capitalized computer software, 2-10
years. Upon sale or retirement of property and equipment, including real estate
held for sale and rental properties, the asset cost and related accumulated
depreciation is removed from the accounts and any resulting gain or loss is
included in income.
Intangibles - Intangibles, consisting principally of excess of cost over the
fair value of net assets of businesses acquired ("goodwill"), are being
amortized on a straight-line basis over 5 to 40 years.
Page 28
Coachmen Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements, Continued
(in thousands, except per share amounts)
1. NATURE OF OPERATIONS AND ACCOUNTING POLICIES, Concluded.
Evaluation of Impairment of Long-Lived Assets - In accordance with SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed Of," the Company evaluates the carrying value of long-lived assets
whenever significant events or changes in circumstances indicate the carrying
value of these assets may be impaired. The Company evaluates potential
impairment of long-lived assets by comparing the carrying value of the assets to
the expected net future cash inflows resulting from use of the assets. During
the year ended December 31, 1998, the Company determined because of recurring
losses and a forecast of negative undiscounted future cash flows that the
carrying value of goodwill of one of its Company-owned dealerships was impaired.
Accordingly, the Company charged-off the $239 of remaining unamortized goodwill.
Income Taxes - The provision for income taxes is based on income recognized for
financial statement purposes and includes the effects of temporary differences
between such income and that recognized for tax return purposes. Deferred tax
assets and liabilities are established for the expected future tax consequences
of events that have been included in the financial statements or tax returns
using enacted tax rates in effect for the years in which the differences are
expected to reverse.
Research and Development Expenses - Research and development expenses charged to
operations were approximately $5,959, $5,727 and $4,706 for the years ended
December 31, 2000, 1999 and 1998, respectively.
Warranty Expense - The Company accrues an estimated warranty liability at the
time the warranted products are sold.
Stock-Based Compensation - The Company has adopted the disclosure only
provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," and,
accordingly, accounts for its stock option plan under the provisions of
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees."
New Accounting Pronouncement - As required by SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities", the Company will adopt the
requirements of SFAS No. 133 effective January 1, 2001. SFAS No. 133 requires
that all derivative instruments be recorded on the balance sheet at their fair
value. Changes in the fair value of derivatives are recorded each period in
current earnings or other comprehensive income, depending on whether a
derivative is designated as part of a hedge transaction and, if it is, the type
of hedge transaction. The Company utilizes U.S. Treasury bond futures options,
which are derivative instruments, and changes in market value are recognized in
current earnings. Accordingly, due to its limited use of derivative instruments
and the fact that changes in fair value are currently recognized in earnings,
the adoption of SFAS No. 133 is not expected to have any significant effect on
the Company's financial statements.
Page 29
Coachmen Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements, Continued
(in thousands, except per share amounts)
2. ACCOUNTING CHANGE.
Effective January 1, 1999, the Company adopted American Institute of Certified
Public Accountants' Statement of Position ("SOP") No. 98-1, "Accounting for
Costs of Computer Software Developed or Obtained for Internal Use". For years
beginning after December 15, 1998, SOP 98-1 requires internal and external costs
incurred to develop internal-use computer software during the application
development stage to be capitalized and amortized over the software's useful
life. Prior to January 1, 1999, these costs were expensed as incurred. During
the years ended December 31, 2000 and 1999, the Company capitalized $96 and
$2,591, respectively, of internal costs which prior to January 1, 1999 would
have been expensed under generally accepted accounting principles. These
capitalized costs were related to the Company's new enterprise computer system.
The effect of this change in accounting principle for the years ended December
31, 2000 and 1999 was to increase net income by approximately $59 ($-0- per
share) and $1,399 ($.09 per share), respectively.
3. 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. The accounting policies of the
segments are the same as those described in Note 1 and there are no inter-
segment revenues. Differences between reported segment amounts and
corresponding consolidated totals represent corporate expenses for
administrative functions and costs or expenses relating to property and
equipment that are not allocated to segments.
Page 30
Coachmen Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements, Continued
(in thousands, except per share amounts)
3. SEGMENT INFORMATION, Concluded.
The table below presents information about segments used by the chief operating
decision maker of the Company for the years ended December 31:
2000 1999 1998
Net sales:
Recreational vehicles $538,380 $691,173 $625,747
Modular housing and building 171,595 155,851 130,283
Consolidated total $709,975 $847,024 $756,030
Pretax income:
Recreational vehicles $ (5,784) $ 28,148 $ 36,156
Modular housing and building 11,578 14,870 11,164
Other reconciling items (2,907) 2,023 2,971
Consolidated total $ 2,887 $ 45,041 $ 50,291
Total assets:
Recreational vehicles $139,383 $166,288 $141,657
Modular housing and building 100,340 37,837 38,948
Other reconciling items 56,723 81,641 88,736
Consolidated total $296,446 $285,766 $269,341
The following specified amounts are included in the measure of segment pretax
income or loss reviewed by the chief operating decision maker:
2000 1999 1998
Interest expense:
Recreational vehicles $ 142 $ 794 $ 474
Modular housing and building 393 324 354
Other reconciling items 1,617 711 910
Consolidated total $ 2,152 $ 1,829 $ 1,738
Depreciation:
Recreational vehicles $ 4,662 $ 4,649 $ 4,216
Modular housing and building 3,568 2,902 2,583
Other reconciling items 2,711 1,595 775
Consolidated total $10,941 $ 9,146 $ 7,574
4. INVENTORIES.
Inventories consist of the following:
2000 1999
Raw materials $ 35,963 $ 39,926
Work in process 8,244 11,131
Finished goods 53,108 48,951
Total $ 97,315 $100,008
Page 31
Coachmen Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements, Continued
(in thousands, except per share amounts)
5. PROPERTY AND EQUIPMENT.
Property and equipment consists of the following:
2000 1999
Land and improvements $ 15,013 $ 12,858
Buildings and improvements 67,198 58,199
Machinery and equipment 24,418 22,351
Transportation equipment 14,130 12,534
Office furniture and fixtures 18,270 16,242
139,029 122,184
Less, Accumulated depreciation 54,866 47,506
Property and equipment, net $ 84,163 $ 74,678
6. SHORT-TERM BORROWINGS.
On October 6, 2000, the Company obtained $155 million of Senior Credit
Facilities under two (2) credit agreements (collectively referred to as the
"Credit Agreement") with the Lenders, as defined, and Bank One, NA,
administrative agent for the Lenders. The Credit Agreement provides for two
(2) unsecured credit facilities: (i) a 364-day revolving credit facility, in a
maximum amount of up to $51,667 and (ii) a three-year revolving credit
facility in a maximum amount of up to $103,333. The initial 364-day period
for the 364-day revolving credit facility may be extended for an additional
364-day period upon appropriate notice and agreement by the Lenders. The
three-year revolving credit facility provides for floating rate advances or
eurodollar advances or a combi-nation thereof or swing line loans, not to
exceed $10 million at any one time, and all swing line loans must be repaid
with interest on the fifth business day after such swing line loan is made.
Floating rate or euro-dollar advances under the three-year revolving credit
facility shall be in the minimum amount of $5 million. The Senior Credit
Facilities have a termination date of October 6, 2003. Borrowings under the
Credit Agreement bear interest equal to: (i) a eurodollar rate plus an applic-
able margin ranging from .525% to 1.175%, depending on the Company's leverage
ratio, as defined, or (ii) a floating rate equal to the greater of the prime
rate or the federal funds rate plus .50%. The Company is also required to pay
a facility fee ranging from .225% to .325%, depending on the Company's
leverage ratio.
At December 31, 2000, there were no borrowings outstanding under the Credit
Agreement.
The Credit Agreement also contains customary affirmative and negative
covenants including financial covenants requiring maintenance of specified
consolidated interest coverage and leverage ratios and a required minimum net
worth. At December 31, 2000, the Company was not in compliance with the
interest coverage ratio. On February 9, 2001, the Lenders and Bank One, NA
waived this violation pursuant to a Waiver and Amendment No. 1 to 364-Day
Credit Agreement, and also reduced the aggregate commitment of the 364-day
revolving credit facility from $51,667 to $16,667, changed applicable margin
to .975% to 1.175% and eliminated swing line loans through March 30, 2001.
Page 32
Coachmen Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements, Continued
(in thousands, except per share amounts)
6. SHORT-TERM BORROWINGS, Concluded.
At December 31, 1999, the Company had an unsecured bank line of credit
aggregating $30 million with interest on outstanding borrowings payable
monthly at a rate of LIBOR plus a margin of .50% to .75%. There were no
borrowings under this bank line of credit during 1999 and 1998.
7. LONG-TERM DEBT.
Long-term debt consists of the following:
2000 1999
Obligations under industrial development
revenue bonds, variable rates (effective
weighted average interest rates of 5.2%
and 5.6% at December 31, 2000 and 1999,
respectively), with various maturities
through 2015 $12,660 $ 7,400
Promissory notes payable, interest at the
prime rate (8.5% at December 31, 1999),
unsecured - 2,489
Total 12,660 9,889
Less, Current maturities 865 1,543
Long-term debt $11,795 $ 8,346
Aggregate maturities of long-term debt for each of the next five years ending
December 31 are as follows: 2001 - $865; 2002 - $865; 2003 - $865; 2004 - $865
and 2005 - $1,165.
In connection with the industrial development revenue bond obligations, the
Company obtained, as a credit enhancement for the bondholders, irrevocable
letters of credit in favor of the bond trustees. Under the industrial revenue
bond for the Mod-U-Kraf Homes' manufacturing facility in Virginia, the issuer of
the letter of credit holds a first lien and security interest on that facility.
The letter of credit agreements relating to these letters of credit contain,
among other provisions, certain covenants relating to required amounts of
working capital and net worth and the maintenance of certain required financial
ratios.
8. ACCRUED EXPENSES AND OTHER LIABILITIES.
Accrued expenses and other liabilities consist of the following:
2000 1999
Wages, salaries and commissions $ 2,134 $ 5,338
Dealer incentives 4,397 4,307
Warranty 7,796 7,195
Insurance 4,518 5,291
Customer deposits and unearned revenues 4,769 1,525
Other current liabilities 8,374 4,383
Total $31,988 $28,039
Page 33
Coachmen Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements, Continued
(in thousands, except per share amounts)
9. COMMON STOCK MATTERS AND EARNINGS PER SHARE.
Stock Award Program
On October 19, 1998, the Board of Directors approved a Stock Award Program which
provides for the awarding to key employees of up to 109 shares of common stock
from shares reserved under the Company's stock option plan. On December 1, 1998,
the Company awarded 64 shares to certain employees, subject to the terms,
conditions and restrictions of the award program. During the year ended December
31, 1999, no shares were awarded, 14.4 shares were issued and 6.1 awarded shares
were canceled. During the year ended December 31, 2000, no shares were awarded,
12 shares were issued and 7.6 awarded shares were canceled. The shares under the
stock awards are issuable in four annual installments of 25% beginning one year
from the date of grant. The Company recognizes compensation expense over the
term of the awards and compensation expense of $263 and $208 was recognized for
the years ended December 31, 2000 and 1999, respectively.
Stock Option Plan
The Company has stock option plans, including the 2000 Omnibus Stock Incentive
Program (the "2000 Plan") which was approved by the shareholders on May 4, 2000.
The 2000 Plan provides for an additional one million common shares to be
reserved for grants under the Company's stock option and award plans. The
Company's stock option plan provides for the granting of options to directors,
officers and eligible key employees to purchase common shares. The 2000 Plan
permits the issuance of either incentive stock options or nonqualified stock
options. Stock Appreciation Rights ("SARs") may be granted in tandem with stock
options or independently of and without relation to options. There were no SARs
outstanding at December 31, 2000. The option price for incentive stock options
shall be an amount of not less than 100% of the fair market value per share on
the date of grant and the option price for nonqualified stock options shall be
an amount of not less than 90% of the fair market value per share on the date
the option is granted. No such options may be exercised during the first year
after grant, and are exercisable cumulatively in four installments of 25% each
year thereafter. Options have terms ranging from five to ten years.
The following table summarizes stock option activity:
Weighted-
Average
Number Exercise
of Shares Price
Outstanding, January 1, 1998 675 $13.07
Granted 177 24.46
Canceled (52) 11.05
Exercised (139) 9.19
Outstanding, December 31, 1998 661 16.77
Granted 395 20.39
Canceled (83) 7.44
Exercised (107) 9.18
Page 34
Coachmen Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements, Continued
(in thousands, except per share amounts)
9. COMMON STOCK MATTERS AND EARNINGS PER SHARE, Continued.
Outstanding, December 31, 1999 866 18.94
Granted 804 7.79
Canceled (152) 18.78
Exercised (130) 4.72
Outstanding, December 31, 2000 1,388 13.83
The granted options in 2000 include 508 options granted to holders of options to
acquire shares of an acquired business, Miller Building Systems, Inc. (see Note
12). The weighted average exercise price of these converted options was $6.59
per share and such options were vested and exercisable at the date of
conversion.
Options outstanding at December 31, 2000 are exercisable at prices ranging from
$2.43 to $24.88 per share and have a weighted average remaining contractual life
of 6.2 years. The following table summarizes information about stock options
outstanding and exercisable at December 31, 2000.
Options Outstanding Options Exercisable
Weighted-
Number Average Weighted- Number Weighted-
Outstanding at Remaining Average Exercisable at Average
Range of December 31, Contractual Exercise December 31, Exercise
Exercise Price 2000 Life Price 2000 Price
$ 2.43 - $ 7.00 201 9.8 $ 5.26 201 $ 5.26
7.01 - 12.00 567 8.8 9.62 272 9.37
12.01 - 17.00 198 3.1 14.78 81 14.97
17.01 - 22.00 144 1.4 19.93 106 19.96
22.01 - 24.88 278 2.7 24.78 97 24.73
1,388 757
At December 31, 1999 and 1998 there were exercisable options to purchase 270 and
243 shares, respectively, at weighted-average exercise prices of $15.55 and
$11.94, respectively. The weighted-average grant-date fair value of options
granted during the years ended December 31, 2000, 1999 and 1998 were $3.11,
$5.92 and $6.99, respectively. As of December 31, 2000, 474 shares were reserved
for the granting of future stock options and awards, compared with 112 shares at
December 31, 1999.
Had the Company adopted the provisions of SFAS No. 123, "Accounting for Stock-
Based Compensation," the Company's pro forma net income and net income per share
would have been:
2000 1999 1998
Pro forma net income $1,588 $29,013 $32,656
Pro forma net income per share:
Basic .10 1.77 1.91
Diluted .10 1.77 1.89
Page 35
Coachmen Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements, Continued
(in thousands, except per share amounts)
9. COMMON STOCK MATTERS AND EARNINGS PER SHARE, Concluded.
The pro forma amounts and the weighted-average grant-date fair-value of options
granted were estimated using the Black-Scholes option-pricing model with the
following assumptions:
2000 1999 1998
Risk free interest rate 5.77% 5.49% 5.04%
Expected life 2.75 years 2.75 years 2.75 years
Expected volatility 46.6% 39.8% 37.9%
Expected dividends 1.7% 1.1% 1.0%
Stock Purchase Plan
The Company has an employee stock purchase plan under which a total of
498 shares of the Company's common stock are reserved for purchase by full-time
employees through payroll deductions, cash payments, or a combination of both at
a price equal to 90% of the market price of the Company's common stock on the
purchase date. As of December 31, 2000, there were 263 employees actively
participating in the plan. Since its inception, a total of 302 shares have been
purchased by employees under the plan. Certain restrictions in the plan limit
the amount of payroll deductions and cash payments an employee may make in any
one quarter. There are also limitations as to the amount of ownership in the
Company an employee may acquire under the plan.
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.
Shareholder Rights Plan
On October 21, 1999, the Company's Board of Directors adopted a new shareholder
rights plan to replace an existing rights plan that was due to expire on
February 15, 2000. The new rights plan, which became effective January 12, 2000
(the "Record Date"), provides for a dividend distribution of one common share
purchase right (the "Rights") for each outstanding common share to each
shareholder of record on the Record Date. The Rights will be represented by
common share certificates and will not be exercisable or transferable apart from
the common shares until the earlier to occur of (i) ten (10) business days
following a public announcement that a person or group of persons (an "Acquiring
Person") has acquired, obtained the right to acquire, beneficial ownership of
20% or more of the outstanding common shares or (ii) ten (10) business days
following the commencement of (or announcement of an intention to make) a
tender offer or exchange offer if, upon consummation thereof, such an Acquiring
Person would be the beneficial owner to 20% or more of the outstanding common
shares. Upon the occurrence of the certain events and after the Rights become
exercisable, each right would entitle the rightholder (other than the Acquiring
Person) to purchase one fully paid and nonaccessable common share of the Company
at a purchase price of $75 per share, subject to anti-dilutive adjustments. The
Rights are nonvoting and expire February 1, 2010, and at any time prior to a
person or a group of persons becoming an Acquiring Person, the Company's Board
of Directors may redeem the Rights in whole, but not in part, at a purchase
price $.01 per Right.
Page 36
Coachmen Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements, Continued
(in thousands, except per share amounts)
10. COMPENSATION AND BENEFIT PLANS.
Incentive Compensation
The Company has incentive compensation plans for its officers and other key
management personnel. The amounts charged to expense for the years ended
December 31, 2000, 1999 and 1998 aggregated $1,085, $3,344 and $3,346,
respectively.
Deferred Compensation
The Company has established a deferred compensation plan for executives and
other key employees. The plan provides for benefit payments upon termination of
employment, retirement, disability, or death. The Company recognizes the cost
of this plan over the projected service lives of the participating employees
based on the present value of the estimated future payments to be made. The
plan is funded by insurance contracts on the lives of the participants, and
investments in insurance contracts (included in other assets) aggregated $12.4
million and $11.3 million as of December 31, 2000 and 1999, respectively. The
deferred compensation obligations, which aggregated $7,327 and $6,782 at
December 31, 2000 and 1999, respectively, are included in other non-current
liabilities, with the current portion ($367 and $342 at December 31, 2000 and
1999, respectively) included in other current liabilities.
In connection with the two business acquisitions in 2000, which are discussed
in Note 12, the Company assumed obligations under existing deferred
compensation agreements. These obligations aggregated $1,877 at December 31,
2000. As part of the acquisition, the Company assumed ownership of life
insurance contracts and trust accounts established for the benefit of
participating executives. Such assets, which are valued at fair value,
aggregated $763 at December 31, 2000.
Employee Benefit Plans
Effective January 1, 2000, the Company established a retirement plan (the
"Plan"), under Section 401(k) of the Internal Revenue Code that covers all
eligible employees. The Plan is a defined contribution plan and allows
employees to make voluntary contributions up to 15% of annual compensation.
Under the Plan, the Company may make discretionary matching contributions up to
6% of participants' compensation. Expense under the Plan aggregated $1,434 for
the year ended December 31, 2000.
Prior to January 1, 2000, the Company sponsored a Coachmen Assisted Retirement
For Employees (C.A.R.E.) program which provided a mechanism for each eligible
employee to establish an individual retirement account and receive matching
contributions from the Company based on the amount contributed by the employee,
the employee's years of service and the profitability of the Company. Company
matching contributions charged to expense under the C.A.R.E. program aggregated
$735 and $857 for the years ended December 31, 1999 and 1998, respectively.
Page 37
Coachmen Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements, Continued
(in thousands, except per share amounts)
11. INCOME TAXES.
Income taxes are summarized as follows:
2000 1999 1998
Federal:
Current $ 1,695 $13,591 $15,492
Deferred (1,564) 489 339
131 14,080 15,831
State:
Current 786 1,389 1,348
Deferred (194) 70 49
592 1,459 1,397
Total $ 723 $15,539 $17,228
The following is a reconciliation of the provision for income taxes
computed at the federal statutory rate (34% in 2000 and 35% in 1999
and 1998) to the reported provision for income taxes:
2000 1999 1998
Computed federal income tax
at federal statutory rate $ 982 $15,765 $17,602
Changes resulting from:
Increase in cash surrender
value of life insurance
contracts (233) (150) (245)
Foreign Sales Corporation
subject to lower tax rate (391) (368) (315)
State income taxes, net of
federal income tax benefit 391 948 908
Preferred stock dividend
exclusion (399) (622) (548)
Settlement of IRS tax
examinations 216 - -
Other, net 157 ( 34) (174)
Total $ 723 $15,539 $17,228
Page 38
Coachmen Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements, Continued
(in thousands, except per share amounts)
11. INCOME TAXES, Concluded.
The components of the net deferred tax assets are as follows:
2000 1999
Current deferred tax asset:
Accrued warranty expense $ 2,981 $ 2,971
Inventories 948 556
Receivables 389 227
Other 4,066 989
Net current deferred
tax asset $ 8,384 $ 4,743
Noncurrent deferred tax
asset (liability):
Deferred compensation $ 2,931 $ 2,713
Property and equipment and other
real estate (5,677) (3,256)
Intangible assets (778) (721)
Other 154 (225)
Net noncurrent deferred
tax liability $(3,370) $(1,489)
12. ACQUISITIONS AND DISPOSITIONS.
Acquisitions
Effective June 30, 2000, the Company acquired all of the issued and
outstanding capital stock of Mod-U-Kraf Homes, Inc. ("Mod-U-Kraf"), a
manufacturer of modular housing, located in Virginia. The purchase price
aggregated $15.1 million and consisted of $9.7 million of cash paid at closing
and the assumption of $5.4 million of liabilities. The excess of purchase
price over fair value of assets acquired ("good-will"), which approximated
$1.5 million, is being amortized on a straight-line basis over 20 years.
On October 31, 2000, the Company acquired all of the issued and out-standing
capital stock of Miller Building Systems, Inc. ("Miller Building"). Miller
Building designs, manufactures and markets factory-built buildings for use as
commercial modular buildings and telecommunication shelters. The purchase
price aggregated $43.8 million and consisted of $27.3 million of cash paid at
closing and the assumption of $16.5 million of liabilities. In addition to the
cash purchase price and assumption of liabilities, the Company assumed Miller
Building's obligations under its stock option plan by converting options to
acquire Miller Building common shares into options to acquire a like number of
common shares of the Company for an adjusted exercise price. The difference
between per share fair value of the Company's common shares less adjusted
exercise price represented additional purchase price and was accounted for as
a credit to additional paid-in capital. The excess of purchase price over
fair value of assets acquired ("goodwill"), which approximated $9.1 million,
is being amortized on a straight-line basis over 20 years.
Page 39
Coachmen Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements, Continued
(in thousands, except per share amounts)
12. ACQUISITIONS AND DISPOSITIONS, Continued.
The acquisitions of Mod-U-Kraf Homes and Miller Building have been accounted
for as a purchase and the operating results of the acquired businesses are
included in the Company's consolidated financial statements from the
respective dates of acquisition.
Unaudited pro forma financial information as if the acquisitions of Mod-U-Kraf
and Miller Building had occurred at the beginning of each period is as
follows:
2000 1999
Net sales $784,999 $933,709
Net income 3,797 33,524
Earnings per share:
Basic .24 2.05
Diluted .24 2.04
On February 3, 1998, the Company acquired certain assets and the operations of
three retail recreational vehicle dealerships, two located in Florida and one
in Georgia. The purchase price, which aggregated $9.8 million and approximated
the fair value of the acquired assets, consisted of $9.0 million in cash and
the assumption of certain liabilities of the sellers. The acquisitions were
accounted for as a purchase and the operating results of the acquired
businesses are included in the Company's consolidated financial statements
from the date of acquisition. Pro forma financial information for 1998 has not
been presented as it is not materially different from the Company's historical
results.
Dispositions
During the years ended December 31, 2000 and 1999, the Company disposed of
certain business operations within its vehicle segment.
On January 12, 2000, the Company sold certain assets and the business
operations of its automotive division (converter of vans and specialty
vehicles). The sales price consisted of cash of $2.3 million and the buyer's
assumption of certain liabilities.
During the quarter ended September 30, 2000, the Company sold the business
operations and assets of its Lux Company subsidiary. The sales price
consisted of cash of $2.5 million and the buyers assumption of certain
liabilities. The pretax gain on the sale, which was primarily attributable to
the sale of real property, approximated $1.2 million.
During the third and fourth quarters of 2000, the Company completed the
closing and liquidation of four of its Company-owned dealerships pursuant to
its previously announced plan to exit this line of business with the exception
of two Company-owned stores which will be retained for research and
development and regional service purposes.
Page 40
Coachmen Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements, Continued
(in thousands, except per share amounts)
12. ACQUISITIONS AND DISPOSITIONS, Concluded.
During the year ended December 31, 1999, the Company sold the business
operations and certain assets of two of its Company-owned dealerships. The
sales proceeds consisted of $3,298 cash and a promissory note receivable of
$650. The Company recognized a $650 gain on the sale of these businesses
which is included in other nonoperating income.
Net sales and pretax losses (including gains and losses on sale, disposal or
liquidation) of these business operations were as follows:
2000 1999 1998
Net sales $60,732 $122,510 $102,912
Pretax losses (5,195) (2,473) (871)
13. COMMITMENTS AND CONTINGENCIES.
Lease Commitments
The Company leases various manufacturing and office facilities under
noncancelable agreements which expire at various dates through November 2006.
Several of the leases contain renewal options and options to purchase and
require the payment of property taxes, normal maintenance and insurance on the
properties. Certain office and delivery equipment are also leased under
various noncancelable agreements. The above described leases are accounted for
as operating leases.
Future minimum annual lease commitments at December 31, 2000 aggregated $1,310
and are payable as