Coachmen Industries, Inc.

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Coachmen Industries, Inc.

2831 Dexter Drive
Elkhart, Indiana 46514
U.S.A.
Telephone: (574) 262-0123
Fax: (574) 262-8823
Web site: http://www.coachmen.com

Public Company
Incorporated: 1964
Employees: 4,416
Sales: $865.1 million (2004)
Stock Exchanges: New York
Ticker Symbol: COA
NAIC: 336213 Motor Home Manufacturing

Coachmen Industries, Inc., based in Elkhart, Indiana, is one of the nation's leading recreational vehicles (RVs) manufacturers, and is also involved in the modular housing industry. The public company, listed on the New York Stock Exchange, is composed of seven main subsidiaries. The cornerstone is Coachmen Recreational Vehicle Company, which has been manufacturing motorhomes and travel trailers since the early 1960s. Georgie Boy Manufacturing, L.L.C. concentrates on Class A motorhomes, and Viking Recreational Vehicles, L.L.C. offers lightweight, folding camping trailers. An offshoot of Viking, Prodesign Products, L.L.C., produces a wide variety of fiberglass and thermoformed plastic items used in the RV as well as automotive, marine, heavy truck, and medical industries, including raised roofs, shower pans, storage boxes, and medical trays. Coachmen's modular home business is conducted through three subsidiaries. All American Homes, L.L.C. produces homes in its Kansas and Colorado plants that range from 900-square-foot ranch homes to 3,000-square-foot two-story colonial models. Mod-U-Kraf Homes, L.L.C. is a Virginia company that makes ranch, Cape Cod, and two-story homes 1,200 to more than 4,000 square feet in size. Miller Building Systems, Inc. focuses on pre-engineered metal buildings for telecommunications and other commercial uses.

ORIGINS DATING TO THE EARLY 1960S

Coachmen's home of Elkhart, Indiana long ago claimed the title of RV capital of the United States and became the rightful location for the RV Museum and Hall of Fame. In the early 1930s Wilbur Schult, a native of Elkhart, attended the World's Fair, where he saw a homemade trailer and was inspired to build his own and in the process launched the town's RV industry. Coachmen was begun in 1964 by three tight-knit brothers from the Elkhart area: Claude, Thomas, and Keith Corson. Claude, re-garded as the idea man between the three, was credited with the thought of putting a 5,000-square-foot building they owned in Middlebury, Indiana, to use by going into the travel trailer business. Keith was put in charge of production, and Tom, who quit his job at an Indiana investment firm to join his brothers, became the man responsible for finance and marketing. In the first year of operation, Coachmen produced a dozen travel trailers as well as 80 truck caps and a single truck camper. It was a modest beginning, but a beginning nonetheless, and the company moved beyond camping trailers to include motorhomes.

Coachmen not only survived the 1960s, it found a way to set itself apart from the competition by introducing what it called the "buck stops here" warranty. At the time, RV manufacturers offered a warranty only on what they actually constructed. As a result, if customers had a problem with a component, such as a refrigerator or stove, they had to deal directly with the individual supplier, with whom they carried little weight. Coachmen removed the inconvenience by taking responsibility for everything included in their products. The company became the one who dealt with the component supplier, and because of the amount of business they offered, they were better able to gain satisfaction. It was an idea that proved popular with customers and was eventually adopted industrywide.

Coachmen began to grow steadily. In 1968 it acquired Viking Boat Company, which produced boats, but in the early 1970s would begin to manufacture fold-down camping trailers as well. Trailer production was moved to Michigan and in 1976 the Viking Recreation Vehicle division was formed. Coachmen continued to run the Viking Boat Company as a separate unit until it was sold in 1982 to Murray Chris-Craft. Also during its first 20 years of existence, Coachmen attempted to diversify into aircraft parts and made an early stab at manufactured housing. Both failed, and in 1978 Coachmen closed its only manufactured housing plant after a decade of trying because Tom Corson believed that the operation was too small to compete effectively. He would not stay out of the business for long, however.

GOING PUBLIC IN THE LATE 1960S

In 1969 Coachmen went public to fuel further growth. In July 1969 it completed a pair of acquisitions: Space Age Camper and Enterprises Inc. One of the Corson brothers, Claude, soon left. Forever restless, he quit in 1970 to pursue other business ideas. Keith at the age of 46 would leave for similar reasons a dozen years later, telling the New York Times in 1982, "I've been pretty much in the same job for 18 years and decided it was time to take a look at things." He would eventually return and serve as Coachmen's president until his retirement in 2000.

Coachmen enjoyed strong growth through much of the 1970s. It gained a listing on the American Stock Exchange in 1972, and used its increased leverage to complete several acquisitions. In 1974 Coachmen added Flannigan Industries, Inc. and Elkhart-based Lux Co., Inc. Fan Coaches Co. Inc. of La Grange, Indiana was bought in 1978 to fill in the low end of Coachmen's RV lines, followed later in the year by the acquisition of Sportscoach Corp. of America, operating out of California, a major market for RV sales but one in which Coachmen had always been weak. It was also in 1978 that Coachmen moved from the American Stock Exchange to the New York Stock Exchange.

Coachmen's momentum was blunted by poor economic conditions in 1979, when fuel shortages led to high gasoline prices, making such heavy gas users as RVs less attractive to the buying public. Moreover, high interest rates further dampened consumer interest. As a result, by 1982 about half of RV manufacturers were put out of business. To hang on until a recovery mounted, Coachmen was forced to shutter five plants. It lost money in both 1979 and 1980 before returning to the black in 1981 when it recorded a net profit of $2.9 million.

COMPANY PERSPECTIVES

Company Mission:

Coachmen Industries, Inc. will be widely recognized as the Nation's premier provider of outstanding Recreational Vehicles and Modular Homes. We are in the housing business, whether providing our owners with recreational homes away from home, permanent single- or multi-family residences, or temporary accommodations for travelers and students alike. Our living space products enrich the lives of our customers.

MEMBERSHIP IN FORTUNE 500 IN THE 1980S

With business back on track in the early 1980s, Tom Corson looked to grow again. Viking added a new line of truck campers in 1981, and Coachmen opened a new plant in Angel, Oregon. Corson also resumed his diversification efforts. In November 1980 Coachmen acquired C/P Products Corp. to build a major RV parts-and-accessories business, including thousands of items, such as sun roofs and tire carriers. It also provided a hedge against a poor economy, when RV owners might be reluctant to buy a new vehicle but were increasingly interested in fixing up what they already owned. Corson also reentered the modular home business, acquiring Marlette Homes, Inc. and All American Homes, Inc. in 1982, which would become a key element in Coachmen's portfolio of subsidiaries. At this stage, however, the modular home business was barely profitable. Overall, Coachmen's sales reached $263 million in 1982 and soared to $450 million in 1983, placing the company among the prestigious Fortune 500.

The good times never proved long-lasting for Coachmen, as it suffered yet another reversal of fortune in the mid-1980s. The company decided to centralize its manufacturing and engineering operations to cut production costs, then reversed field and decided to disperse its plants in order to be closer to its markets, as well as to overcome a problem of all its products starting to look alike. The change in course took about three years longer than anticipated, and as a result engineering costs created a bloated research and development expense. Coachmen also lost money in Texas, where the economy was devastated by a downturn in the oil and gas industry. It finally closed its Texas plant in 1987. Also during this rough patch, Coachmen sold off its parts and accessories businesses:

United Sales of Texas and CoachLite Supply Co. in 1984, and C/P Products in 1985. Business bottomed out by the end of 1987 and Coachmen appeared to be rebounding in 1988 when difficult economic conditions once again took their toll and the company closed the decade with two more losing years, including a net loss of nearly $11.5 million in 1989.

During the first half of the 1990s, Coachmen divested itself of noncore businesses it had ventured into in the 1980s, such as ambulances through the 1986 acquisition of Southern Ambulance Builders, Inc., and tried to narrow its focus to RVs and modular homes. Viking also sold off its truck camper division in the early 1990s. One of the keepers, however, was the $12.8 million 1995 acquisition of Georgie Boy Manufacturing, Inc.

As the economy picked up in the 1990s, modular home sales took on increasing importance for Coachmen. In 1996 All American contributed $98.7 million in sales, or 16 percent of the company's $606.4 million total revenues, and a sizable portion of Coachmen's more than $29.6 million in net income.

In 1997 Corson began thinking about turning over the reins of the business and settled on his daughter, Claire C. Skinner, as his successor. Skinner had first gone to work for her father at the Elkhart plant at the age of nine gathering screws from the floor for reuse at nine cents an hour. By the time she was ready for college, Skinner had no intention of working in the RV field. She attended Southern Methodist University in Dallas, earning a degree in journalism and marketing, but she found she missed the family business and entered into a management training program at Coachmen's Grapevine, Texas office, and soon became familiar with all aspects of the RV industry. Again, she grew disenchanted with the business, and this time left for law school at Notre Dame, followed by two years in Chicago working as an attorney. Her love for the family business was rekindled once more and finally in 1983 she returned and stayed. Three years later she was named president of the company's largest subsidiary, the flagship Coachmen RV unit. By the time her father was ready to step away from the chairmanship and CEO position, Skinner was well seasoned and the perfect choice to succeed her father. Her uncle, Keith Corson, remained on the management team as president and chief operating officer until he retired in 2000.

Coachmen enjoyed a strong 1998, when revenues increased to $756 million, a 14 percent increase over 1997's $661.6 million. Net income showed even greater improvement, from $24.8 million in 1997 to more than $33 million in 1998, a 34 percent increase. The company's prospects also appeared bright. In the short run, the company benefited from a robust economy that spurred sales of both RVs and modular homes, but a longer-term trend was also hopeful: the baby boom generation was beginning to enter into its 50s, the prime demographic for buyers of RVs. As a result, Coachmen and other RV manufacturers expected to enjoy a 20- to 25-year period of high demand.

KEY DATES

1964:: The company is founded by three Corson brothers.
1969:: Coachmen is taken public.
1978:: Stock is listed on the New York Stock Exchange.
1984:: Coachmen is listed among the Fortune 500.
1997:: Cofounder Tom Corson is succeeded as chair-man and CEO by daughter Claire Skinner.
2000:: Mod-U-Kraf Homes and Miller Building Systems are acquired.

Coachmen experienced another record-setting year to close out the 1990s, building sales to $847 million, although net income slipped to $29.5 million due to investment in new technology, start-up costs for new production capacity, and some accounting changes. Nevertheless, Coachmen entered the new century on a high note. In 2000 it was once again aggressive on the acquisition front. It used $10 million in stock to acquire Mod-U-Kraf Homes, Inc. in June 2000. Based in Rocky Mount, Virginia, Mod-U-Kraf had been in the modular home business since 1971. Later in 2000 Coachmen paid $27.3 million in cash and the assumption of $16.6 million in liabilities to acquire Miller Building Systems. Also based in Elkhart, the company was founded by Otto Miller, who in 1967 had cofounded Cliff Industries, which grew into one of the country's largest modular home manufacturers. Miller's latest venture now joined forces with Coachmen's All American Homes division, which had become the largest U.S. builder of modular homes. The year 2000 also was marked by an attempted hostile takeover of the company. Thor Industries Inc. of Jackson Center, Ohio, made a nearly $290 million offer for Coachmen in April 2000. The board of directors quickly rejected the bid, calling it inadequate. Thor, which owned 3 percent of Coachmen stock, urged stockholders to withhold votes for the company's board at the annual shareholders' meeting the following month, but the board remained intact and the Thor threat dissipated.

RV sales had generally proven to provide an early warning sign of economic downturns. The recession of the early 2000s was no exception, as Coachmen experienced a significant drop in revenues to $710 million, especially in the fourth quarter when sales fell off 30 percent from 1999, from $206.7 million to $144.1 million. As a result, net income for the year plummeted to just $2.2 million. To weather these difficult times, Coachmen was quick to take steps to minimize the damage, lessons learned from previous down cycles. Primarily, payroll was cut and production facilities were consolidated. In addition, Coachmen eliminated the few sidelines in which it participated other than RV manufacturing and modular homes. It exited the van conversion business by selling Coachmen Automotive, the furniture industry with the sale of the Lux Company, and RV retailing by shutting down four RV dealerships, although two locations were retained for support purposes and research and development efforts.

With the full force of the recession now being felt, Coachmen could not avoid losing money in 2001, but the company was able to return to profitability in 2002, netting $9.9 million on sales of $665.2 million. Coachmen had not turned the corner completely, however. In 2003 it experienced an up-and-down year. In the end, sales increased to $711.1 million but net income slipped to $7.4 million. Business was much better in 2004, when the company posted record sales of more than $865.1 million, to go with net income of $15.3 million, the company's best year since 1999. With the demographics still favoring it, Coachmen appeared well positioned now to enjoy a long stretch of success.

PRINCIPAL SUBSIDIARIES

Coachmen Recreational Vehicle Company, L.L.C.; Georgie Boy Manufacturing, L.L.C.; Viking Recreational Vehicles, L.L.C.; Prodesign Products, L.L.C.; All American Homes, L.L.C.; Miller Building Systems; Mod-U-Kraf Homes, L.L.C.