Economic News Not Improving

From today’s The Outdoor Wire

Berkshire Hathaway Inc.’s Forest River Inc. has acquired the RV assets of Coachmen Industries, Inc. (NYSE:COA). Those assets include its brands, product lines, central manufacturing operations in Middlebury, Indiana and the dealership in Elkhart, Indiana.

Executives at Coachmen say the decision was all about securing the future of the company. For months, it was common knowledge in the industry that Coachmen was floundering, along with most of the rest of the recreational vehicle industry. Coachmen, however, has made a deal that will keep the company operating, maintain the corporate offices and facilities in Middlebury/Elkhart and provide what CEO Richard Lavers calls “sufficient cash liquidity to not just survive, but to build our profitable housing businesses and continue our diversification into the bus and specialty vehicle transportation industries.” In today’s struggling economy, those are goals simply out of the reach of many of Coachmen’s competitors.

It’s been a tough trip to this point for the RV manufacturer. This time last year, COA shares were trading at $6.40. Prior to the announcement of the acquisition, they had traded as low as forty-eight cents per share. Friday, Coachmen shares nearly doubled, closing trading Friday at $1.08/share.

According to a release issued by the company, full details of this transaction will be released “at the appropriate time” and the transaction is subject to shareholder approval. The company says it will seek that approval in December.
“There is still much to be done, but we look forward to a long and bright future for both these fine companies,” concluded Lavers.

Coachmen Industries, Inc. has been one of America’s leading manufacturers of recreational vehicles with Coachmen, Georgie Boy, Sportscoach and Viking. The company also produces “systems-built homes” through All American Homes and Modu-Kraf and commercial structures with All American Building Systems,

Berkshire subsidiary Forest River describes itself as the world’s largest manufacturer of towable and fifth-wheel trailers, but it’s holdings are considerably more extensive. With 60 manufacturing facilities and 5400 employees Forest River subsidiaries include Elkhart Coach and Glaval and Starcraft Bus, Rockport Commercial Vehicles, Forest River Marine (pontoon boats) and Forest River Housing subsidiaries Hart Housing and Sterling Homes.

And the RV industry isn’t alone in their suffering. The boat industry, despite reports to the contrary, is hurting. The Outdoor Wire has learned that many of the manufacturers of smaller sport and fishing craft are losing dealers nationwide. Some smaller dealers, faced with the challenge of meeting their obligations – including the technique known as floor planning their inventory from boat makers, are simply walking away. Their abandonment is making an already shaky industry worse as manufacturers find themselves faced with the task of bringing retrieving their inventory, and dealing with the loss of cash flow from the floor planned inventory.

We’re also hearing that financial challenges are biting deeply into the regional competition circuits. Many professional anglers have “memo boats” technically, they are purchased from the manufacturer on very favorable terms, but the anglers normally sell the boats at the end of their competition season, pay that money to the manufacturer and roll their memo into a new boat for the next season. It’s a practice that is being curtailed – drastically- according to professional anglers.

And there is the continuing challenge of finding financing for qualified buyers. We’re hearing that consumers who want to buy boats and have good credit scores (in some cases, excellent credit scores) just can’t get financing. At an industry meeting recently in Las Vegas, there were a couple of potential solutions offered, but we’ve yet to hear any of them taking definitive shape.

In the meantime, everyone watches as the economic conditions continue to worsen across the outdoor industry. Since our report on Friday concerning the acquisitions and stock prices at two major outdoor retailers, we’ve continued to get reports that indicate that small vendors and specialty service suppliers are finding themselves waiting longer – and in some cases, considerably longer – for their payments. That’s a frightening trend in the industry as these smaller suppliers don’t have the resources to either survive without timely payment, or pursue collection measures against their customers.

With staff cuts across the retail sector and the continued reluctance of consumers to spend beyond their means, we may be facing a very mediocre shopping day this coming Friday. Although there is an excessive amount of hyping of the significance of that first shopping day after Thanksgiving, it is one indicator of the type of holiday retail season ahead.

Meanwhile, this new frugality – by consumers and companies – is good news and bad news. Retail is suffering, but debt is slowing as consumers hold off on all but essential purchases. We’re hearing that bargain hunters, armed with figurative wads of cash (like Berkshire Hathaway) are shopping the outdoor and firearms industries for bargains.

They’re out there.