Exhibit 99.1
NEW ERA BUILDING SYSTEMS, INC. |
UNAUDITED CONSOLIDATED INCOME STATEMENT |
FOR THE SIX MONTHS ENDED JUNE 30, 2005 AND JUNE 30, 2004 |
(IN THOUSANDS) |
|
| Six Months Ended |
| Six Months Ended | |||
|
|
|
|
|
|
|
|
Net sales |
| $ | 57,540 |
| $ | 51,558 |
|
Cost of sales |
|
| 51,688 |
|
| 45,679 |
|
Gross margin |
|
| 5,852 |
|
| 5,879 |
|
|
|
|
|
|
|
|
|
Selling, general, and administrative expenses |
|
| 4,297 |
|
| 4,150 |
|
Operating income |
|
| 1,555 |
|
| 1,729 |
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
| 522 |
|
| 436 |
|
Income before minority interest in income of consolidated |
|
| 1,033 |
|
| 1,293 |
|
|
|
|
|
|
|
|
|
Minority interest in income of consolidated subsidiaries |
|
| 43 |
|
| 94 |
|
Net income |
| $ | 990 |
| $ | 1,199 |
|
See accompanying Notes to Unaudited Consolidated Financial Statements.
NEW ERA BUILDING SYSTEMS, INC. |
UNAUDITED CONSOLIDATED BALANCE SHEET |
AS OF JUNE 30, 2005 AND DECEMBER 31, 2004 |
(IN THOUSANDS) |
|
| June 30, 2005 |
| December 31, 2004 |
| ||
Current assets |
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 1,924 |
| $ | 1,436 |
|
Accounts receivable, trade |
|
| 2,393 |
|
| 3,555 |
|
Inventories |
|
| 14,555 |
|
| 13,308 |
|
Other current assets |
|
| 593 |
|
| 602 |
|
Total current assets |
|
| 19,465 |
|
| 18,901 |
|
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
| 25,861 |
|
| 24,493 |
|
Less-accumulated depreciation |
|
| 10,159 |
|
| 9,228 |
|
|
|
| 15,702 |
|
| 15,265 |
|
|
|
|
|
|
|
|
|
Goodwill |
|
| 1,092 |
|
| 1,092 |
|
Other non-current assets |
|
| 355 |
|
| 590 |
|
|
| $ | 36,614 |
| $ | 35,848 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
Short-term debt |
| $ | 8,641 |
| $ | 7,687 |
|
Current maturities of long-term debt |
|
| 1,222 |
|
| 809 |
|
Accounts payable |
|
| 4,131 |
|
| 4,824 |
|
Accrued warranty obligations |
|
| 1,771 |
|
| 1,771 |
|
Customer deposits |
|
| 674 |
|
| 1,195 |
|
Other current liabilities |
|
| 6,481 |
|
| 5,301 |
|
Total current liabilities |
|
| 22,920 |
|
| 21,587 |
|
|
|
|
|
|
|
|
|
Long-term debt |
|
| 7,130 |
|
| 6,587 |
|
Contingent liabilities |
|
|
|
|
|
|
|
Minority interest in net assets of consolidated subsidiaries |
|
| 1,987 |
|
| 1,944 |
|
Shareholders’ equity |
|
| 4,577 |
|
| 5,730 |
|
|
| $ | 36,614 |
| $ | 35,848 |
|
See accompanying Notes to Unaudited Consolidated Financial Statements.
NEW ERA BUILDING SYSTEMS, INC. |
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS |
FOR THE SIX MONTHS ENDED JUNE 30, 2005 AND JUNE 30, 2004 |
(IN THOUSANDS) |
|
| Six Months Ended |
| Six Months Ended |
| ||
|
| June 30, 2005 |
| June 30, 2004 |
| ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
Net income |
| $ | 990 |
| $ | 1,199 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
Minority interest in income of consolidated subsidiaries |
|
| 43 |
|
| 94 |
|
Depreciation and amortization |
|
| 931 |
|
| 799 |
|
Increase/decrease: |
|
|
|
|
|
|
|
Accounts receivable |
|
| 1,162 |
|
| (197 | ) |
Inventories |
|
| (1,247 | ) |
| (1,094 | ) |
Accounts payable |
|
| (693 | ) |
| 494 |
|
Other, net |
|
| 668 |
|
| 1,507 |
|
Net cash provided by continuing operating activities |
|
| 1,854 |
|
| 2,802 |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITES: |
|
|
|
|
|
|
|
Additions to property, plant and equipment |
|
| (1,368 | ) |
| (1,266 | ) |
Advances to unconsolidated subsidiaries |
|
| — |
|
| (629 | ) |
Net cash used for investing activities |
|
| (1,368 | ) |
| (1,895 | ) |
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
Net increase in long- and short-term debt |
|
| 1,910 |
|
| 930 |
|
Dividends paid |
|
| (1,908 | ) |
| (1,705 | ) |
Net cash provided by (used for) financing activities |
|
| 2 |
|
| (775 | ) |
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
| 488 |
|
| 132 |
|
Cash and cash equivalents at beginning of period |
|
| 1,436 |
|
| 1,022 |
|
Cash and cash equivalents at end of period |
|
| 1,924 |
|
| 1,154 |
|
See accompanying Notes to Unaudited Consolidated Financial Statements.
NEW ERA BUILDING SYSTEMS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
As of and for the six months ended June 30, 2005 and June 30, 2004
NOTE 1 – Basis of presentation and summary of significant accounting policies
| Basis of presentation and principles of consolidation |
On August 8, 2005, pursuant to respective Asset Purchase Agreements, a wholly-owned subsidiary of Champion Enterprises, Inc. (“Champion”) acquired the assets of New Era Building Systems, Inc. (“New Era”), its wholly-owned subsidiary Unique Fabrications, LLC (“Unique”), and its majority-owned subsidiaries, Castle Housing of Pennsylvania, Ltd. (“Castle”) and Carolina Building Solutions, LLC (“CBS”), collectively “the acquired businesses.” At December 31, 2004, New Era owned 55.7% and 54.6%, respectively, of the outstanding membership interests of Castle and CBS.
The consolidated financial statements include the accounts of the acquired businesses (“the Company”). All significant intercompany transactions have been eliminated.
At June 30, 2005, New Era held a 62% interest in an affiliate. The affiliate was not acquired by Champion in the asset acquisitions described above, and therefore New Era’s investment in the affiliate and the affiliate’s accounts and results are not included in the accompanying consolidated financial statements of the acquired companies. At June 30, 2005, New Era’s investment in the affiliate was $178,000.
| Business |
The Company is a manufacturer and wholesaler of modular and manufactured housing. The factory-built homes that are produced are primarily single-family dwellings sold to builders/retailers throughout the Eastern United States.
NOTE 2 – Inventory
The following is a summary of inventories by component at June 30, 2005 and December 31, 2004:
|
| June 30, 2005 |
| December 31, 2004 |
| ||
|
|
| (in thousands) |
| |||
Raw materials |
| $ | 5,833 |
| $ | 6,182 |
|
Work-in-process |
|
| 1,586 |
|
| 1,586 |
|
Finished goods |
|
| 7,173 |
|
| 5,577 |
|
Inventory reserve |
|
| (37 | ) |
| (37) |
|
Total inventory |
| $ | 14,555 |
| $ | 13,308 |
|
NOTE 3 – Short-term debt
Short-term debt primarily consists of borrowings under bank lines of credit and is secured by the accounts receivable, inventories and certain property and equipment of the Company. Interest on short-term debt ranges from the bank’s prime rate (6.25% at June 30, 2005) to the prime rate plus 0.5%.
NOTE 4 – Long-term debt
| Long-term debt at June 30, 2005 and December 31, 2004 consists of the following: |
|
| June 30, 2005 |
| December 31, 2004 |
| ||
|
|
| (in thousands) |
| |||
Mortgage loans payable |
|
| 8,352 |
|
| 7,396 |
|
Less: current portion |
|
| (1,222 | ) |
| (809 | ) |
Long-Term Debt |
| $ | 7,130 |
| $ | 6,587 |
|
Mortgage loans are secured principally by land, buildings and certain equipment. Interest on mortgage loans is payable monthly at rates ranging from the bank’s prime rate (6.25% at June 30, 2005) to 8.375%.
NOTE 5 – Other current liabilities
Other current liabilities at June 30, 2005 and December 31, 2004 consists of the following:
|
| June 30, 2005 |
| December 31, 2004 |
| ||
|
|
| (in thousands) |
| |||
Accrued dealer volume rebates |
| $ | 1,912 |
| $ | 1,233 |
|
Accrued delivery and set up costs |
|
| 1,438 |
|
| 1,024 |
|
Accrued employee costs |
|
| 1,523 |
|
| 938 |
|
Other accrued liabilities |
|
| 1,608 |
|
| 2,106 |
|
Total current liabilities |
| $ | 6,481 |
| $ | 5,301 |
|
NOTE 6 – Contingent liabilities
As is customary in the manufactured housing industry, a significant portion of the Company’s sales to builders/retailers are made pursuant to repurchase agreements with lending institutions that provide wholesale floor plan financing to the builders/retailers. Pursuant to these agreements, generally for a period of up to 24 months from invoice date of the sale of the homes and upon default by the builders/retailers and repossession by the financial institution, the Company is obligated to purchase the related floor plan loans or repurchase the homes from the lender. Losses under repurchase agreements have not been and at June 30, 2005, are not expected to be significant.
NOTE 7 – Related party transactions
A significant portion of the shareholders of the Company are also customers of the Company. During 2005 and 2004, there were significant amounts of sales to these shareholders as well as rebates earned and accrued or paid to these shareholders.
NOTE 8 – Income Taxes
New Era is an S Corporation and its subsidiaries are limited liability corporations and therefore are not subject to federal and most state income taxes. Accordingly, there is no provision for federal income taxes in the consolidated financial statement. State income taxes are provided in the consolidated financial statements for states in which the Company is subject to income tax.