EXHIBIT 99.1
To the Board of Directors and Shareholders of
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of shareholders’ equity and of cash flows present fairly, in all material respects, the financial position of Champion Enterprises, Inc, and its subsidiaries at December 29, 2001 and December 30, 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 29, 2001, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements 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.
/s/ PricewaterhouseCoopers LLP
Detroit, Michigan
CHAMPION ENTERPRISES, INC.
| Year Ended | ||||||||||||
| December 29, | December 30, | January 1, | ||||||||||
| 2001 | 2000 | 2000 | ||||||||||
| (In thousands, except per share amounts) | ||||||||||||
Net sales | $ | 1,548,225 | $ | 1,921,734 | $ | 2,564,638 | ||||||
| Cost of sales | 1,283,216 | 1,619,903 | 2,138,368 | |||||||||
| Cost of sales — loss from independent retailer bankruptcy | — | — | 26,500 | |||||||||
Gross margin | 265,009 | 301,831 | 399,770 | |||||||||
| Selling, general and administrative expenses | 283,673 | 305,286 | 292,188 | |||||||||
| Goodwill impairment charges | — | 189,700 | — | |||||||||
Operating income (loss) | (18,664 | ) | (193,155 | ) | 107,582 | |||||||
| Interest income | 2,721 | 2,647 | 2,830 | |||||||||
| Interest expense | (25,345 | ) | (29,824 | ) | (28,370 | ) | ||||||
Income (loss) before income taxes | (41,288 | ) | (220,332 | ) | 82,042 | |||||||
| Income tax expense (benefits) | (13,400 | ) | (73,000 | ) | 32,000 | |||||||
Net income (loss) | $ | (27,888 | ) | $ | (147,332 | ) | $ | 50,042 | ||||
Basic earnings (loss) per share | $ | (0.59 | ) | $ | (3.12 | ) | $ | 1.04 | ||||
Diluted earnings (loss) per share | $ | (0.59 | ) | $ | (3.12 | ) | $ | 1.02 | ||||
See accompanying Notes to Consolidated Financial Statements.
CHAMPION ENTERPRISES, INC.
| December 29, | December 30, | ||||||||
| 2001 | 2000 | ||||||||
| (In thousands, except par value) | |||||||||
Assets | |||||||||
Current assets | |||||||||
| Cash and cash equivalents | $ | 69,456 | $ | 50,143 | |||||
| Accounts receivable, trade | 27,507 | 31,132 | |||||||
| Inventories | 172,276 | 217,765 | |||||||
| Deferred taxes and other current assets | 76,385 | 77,493 | |||||||
| Total current assets | 345,624 | 376,533 | |||||||
Property, plant and equipment | |||||||||
| Land and improvements | 38,940 | 38,191 | |||||||
| Buildings and improvements | 169,162 | 180,860 | |||||||
| Machinery and equipment | 99,639 | 101,822 | |||||||
| 307,741 | 320,873 | ||||||||
| Less-accumulated depreciation | 130,311 | 113,596 | |||||||
| 177,430 | 207,277 | ||||||||
Goodwill | 317,224 | 320,656 | |||||||
| Less-accumulated amortization | 58,257 | 46,686 | |||||||
| 258,967 | 273,970 | ||||||||
Deferred taxes and other assets | 76,131 | 84,276 | |||||||
| $ | 858,152 | $ | 942,056 | ||||||
Liabilities and Shareholders’ Equity | |||||||||
Current liabilities | |||||||||
| Floor plan payable | $ | 70,919 | $ | 114,198 | |||||
| Accounts payable | 47,559 | 43,103 | |||||||
| Accrued warranty obligations | 42,540 | 49,304 | |||||||
| Accrued volume rebates | 39,426 | 45,552 | |||||||
| Accrued compensation and payroll taxes | 22,639 | 19,034 | |||||||
| Accrued insurance | 19,089 | 18,250 | |||||||
| Other current liabilities | 50,342 | 53,412 | |||||||
| Total current liabilities | 292,514 | 342,853 | |||||||
Long-term liabilities | |||||||||
| Long-term debt | 224,926 | 225,634 | |||||||
| Deferred portion of purchase price | 18,000 | 39,157 | |||||||
| Other long-term liabilities | 30,678 | 37,603 | |||||||
| 273,604 | 302,394 | ||||||||
Contingent liabilities (Note 10) | |||||||||
Redeemable convertible preferred stock, no par value, 5,000 shares authorized, 20 issued | 20,000 | — | |||||||
Shareholders’ equity | |||||||||
| Common stock, $1 par value, 120,000 authorized, 2001 — 48,320 issued and outstanding; 2000 — 47,357 issued and outstanding | 48,320 | 47,357 | |||||||
| Capital in excess of par value | 36,423 | 33,116 | |||||||
| Retained earnings | 189,262 | 217,650 | |||||||
| Accumulated other comprehensive income (loss) | (1,971 | ) | (1,314 | ) | |||||
| Total shareholders’ equity | 272,034 | 296,809 | |||||||
| $ | 858,152 | $ | 942,056 | ||||||
See accompanying Notes to Consolidated Financial Statements.
CHAMPION ENTERPRISES, INC.
| Year Ended | |||||||||||||||
| December 29, | December 30, | January 1, | |||||||||||||
| 2001 | 2000 | 2000 | |||||||||||||
| (In thousands) | |||||||||||||||
Cash flows from operating activities | |||||||||||||||
| Net income (loss) | $ | (27,888 | ) | $ | (147,332 | ) | $ | 50,042 | |||||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities | |||||||||||||||
| Depreciation and amortization | 36,043 | 40,306 | 37,890 | ||||||||||||
| Goodwill impairment charges | — | 189,700 | — | ||||||||||||
| Other asset impairment charges | 7,700 | 10,500 | — | ||||||||||||
| Loan losses | 3,700 | — | — | ||||||||||||
| Deferred income taxes | (3,500 | ) | (43,700 | ) | (9,900 | ) | |||||||||
| Increase/decrease, net of acquisitions | |||||||||||||||
| Accounts receivable | (75 | ) | 35,504 | (1,039 | ) | ||||||||||
| Inventories | 44,204 | 82,428 | 18,386 | ||||||||||||
| Accounts payable | 4,456 | 943 | (8,203 | ) | |||||||||||
| Accrued liabilities | (9,644 | ) | (22,003 | ) | (1,804 | ) | |||||||||
| Independent retailer bankruptcy | — | (12,177 | ) | 27,763 | |||||||||||
| Other, net | 12,038 | (19,457 | ) | (13,199 | ) | ||||||||||
| Total adjustments | 94,922 | 262,044 | 49,894 | ||||||||||||
| Net cash provided by operating activities | 67,034 | 114,712 | 99,936 | ||||||||||||
Cash flows from investing activities | |||||||||||||||
| Acquisitions | (16,633 | ) | (10,165 | ) | (79,131 | ) | |||||||||
| Additions to property, plant and equipment | (6,972 | ) | (15,035 | ) | (50,390 | ) | |||||||||
| Investments in and advances to unconsolidated subsidiaries | (3,226 | ) | (659 | ) | (10,776 | ) | |||||||||
| Proceeds from the disposal of property, plant and equipment | 2,341 | 3,745 | 996 | ||||||||||||
| Net cash used for investing activities | (24,490 | ) | (22,114 | ) | (139,301 | ) | |||||||||
Cash flows from financing activities | |||||||||||||||
| Decrease in floor plan payable, net | (43,279 | ) | (56,355 | ) | (44,953 | ) | |||||||||
| Increase (decrease) in other long-term debt | (652 | ) | 1,584 | 12,240 | |||||||||||
| Preferred stock issued, net | 18,464 | — | — | ||||||||||||
| Common stock issued, net | 1,282 | 332 | 4,433 | ||||||||||||
| Tax benefit of stock options exercised | 954 | — | 1,000 | ||||||||||||
| Common stock repurchased | — | (863 | ) | (22,520 | ) | ||||||||||
| Proceeds from senior notes | — | — | 197,300 | ||||||||||||
| Decrease in long-term bank debt, net | — | — | (118,000 | ) | |||||||||||
| Deferred financing costs | — | — | (1,116 | ) | |||||||||||
| Net cash provided by (used for) financing activities | (23,231 | ) | (55,302 | ) | 28,384 | ||||||||||
| Net increase (decrease) in cash and cash equivalents | 19,313 | 37,296 | (10,981 | ) | |||||||||||
| Cash and cash equivalents at beginning of period | 50,143 | 12,847 | 23,828 | ||||||||||||
| Cash and cash equivalents at end of period | $ | 69,456 | $ | 50,143 | $ | 12,847 | |||||||||
Additional cash flow information | |||||||||||||||
| Cash paid for interest | $ | 26,253 | $ | 30,151 | $ | 27,617 | |||||||||
| Cash paid for income taxes | $ | 2,416 | $ | 4,977 | $ | 49,692 | |||||||||
Cash flows from acquisitions | |||||||||||||||
| Guaranteed purchase price | $ | — | $ | 165 | $ | 71,600 | |||||||||
| Less: Cash acquired | — | — | (18,999 | ) | |||||||||||
| Plus: Payment of deferred and contingent portions of purchase price | 16,633 | 10,000 | 26,079 | ||||||||||||
| Plus: Acquisition costs | — | — | 451 | ||||||||||||
| $ | 16,633 | $ | 10,165 | $ | 79,131 | ||||||||||
See accompanying Notes to Consolidated Financial Statements.
CHAMPION ENTERPRISES, INC.
| Accumulated | ||||||||||||||||||||||||||||
| Common stock | Capital in | other | Total | |||||||||||||||||||||||||
| excess of | Retained | comprehensive | comprehensive | |||||||||||||||||||||||||
| Shares | Amount | par value | earnings | income (loss) | Total | income (loss) | ||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||
Balance January 2, 1999 | 48,270 | $ | 48,270 | $ | 43,649 | $ | 314,940 | $ | (1,613 | ) | $ | 405,246 | ||||||||||||||||
| Net income | — | — | — | 50,042 | — | 50,042 | $ | 50,042 | ||||||||||||||||||||
| Stock option and benefit plans | 814 | 814 | 9,251 | — | — | 10,065 | ||||||||||||||||||||||
| Common stock repurchases | (1,780 | ) | (1,780 | ) | (20,740 | ) | — | — | (22,520 | ) | ||||||||||||||||||
| Tax benefit of stock options | — | — | 1,000 | — | — | 1,000 | ||||||||||||||||||||||
| Foreign currency translation adjustments | — | — | — | — | 429 | 429 | 429 | |||||||||||||||||||||
Balance January 1, 2000 | 47,304 | 47,304 | 33,160 | 364,982 | (1,184 | ) | 444,262 | $ | 50,471 | |||||||||||||||||||
| Net loss | — | — | — | (147,332 | ) | — | (147,332 | ) | $ | (147,332 | ) | |||||||||||||||||
| Stock option and benefit plans | 170 | 170 | 702 | — | — | 872 | ||||||||||||||||||||||
| Common stock repurchases | (117 | ) | (117 | ) | (746 | ) | — | — | (863 | ) | ||||||||||||||||||
| Foreign currency translation adjustments | — | — | — | — | (130 | ) | (130 | ) | (130 | ) | ||||||||||||||||||
Balance December 30, 2000 | 47,357 | 47,357 | 33,116 | 217,650 | (1,314 | ) | 296,809 | $ | (147,462 | ) | ||||||||||||||||||
| Net loss | — | — | — | (27,888 | ) | — | (27,888 | ) | $ | (27,888 | ) | |||||||||||||||||
| Preferred stock dividends declared | 49 | 49 | 451 | (500 | ) | — | — | |||||||||||||||||||||
| Stock option and benefit plans | 519 | 519 | 1,246 | — | — | 1,765 | ||||||||||||||||||||||
| Tax benefit of stock options | — | — | 954 | — | — | 954 | ||||||||||||||||||||||
| Preferred stock issuance costs | — | — | (1,536 | ) | — | — | (1,536 | ) | ||||||||||||||||||||
| Issuance for acquisition deferred purchase price payments | 395 | 395 | 2,192 | — | — | 2,587 | ||||||||||||||||||||||
| Foreign currency translation adjustments | — | — | — | — | (657 | ) | (657 | ) | (657 | ) | ||||||||||||||||||
Balance December 29, 2001 | 48,320 | $ | 48,320 | $ | 36,423 | $ | 189,262 | $ | (1,971 | ) | $ | 272,034 | $ | (28,545 | ) | |||||||||||||
See accompanying Notes to Consolidated Financial Statements.
NOTE 1 — Summary of Significant Accounting Policies
Principles of Consolidation
The Consolidated Financial Statements include the accounts of Champion Enterprises, Inc. and its wholly-owned subsidiaries (the Company). All significant intercompany transactions have been eliminated. The preparation of financial statements in conformity with generally accepted accounting principles 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.
Business
The Company is the industry’s leading producer of manufactured housing with operations and markets located throughout the U.S. and in western Canada. The Company is also a leading retailer of manufactured housing with sales centers in 27 states.
Revenue Recognition
For wholesale shipments to independent retailers, sales revenue is recognized when wholesale floor plan financing or retailer credit approval has been received, the home is shipped and title is transferred. For wholesale shipments to independent retailers, the Company has no obligation to install or set up the home upon retail sale to the consumer-homebuyer. As is customary in the manufactured housing industry, the majority of the Company’s wholesale shipments to independent retailers are financed by the retailers under floor plan agreements with financing companies (lenders). In connection with these floor plan agreements, the Company generally has separate agreements with the lenders that require the Company, for a period of either 12 or 15 months from invoice date of the sale of the homes, upon default by the retailer and repossession of the homes by the lender, to purchase the related floor plan loans or repurchase the homes from the lender. The repurchase price is equal to the unpaid balance of the floor plan loans, plus certain administrative costs incurred by the lender to repossess the homes, less any damage to the homes or any missing parts or accessories. Estimated losses for repurchase obligations are accrued for currently. See Note 10.
Wholesale shipments to independent retailers that are subject to repurchase agreements are not consignment sales or financings because the Company does not provide financing for sales to independent retailers; retailers do not have the right to return homes purchased from the Company; retailers are responsible to the floor plan lenders for interest costs; and, the Company does not refund a portion of the original net selling price representative of interest cost on the retailers’ floor plan obligations.
For retail sales to consumers from Company-owned retail sales centers, sales revenue is recognized when the home has been delivered, set-up and accepted by the consumer, title has been transferred and either funds have been released by the finance company (financed sales transactions) or cash has been received from the homebuyer (cash sales transactions).
Cash and Cash Equivalents
Cash and cash equivalents include investments which have original maturities less than 90 days at the time of their purchase. These investments are carried at cost which approximates market value because of their short maturities.
Inventories
Inventories are stated at the lower of cost or market, with cost determined under the first-in, first-out method for manufacturing operations and the specific identification method for retail operations.
Year End
The Company’s fiscal year ends on the Saturday nearest December 31.
Property, Plant and Equipment
Property, plant and equipment (PP&E) are stated at cost. Depreciation is provided principally on the straight-line method over the following estimated useful lives: land improvements — 3 to 15 years; buildings and improvements — 8 to 33 years; and machinery and equipment — 3 to 15 years. Depreciation expense was $24.4 million, $26.6 million and $24.2 million in 2001, 2000 and 1999, respectively. The recoverability of PP&E is evaluated whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable, primarily based on estimated selling price, appraised value or projected undiscounted cash flows. In 2001 and 2000 the Company recorded PP&E impairment charges of $7.7 million and $10.5 million, respectively, relating to closed retail sales centers and idle manufacturing facilities. Impairment charges are included in selling, general and administrative expenses. At December 29, 2001 the net book value of the Company’s idle manufacturing facilities totaled $15 million.
Goodwill
Goodwill represents the excess of cost over the fair value of net assets of businesses acquired and is amortized on the straight-line method over the expected periods to be benefited, which through 2000, was generally 40 years. Commencing in 2001, remaining goodwill from retail acquisitions is amortized over 20 years. Amortization expense was $11.6 million, $13.7 million, and $13.6 million in 2001, 2000 and 1999, respectively. The recoverability of goodwill is evaluated whenever events or changes in circumstances indicate that the carrying amount of goodwill may not be recoverable, primarily based on each business’ projected undiscounted cash flows. In 2000 the Company recorded goodwill impairment charges of $189.7 million. See Note 14.
| Unconsolidated Subsidiaries |
The Company uses the equity method to account for its minority interests in certain manufactured housing community development companies. The Company’s net investment in these unconsolidated subsidiaries totaled $10.6 million and $6.2 million at December 29, 2001 and December 30, 2000, respectively. Equity method pretax losses from these companies totaled $1.9 million in 2001, $2.0 million in 2000 and $1.1 million in 1999 and were recorded in general and administrative expenses.
| Warranty Obligations |
The Company’s manufacturing operations provide the retail homebuyer with a twelve-month warranty from the date of retail purchase. Estimated warranty costs are accrued as cost of sales at the time of sale.
| Other Long-Term Liabilities |
Other long-term liabilities consist of the non-current portion of self-insurance and warranty reserves, compensation programs and other reserves.
| Income Taxes |
Deferred tax assets and liabilities are determined based on the differences between the financial statement amounts and the tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse.
| Stock Based Compensation Programs |
The Company accounts for its stock based employee compensation programs under Accounting Principles Board (APB) Opinion No. 25. The additional disclosures and pro forma information required by SFAS No. 123 are included in Note 11.
| Advertising Costs and Delivery Costs |
Advertising costs are expensed as incurred and are included in selling, general and administrative expenses. Total advertising expense was approximately $18 million, $24 million and $15 million in 2001, 2000 and 1999, respectively. Delivery costs are included in cost of sales.
| New Accounting Pronouncements |
In July 2001 the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets,” which requires that goodwill and other intangible assets with indefinite lives not be amortized but instead will be tested annually for impairment based on a reporting unit’s fair value versus its carrying value. SFAS No. 142 is effective for fiscal years beginning after December 15, 2001. The adoption of this pronouncement by the Company in January 2002 eliminated goodwill amortization expense commencing the first quarter of 2002. Goodwill amortization expense totaled $11.6 million pretax and $8.8 million after tax in 2001. We have completed the transitional impairment test of goodwill required by SFAS No. 142, and will not be recognizing any impairment charges upon adoption of SFAS No. 142.
In June 2001 the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations.” SFAS No. 143 requires the recognition of the fair value of an asset retirement obligation in the period in which the obligation is incurred. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002. The early adoption of SFAS No. 143 in January 2002 did not have a material effect on the Company’s financial statements.
In August 2001 the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS No. 144 broadens the definition of discontinued operations to include any component of an entity which comprises operations and cash flows that can be clearly distinguished from the rest of the entity. SFAS No. 144 also addresses recording impairment charges and depreciation for long-lived assets to be disposed. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. The adoption of SFAS No. 144 in January 2002 did not have a material effect on the Company’s financial statements.
NOTE 2 — Inventories
A summary of inventories by component at December 29, 2001 and December 30, 2000 follows:
| 2001 | 2000 | |||||||
| (In thousands) | ||||||||
| New and pre-owned manufactured homes | $ | 107,877 | $ | 143,892 | ||||
| Raw materials and work-in-process | 40,337 | 44,980 | ||||||
| Other inventory | 24,062 | 28,893 | ||||||
| $ | 172,276 | $ | 217,765 | |||||
NOTE 3 — Business Combinations
In 1999 the Company acquired two manufactured housing retail organizations, one manufactured housing company with six homebuilding facilities and one manufactured housing communities developer. The acquisitions were recorded using the purchase method. The purchase price for these acquisitions consisted of guaranteed purchase price of $70 million and contingent purchase price of up to $66.5 million, based upon the future performance of the acquired businesses, potentially payable through 2003. Recognition of additional purchase price related to contingent amounts results in the recording of a corresponding amount of goodwill. During 2000 and 1999 contingent purchase price of $6 million and $23 million, respectively, was recorded related to the Company’s 1998 and 1999 retail and manufacturing acquisitions. During 2001, 2000 and 1999
the Company made net cash payments of $17 million, $10 million and $79 million, respectively, and in 2001 issued common stock valued at $3 million, for these acquisitions.
The results of operations of acquisitions are included with those of the Company from the respective acquisition dates. Pro forma results of operations are not presented for the year ended January 1, 2000 because the significant acquisitions occurred in January 1999, and their full year results of operations are included in the Company’s actual results. The preacquisition results of operations for other 1999 acquisitions are immaterial.
NOTE 4 — Earnings per Share
The numerators used in the Company’s basic earnings per share (EPS) calculations is net income (loss) as reported in the financial statements less the effect of preferred stock dividends. The numerator for diluted EPS calculations is the numerator of basic EPS adjusted by adding back the preferred stock dividend. In loss years the dividend is not added back because the effect would be antidilutive. The denominators used in the Company’s EPS calculations are as follows: weighted average shares outstanding are used in calculating basic EPS; and weighted average shares outstanding plus the effect of dilutive securities are used in calculating diluted EPS. The Company’s dilutive securities consist of its outstanding stock options and its convertible preferred stock. Dilutive securities were not considered in determining the denominator for diluted EPS in 2001 and 2000 because the effect on the net loss would be antidilutive. The amount of potentially dilutive securities that were excluded from the determination of diluted EPS was 3 million shares in 2001 and 76,000 shares in 2000. A reconciliation of the numerators and denominators follows:
| 2001 | 2000 | 1999 | ||||||||||
| (In thousands) | ||||||||||||
| Numerator: | ||||||||||||
| Net income (loss) | $ | (27,888 | ) | $ | (147,332 | ) | $ | 50,042 | ||||
| Less: preferred stock dividend | 500 | — | — | |||||||||
| Income (loss) available to common shareholders | $ | (28,388 | ) | $ | (147,332 | ) | $ | 50,042 | ||||
| Denominator: | ||||||||||||
| Weighted average shares outstanding | 47,887 | 47,252 | 48,227 | |||||||||
| Effect of dilutive securities — options | — | — | 662 | |||||||||
| Shares for diluted EPS | 47,887 | 47,252 | 48,889 | |||||||||
NOTE 5 — Debt
Long-term debt at December 29, 2001 and December 30, 2000 consisted of $200 million of unsecured Senior Notes, $18 million of obligations under industrial revenue bonds and approximately $7 million of other debt. The $200 million of unsecured Senior Notes are due May 15, 2009, with interest payable semi-annually at an annual rate of 7.625%. The obligations under industrial revenue bonds are due in 2019 and 2029 with interest payable monthly at variable rates tied to short-term tax exempt rate indices, which averaged 3.2% during 2001.
The Company has a revolving credit agreement, maturing in May 2003, with a group of banks for a $75 million secured line of credit. The agreement allows for letters of credit up to $35 million. Availability under the credit agreement is limited to a borrowing base calculated based on qualifying accounts receivable and inventories, as defined therein. During 2001 the borrowing base ranged from $37 million at the end of December up to $75 million at various times during the year. The borrowing base at the end of February 2002 was $50 million. At December 29, 2001, the Company had no cash borrowings and $35 million of letters of credit outstanding under the facility. Borrowings under the credit agreement bear interest at the bank’s prime rate plus 1%. The Company’s letter of credit fees are 3% annually of the amount outstanding and commitment
fees are 0.625% annually on the unused portion of the facility. The agreement contains covenants which, among other things, limit additional indebtedness and capital spending and require maintenance of minimum consolidated cash flows from operations and net worth, as defined. The amount of unrestricted retained earnings at December 29, 2001 was $32 million. Under the credit agreement, the Company has pledged as collateral certain of its current assets, including certain accounts receivable and inventories, other personal property and intangible assets, subject to negative pledge limitations in the Company’s Senior Notes.
Floor plan liabilities are borrowings from various financial institutions secured principally by retail inventories of manufactured homes. Interest on these liabilities generally ranges from the prime rate to the prime rate plus 2.75%.
NOTE 6 — Redeemable Convertible Preferred Stock
In July 2001 Champion issued $20 million of a newly designated class of convertible preferred stock. The proceeds from issuance totaled $18.5 million, net of issuance costs. The preferred stock has a seven-year term with a 5% annual dividend, which is payable quarterly in either cash or common stock, at Champion’s option, and was convertible into common stock at a conversion price of $15.93 per share during the first six months. In December 2001, in accordance with the agreement, the conversion price was adjusted to $13.854 per share. Following 24 months of issuance, the preferred stock is redeemable by the investor in either cash or common stock, at the Company’s option. At the investor’s option, an additional $12 million of preferred stock can be purchased through March 2003 on similar terms. On September 28, 2001 and December 31, 2001, Champion paid dividends on the preferred stock by issuing 27,000 and 22,000 shares of common stock, respectively.
NOTE 7 — Shareholders’ Equity
The Company has 120 million shares of common stock authorized. In addition, there are 5 million authorized shares of preferred stock, without par value, the issuance of which is subject to approval by the Board of Directors. The Board has the authority to fix the number, rights, preferences and limitations of the shares of each series, subject to applicable laws and the provisions of the Articles of Incorporation. In July 2001 the Company issued 20,000 shares of convertible preferred stock. See Note 6.
In June 2001 Champion restructured the payment terms of a deferred purchase price liability totaling $32 million that was originally scheduled for payment in cash in June 2002. In July 2001 $6 million of the obligation was paid in cash. The remaining $26 million is due quarterly, the first payment of which commenced October 2001, in installments of $2 million without interest, and is payable, at Champion’s option, in cash or common stock. In October 2001 and January 2002, Champion paid the quarterly installments by issuing 220,000 shares and 157,000 shares of Champion common stock, respectively. The terms do not require a payment in April 2002.
In February 1999 the Board of Directors authorized a common stock repurchase program for up to 3.0 million shares. Pursuant to this authorization, the Company repurchased 117,000 shares of its common stock during 2000 for $0.9 million and 1.8 million shares during 1999 for $22.5 million. In June 2000 the program was suspended.
The Board of Directors has reserved 750,000 preferred shares for issuance in connection with the 1996 Shareholders Rights Plan. Each outstanding share of the Company’s common stock is entitled to one Preferred Stock Purchase Right. Each Right entitles shareholders to buy one two-hundredth share of preferred stock for $140 and becomes exercisable only if a third party acquires or announces an intention to acquire 20% or more of the Company’s common stock. The Rights expire on February 5, 2006 unless redeemed or exercised.
NOTE 8 — Income Taxes
Pretax income (loss) for the fiscal years ended December 29, 2001, December 30, 2000 and January 1, 2000 was taxed under the following jurisdictions:
| 2001 | 2000 | 1999 | |||||||||||
| (In thousands) | |||||||||||||
| Domestic | $ | (42,665 | ) | $ | (219,664 | ) | $ | 79,090 | |||||
| Foreign | 1,377 | (668 | ) | 2,952 | |||||||||
| Total | $ | (41,288 | ) | $ | (220,332 | ) | $ | 82,042 | |||||
The provisions for income taxes (benefits) were as follows:
| 2001 | 2000 | 1999 | ||||||||||||
| (In thousands) | ||||||||||||||
| Current | ||||||||||||||
| Federal | $ | (10,600 | ) | $ | (24,000 | ) | $ | 36,000 | ||||||
| Foreign | 900 | (100 | ) | 1,400 | ||||||||||
| State | (200 | ) | (5,200 | ) | 4,500 | |||||||||
| Total current | (9,900 | ) | (29,300 | ) | 41,900 | |||||||||
| Deferred | ||||||||||||||
| Federal | (1,500 | ) | (39,400 | ) | (9,100 | ) | ||||||||
| Foreign | (100 | ) | (100 | ) | 100 | |||||||||
| State | (1,900 | ) | (4,200 | ) | (900 | ) | ||||||||
| Total deferred | (3,500 | ) | (43,700 | ) | (9,900 | ) | ||||||||
| Total provision (benefits) | $ | (13,400 | ) | $ | (73,000 | ) | $ | 32,000 | ||||||
The provisions for income taxes (benefits) differ from the amount of income tax determined by applying the applicable U.S. statutory federal income tax rate to pretax income (loss) as a result of the following differences:
| 2001 | 2000 | 1999 | |||||||||||
| (Dollars in thousands) | |||||||||||||
| Statutory U.S. tax rate | $ | (14,450 | ) | $ | (77,100 | ) | $ | 28,700 | |||||
| Increase (decrease) in rate resulting from State taxes, net of federal benefit | (1,400 | ) | (7,600 | ) | 2,900 | ||||||||
| Nondeductible goodwill amortization | 1,500 | 1,600 | 1,000 | ||||||||||
| Nondeductible goodwill impairment | — | 9,900 | — | ||||||||||
| Other | 950 | 200 | (600 | ) | |||||||||
| Total provision (benefits) | $ | (13,400 | ) | $ | (73,000 | ) | $ | 32,000 | |||||
| Effective tax rate | 32 | % | 33 | % | 39 | % | |||||||
Due to the current federal and state tax benefit in 2001, the Company is expecting refunds from federal and state authorities of approximately $21.7 million, as a result of NOL carrybacks. Refundable income taxes are reflected in other current assets. The Company has available state net operating loss carryforwards of approximately $88.5 million for tax purposes to offset future taxable income. The state net operating losses expire principally between 2015 and 2021.
Deferred tax assets and liabilities are comprised of the following as of December 29, 2001 and December 30, 2000:
| 2001 | 2000 | ||||||||
| (In thousands) | |||||||||
| Assets | |||||||||
| Warranty reserve | $ | 18,900 | $ | 20,900 | |||||
| Insurance accruals | 10,600 | 10,400 | |||||||
| Goodwill | 41,900 | 46,700 | |||||||
| Employee compensation | 7,500 | 6,000 | |||||||
| Fixed asset impairments | 5,000 | 4,100 | |||||||
| Volume rebates | 3,500 | 5,000 | |||||||
| Other | 13,900 | 4,500 | |||||||
| Gross deferred tax assets | 101,300 | 97,600 | |||||||
| Liabilities | |||||||||
| Depreciation | 5,900 | 6,100 | |||||||
| Canadian withholding | 600 | 500 | |||||||
| Safe harbor leases | — | 400 | |||||||
| Gross deferred tax liabilities | 6,500 | 7,000 | |||||||
| Net deferred tax assets | $ | 94,800 | $ | 90,600 | |||||
| Net deferred tax assets | |||||||||
| Current | $ | 39,100 | $ | 30,600 | |||||
| Non-current | 55,700 | 60,000 | |||||||
| $ | 94,800 | $ | 90,600 | ||||||
At December 29, 2001, the Company had gross deferred tax assets of $101 million. Based on an analysis of historical performance and forecasted future performance, we believe that our deferred tax assets will be realized. The Company has been profitable for eight of the last ten years, generating pretax earnings of $82 million, $157 million and $117 million in 1999, 1998 and 1997, respectively. A large portion of the pretax loss in 2000 was due to $190 million of goodwill impairment charges. The net operating loss carryforward period of 20 years allows for the gross deferred tax assets to be realized through cumulative taxable income of $261 million or an average of $13 million per year. Despite current industry conditions, we believe that a minimum expectation of $13 million in average annual taxable income over the next 20 years is reasonable.
NOTE 9 — Retirement Plans
The Company and certain of its subsidiaries sponsor defined contribution retirement and savings plans covering most employees. Full time employees of participating companies are eligible to participate in a plan after completing one year of service. Participating employees may contribute from 1% to 17% of their compensation to the plans. The Company generally makes matching contributions of 50% of the first 6% of employees’ contributions. Company contributions vest when made. Amounts expensed under these plans were $3.6 million in 2001, $3.6 million in 2000 and $4.7 million in 1999.
NOTE 10 — Contingent Liabilities
The majority of the Company’s manufacturing sales to independent retailers are made pursuant to repurchase agreements. The contingent obligations under these agreements are spread over many retailers and financial institutions, and are reduced by the resale value of the homes which may be repurchased. The
maximum repurchase obligation is calculated as the total amount that would be paid upon the default of all the Company’s independent retailers, without reduction for the resale value of the repurchased homes. The maximum potential repurchase obligation was approximately $300 million at December 29, 2001, compared to $430 million at December 30, 2000. Potential losses under repurchase obligations are determined by the difference between the repurchase price and the estimated net resale value of the homes. Repurchase losses incurred totaled $3.9 million in 2001, $6.0 million in 2000 and $2.9 million in 1999, excluding the losses from the bankruptcy discussed below. In 1999 Champion’s former largest independent retailer declared bankruptcy. In the bankruptcy proceedings the Company repurchased 1,850 homes for approximately $70 million which were financed through floor plan borrowings. Pretax charges of $33.6 million were recorded in the third quarter of 1999 for the estimated losses associated with the bankruptcy, consisting of $26.5 million to write down the repurchased homes to estimated net resale value (included in cost of sales) and $7.1 million to write off uncollectible receivables (included in selling, general and administrative expenses). In the second quarter of 2000, a loss of $5 million was recorded for an additional write down of the value of the remaining repurchased homes (in cost of sales). Substantially all the repurchased homes had been liquidated by the end of the third quarter of 2000.
At December 29, 2001 the Company was contingently obligated for additional purchase price of up to $54 million related to its 1999 and 1998 acquisitions. Management currently believes that none of this contingent purchase price will require payment.
Under the Company’s insurance programs, coverage is obtained for catastrophic exposures as well as those risks required to be insured by law. The Company retains a significant portion of risk of certain losses related primarily to medical benefits, workers’ compensation and general, product and auto liability and has established reserves for its retained portion of these risks.
The Company is subject to various legal proceedings and claims which arise in the ordinary course of its business. Management believes the ultimate liability with respect to these actions will not have a material effect on the Company’s financial position or results of operations.
At December 29, 2001 the Company was contingently obligated for approximately $46 million under surety bonds and $35 million under letters of credit, generally to support insurance, industrial revenue bond financing, and licensing and service bonding requirements. The $35 million of letters of credit and $21 million of the surety bonds support long-term debt and insurance reserves that are reflected as liabilities in the Company’s consolidated balance sheet.
At December 29, 2001 certain of the Company’s subsidiaries are guarantors of $9.4 million of debt of unconsolidated subsidiaries.
NOTE 11 — Stock Option and Incentive Plans
The Company has various stock option and incentive plans and agreements whereby stock options are made available to key employees, directors and others. Stock options may be granted below, at or above fair market value and generally expire six, seven or ten years from the grant date. Some options become exercisable immediately and others over a period of up to five years. Under the Company’s 1995 Stock Option and Incentive Plan, grants may be made of stock options, stock awards, stock appreciation rights and other stock based incentives. In addition to these plans, other nonqualified stock options and awards have been granted to executive officers and key employees and in connection with acquisitions.
Amounts charged to expense in connection with the grants and awards under these plans and agreements totaled $0.7 million in 2001, $0.8 million in 2000 and $4.6 million in 1999. There were 3,103,000, 4,850,000 and 2,183,000 shares reserved for future grants and awards at December 29, 2001, December 30, 2000, and January 1, 2000, respectively.
The following table summarizes the changes in outstanding stock options during the last three years:
| Weighted average | |||||||||
| Number | exercise price | ||||||||
| of shares | per share | ||||||||
| (In thousands) | |||||||||
| Outstanding at January 2, 1999 | 5,927 | $ | 15.95 | ||||||
| Granted | 1,956 | 16.07 | |||||||
| Exercised | (652 | ) | 5.57 | ||||||
| Canceled or forfeited | (359 | ) | 19.57 | ||||||
| Outstanding at January 1, 2000 | 6,872 | 16.78 | |||||||
| Granted | 1,923 | 4.20 | |||||||
| Exercised | (4 | ) | 2.78 | ||||||
| Canceled or forfeited | (3,328 | ) | 20.47 | ||||||
| Outstanding at December 30, 2000 | 5,463 | 10.12 | |||||||
| Granted | 3,804 | 5.87 | |||||||
| Exercised | (825 | ) | 6.57 | ||||||
| Canceled or forfeited | (706 | ) | 11.37 | ||||||
Outstanding at December 29, 2001 | 7,736 | $ | 8.29 | ||||||
The following table summarizes information regarding stock options outstanding at December 29, 2001:
| Options outstanding | Options exercisable | |||||||||||||||||||
| Weighted | Average | Average | ||||||||||||||||||
| Range of | Number | average | exercise price | Number | exercise price | |||||||||||||||
| exercise prices | of shares | life (years) | per share | of shares | per share | |||||||||||||||
| (In thousands) | (In thousands) | |||||||||||||||||||
| $1.25-$5.00 | 3,060 | 6.2 | $ | 3.22 | 291 | $ | 3.03 | |||||||||||||
| $5.01-$10.00 | 2,069 | 4.8 | 7.21 | 1,312 | 7.79 | |||||||||||||||
| $10.01-$15.00 | 1,485 | 5.2 | 10.77 | 286 | 13.08 | |||||||||||||||
| $15.01-$28.50 | 1,122 | 6.3 | 20.87 | 705 | 20.60 | |||||||||||||||
| 7,736 | 5.6 | $ | 8.29 | 2,594 | $ | 11.32 | ||||||||||||||
As of December 30, 2000 exercisable shares totaled 2,852,000 with a weighted average exercise price of $10.44. As of January 1, 2000 exercisable shares totaled 1,919,000 with a weighted average exercise price of $12.53 per share.
The number of shares issued through stock awards in 2001, 2000 and 1999 was 75,000, 24,800 and 91,119, respectively, with award date fair values per share of $3.06, $6.88, and $19.07, respectively.
As permitted by SFAS Statement No. 123, the Company has elected to continue to account for its stock based plans under APB Opinion No. 25. If compensation costs for the Company’s stock based compensation plans had been determined based on the fair value at the grant dates consistent with the method of SFAS No. 123, pro forma net income (loss) and earnings (loss) per share would have been the amounts indicated below:
| 2001 | 2000 | 1999 | ||||||||||
| Net income (loss) (in millions) | $ | (30.5 | ) | $ | (147.0 | ) | $ | 41.8 | ||||
| Basic and diluted EPS (loss) | $ | (0.64 | ) | $ | (3.11 | ) | $ | 0.87 | ||||
In determining the pro forma amounts in accordance with SFAS No. 123, the fair value of each stock option grant or award is estimated as of the grant date using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2001, 2000 and 1999:
| 2001 | 2000 | 1999 | ||||||||||
| Risk free interest rate | 4.5 | % | 5.7 | % | 5.9 | % | ||||||
| Expected life (years) | 4.3 | 3.4 | 3.3 | |||||||||
| Expected volatility | 38 | % | 37 | % | 37 | % | ||||||
| Expected dividend | — | — | — | |||||||||
The weighted average per share fair value of stock options granted during 2001, 2000 and 1999 was $2.19, $1.52 and $6.97, respectively, for options granted at market value, and, $1.93 in 2000 and $11.17 in 1999 for options granted at less than market value. There were no options granted at less than market value in 2001. Total stock based compensation costs that would have been charged to income under SFAS No. 123 were $4.9 million, $0.2 million and $18.1 million in 2001, 2000 and 1999, respectively. SFAS No. 123 pro forma compensation costs for 2001 and 2000 were reduced by the reversal of prior year pro forma compensation costs totaling $0.9 million and $7.4 million, respectively, for forfeitures of unvested options during the year.
NOTE 12 — Segment Information
The Company operates principally in two segments in the manufactured housing industry: (1) production and wholesale distribution and (2) retail selling. The accounting policies of the segments are the same as those described in Note 1, “Summary of Significant Accounting Policies”. Manufacturing segment sales to the retail segment and related manufacturing profits are included with the manufacturing segment. Retail segment results include retail profits from the sale of homes to consumers but do not include any manufacturing segment profits associated with the homes sold. Intercompany transactions between reportable operating segments are eliminated in consolidation. Each segment’s results include corporate office costs that are directly and exclusively incurred for the segment. General corporate expenses include the costs and equity method losses from development operations. Intercompany profit in inventory represents the change in manufacturing segment gross profit in Champion-produced inventory at Company-owned retailers. The Company has foreign operations consisting of two manufacturing facilities in western Canada. The total sales and total assets of these Canadian operations were less than 3% of the Company’s consolidated totals.
The Company evaluates the performance of its segments and allocates resources to them primarily based on earnings before interest, taxes, goodwill amortization and general corporate expenses (EBITA), excluding goodwill impairment charges and losses associated with the 1999 independent retailer bankruptcy. The Company also evaluates the performance of its segments based on return on net capital employed (working capital plus net fixed assets).
Expenditures during 2001 for long-lived assets were $4 million for the manufacturing segment and $2 million for the retail segment. In addition, corporate expenditures for long-lived assets totaled $1 million. These amounts compare to $7 million, $7 million and $1 million for the manufacturing, retail and corporate segments, respectively, in 2000, and $65 million, $43 million and $4 million, respectively, in 1999, including goodwill for each segment.
Reconciliations of segment sales to consolidated sales, segment EBITA to consolidated operating income (loss) and segment depreciation expense to consolidated depreciation expense in 2001, 2000 and 1999, and
segment assets to consolidated assets as of December 29, 2001, December 30, 2000 and January 1, 2000, were as follows:
| 2001 | 2000 | 1999 | |||||||||||
| (In thousands) | |||||||||||||
| Net sales | |||||||||||||
| Manufacturing | $ | 1,296,315 | $ | 1,564,026 | $ | 2,068,627 | |||||||
| Retail | 452,910 | 606,708 | 787,011 | ||||||||||
| Less: intercompany | (201,000 | ) | (249,000 | ) | (291,000 | ) | |||||||
| Consolidated net sales | $ | 1,548,225 | $ | 1,921,734 | $ | 2,564,638 | |||||||
| Operating income (loss) | |||||||||||||
| Manufacturing EBITA excluding losses from independent retailer bankruptcy | $ | 54,131 | $ | 50,974 | $ | 132,110 | |||||||
| Retail EBITA (loss) | (33,154 | ) | (9,109 | ) | 51,372 | ||||||||
| General corporate expenses | (28,023 | ) | (30,803 | ) | (24,255 | ) | |||||||
| Goodwill amortization | (11,618 | ) | (13,717 | ) | (13,645 | ) | |||||||
| Intercompany profit in inventory | — | 4,200 | (4,400 | ) | |||||||||
| Goodwill impairment charges | — | (189,700 | ) | — | |||||||||
| Losses from independent retailer bankruptcy | — | (5,000 | ) | (33,600 | ) | ||||||||
| Consolidated operating income (loss) | $ | (18,664 | ) | $ | (193,155 | ) | $ | 107,582 | |||||
| Total assets | |||||||||||||
| Manufacturing | $ | 356,557 | $ | 392,404 | $ | 498,259 | |||||||
| Retail | 302,542 | 367,905 | 632,067 | ||||||||||
| Corporate and developments | 214,672 | 197,584 | 88,154 | ||||||||||
| Intercompany elimination | (15,619 | ) | (15,837 | ) | (35,540 | ) | |||||||
| Consolidated total assets | $ | 858,152 | $ | 942,056 | $ | 1,182,940 | |||||||
| Depreciation expense | |||||||||||||
| Manufacturing | $ | 17,510 | $ | 18,418 | $ | 18,066 | |||||||
| Retail | 5,952 | 7,181 | 5,381 | ||||||||||
| Corporate and developments | 963 | 990 | 798 | ||||||||||
| Consolidated depreciation expense | $ | 24,425 | $ | 26,589 | $ | 24,245 | |||||||
For the twelve months ended December 29, 2001, manufacturing segment EBITA includes non-cash fixed asset impairment charges totaling $3.3 million, related to closed plants. For the same period, retail segment EBITA includes a charge of $3.7 million for losses on loans and transition costs for alternative financing sources, as well as non-cash asset impairment charges of $4.4 million for closed retail locations.
Included in 2000 manufacturing segment EBITA are non-cash fixed asset impairment charges of $2.5 million related to plant closures and $6.9 million of property insurance gains. Included in 2000 retail segment EBITA are non-cash asset impairment charges of $4.0 million related to sales center closures. Included in 2000 general corporate expenses are $4.0 million of non-cash fixed asset impairment charges related to development operations, $1.5 million of which was recognized upon the sale of a majority interest in certain developments, and $2.5 million of which was recognized due to insufficient estimated future cash flows from a wholly-owned development.
All cash balances and deferred tax assets are classified as corporate assets. Retail floor plan interest expense not charged to retail segment EBITA totaled $8.3 million, $13.2 million and $12.5 million in 2001, 2000 and 1999, respectively.
NOTE 13 — Leases
Most of the Company’s retail sales locations, certain of its other facilities and certain manufacturing equipment are leased under terms that range from monthly to five years. Rent expense was $14.3 million in 2001, $16.3 million in 2000 and $11.5 million in 1999. Some of the real property leases have renewal options or escalation clauses.
Future minimum lease payments under operating leases totaled $30.5 million at December 29, 2001, as follows: $9.7 million in 2002, $6.2 million in 2003, $3.9 million in 2004, $2.3 million in 2005, $1.5 million in 2006, and $6.9 million thereafter.
NOTE 14 — Goodwill Impairment Charges
The Company evaluates the recoverability of long-lived assets not held for sale by measuring the carrying value of the assets against the estimated undiscounted future cash flows in accordance with SFAS No. 121. At the time such evaluations indicate that the undiscounted future cash flows of certain long-lived assets are not sufficient to recover the carrying value of such assets, the assets are adjusted to their estimated fair values. Estimated fair values are determined using the present value of estimated future cash flows.
Industry conditions in 2000, including excess number of retail locations and inventory levels, tightened consumer credit standards, a reduction in the number of consumer lenders, high consumer repossession levels, and higher interest rates for purchasers of manufactured housing, resulted in lower sales volumes and sales center closures for the Company’s acquired retail businesses. These conditions also resulted in operating losses for the Company’s retail operations. The culmination of these factors resulted in the Company performing an assessment of the recoverability of long-lived assets, including goodwill. As a result of this assessment, in the fourth quarter of 2000, the Company recorded non-cash pretax goodwill impairment charges of $189.7 million, consisting of $180.0 million for seven acquired retail companies and $9.7 million for two acquired manufacturing companies.
NOTE 15 — Subsidiaries’ Guaranty of Indebtedness
In April 2002, Champion Home Builders Co. (“CHB”), a wholly-owned subsidiary of the Company, issued $150 million Senior Notes due 2007. Substantially all the other subsidiaries in the consolidated financial statements became guarantors and the Company became a subordinated guarantor of the Senior Notes due 2007. In addition, CHB became a guarantor and substantially all the other subsidiaries in the consolidated financial statements became guarantors on a basis subordinated to their guarantees of the Senior Notes due 2007, of the Company’s Senior Notes due 2009. The non-guarantor subsidiaries include the Company’s foreign operations and development companies.
Separate financial statements for each guarantor subsidiary are not included in this filing because each guarantor subsidiary is wholly-owned and was fully, unconditionally, jointly and severally liable for the Senior Notes due 2007. There were no significant restrictions on the ability of the parent company or any guarantor subsidiary to obtain funds from its subsidiaries by dividend or loan.
The following condensed consolidating financial information presents the financial position, results of operations and cash flows of (i) the Company (“parent”) and CHB, as parents, as if they accounted for their subsidiaries on the equity method; (ii) the guarantor subsidiaries, and (iii) the non-guarantor subsidiaries.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
CHAMPION ENTERPRISES, INC.
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 29, 2001
| Guarantor | Non-guarantor | Consolidating | ||||||||||||||||||||||
| Parent | CHB | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
| Net sales | $ | — | $ | 295,261 | $ | 1,423,512 | $ | 30,452 | $ | (201,000 | ) | $ | 1,548,225 | |||||||||||
| Cost of sales | — | 259,949 | 1,198,790 | 25,477 | (201,000 | ) | 1,283,216 | |||||||||||||||||
| Gross margin | — | 35,312 | 224,722 | 4,975 | — | 265,009 | ||||||||||||||||||
| Selling, general and administrative expenses | — | 50,051 | 225,244 | 8,378 | — | 283,673 | ||||||||||||||||||
| Operating loss | — | (14,739 | ) | (522 | ) | (3,403 | ) | — | (18,664 | ) | ||||||||||||||
| Interest income | 15,490 | 1 | 2,787 | 254 | (15,811 | ) | 2,721 | |||||||||||||||||
| Interest expense | (15,490 | ) | (218 | ) | (24,944 | ) | (504 | ) | 15,811 | (25,345 | ) | |||||||||||||
| Loss before income taxes | — | (14,956 | ) | (22,679 | ) | (3,653 | ) | — | (41,288 | ) | ||||||||||||||
| Income tax benefit | — | (6,210 | ) | (6,090 | ) | (1,100 | ) | — | (13,400 | ) | ||||||||||||||
| Loss before equity in income (loss) of consolidated subsidiaries | — | (8,746 | ) | (16,589 | ) | (2,553 | ) | — | (27,888 | ) | ||||||||||||||
| Equity in income (loss) of consolidated subsidiaries | (27,888 | ) | — | — | — | 27,888 | — | |||||||||||||||||
| Net loss | $ | (27,888 | ) | $ | (8,746 | ) | $ | (16,589 | ) | $ | (2,553 | ) | $ | 27,888 | $ | (27,888 | ) | |||||||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
CHAMPION ENTERPRISES, INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 29, 2001
| Guarantor | Non-guarantor | Consolidating | |||||||||||||||||||||||
| Parent | CHB | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||
| Net cash provided by operating activities | $ | 3,988 | $ | 11,691 | $ | 48,315 | $ | 3,040 | $ | — | $ | 67,034 | |||||||||||||
| Cash flows from investing activities | |||||||||||||||||||||||||
| Acquisitions | — | — | (16,633 | ) | — | — | (16,633 | ) | |||||||||||||||||
| Additions to property, plant and equipment | — | (1,158 | ) | (5,292 | ) | (522 | ) | — | (6,972 | ) | |||||||||||||||
| Investments in and advances to unconsolidated subsidiaries | — | — | — | (3,226 | ) | — | (3,226 | ) | |||||||||||||||||
| Investments in and advances to consolidated subsidiaries | (5,529 | ) | (9,324 | ) | 14,804 | 49 | — | — | |||||||||||||||||
| Proceeds from the disposal of property, plant and equipment | — | — | 2,341 | — | — | 2,341 | |||||||||||||||||||
| Net cash used for investing activities | (5,529 | ) | (10,482 | ) | (4,780 | ) | (3,699 | ) | — | (24,490 | ) | ||||||||||||||
| Cash flows from financing activities | |||||||||||||||||||||||||
| Decrease in floor plan payable, net | — | — | (42,988 | ) | (291 | ) | — | (43,279 | ) | ||||||||||||||||
| Increase (decrease) in other long-term debt | — | (45 | ) | (665 | ) | 58 | — | (652 | ) | ||||||||||||||||
| Preferred stock issued, net | 18,464 | — | — | — | — | 18,464 | |||||||||||||||||||
| Common stock issued, net | 1,282 | — | — | — | — | 1,282 | |||||||||||||||||||
| Tax benefit of stock options exercised | 954 | — | — | — | — | 954 | |||||||||||||||||||
| Net cash provided by (used for) financing activities | 20,700 | (45 | ) | (43,653 | ) | (233 | ) | — | (23,231 | ) | |||||||||||||||
| Net increase (decrease) in cash and cash equivalents | 19,159 | 1,164 | (118 | ) | (892 | ) | — | 19,313 | |||||||||||||||||
| Cash and cash equivalents at beginning of period | 41,152 | (1,413 | ) | 3,124 | 7,280 | — | 50,143 | ||||||||||||||||||
| Cash and cash equivalents at end of period | $ | 60,311 | $ | (249 | ) | $ | 3,006 | $ | 6,388 | $ | — | $ | 69,456 | ||||||||||||
CHAMPION ENTERPRISES, INC.
| Guarantor | Non-guarantor | Consolidating | |||||||||||||||||||||||
| Parent | CHB | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||
| Current assets | |||||||||||||||||||||||||
| Cash and cash equivalents | $ | 60,311 | $ | (249 | ) | $ | 3,006 | $ | 6,388 | $ | — | $ | 69,456 | ||||||||||||
| Accounts receivable, trade | — | 8,446 | 30,457 | 1,204 | (12,600 | ) | 27,507 | ||||||||||||||||||
| Inventories | — | 13,694 | 158,138 | 2,263 | (1,819 | ) | 172,276 | ||||||||||||||||||
| Deferred taxes and other current assets | 479 | 12,091 | 127,102 | 2,505 | (65,792 | ) | 76,385 | ||||||||||||||||||
| Total current assets | 60,790 | 33,982 | 318,703 | 12,360 | (80,211 | ) | 345,624 | ||||||||||||||||||
| Property, plant and equipment, net | — | 44,793 | 129,633 | 3,004 | — | 177,430 | |||||||||||||||||||
| Goodwill, net | — | — | 257,444 | 1,523 | — | 258,967 | |||||||||||||||||||
| Investment in consolidated subsidiaries | 440,786 | 1 | 33,310 | 4,438 | (478,535 | ) | — | ||||||||||||||||||
| Deferred taxes and other assets | 3,143 | 6,834 | 53,581 | 12,573 | — | 76,131 | |||||||||||||||||||
| $ | 504,719 | $ | 85,610 | $ | 792,671 | $ | 33,898 | $ | (558,746 | ) | $ | 858,152 | |||||||||||||
| Liabilities and Shareholders’ Equity | |||||||||||||||||||||||||
| Current liabilities | |||||||||||||||||||||||||
| Floor plan payable | $ | — | $ | — | $ | 70,596 | $ | 323 | $ | — | $ | 70,919 | |||||||||||||
| Accounts payable | — | 10,839 | 35,929 | 791 | — | 47,559 | |||||||||||||||||||
| Accrued warranty obligations | — | 5,888 | 35,955 | 697 | — | 42,540 | |||||||||||||||||||
| Accrued volume rebates | — | 12,082 | 26,801 | 1,043 | (500 | ) | 39,426 | ||||||||||||||||||
| Other current liabilities | 2,280 | 90,053 | 64,112 | 917 | (65,292 | ) | 92,070 | ||||||||||||||||||
| Total current liabilities | 2,280 | 118,862 | 233,393 | 3,771 | (65,792 | ) | 292,514 | ||||||||||||||||||
| Long-term liabilities | |||||||||||||||||||||||||
| Long-term debt | 200,000 | 7,597 | 14,338 | 2,991 | — | 224,926 | |||||||||||||||||||
| Deferred portion of purchase price | — | — | 18,000 | — | — | 18,000 | |||||||||||||||||||
| Other long-term liabilities | — | 16,012 | 14,569 | 97 | — | 30,678 | |||||||||||||||||||
| 200,000 | 23,609 | 46,907 | 3,088 | — | 273,604 | ||||||||||||||||||||
| Intercompany balances | 8,434 | (87,936 | ) | 414,301 | 949 | (335,748 | ) | — | |||||||||||||||||
| Redeemable convertible preferred stock, no par value, 5,000 shares authorized, 20 issued | 20,000 | — | — | — | — | 20,000 | |||||||||||||||||||
| Shareholders’ equity | |||||||||||||||||||||||||
| Common stock | 48,320 | 1 | 259 | 13 | (273 | ) | 48,320 | ||||||||||||||||||
| Capital in excess of par value | 36,423 | 29,914 | 214,152 | 28,756 | (272,822 | ) | 36,423 | ||||||||||||||||||
| Retained earnings | 189,262 | 1,160 | (116,341 | ) | (708 | ) | 115,889 | 189,262 | |||||||||||||||||
| Accumulated other comprehensive income (loss) | — | — | — | (1,971 | ) | — | (1,971 | ) | |||||||||||||||||
| Total shareholders’ equity | 274,005 | 31,075 | 98,070 | 26,090 | (157,206 | ) | 272,034 | ||||||||||||||||||
| $ | 504,719 | $ | 85,610 | $ | 792,671 | $ | 33,898 | $ | (558,746 | ) | $ | 858,152 | |||||||||||||
CHAMPION ENTERPRISES, INC.
| Guarantor | Non-guarantor | Consolidating | ||||||||||||||||||||||
| Parent | CHB | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
| Net sales | $ | — | $ | 354,175 | $ | 1,790,768 | $ | 25,791 | $ | (249,000 | ) | $ | 1,921,734 | |||||||||||
| Cost of sales | — | 316,295 | 1,533,809 | 22,999 | (253,200 | ) | 1,619,903 | |||||||||||||||||
| Gross margin | — | 37,880 | 256,959 | 2,792 | 4,200 | 301,831 | ||||||||||||||||||
| Selling, general and administrative expenses | — | 46,608 | 244,965 | 13,713 | — | 305,286 | ||||||||||||||||||
| Goodwill impairment | — | — | 189,700 | — | — | 189,700 | ||||||||||||||||||
| Operating loss | — | (8,728 | ) | (177,706 | ) | (10,921 | ) | 4,200 | (193,155 | ) | ||||||||||||||
| Interest income | 15,408 | 3 | 2,235 | 381 | (15,380 | ) | 2,647 | |||||||||||||||||
| Interest expense | (15,408 | ) | (289 | ) | (29,115 | ) | (392 | ) | 15,380 | (29,824 | ) | |||||||||||||
| Loss before income taxes | — | (9,014 | ) | (204,586 | ) | (10,932 | ) | 4,200 | (220,332 | ) | ||||||||||||||
| Income tax benefit | — | (4,430 | ) | (64,470 | ) | (4,100 | ) | — | (73,000 | ) | ||||||||||||||
| Loss before equity in income (loss) of consolidated subsidiaries | — | (4,584 | ) | (140,116 | ) | (6,832 | ) | 4,200 | (147,332 | ) | ||||||||||||||
| Equity in income (loss) of consolidated subsidiaries | (147,332 | ) | — | — | — | 147,332 | — | |||||||||||||||||
| Net loss | $ | (147,332 | ) | $ | (4,584 | ) | $ | (140,116 | ) | $ | (6,832 | ) | $ | 151,532 | $ | (147,332 | ) | |||||||
CHAMPION ENTERPRISES, INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 30, 2000
| Guarantor | Non-guarantor | Consolidating | |||||||||||||||||||||||
| Parent | CHB | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||
| Net cash provided by (used for) operating activities | $ | 6,841 | $ | 24,397 | $ | 93,475 | $ | (10,001 | ) | $ | — | $ | 114,712 | ||||||||||||
| Cash flows from investing activities | |||||||||||||||||||||||||
| Acquisitions | — | — | (10,165 | ) | — | — | (10,165 | ) | |||||||||||||||||
| Additions to property, plant and equipment | — | (2,055 | ) | (12,339 | ) | (641 | ) | — | (15,035 | ) | |||||||||||||||
| Investments in and advances to unconsolidated subsidiaries | — | — | — | (659 | ) | — | (659 | ) | |||||||||||||||||
| Investments in and advances to consolidated subsidiaries | 24,121 | (20,188 | ) | (17,884 | ) | 13,951 | — | — | |||||||||||||||||
| Proceeds from the disposal of property, plant and equipment | — | — | 3,745 | — | — | 3,745 | |||||||||||||||||||
| Net cash provided by (used for) investing activities | 24,121 | (22,243 | ) | (36,643 | ) | 12,651 | — | (22,114 | ) | ||||||||||||||||
| Cash flows from financing activities | |||||||||||||||||||||||||
| Decrease in floor plan payable, net | — | — | (55,296 | ) | (1,059 | ) | — | (56,355 | ) | ||||||||||||||||
| Increase (decrease) in other long-term debt | — | (22 | ) | (1,294 | ) | 2,900 | — | 1,584 | |||||||||||||||||
| Common stock repurchased | (863 | ) | — | — | — | — | (863 | ) | |||||||||||||||||
| Common stock issued, net | 332 | — | — | — | — | 332 | |||||||||||||||||||
| Net cash provided by (used for) financing activities | (531 | ) | (22 | ) | (56,590 | ) | 1,841 | — | (55,302 | ) | |||||||||||||||
| Net increase in cash and cash equivalents | 30,431 | 2,132 | 242 | 4,491 | — | 37,296 | |||||||||||||||||||
| Cash and cash equivalents at beginning of period | 10,721 | (3,545 | ) | 2,882 | 2,789 | — | 12,847 | ||||||||||||||||||
| Cash and cash equivalents at end of period | $ | 41,152 | $ | (1,413 | ) | $ | 3,124 | $ | 7,280 | $ | — | $ | 50,143 | ||||||||||||
CHAMPION ENTERPRISES, INC.
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 30, 2000
| Guarantor | Non-guarantor | Consolidating | |||||||||||||||||||||||
| Parent | CHB | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||
| Current assets | |||||||||||||||||||||||||
| Cash and cash equivalents | $ | 41,152 | $ | (1,413 | ) | $ | 3,124 | $ | 7,280 | $ | — | $ | 50,143 | ||||||||||||
| Accounts receivable, trade | — | 11,096 | 32,120 | 1,216 | (13,300 | ) | 31,132 | ||||||||||||||||||
| Inventories | — | 15,257 | 200,913 | 3,014 | (1,419 | ) | 217,765 | ||||||||||||||||||
| Deferred taxes and other current assets | 843 | 10,888 | 117,138 | 5,481 | (56,857 | ) | 77,493 | ||||||||||||||||||
| Total current assets | 41,995 | 35,828 | 353,295 | 16,991 | (71,576 | ) | 376,533 | ||||||||||||||||||
| Property, plant and equipment, net | — | 49,834 | 154,325 | 3,118 | — | 207,277 | |||||||||||||||||||
| Goodwill, net | — | — | 272,161 | 1,809 | — | 273,970 | |||||||||||||||||||
| Investment in consolidated subsidiaries | 505,964 | 1 | (4,558 | ) | 3,784 | (505,191 | ) | — | |||||||||||||||||
| Deferred taxes and other assets | 3,901 | 8,032 | 60,974 | 11,369 | — | 84,276 | |||||||||||||||||||
| $ | 551,860 | $ | 93,695 | $ | 836,197 | $ | 37,071 | $ | (576,767 | ) | $ | 942,056 | |||||||||||||
| Liabilities and Shareholders’ Equity | |||||||||||||||||||||||||
| Current liabilities | |||||||||||||||||||||||||
| Floor plan payable | $ | — | $ | — | $ | 113,584 | $ | 614 | $ | — | $ | 114,198 | |||||||||||||
| Accounts payable | — | 7,269 | 35,244 | 890 | (300 | ) | 43,103 | ||||||||||||||||||
| Accrued warranty obligations | — | 8,004 | 40,631 | 669 | — | 49,304 | |||||||||||||||||||
| Accrued volume rebates | — | 13,804 | 31,313 | 1,035 | (600 | ) | 45,552 | ||||||||||||||||||
| Other current liabilities | 2,484 | 79,173 | 64,051 | 1,245 | (56,257 | ) | 90,696 | ||||||||||||||||||
| Total current liabilities | 2,484 | 108,250 | 284,823 | 4,453 | (57,157 | ) | 342,853 | ||||||||||||||||||
| Long-term liabilities | |||||||||||||||||||||||||
| Long-term debt | 200,000 | 7,642 | 15,059 | 2,933 | — | 225,634 | |||||||||||||||||||
| Deferred portion of purchase price | — | — | 39,157 | — | — | 39,157 | |||||||||||||||||||
| Other long-term liabilities | — | 16,594 | 20,770 | 239 | — | 37,603 | |||||||||||||||||||
| 200,000 | 24,236 | 74,986 | 3,172 | — | 302,394 | ||||||||||||||||||||
| Intercompany balances | 51,253 | (78,612 | ) | 361,640 | 1,445 | (335,726 | ) | — | |||||||||||||||||
| Redeemable convertible preferred stock, no par value, 5,000 shares authorized, none issued | — | — | — | — | — | — | |||||||||||||||||||
| Shareholders’ equity | |||||||||||||||||||||||||
| Common stock | 47,357 | 1 | 259 | 13 | (273 | ) | 47,357 | ||||||||||||||||||
| Capital in excess of par value | 33,116 | 29,914 | 214,241 | 27,457 | (271,612 | ) | 33,116 | ||||||||||||||||||
| Retained earnings | 217,650 | 9,906 | (99,752 | ) | 1,845 | 88,001 | 217,650 | ||||||||||||||||||
| Accumulated other comprehensive income (loss) | — | — | — | (1,314 | ) | — | (1,314 | ) | |||||||||||||||||
| Total shareholders’ equity | 298,123 | 39,821 | 114,748 | 28,001 | (183,884 | ) | 296,809 | ||||||||||||||||||
| $ | 551,860 | $ | 93,695 | $ | 836,197 | $ | 37,071 | $ | (576,767 | ) | $ | 942,056 | |||||||||||||
CHAMPION ENTERPRISES, INC.
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JANUARY 1, 2000
| Guarantor | Non-guarantor | Consolidating | ||||||||||||||||||||||||
| Parent | CHB | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||
| Net sales | $ | — | $ | 431,068 | $ | 2,387,313 | $ | 37,257 | $ | (291,000 | ) | $ | 2,564,638 | |||||||||||||
| Cost of sales | — | 391,022 | 2,030,168 | 30,278 | (286,600 | ) | 2,164,868 | |||||||||||||||||||
| Gross margin | — | 40,046 | 357,145 | 6,979 | (4,400 | ) | 399,770 | |||||||||||||||||||
| Selling, general and administrative expenses | — | 48,117 | 236,692 | 7,379 | — | 292,188 | ||||||||||||||||||||
| Operating income (loss) | — | (8,071 | ) | 120,453 | (400 | ) | (4,400 | ) | 107,582 | |||||||||||||||||
| Interest income | 10,213 | 4 | 3,309 | 294 | (10,990 | ) | 2,830 | |||||||||||||||||||
| Interest expense | (10,213 | ) | (103 | ) | (28,763 | ) | (281 | ) | 10,990 | (28,370 | ) | |||||||||||||||
| Income (loss) before income taxes | — | (8,170 | ) | 94,999 | (387 | ) | (4,400 | ) | 82,042 | |||||||||||||||||
| Income tax expense (benefit) | — | (3,770 | ) | 35,570 | 200 | — | 32,000 | |||||||||||||||||||
| Income (loss) before equity in income (loss) of consolidated subsidiaries | — | (4,400 | ) | 59,429 | (587 | ) | (4,400 | ) | 50,042 | |||||||||||||||||
| Equity in income (loss) of consolidated subsidiaries | 50,042 | — | — | — | (50,042 | ) | — | |||||||||||||||||||
| Net income (loss) | $ | 50,042 | $ | (4,400 | ) | $ | 59,429 | $ | (587 | ) | $ | (54,442 | ) | $ | 50,042 | |||||||||||
CHAMPION ENTERPRISES, INC.
| Guarantor | Non-guarantor | Consolidating | |||||||||||||||||||||||
| Parent | CHB | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||
| Net cash provided by (used for) operating activities | $ | 2,634 | $ | 7,057 | $ | 92,969 | $ | (2,724 | ) | $ | — | $ | 99,936 | ||||||||||||
| Cash flows from investing activities | |||||||||||||||||||||||||
| Acquisitions | — | — | (77,339 | ) | (1,792 | ) | — | (79,131 | ) | ||||||||||||||||
| Additions to property, plant and equipment | — | (10,380 | ) | (39,477 | ) | (533 | ) | — | (50,390 | ) | |||||||||||||||
| Investments in and advances to unconsolidated subsidiaries | — | — | — | (10,776 | ) | — | (10,776 | ) | |||||||||||||||||
| Investments in and advances to consolidated subsidiaries | (60,724 | ) | (3,015 | ) | 53,938 | 9,801 | — | — | |||||||||||||||||
| Proceeds from the disposal of property, plant and equipment | — | — | 996 | — | — | 996 | |||||||||||||||||||
| Net cash used for investing activities | (60,724 | ) | (13,395 | ) | (61,882 | ) | (3,300 | ) | — | (139,301 | ) | ||||||||||||||
| Cash flows from financing activities | |||||||||||||||||||||||||
| Increase (decrease) in floor plan payable, net | — | — | (46,626 | ) | 1,673 | — | (44,953 | ) | |||||||||||||||||
| Increase in other long-term debt | — | 6,764 | 5,443 | 33 | — | 12,240 | |||||||||||||||||||
| Common stock repurchased | (22,520 | ) | — | — | — | — | (22,520 | ) | |||||||||||||||||
| Common stock issued, net | 4,433 | — | — | — | — | 4,433 | |||||||||||||||||||
| Proceeds from senior notes | 197,300 | — | — | — | — | 197,300 | |||||||||||||||||||
| Decrease in long-term bank debt, net | (118,000 | ) | — | — | — | — | (118,000 | ) | |||||||||||||||||
| Deferred financing costs | (1,116 | ) | — | — | — | — | (1,116 | ) | |||||||||||||||||
| Tax benefit of stock options exercised | 1,000 | — | — | — | — | 1,000 | |||||||||||||||||||
| Net cash provided by (used for) financing activities | 61,097 | 6,764 | (41,183 | ) | 1,706 | — | 28,384 | ||||||||||||||||||
| Net increase (decrease) in cash and cash equivalents | 3,007 | 426 | (10,096 | ) | (4,318 | ) | — | (10,981 | ) | ||||||||||||||||
| Cash and cash equivalents at beginning of period | 7,714 | (3,971 | ) | 12,978 | 7,107 | — | 23,828 | ||||||||||||||||||
| Cash and cash equivalents at end of period | $ | 10,721 | $ | (3,545 | ) | $ | 2,882 | $ | 2,789 | $ | — | $ | 12,847 | ||||||||||||
NOTE 16 — Quarterly Financial Information (Unaudited)
| First | Second | Third | Fourth | ||||||||||||||||||
| Quarter | Quarter | Quarter | Quarter | Total | |||||||||||||||||
| (Dollars in thousands, except per share amounts) | |||||||||||||||||||||
2001 | |||||||||||||||||||||
| Net sales | |||||||||||||||||||||
| Manufacturing | $ | 260,510 | $ | 351,199 | $ | 362,005 | $ | 322,601 | $ | 1,296,315 | |||||||||||
| Retail | 108,402 | 129,403 | 119,637 | 95,468 | 452,910 | ||||||||||||||||
| Less: intercompany | (42,600 | ) | (52,400 | ) | (54,000 | ) | (52,000 | ) | (201,000 | ) | |||||||||||
| Total net sales | 326,312 | 428,202 | 427,642 | 366,069 | 1,548,225 | ||||||||||||||||
| Cost of sales | 281,504 | 351,791 | 350,175 | 299,746 | 1,283,216 | ||||||||||||||||
| Gross margin | 44,808 | 76,411 | 77,467 | 66,323 | 265,009 | ||||||||||||||||
| Selling, general and administrative expenses | 79,563 | 68,839 | 67,461 | 67,810 | 283,673 | ||||||||||||||||
| Operating income (loss) | (34,755 | ) | 7,572 | 10,006 | (1,487 | ) | (18,664 | ) | |||||||||||||
| Interest expense, net | 6,428 | 5,782 | 5,190 | 5,224 | 22,624 | ||||||||||||||||
| Pretax income (loss) | (41,183 | ) | 1,790 | 4,816 | (6,711 | ) | (41,288 | ) | |||||||||||||
| Net income (loss) | (26,083 | ) | 490 | 2,516 | (4,811 | ) | (27,888 | ) | |||||||||||||
| Basic earnings (loss) per share | (0.55 | ) | 0.01 | 0.05 | (0.10 | ) | (0.59 | ) | |||||||||||||
| Diluted earnings (loss) per share | $ | (0.55 | ) | $ | 0.01 | $ | 0.05 | $ | (0.10 | ) | $ | (0.59 | ) | ||||||||
| Homes sold | |||||||||||||||||||||
| Wholesale | 8,210 | 10,918 | 10,941 | 9,482 | 39,551 | ||||||||||||||||
| Retail — new | 1,824 | 2,183 | 1,990 | 1,581 | 7,578 | ||||||||||||||||
| Retail — pre-owned | 513 | 529 | 461 | 394 | 1,897 | ||||||||||||||||
| Wholesale multi-section mix | 76 | % | 76 | % | 77 | % | 80 | % | 77 | % | |||||||||||
| Locations at period end | |||||||||||||||||||||
| Manufacturing facilities | 51 | 49 | 49 | 49 | 49 | ||||||||||||||||
| Sales centers | 230 | 230 | 229 | 218 | 218 | ||||||||||||||||
| First | Second | Third | Fourth | ||||||||||||||||||
| Quarter | Quarter | Quarter | Quarter | Total | |||||||||||||||||
| (Dollars in thousands, except per share amounts) | |||||||||||||||||||||
2000 | |||||||||||||||||||||
| Net sales | |||||||||||||||||||||
| Manufacturing | $ | 435,802 | $ | 439,277 | $ | 378,449 | $ | 310,498 | $ | 1,564,026 | |||||||||||
| Retail | 167,507 | 166,934 | 148,619 | 123,648 | 606,708 | ||||||||||||||||
| Less: intercompany | (68,000 | ) | (73,000 | ) | (61,000 | ) | (47,000 | ) | (249,000 | ) | |||||||||||
| Total net sales | 535,309 | 533,211 | 466,068 | 387,146 | 1,921,734 | ||||||||||||||||
| Cost of sales | 451,338 | 447,791 | 390,359 | 330,415 | 1,619,903 | ||||||||||||||||
| Gross margin | 83,971 | 85,420 | 75,709 | 56,731 | 301,831 | ||||||||||||||||
| Selling, general and administrative expenses | 74,801 | 73,254 | 75,420 | 81,811 | 305,286 | ||||||||||||||||
| Goodwill impairment charges | — | — | — | (189,700 | ) | (189,700 | ) | ||||||||||||||
| Operating income (loss) | 9,170 | 12,166 | 289 | (214,780 | ) | (193,155 | ) | ||||||||||||||
| Interest expense, net | 6,969 | 6,844 | 6,762 | 6,602 | 27,177 | ||||||||||||||||
| Pretax income (loss) | 2,201 | 5,322 | (6,473 | ) | (221,382 | ) | (220,332 | ) | |||||||||||||
| Net income (loss) | 1,301 | 2,822 | (3,973 | ) | (147,482 | ) | (147,332 | ) | |||||||||||||
| Basic earnings (loss) per share | 0.03 | 0.06 | (0.08 | ) | (3.12 | ) | (3.12 | ) | |||||||||||||
| Diluted earnings (loss) per share | $ | 0.03 | $ | 0.06 | $ | (0.08 | ) | $ | (3.12 | ) | $ | (3.12 | ) | ||||||||
| Homes sold | |||||||||||||||||||||
| Wholesale | 15,351 | 14,961 | 12,393 | 9,737 | 52,442 | ||||||||||||||||
| Retail — new | 3,315 | 3,176 | 2,776 | 2,216 | 11,483 | ||||||||||||||||
| Retail — pre-owned | 906 | 713 | 650 | 594 | 2,863 | ||||||||||||||||
| Wholesale multi-section mix | 66 | % | 69 | % | 73 | % | 77 | % | 71 | % | |||||||||||
| Locations at period end | |||||||||||||||||||||
| Manufacturing facilities | 59 | 57 | 55 | 53 | 53 | ||||||||||||||||
| Sales centers | 285 | 291 | 270 | 260 | 260 | ||||||||||||||||
In the fourth quarter of 2000, the Company recorded goodwill impairment charges of $189.7 million ($127.8 million after tax or $2.70 per diluted share).
In connection with the 1999 bankruptcy of the Company’s former largest independent retailer, the Company recorded losses totaling $5.0 million in cost of sales in the second quarter of 2000.
Per share amounts are based on the weighted average shares outstanding for each period. Quarterly amounts may not add to annual amounts due to changes in shares outstanding.
NOTE 17 — Supplemental Earnings Information
As discussed in Note 1, we adopted SFAS No. 142 in January 2002, which resulted in the cessation of the amortization of goodwill commencing on the first day of our fiscal year 2002. Pursuant to SFAS No. 142, goodwill is no longer amortized but will be reviewed annually (or more frequently if impairment indicators arise) for impairment. For comparative purposes, the following reconciliation summarizes the Company’s net income (loss) and earnings (loss) per share adjusted to exclude goodwill amortization expense, net of tax, for the fiscal years ended December 29, 2001, December 30, 2000 and January 1, 2000:
| 2001 | 2000 | 1999 | ||||||||||
| (In thousands, except per share amounts) | ||||||||||||
| Reported net income (loss) | $ | (27,888 | ) | $ | (147,332 | ) | $ | 50,042 | ||||
| Plus: Goodwill amortization (net of taxes of $2,800; $3,600 and $3,500 for the years ended December 29, 2001, December 30, 2000 and January 1, 2000, respectively) | 8,861 | 10,110 | 10,165 | |||||||||
| Adjusted net income (loss) | $ | (19,027 | ) | $ | (137,222 | ) | $ | 60,207 | ||||
| Basic earnings (loss) per share as reported | $ | (0.59 | ) | $ | (3.12 | ) | $ | 1.04 | ||||
| Goodwill amortization | 0.18 | 0.22 | 0.21 | |||||||||
| Adjusted basic earnings (loss) per share | $ | (0.41 | ) | $ | (2.90 | ) | $ | 1.25 | ||||
| Diluted earnings (loss) per share as reported | $ | (0.59 | ) | $ | (3.12 | ) | $ | 1.02 | ||||
| Goodwill amortization | 0.18 | 0.22 | 0.21 | |||||||||
| Adjusted diluted earnings (loss) per share | $ | (0.41 | ) | $ | (2.90 | ) | $ | 1.23 | ||||
