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FILED PURSUANT TO RULE 424(B)(3)
REGISTRATION NO. 333-62850
333-62850-01
333-62850-02
PROSPECTUS
[LOGO]
AMENDED EXCHANGE OFFER OF
9.5% CONVERTIBLE TRUST II PREFERRED SECURITIES DUE FEBRUARY 15, 2013 OF
FLEETWOOD CAPITAL TRUST II
FOR UP TO $86.25 MILLION IN AGGREGATE LIQUIDATION AMOUNT OF THE 6% CONVERTIBLE
TRUST
PREFERRED SECURITIES DUE FEBRUARY 15, 2028 OF FLEETWOOD CAPITAL TRUST
AND AMENDED CASH OFFER OF
9.5% CONVERTIBLE TRUST III PREFERRED SECURITIES DUE FEBRUARY 15, 2013
OF FLEETWOOD CAPITAL TRUST III
If you elect to participate in the exchange offer, you will receive from us
$22 in liquidation amount of the 9.5% Convertible Trust II Preferred Securities
due February 15, 2013 of Fleetwood Capital Trust II, referred to as the
"exchange preferred securities," for each $50 in liquidation amount of a maximum
of $86.25 million in aggregate liquidation amount of the outstanding 6%
Convertible Trust Preferred Securities due February 15, 2028 of Fleetwood
Capital Trust, referred to as the "existing preferred securities." We are also
offering investors the right to purchase up to an aggregate of $150.0 million in
liquidation amount of "cash offer preferred securities" for cash. The cash offer
preferred securities will be substantially identical to the exchange preferred
securities except that the cash offer preferred securities will have a different
conversion price and a different liquidation amount, and will be issued by a
different trust. The exchange preferred securities and the cash offer preferred
securities are collectively referred to as the "new preferred securities."
The exchange offer was commenced on December 5, 2001 and amended on
December 11, 2001. The exchange offer will expire at 5:00 p.m., New York City
Time, on January 4, 2002, unless we extend it.
The cash offer is not conditioned upon a minimum number of cash offer
preferred securities being sold. The placement agent has agreed to use its best
efforts to sell the cash offer preferred securities. The cash offer is also not
conditioned upon consummation of the exchange offer. The cash offer is expected
to close prior to the expiration of the exchange offer. The exchange offer is
subject to a number of conditions, including there being tendered in the
exchange offer, and not withdrawn, a minimum of $50.0 million in aggregate
liquidation amount of existing preferred securities and the receipt of proceeds
in the cash offer in an amount equal to at least 30% of the aggregate
liquidation amount of the existing preferred securities tendered and accepted
for exchange in the exchange offer.
The exchange preferred securities will be convertible into shares of our
common stock in the manner described in this prospectus at an initial conversion
price that is equal to the higher of:
- the equivalent of a 15% premium over the daily volume-weighted average of
the closing prices of our common stock for each of the five trading days
immediately preceding the fourth trading day prior to the exchange offer
expiration date, or
- $8.63 per share,
subject to adjustment.
The cash offer preferred securities will be convertible into shares of our
common stock at any time prior to maturity in the manner described in this
prospectus at an initial conversion price that is equal to the higher of:
- the equivalent of a 15% premium over the closing price of our common stock
on the day that we price the cash offer, or
- $8.63 per share,
subject to adjustment.
The distributions on the new preferred securities will be paid in cash or,
at our election, prior to February 15, 2004, in our common stock. At any time
after February 15, 2004, we may cause the payment of distributions on the new
preferred securities to be deferred for up to 20 consecutive quarterly periods
in the manner described in this prospectus.
We may cause all or some of the new preferred securities to be redeemed at
any time on or after February 15, 2004, at the applicable redemption price plus
any accumulated and unpaid distributions, on the terms and conditions described
in this prospectus.
Prior to February 15, 2004, if our common stock price exceeds specific
targets described in this prospectus, we may cause the new preferred securities
to be redeemed for a price of 100% of the liquidation amount per exchange
preferred security, plus any accumulated and unpaid distributions. In the case
of such redemption prior to February 15, 2004, we will cause additional
distributions to be paid in cash or common stock, at our election, in an amount
equal to the total distributions payable on the new preferred securities through
February 15, 2004, less any distributions that have actually been paid on any
new preferred securities that are converted following the notice of redemption
and prior to the date of redemption.
Our common stock is traded on the New York Stock Exchange and the Pacific
Stock Exchange under the symbol "FLE." On December 11, 2001, the last reported
sales price for our common stock on the New York Stock Exchange was $9.01 per
share.
We first mailed a preliminary prospectus and a letter of transmittal on
December 5, 2001.
PLEASE SEE THE SECTION TITLED "RISK FACTORS," BEGINNING ON PAGE 25 OF THIS
PROSPECTUS, FOR A DISCUSSION OF FACTORS THAT YOU SHOULD CONSIDER BEFORE YOU
DECIDE TO PARTICIPATE IN THE EXCHANGE OFFER OR PURCHASE CASH OFFER PREFERRED
SECURITIES.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
--------------------------
THE DEALER MANAGER FOR THE EXCHANGE OFFER:
BANC OF AMERICA SECURITIES LLC
------------------
This prospectus is dated December 11, 2001.
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THIS PROSPECTUS INCORPORATES IMPORTANT BUSINESS AND FINANCIAL INFORMATION ABOUT
THE REGISTRANTS THAT IS NOT INCLUDED IN OR DELIVERED WITH THE DOCUMENT, WHICH
INFORMATION IS AVAILABLE WITHOUT CHARGE TO SECURITY HOLDERS UPON WRITTEN OR ORAL
REQUEST BY CALLING OUR INFORMATION AGENT, D.F. KING & CO., INC., TOLL-FREE AT
(800) 290-6428 OR BY WRITING TO D.F. KING & CO., INC., 77 WATER STREET, 20TH
FLOOR, NEW YORK, NEW YORK 10005. TO OBTAIN TIMELY DELIVERY, SECURITY HOLDERS
WISHING TO PARTICIPATE IN THE EXCHANGE OFFER MUST REQUEST THE INFORMATION NO
LATER THAN DECEMBER 27, 2001, FIVE BUSINESS DAYS BEFORE THE DATE THEY MUST MAKE
THEIR INVESTMENT DECISION.
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with different information. We are not making an
offer of these preferred securities in any state where the offer is not
permitted. You should not assume the information in this prospectus or any
prospectus supplement is accurate as of any date other than the date on the
front of those documents.
TABLE OF CONTENTS
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<Caption>
PAGE
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Summary..................................................... 4
Comparison of Terms of New Preferred Securities
and Existing Preferred Securities......................... 15
Summary Financial Data...................................... 24
Risk Factors................................................ 25
Risks Relating to Our Business............................ 25
Risks Relating to the Exchange Offer, the Cash Offer, the
New Preferred Securities
and Our Common Stock.................................... 34
Special Note Regarding Forward-Looking Statements........... 40
Use of Proceeds............................................. 41
Price Range of Common Stock................................. 42
Dividend Policy............................................. 42
Capitalization.............................................. 42
Selected Consolidated Financial Data........................ 44
Management's Discussion and Analysis........................ 46
Fiscal 2001 Compared to Fiscal 2000....................... 48
Fiscal 2000 Compared to Fiscal 1999....................... 51
Liquidity and Capital Resources........................... 53
Recent Developments....................................... 54
New Accounting Pronouncements............................. 60
Business.................................................... 62
General................................................... 62
Manufactured Housing...................................... 62
Manufactured Housing--Retail.............................. 63
Recreational Vehicles..................................... 64
Competitive Advantages.................................... 66
Our Business Strategy..................................... 67
Sales and Distribution of Our Products.................... 68
Financing of Our Products................................. 69
Our Principal Properties.................................. 70
Competition in Our Business............................... 70
</Table>
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<Table>
<Caption>
PAGE
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Regulatory Issues Applicable to Our Business and
Products................................................ 71
Our Intellectual Property................................. 71
Our Relationship with Our Employees....................... 72
Legal Proceedings in Which We Are Involved................ 72
The Exchange Offer.......................................... 74
Terms of the Exchange Offer; Reasons for the Exchange
Offer;
Period for Tendering Existing Preferred Securities...... 74
Minimum Conditions........................................ 75
Expiration Date........................................... 75
Extensions; Amendments.................................... 75
Procedures for Tendering Existing Preferred Securities.... 76
Our Interpretations Are Binding........................... 77
Acceptance of Existing Preferred Securities for Exchange;
Delivery of Exchange Preferred Securities............... 78
Guaranteed Delivery Procedures............................ 79
Withdrawal Rights......................................... 79
Conditions for Completion of the Exchange Offer........... 80
Legal Limitation.......................................... 81
Fees and Expenses......................................... 81
Exchange Agent............................................ 83
Consequences of Exchanging or Failing to Exchange Existing
Preferred Securities.................................... 83
Cash Offer for Cash Offer Preferred Securities.............. 84
Fleetwood Capital Trust..................................... 85
Fleetwood Capital Trust II and Fleetwood Capital Trust
III....................................................... 86
Description of Preferred Securities......................... 88
Description of the New Preferred Securities............... 88
Description of the New Preferred Securities Guarantees.... 112
Description of the New Debentures......................... 116
Relationship Among the New Preferred Securities, the New
Debentures and the New Preferred Securities Guarantee... 128
Description of the Existing Preferred Securities, Existing
Debentures and the Existing Preferred Securities
Guarantee............................................... 130
Description of Our Capital Stock............................ 133
Capital Stock............................................. 133
Rights.................................................... 133
Warrants.................................................. 134
United States Federal Income Tax Considerations............. 135
Classification of the New Debentures...................... 135
Classification of the New Trusts.......................... 136
Treatment of Exchange Offer............................... 136
Tax Treatment of the Ownership and Disposition of New
Preferred Securities and Common Stock................... 136
Non-U.S. Holders.......................................... 140
Plan of Distribution........................................ 142
Identity and Background of Filing Persons and Security
Ownership of Certain Beneficial Owners and Management..... 144
Legal Matters............................................... 147
Experts..................................................... 147
Where You Can Find Additional Information................... 147
</Table>
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SUMMARY
This summary does not contain all the information you should consider before
exchanging your existing preferred securities for the exchange preferred
securities or investing in cash offer preferred securities. You should read this
entire prospectus carefully. Unless otherwise indicated, "we," "us," "our" and
similar terms refer to Fleetwood Enterprises, Inc. Throughout this prospectus,
we use the term "fiscal," as it applies to a year, to represent the fiscal year
ending on the last Sunday in April. When we refer to a specific fiscal year, the
year reference is to the calendar year in which the fiscal year ends. For
example, "fiscal 2001" represents the fiscal year that ended on April 29, 2001.
Similarly, our fiscal quarters end on the last Sunday of each of the months of
July, October, January and April.
FLEETWOOD ENTERPRISES, INC.
We are the nation's largest manufacturer of recreational vehicles, including
motor homes, travel trailers, folding trailers and slide-in truck campers, and
one of the nation's largest producers and retailers of manufactured housing. In
fiscal 2001 and the fiscal quarter ended July 29, 2001, we sold 60,225 and
13,006 recreational vehicles, respectively. In calendar 2000, we had a 23% share
of the overall recreational vehicle market, consisting of a 22% share of the
motor home market, a 19% share of the travel trailer market and a 40% share of
the folding trailer market. We believe our market share has declined in calendar
2001 in each of the motor home and travel trailer markets. In fiscal 2001 and
the fiscal quarter ended July 29, 2001, we shipped 36,201 and 7,769 manufactured
homes, respectively, and were the second largest producer of HUD-Code homes in
the United States in terms of units sold. In calendar 2000, we also had a 3%
share of the single-family housing market and an 18% share of the manufactured
housing market.
In fiscal 2001, we generated consolidated revenues of $2.53 billion and
incurred a net loss of $284 million, and in the first quarter of fiscal 2002 we
had consolidated revenues of $564.1 million and incurred a net loss of
$11.1 million. The losses were due primarily to significantly reduced sales
volume in both manufactured housing and recreational vehicles caused by reduced
consumer demand and other charges related to goodwill impairment, restructuring
and downsizing initiatives.
Our manufacturing activities are conducted in 16 states within the U.S., and
to a much lesser extent in Canada. In addition, we operate five supply companies
that provide components for our manufactured housing and recreational vehicle
operations, while also generating outside sales.
Our business began in 1950 in producing manufactured homes. We entered the
recreational vehicle business in 1964. In fiscal 1999, we entered the
manufactured housing retail business through a combination of key acquisitions
and internal development of new retail sales centers. At July 29, 2001, we
operated 156 retail sales locations in 25 states, and were one of the four
largest retailers of manufactured homes in the United States.
Our principal executive offices are located at 3125 Myers Street in
Riverside, California 92503, and our telephone number is (909) 351-3500.
Fleetwood Capital Trust, Fleetwood Capital Trust II and Fleetwood Capital
Trust III are wholly owned subsidiaries of ours and, accordingly, we are deemed
an affiliate of each of these entities, which are also affiliates of each other.
FLEETWOOD CAPITAL TRUST
Fleetwood Capital Trust, referred to as the "existing trust," is a Delaware
statutory business trust. The existing trust was organized in 1998 for the sole
purpose of issuing the existing preferred securities and the existing common
securities and investing the proceeds of that issuance in an equivalent
principal amount of 6% Convertible Subordinated Debentures due February 15,
2028, also referred to as the "existing debentures." The existing trust's assets
consist principally of the existing debentures and payments under the existing
debentures are its sole source of revenue. The principal executive offices
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of the existing trust are located at 3125 Myers Street in Riverside, California
92503, and its telephone number is (909) 351-3500.
FLEETWOOD CAPITAL TRUST II
Fleetwood Capital Trust II, referred to as "Trust II," is a Delaware
statutory business trust. Trust II was organized in 2001 for the purposes of
issuing exchange preferred securities in exchange for the existing preferred
securities, issuing and selling its common securities to us, purchasing and
owning the 9.5% Convertible Trust II Subordinated Debentures due February 15,
2013, which are referred to as the "exchange debentures," and engaging in any
other lawful business or activity that may be engaged in by a business trust
formed under the Delaware Business Trust Act. Trust II's assets will consist
principally of the exchange debentures and payments under the exchange
debentures will be its sole source of revenue. The principal executive offices
of Trust II are located at 3125 Myers Street in Riverside, California 92503, and
its telephone number is (909) 351-3500.
FLEETWOOD CAPITAL TRUST III
Fleetwood Capital Trust III, referred to as "Trust III," is a Delaware
statutory business trust. Trust III was organized in 2001 for the purposes of
issuing and selling the cash offer preferred securities, issuing and selling its
common securities to us, purchasing and owning the 9.5% Convertible Trust III
Subordinated Debentures due February 15, 2013, which are referred to as the
"cash offer debentures," (the exchange debentures and the cash offer debentures
are referred to collectively as the "new debentures") and engaging in any other
lawful business or activity that may be engaged in by a business trust formed
under the Delaware Business Trust Act. Trust III's assets will consist
principally of the cash offer debentures and payments under the cash offer
debentures will be its sole source of revenue. The principal executive offices
of Trust III are located at 3125 Myers Street in Riverside, California 92503,
and its telephone number is (909) 351-3500.
Trust II and Trust III are collectively referred to as the "new trusts."
RATINGS DOWNGRADE
On November 16, 2001, Moody's Investors Services, Inc. announced that it had
lowered its rating on our senior implied debt from B1 to B2, and on our existing
preferred securities from B3 to Caa3, with a negative rating outlook. On
December 6, 2001, Standard and Poor's announced that it had lowered our
corporate credit rating from BB+ to BB-, and Fleetwood Capital Trust's corporate
credit rating from B+ to D, with a negative rating outlook. These actions could
result in lower trading prices for the existing preferred securities, and could
also result in any capital that we might raise in the future being more
expensive or more difficult to raise.
OUR REFINANCING PLAN
We are offering to exchange the exchange preferred securities for the
existing preferred securities, and we are also offering to sell up to $150.0
million in aggregate liquidation amount of cash offer preferred securities for
cash.
We are making the exchange offer and the cash offer to enhance liquidity and
to improve our balance sheet by increasing shareholders' equity, which will
increase our capacity to carry senior debt. If we raise only the minimum amount
in our cash offer necessary to consummate the exchange offer, we will have also
reduced the outstanding aggregate liquidation amount of our trust preferred
securities. Our trust preferred securities include the existing preferred
securities and will include the exchange preferred securities and the cash offer
preferred securities. The trust preferred securities are classified on our
balance sheet as minority interest. Upon consummation of the exchange offer, and
assuming we (1) accept a maximum of $86.25 million in aggregate liquidation
amount of existing preferred securities
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for tender in the exchange offer (thereby issuing $37.95 million in exchange
preferred securities), and (2) receive proceeds in the cash offer in an amount
equal to 30% of the aggregate liquidation amount of the existing preferred
securities tendered and accepted for exchange in the exchange offer, then the
aggregate liquidation amount of trust preferred securities will be reduced from
$287.5 million to $265.1 million. If the exchange offer is fully subscribed, we
will have enhanced our shareholders' equity by approximately $28.1 million. We
may however raise in the cash offer more than the minimum proceeds required as
one of the conditions to the exchange offer, or we may consummate the cash offer
without consummating the exchange offer, which would result in an increase in
the outstanding liquidation amount of trust preferred securities. If we raise
$150.0 million in the cash offer and accept $86.25 million in aggregate
liquidation amount of existing preferred securities for exchange in the exchange
offer, the outstanding aggregate liquidation amount of trust preferred
securities would increase to $389.2 million.
If we consummate the exchange offer, we intend to use a portion of the
proceeds from the cash offer to pay the taxes we expect to incur as a result of
the cancellation of the existing debentures that support the existing preferred
securities tendered and accepted for exchange in the exchange offer. We will
also use a portion of the proceeds to pay the fees and expenses incurred in
connection with the exchange offer and the cash offer. We will use the remainder
of the proceeds from the cash offer, if any, for general corporate purposes,
including the repayment of corporate indebtedness. As a result of a recent
amendment to our senior secured facility, we have agreed to contribute one half
of the amount raised in the cash offer to our manufacturing company
subsidiaries, after allowing for expenses of the offers and taxes incurred in
connection with the exchange offer, with one half of the amount contributed
being used to pay down the term loan up to $24.0 million, and the balance of
that contributed amount being then applied to pay down the revolving loan. If
$86.25 million in aggregate liquidation amount of the existing preferred
securities are tendered and accepted for exchange, we anticipate incurring a tax
liability of approximately $18.0 million.
In the event that the conditions to the exchange offer are not satisfied or
we do not otherwise consummate the exchange offer, we nonetheless expect to
consummate the cash offer and will use all proceeds received in the cash offer,
after payment of fees and expenses, for general corporate purposes, including
the repayment of corporate indebtedness.
The effect of the exchange offer on our cash flow will be positive, assuming
we raise only the minimum amount in our cash offer, which is a condition to the
exchange offer. If we raise more than the minimum amount, or if we do not
consummate the exchange offer but we do consummate the cash offer, our cash
balance will increase; however, the effect on our cash earnings in future
periods may be negative. However, in any of the circumstances described in the
two previous sentences, we anticipate that the effect of either or both of the
exchange offer or the cash offer on our balance sheet will be to provide us with
greater flexibility in executing our strategic plan and exploring financing
opportunities in the future, by enhancing liquidity and increasing our capacity
to carry senior debt.
The exchange offer and the cash offer are an integral part of a larger
program to restructure our debt obligations and to improve liquidity and enhance
our balance sheet. As part of this program, on July 27, 2001, we entered into a
new senior secured facility funded by a syndicate of banks led by Bank of
America. We used part of the proceeds of this facility to retire our senior
unsecured notes payable to The Prudential Insurance Company of America, with
whom we had previously entered into a forbearance agreement with respect to
certain defaults under covenants governing these notes.
The new senior secured facility with the syndicate of banks led by Bank of
America was funded on July 30, 2001. The senior secured facility, as amended, is
structured as a three-year, syndicated revolving credit facility of
$190 million with an additional two-year term loan of $30 million. The borrowers
under the facilities are substantially all of our subsidiaries and we are a
guarantor of the senior secured facility. The revolving credit facility and the
related guaranties are secured by
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substantially all of our and our subsidiaries' existing and future assets,
excluding assets securing the term loan (upon which a second priority lien
secures the revolving credit facility), assets of our retail subsidiaries
subject to a floor plan financing agreement with another lender, those assets at
our retail subsidiaries' sites managed by a third party, and the cash value of
our company-owned life insurance. The term loan is secured by first priority
liens on real estate owned by certain of our manufacturing subsidiaries, stock
in our folding trailer subsidiary and the future fixed assets of our folding
trailer subsidiary, as well as a second lien on the assets securing the
revolving credit facility. Under the revolving credit facility, letters of
credit totaling up to $75 million may be issued.
Revolving loans bear interest, at our option, at a base rate of Bank of
America's prime rate or one, two or three month LIBOR, plus a margin. For
purposes of determining the interest rate under the revolving credit facility,
the applicable margin is adjusted monthly, based on our liquidity and a fixed
charge coverage test, within a range of 0.0% to 1.5% for prime rate loans and
within a range of 2.25% to 3.75% for LIBOR rate loans. Borrowings under the term
loan initially bear interest at Bank of America's prime rate plus 3% for the
first year of the loan, with escalations and amortizations for the remainder of
the term.
We are required to pay a monthly facility fee for any unused portion of the
revolving credit facility and for outstanding letters of credit, such fees to be
based upon our liquidity margin then in effect.
Our senior secured facility contains a number of affirmative and negative
covenants, including covenants requiring the maintenance of specified financial
ratios and compliance with certain financial tests. The senior secured facility
has been amended to enable us to comply with certain of these covenants in the
near future. In amending the terms of the facility, our lenders have agreed to
replace the existing EBITDA covenant with a new covenant based on the projected
amount of our free cash flow, and also to amend the definition of the fixed
charge coverage ratio in the existing fixed charge coverage ratio covenant. The
interest rates on our LIBOR rate loans and prime rate loans have also been
increased by 0.5% for a period of at least 90 days post-closing, while remaining
within the interest rate ranges indicated above. In addition, under the amended
senior secured facility we are required to contribute one half of the proceeds
raised in the cash offer to our manufacturing company subsidiaries, after
allowing for expenses of the offers and taxes incurred in connection with the
exchange offer, with half of the amount contributed being used to pay down the
term loan up to $24 million, and the balance of that contributed amount being
then applied to pay down the revolving loan. Please read the section titled "Use
of Proceeds," beginning on page 41 of this prospectus for more information.
On July 27, 2001, concurrent with the closing of the senior secured
facility, we designated an initial borrowing of $83 million. At the close of
business on July 30, 2001, the funding date, after the posting of bank clearings
and application of a portion of our cash reserves, the net outstanding loan was
$55.6 million. As of October 28, 2001, the net outstanding loan was
$66.0 million. The net borrowings plus our cash reserves were applied as
follows:
- to retire the $68 million remaining principal balance of the Prudential
notes, along with payment of accrued interest and a yield maintenance
penalty;
- to reduce the outstanding retail flooring liability to Conseco Finance
Servicing Corp. to approximately $40 million; and
- to secure standby letters of credit that primarily underwrite self-insured
workers' compensation programs at manufacturing plants in various states.
At October 28, 2001, gross excess availability was approximately
$90 million. After consideration of the $50 million required minimum excess
availability, approximately $40 million was available to be used for general
corporate purposes.
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OUR EXCHANGE OFFER
We have summarized the terms of the exchange offer in this section. Before
you decide whether to tender your existing preferred securities in this offer,
you should read the detailed description of the offer under "The Exchange Offer"
and of the exchange preferred securities under "Description of Preferred
Securities" for further information.
<Table>
Terms of the Exchange Offer.......................... We are offering up to an aggregate of
$37.95 million in liquidation amount of 9.5%
Convertible Trust II Preferred Securities due
February 15, 2013 for up to an aggregate of
$86.25 million of the $287.5 million in
liquidation amount of outstanding 6%
Convertible Trust Preferred Securities due
February 15, 2028. We are offering to exchange
$22 in liquidation amount of exchange
preferred securities for each $50 in
liquidation amount of existing preferred
securities. You may tender all, some or none
of your existing preferred securities. We will
pay distributions on the exchange preferred
securities in cash or, at our election, prior
to February 15, 2004, in shares of our common
stock, par value $1.00 per share.
Conversion Price..................................... The exchange preferred securities will be
convertible into shares of our common stock at
any time prior to maturity at an initial
conversion price that is equal to the higher
of:
- the equivalent of a 15% premium over the
daily volume-weighed average of the closing
prices of our common stock for each of the
five trading days immediately preceding the
fourth trading day prior to the exchange
offer expiration date, or
- $8.63 per share,
subject to adjustment.
Solely for purposes of illustration, the
initial conversion price would be $12.56 per
share if it were calculated as the equivalent
of a 15% premium over the daily volume-weighed
average of the closing prices of our common
stock for each of the five trading days
immediately preceding December 10, 2001.
The following table illustrates the number of
shares of our common stock that would be
issuable upon conversion of each $22 in
liquidation amount of exchange preferred
securities for a range of conversion prices,
calculated as the equivalent of a 15% premium
over a range of sale prices for our common
stock, including the closing sale price per
share of $9.25 for our common stock on
December 10, 2001. This table is for purposes
of illustration only. The conversion price may
exceed
</Table>
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<Table>
$17.83 per share, but may not be less than
$8.63 per share.
</Table>
<Table>
<Caption>
SHARES OF FLE COMMON STOCK
ISSUED FOR EACH $22 LIQUIDATION
PRICE OF FLE CONVERSION AMOUNT OF CONVERTED EXCHANGE
COMMON STOCK PRICE PREFERRED SECURITIES
- ------------------------ ------------------------ -------------------------------
$5.50 $8.63 2.55
7.50 8.63 2.55
9.25 10.64 2.07
9.50 10.93 2.01
10.50 12.08 1.82
11.50 13.23 1.66
13.50 15.53 1.42
15.50 17.83 1.23
</Table>
<Table>
To ascertain the conversion price to be used
four days prior to the expiration date of the
exchange offer, holders may call (800)
290-6428.
Expiration Date; Extension; Termination.............. The exchange offer was commenced on
December 5, 2001 and amended on December 11,
2001. The exchange offer and withdrawal rights
will expire at 5:00 p.m., New York City Time,
on January 4, 2002, or any subsequent date to
which we extend it. We may extend the
expiration date for any reason. In the case of
any extension, we will issue a press release
or other public announcement no later than
9:00 a.m., New York City Time, on the next
business day after the previously scheduled
expiration date. You must tender your existing
preferred securities prior to this date if you
wish to participate in the offer. We have the
right to:
- extend the period during which the exchange
offer is open and retain all tendered
existing preferred securities, subject to
your right to withdraw your tendered
preferred securities, or
- waive any condition or otherwise amend the
terms of the exchange offer in any respect,
other than the condition that the
registration statement be declared
effective.
Acceptance of Existing Preferred Securities for
Exchange; Pro Rata Acceptance........................ Once all of the conditions to the exchange
offer are satisfied or waived, we will accept,
promptly after the expiration date, up to
$86.25 million in aggregate liquidation amount
of existing preferred securities properly
tendered, and will issue the exchange
preferred securities promptly after acceptance
of the existing preferred securities. If
existing preferred securities in an aggregate
liquidation amount of more than $86.25 million
are validly tendered, we will only accept them
for
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<Table>
exchange on a pro rata basis, in an aggregate
liquidation amount per holder equal to:
- a fraction, the numerator of which is the
total liquidation amount of existing preferred
securities validly tendered for exchange by
such holder and the denominator of which is
the aggregate liquidation amount of all
existing preferred securities tendered by
all holders, multiplied by
- $86.25 million.
Conditions to the Exchange Offer..................... The exchange offer is subject to:
- the registration statement and any
post-effective amendment to the registration
statement covering the exchange preferred
securities being effective under the
Securities Act of 1933;
- an aggregate liquidation amount of a minimum
of $50.0 million of existing preferred
securities being tendered into the exchange
offer and not withdrawn;
- the receipt of proceeds in the sale of cash
offer preferred securities being purchased in
our cash offer, described below, in an
amount equal to at least 30% of the
aggregate liquidation amount of existing
preferred securities tendered and accepted
for exchange in the exchange offer; and
- other customary conditions.
Please read the section titled "The Exchange
Offer--Conditions for Completion of The
Exchange Offer," beginning on page 80 of this
prospectus, for more information.
Withdrawal Rights.................................... You may withdraw a tender of your existing
preferred securities at any time before the
exchange offer expires by delivering a written
notice of withdrawal to The Bank of New York,
the exchange agent, before the expiration
date. If you change your mind, you may
retender your existing preferred securities by
again following the exchange offer procedures
before the exchange offer expires.
You may also withdraw a tender of your
existing preferred securities after the
expiration of 40 business days from the
commencement date of the exchange offer if
your tender has not yet been accepted for
payment.
Procedures for Tendering Existing Preferred
Securities........................................... If you hold existing preferred securities
through a broker, dealer, commercial bank,
trust company or other nominee, you should
contact that person promptly if you wish to
tender your existing preferred securities.
Tenders of your existing
</Table>
10
<Page>
<Table>
preferred securities will be effected by
book-entry transfers through The Depository
Trust Company.
If you hold your existing preferred securities
through a broker, dealer, commercial bank,
trust company or other nominee, you may also
comply with the procedures for guaranteed
delivery.
Please do not send letters of transmittal to
us. You should send those letters to The Bank
of New York, the exchange agent. The exchange
agent can answer your questions regarding how
to tender your existing preferred securities.
Distributions........................................ Distributions on the exchange preferred
securities will be payable, in cash or, at our
election, prior to February 15, 2004, in our
common stock, payable on February 15, May 15,
August 15 and November 15 of each year,
beginning February 15, 2002. We cannot
determine at this time whether we will elect
to cause distributions to be paid on our
exchange preferred securities in shares of our
common stock. However, if our business
environment and our operating results do not
significantly improve from those we have
recently experienced, we would likely find it
necessary to do so as early as the February
2002 distribution.
Exchange Agent....................................... The Bank of New York.
Information Agent.................................... D.F. King & Co., Inc.
For information regarding the exchange offer,
please call toll-free at (800) 290-6428.
Dealer Manager....................................... Banc of America Securities LLC.
Risk Factors......................................... You should consider carefully the matters
described under "Risk Factors," beginning on
page 25 of this prospectus, as well as other
information set forth in this prospectus and
in the letter of transmittal.
Deciding Whether to Participate in the
Exchange Offer....................................... Neither we nor our officers or directors make
any recommendation as to whether you should
tender or refrain from tendering all or any
portion of your existing preferred securities
in the exchange offer. Further, we have not
authorized anyone to make any such
recommendation. You must make your own
decision as to whether to tender your existing
preferred securities in the exchange offer
and, if so, the aggregate amount of existing
preferred securities to tender after reading
this prospectus and the letter of transmittal
and consulting with your advisers, if any,
based on your own financial position and
requirements. If you decide to tender all or a
portion of your existing preferred securities
</Table>
11
<Page>
<Table>
in the exchange offer, upon the consummation
of the exchange offer and the acceptance of
your existing preferred securities, any
accrued but unpaid distributions, or any
distributions that would otherwise be due and
payable on the existing preferred securities
that you tendered and which were accepted for
exchange, shall not be required to be paid by
us or the existing trust and any other rights
you may have under the terms of your tendered
existing preferred securities will terminate.
Consequences of Not Exchanging Existing Preferred
Securities........................................... If you do not exchange your existing preferred
securities in the exchange offer, our
obligation to make payments that are
distributed to you as holders of the existing
preferred securities will be subordinated to
our obligation to make payments that are
distributed to holders of the exchange
preferred securities. Further, the liquidity
of the trading market for existing preferred
securities not tendered for exchange, or
tendered for exchange but not accepted, could
be adversely affected to the extent that
existing preferred securities are tendered and
accepted for exchange in the exchange offer.
In addition, we have the right to elect to
defer distributions on our existing preferred
securities, including deferrals for up to
twenty consecutive quarters. On October 30,
2001, we elected to defer distributions on our
existing preferred securities due to be made
on November 15, 2001. If our business
environment and our operating results do not
significantly improve from those we have
recently experienced, we would likely find it
necessary to defer distributions on our
existing preferred securities through at least
August 15, 2002. Even though our board of
directors has discontinued the payment of
dividends on our common stock for the
foreseeable future, these deferrals of
distributions on our existing preferred
securities would further prevent us from
declaring or paying any dividends during the
period of such deferrals.
Tax Consequences..................................... Please see the section titled "United States
Federal Income Tax Considerations," beginning
on page 135 of this prospectus.
</Table>
12
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<Table>
OUR CASH OFFER
THE TERMS OF THE EXCHANGE PREFERRED SECURITIES AND THE CASH OFFER PREFERRED SECURITIES ARE
SUBSTANTIALLY IDENTICAL, EXCEPT THAT THE CASH OFFER PREFERRED SECURITIES WILL HAVE A DIFFERENT
CONVERSION PRICE AND A DIFFERENT LIQUIDATION AMOUNT, AND WILL BE ISSUED BY TRUST III INSTEAD OF TRUST
II.
Cash Offer for Cash Offer Preferred Securities....... We will offer cash offer preferred securities
for cash pursuant to the cash offer, which
will close prior to the expiration date for
the exchange offer. The discussion under the
section titled "Cash Offer For Cash Offer
Preferred Securities," beginning on page 84 of
this prospectus, provides further information
regarding the cash offer.
Conversion Price..................................... The cash offer preferred securities will be
convertible into shares of our common stock at
any time prior to maturity at an initial
conversion price that will be equal to the
higher of:
- the equivalent of a 15% premium over the
closing price of our common stock on the
day that we price the cash offer, or
- $8.63 per share,
subject to adjustment.
Solely for purposes of illustration, the
initial conversion price would be $10.64 per
share if it were calculated as the equivalent
of a 15% premium over the closing price of our
common stock on December 10, 2001.
The following table illustrates the number of
shares of our common stock that would be
issuable upon conversion of each $50 in
liquidation amount of cash offer preferred
securities for a range of conversion prices,
calculated as the equivalent of a 15% premium
over a range of closing sale prices for our
common stock, including the closing sale price
per share for our common stock on
December 10, 2001. This table is for purposes
of illustration only. The conversion price may
exceed $17.83, but may not be less than $8.63
per share.
</Table>
<Table>
<Caption>
SHARES OF FLE COMMON STOCK
ISSUED FOR EACH $50 LIQUIDATION
CONVERSION AMOUNT OF CONVERTED CASH OFFER
PRICE OF FLE COMMON STOCK PRICE PREFERRED SECURITIES
- ------------------------- ------------------------ -------------------------------
$5.50 $8.63 5.79
7.50 8.63 5.79
9.25 10.64 4.70
9.50 10.93 4.57
10.50 12.08 4.14
11.50 13.23 3.78
13.50 15.53 3.23
15.50 17.83 2.80
</Table>
13
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<Table>
Use of Proceeds...................................... We will not receive any proceeds from the
exchange offer. If we consummate the exchange
offer, we will use a portion of the proceeds
from the cash offer to pay taxes we expect to
incur as a result of consummation of the
exchange offer, together with the fees and
expenses we will incur as a result of the
exchange offer and cash offer. We will use the
remainder of the proceeds from the cash offer,
if any, for general corporate purposes,
including the repayment of corporate
indebtedness. If we do not consummate the
exchange offer for any reason, we will use the
proceeds from the cash offer, after the
payment of fees and expenses incurred in
connection with the cash offer, for general
corporate purposes, including the repayment of
corporate indebtedness. As a result of a
recent amendment to our senior secured
facility, we have agreed to contribute one
half of the amount raised in the cash offer to
our manufacturing company subsidiaries, after
allowing for expenses of the offers and taxes
incurred in connection with the exchange
offer, with half of the contributed amount
being used to pay down the term loan up to
$24.0 million, and the balance of that
contributed amount being then applied to pay
down the revolving loan.
Placement Agent...................................... Banc of America Securities LLC. Banc of
America Securities LLC's duties as placement
agent are undertaken on a best efforts basis
only. Banc of America Securities LLC is not
making a commitment to take or purchase cash
offer preferred securities from us and has not
assured us that these securities will be
placed successfully in the cash offer.
Conditions to the Cash Offer......................... The cash offer is subject to certain customary
conditions but is not subject to a minimum
number of cash offer preferred securities
being sold in the cash offer or the
consummation of the exchange offer.
</Table>
14
<Page>
COMPARISON OF TERMS OF
NEW PREFERRED SECURITIES AND EXISTING PREFERRED SECURITIES
The following is a brief summary of the terms of the new preferred
securities and existing preferred securities. For a more complete description,
see the section titled "Description of Preferred Securities--Description of the
New Preferred Securities," beginning on page 88 of this prospectus.
<Table>
<Caption>
NEW PREFERRED SECURITIES EXISTING PREFERRED SECURITIES
--------------------------------- ---------------------------------
Title.................... The exchange preferred securities 6% Convertible Trust Preferred
will be called the 9.5% Securities due February 15, 2028.
Convertible Trust II Preferred
Securities due February 15, 2013.
The cash offer preferred
securities will be called the
9.5% Convertible Trust III
Preferred Securities due
February 15, 2013.
Preferred Securities..... Up to an aggregate of An aggregate of $287.5 million in
$37.95 million in liquidation liquidation amount and 5,750,000
amount and 1,725,000 in number of in number, of existing preferred
exchange preferred securities to securities. Each existing
be issued in the exchange offer, preferred security represents a
and up to an aggregate of preferred undivided beneficial
$150.0 million in liquidation interest in the assets of the
amount and 3,000,000 in number of issuer.
cash offer preferred securities
to be issued in the cash offer.
Each new preferred security
represents a preferred undivided
beneficial interest in the assets
of the applicable issuer.
Issuer................... In the case of the exchange Fleetwood Capital Trust, a
preferred securities, Fleetwood Delaware business trust. The
Capital Trust II, a Delaware address of the existing trust's
business trust. The address of principal office is c/o Fleetwood
Trust II's principal office is Enterprises, Inc., 3125 Myers
c/o Fleetwood Enterprises, Inc., Street, Riverside, California
3125 Myers Street in Riverside, 92503, and its telephone number
California 92503, and its is (909) 351-3500.
telephone number is (909)
351-3500.
In the case of the cash offer
preferred securities, Fleetwood
Capital Trust III, a Delaware
business trust. The address of
Trust III's principal office is
c/o Fleetwood Enterprises, Inc.
3125 Myers Street in Riverside,
California 92503, and its
telephone number is
(909) 351-3500.
Common Securities........ Each new trust will issue its new The existing trust issued its
common securities to us. The new existing common securities to us.
common securities represent The existing common securities
common undivided beneficial represent common undivided
interests in the assets of the beneficial interests in the
applicable new trust. We will own assets of the trust. We own all
all of the new common securities. of the existing common
securities.
</Table>
15
<Page>
<Table>
<Caption>
NEW PREFERRED SECURITIES EXISTING PREFERRED SECURITIES
--------------------------------- ---------------------------------
Debentures............... Trust II will exchange its The existing trust used the
exchange preferred securities and proceeds from the sale of the
use any existing preferred existing preferred securities to
securities it receives in the purchase from us the 6%
exchange offer to purchase from Convertible Subordinated
us the 9.5% Convertible Trust II Debentures due February 15, 2028.
Subordinated Debentures due The existing debentures have the
February 15, 2013. Trust III will same financial terms as the
sell its cash offer preferred existing preferred securities,
securities and use the proceeds including conversion rights.
to purchase from us the 9.5%
Convertible Trust III
Subordinated Debentures due
February 15, 2013. Each series of
9.5% Convertible Subordinated
Debentures will be substantially
identical except that the two
series will have different
conversion prices and will be
issued under different new
indentures. Each new trust will
also use the proceeds from the
sale of its new common securities
to us to purchase from us
additional 9.5% Convertible
Subordinated Debentures due
February 15, 2013 of the
applicable series. Each series of
new debentures will have the same
financial terms as the applicable
new preferred securities,
including conversion rights.
Distributions............ Distributions on the new Distributions on the existing
preferred securities will be preferred securities are payable
payable in cash or, at our in cash at a rate of 6% per year
election, prior to February 15, of the liquidation amount of $50
2004, in our common stock, at a per existing preferred security.
rate of 9.5% per year of the Distributions are payable
liquidation amount of $22 per quarterly in arrears on February
exchange preferred security and 15, May 15, August 15 and
$50 per cash offer preferred November 15 of each year, unless
security. Holders of the we defer interest payments on the
applicable new preferred existing debentures.
securities will be given notice
of an election to pay interest in
our common stock instead of cash
no later than the relevant record
date, which will be the 15th day
before the relevant distribution
payment date.
WE CANNOT BE CERTAIN AT THIS TIME
WHETHER WE WILL ELECT TO CAUSE
DISTRIBUTIONS TO BE PAID ON OUR
NEW PREFERRED SECURITIES IN
SHARES OF OUR COMMON STOCK.
HOWEVER, IN LIGHT OF OUR BUSINESS
ENVIRONMENT AND RECENT OPERATING
RESULTS, WE CURRENTLY
</Table>
16
<Page>
<Table>
<Caption>
NEW PREFERRED SECURITIES EXISTING PREFERRED SECURITIES
--------------------------------- ---------------------------------
ANTICIPATE THAT WE WILL FIND IT
NECESSARY TO DO SO AS EARLY AS
THE FEBRUARY 2002 DISTRIBUTION.
While we intend to deduct
interest paid on the new
debentures, as a result of our
having the right for financial
reporting purposes to elect to
pay interest in shares of our
common stock, the interest
payments may not be deductible by
us for income tax purposes. For a
more detailed discussion, see the
section titled "United States
Federal Income Tax
Considerations--Tax Treatment of
the Ownership and Disposition of
New Preferred Securities and
Common Stock--Original Issue
Discount and Stated Interest on
the New Preferred Securities,"
beginning on page 137 of this
prospectus. If we cause
distributions to be paid in our
common stock, the shares of
common stock will be valued at
90% of the average of the closing
prices for the five trading days
immediately preceding the second
trading day prior to the
distribution payment date.
Distributions will be payable
quarterly in arrears on February
15, May 15, August 15 and
November 15 of each year,
commencing February 15, 2002,
unless we defer interest payments
on the applicable series of new
debentures.
Distribution Deferral.... Same terms for the new preferred We can, on one or more occasions,
securities and new debentures as defer interest payments on the
for the existing preferred existing debentures for up to 20
securities and existing consecutive quarterly periods
debentures, except that we may unless we are in default in the
not defer interest payments on payment of interest on the
the new debentures or debentures. Interest payments are
distributions on the new not due and payable on the
preferred securities prior to existing debentures during a
February 15, 2004. deferral period. We cannot,
however, defer interest payments
beyond the maturity date of the
existing debentures, which is
February 15, 2028. If we defer
interest payments on the existing
debentures, the existing trust
defers distribution payments on
the existing preferred securities
and the existing common
</Table>
17
<Page>
<Table>
<Caption>
NEW PREFERRED SECURITIES EXISTING PREFERRED SECURITIES
--------------------------------- ---------------------------------
securities. During a deferral
period, distributions continue to
accumulate on the existing
preferred securities. Additional
cash distributions will
accumulate on any deferred
distributions.
Compounded interest accrues on
any deferred interest payments.
While interest payments on the
existing debentures are deferred,
we are generally not permitted to
pay any dividend on or purchase
any shares of our capital stock
or pay on debt that is equal with
or junior in rank to the existing
debentures.
On October 30, 2001, we elected
to defer distributions on our
existing preferred securities due
to be made on November 15, 2001.
In light of our business
environment and recent operating
results, we currently anticipate
that we will find it necessary to
defer distributions on our
existing preferred securities
through at least August 15, 2002.
Even though our board of
directors has discontinued the
payment of dividends on our
common stock for the foreseeable
future, these deferrals of
distributions on our existing
preferred securities would
further prevent us from declaring
or paying any dividends during
the period of such deferrals.
Conversion Into Common
Stock.................... Unless we have redeemed the Unless we redeem the existing
applicable series of new debentures, you have the right to
debentures, you will have the convert your existing preferred
right to convert your new securities into shares of our
preferred securities into shares common stock at any time prior to
of our common stock at any time maturity. The conversion price on
prior to maturity. The initial December 7, 2001 was $48.72 per
conversion price of the exchange share of our common stock, which
preferred securities to be issued is equivalent to a conversion
in the exchange offer will be rate of 1.03 shares of our common
equal to the higher of: stock for each existing preferred
- the equivalent of a 15% premium security. This conversion price
over the daily volume weighted remains subject to further
average of the closing prices adjustment.
of our common stock for each of
the five trading days
immediately preceding
</Table>
18
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<Table>
<Caption>
NEW PREFERRED SECURITIES EXISTING PREFERRED SECURITIES
--------------------------------- ---------------------------------
the fourth trading day prior to
the exchange offer expiration
date, or
- $8.63 per share,
subject to adjustment under the
same provisions that require
adjustment of the conversion
price of the existing preferred
securities.
The initial conversion price of
the cash offer preferred
securities to be issued in the
cash offer will be equal to the
higher of:
- the equivalent of a 15% premium
over the closing price of our
common stock on the day that we
price the cash offer, or
- $8.63 per share,
subject to adjustment under the
same provisions that require
adjustment of the conversion
price of the existing preferred
securities.
Ranking.................. The new preferred securities The existing preferred securities
represent preferred undivided represent preferred undivided
beneficial interests in the beneficial interests in the
assets of the applicable new assets of the existing trust,
trust, which will consist of the which consist of the existing
applicable series of new debentures. Our payment
debentures. Our payment obligations under the existing
obligations under the new debentures are subordinated to
debentures are subordinated to our payment obligations under our
our payment obligations under our senior debt, including our
senior debt, but senior to our obligations under the exchange
obligations under the existing debentures and the exchange
debentures and the existing preferred securities guarantee.
preferred securities guarantee. They are also effectively
We have pledged most of our subordinated to all indebtedness
assets to fully secure our senior and other liabilities of our
debt lenders. Our payment subsidiaries, including
obligations under the new intercompany liabilities to the
debentures are also effectively extent that the instruments
subordinated to all indebtedness governing these intercompany
and other liabilities of our liabilities provide for
subsidiaries, including subordination.
intercompany liabilities to the
extent that the instruments
governing these intercompany
liabilities provide for
subordination. The new debentures
will rank equally with each
other.
Optional
Redemption............... Each new trust will redeem all of The existing trust will redeem
its outstanding new preferred all of its outstanding existing
securities and new common preferred securities and existing
securities when the applicable common securities when the
series of new debentures are paid existing debentures are paid at
at maturity on February 15, maturity on
</Table>
19
<Page>
<Table>
<Caption>
NEW PREFERRED SECURITIES EXISTING PREFERRED SECURITIES
--------------------------------- ---------------------------------
2013. In addition, we can make February 15, 2028. In addition,
each new trust redeem all or some we can make the existing trust
of its new preferred securities redeem all or some of the
at any time on or after existing preferred securities at
February 15, 2004 by redeeming any time on or after February 15,
the related series of new 2001, by redeeming the existing
debentures at the applicable debentures at the applicable
redemption price, plus any redemption price, plus any
accrued and unpaid distributions, accrued and unpaid distributions,
upon not less then 30 but not upon not less than 30 but not
more than 60 days' notice. We can more than 60 days' notice.
make each new trust redeem all or
some of its new preferred
securities prior to February 15,
2004 only if our common stock
price has exceeded 200% of the
conversion price for at least 20
days during a 30-day trading
period ending five trading days
prior to the notice of
redemption. This notice of
redemption must be delivered not
more than 30 and not less than 15
days prior to the date of
redemption.
Special Event Redemption
or Distribution.......... Same terms for the new preferred Upon the occurrence of a tax
securities and new debentures as event described below, we may
for the existing preferred redeem all outstanding existing
securities and existing debentures at a redemption price
debentures, except that the equal to 100% of the principal
non-deductibility of interest amount of the existing debentures
payments on the existing plus accrued and unpaid interest
debentures will not constitute a to the redemption date (and thus
tax event. cause the redemption of the
existing preferred securities at
that price). Upon the occurrence
of a tax event, we may,
alternatively, elect to pay
additional interest to the
existing trust so that the
distributions to holders of the
existing preferred securities are
not reduced because of the tax
event. In addition, if a tax
event or a change in law that
could require the trust to
register as an investment company
under the Investment Company Act
of 1940 occurs, we may generally
cause the existing trust to be
dissolved and, after satisfaction
of liabilities to creditors of
the existing trust, cause the
existing debentures to be
distributed to the holders of the
existing preferred securities.
</Table>
20
<Page>
<Table>
<Caption>
NEW PREFERRED SECURITIES EXISTING PREFERRED SECURITIES
--------------------------------- ---------------------------------
A tax event generally means
specified tax changes that could
result in:
- the trust being subject to
United States federal income
taxes or more than a de minimis
amount of other governmental
charges, or
- the non-deductibility of
interest payments on the existing
debentures.
Additional Redemption.... Prior to February 15, 2004, we None.
may elect to redeem each series
of new debentures, and therefore
cause the related new trust to
redeem the corresponding new
preferred securities, for a price
equal to 100% of the liquidation
amount per new preferred
security, if our common stock
price has exceeded 200% of the
conversion price for at least 20
trading days during a 30-day
trading period ending five
trading days prior to the notice
of redemption. Prior to the
redemption date, holders of the
applicable new preferred
securities will have the right to
convert their new preferred
securities, and therefore the
corresponding series of new
debentures, into shares of our
common stock at the conversion
price in effect at the time. In
the case of such a redemption
prior to February 15, 2004, we
will pay additional interest, and
the applicable new trust will
make corresponding distribution
payments, in cash or common
stock, at our election, in an
amount equal to the total
distributions payable on those
new preferred securities through
February 15, 2004, less any
interest actually paid prior to
the date of conversion.
Liquidation
Preference............... If a new trust is liquidated and If the existing trust is
the applicable series of new liquidated and the exchange
debentures are not distributed to debentures are not distributed to
you, you will generally be you, you will generally be
entitled to receive: entitled to receive $50 per
- $22 per exchange preferred existing preferred security plus
any accumulated and unpaid
distributions
</Table>
21
<Page>
<Table>
<Caption>
NEW PREFERRED SECURITIES EXISTING PREFERRED SECURITIES
--------------------------------- ---------------------------------
security plus any accumulated on each existing preferred
and unpaid distributions on security you hold.
each exchange preferred
security you hold; or
- $50 per cash offer preferred
security plus any accumulated
and unpaid distributions on
each cash offer preferred
security you hold.
The Guarantee............ We will guarantee each new We have guaranteed the existing
trust's payment obligations on trust's payment obligations on
its new preferred securities on the existing preferred securities
the same terms as the terms on to the extent described in this
which we have guaranteed the prospectus. Under the existing
existing trust's obligations on preferred securities guarantee,
the existing preferred we guarantee the existing trust's
securities, except that: payment obligations, but only to
- the new preferred securities the extent that the existing
guarantees will cover both trust has sufficient funds to
distribution payments in cash make payments on the existing
and in our common stock, since preferred securities. If we do
we have the option to pay not make payments on the existing
interest on the new debentures debentures, the existing trust
in cash or, at our election, will not have sufficient funds to
prior to February 15, 2004, in make payments on the existing
our common stock; and preferred securities, in which
- our obligations under the new case you will be unable to rely
preferred securities on the guarantee for payment. Our
guarantees are senior to our obligations under the existing
obligations under the existing preferred securities guarantee
debentures and the existing are subordinated to our payment
preferred securities obligations under our senior
guarantee. debt, including our obligations
under the exchange debentures and
the exchange preferred securities
guarantee. They are also
effectively subordinated to all
indebtedness and other
liabilities of our subsidiaries,
including intercompany
liabilities.
Form of Preferred
Securities............... Same form as for the existing The existing preferred securities
preferred securities. are represented by a global
certificate registered in the
name of Cede & Co., as nominee of
The Depository Trust Company.
Voting Rights............ Same terms for the new preferred Generally, you will not have any
securities and new debentures as voting rights as a holder of
for the existing preferred existing preferred securities.
securities and existing However, if an event of default
debentures. under the existing indenture
governing the existing debentures
occurs and is continuing, the
holders of 25% of the aggregate
liquidation amount of the
outstanding existing preferred
</Table>
22
<Page>
<Table>
<Caption>
NEW PREFERRED SECURITIES EXISTING PREFERRED SECURITIES
--------------------------------- ---------------------------------
securities may direct the
property trustee, one of the
trustees of the existing trust,
to declare the principal and
interest on the existing
debentures immediately due and
payable and thus cause payment to
be made to the holders of
existing preferred securities. If
the property trustee fails to
enforce its rights under the
existing debentures, or the
guarantee trustee fails to
enforce its rights under the
existing preferred securities
guarantee, a holder of existing
preferred securities may
institute a proceeding directly
against us to enforce these
rights without first instituting
any legal proceeding against any
other person or entity.
Listing.................. The new preferred securities are The existing preferred securities
expected to trade in the trade in the over-the-counter
over-the-counter market. market.
</Table>
23
<Page>
SUMMARY FINANCIAL DATA
The following is a summary of our selected consolidated financial data for
each of the fiscal years in the five-year period ended April 29, 2001 and for
each of the fiscal quarters ended July 30, 2000 and July 29, 2001. You should
read this summary together with the selected consolidated financial data
provided in this prospectus on pages 44 and 45, our financial statements and
accompanying notes which are incorporated into this prospectus by reference, and
our management's discussion and analysis of our operations contained in this
prospectus and in the reports containing our financial statements.
<Table>
<Caption>
FISCAL QUARTER ENDED
FISCAL YEAR(1) -----------------------
-------------------------------------------------------------- JULY 30, JULY 29,
1997 1998 1999 2000 2001 2000 2001
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
OPERATING DATA:
Net sales..................... $2,945,777 $3,121,278 $3,555,519 $3,769,534 $2,531,463 $ 720,121 $ 564,132
Operating income (loss)....... 139,559 170,195 190,311 162,176 (307,626) (24,078) (9,613)
Income (loss) before
cumulative effect of
accounting change........... 124,830 111,044 118,269 94,598 (272,814) (19,941) (11,127)
Net income (loss) for diluted
earnings per share.......... 124,830 108,545 107,121 83,494 (283,990) (31,117) (11,127)
Earnings (loss) per
share--diluted.............. 3.19 3.01 2.94 2.41 (8.67) (.95) (.34)
---------- ---------- ---------- ---------- ---------- ---------- ----------
BALANCE SHEET DATA AT END OF
PERIOD:
Total assets.................. $ 871,547 $1,129,480 $1,531,184 $1,536,693 $1,142,461 $1,524,759 $1,102,891
Total liabilities............. 428,452 465,954 656,981 664,388 568,813 688,863 540,337
Existing Preferred
Securities.................. -- 287,500 287,500 287,500 287,500 287,500 287,500
Shareholders' equity.......... 443,095 376,026 586,703 584,805 286,148 548,396 275,054
OTHER DATA:
Gross profit margin........... 17.6% 18.3% 20.5% 21.0% 19.0% 20.4% 19.6%
Operating income (loss)
margin...................... 4.7% 5.5% 5.4% 4.3% (12.2)% (3.3)% (1.7)%
Depreciation and
amortization................ $ 27,579 $ 27,799 $ 31,841 $ 35,080 $ 36,546 $ 8,942 $ 6,892
Capital expenditures.......... 56,184 37,809 49,757 55,078 36,921 8,759 3,186
EBITDA(2)..................... 167,138 197,994 222,152 197,256 (271,080) (15,136) (2,721)
Cash flows from operations.... 85,138 118,152 114,522 (4,757) 15,520 (46,398) 66,779
Cash flows from investing
activities.................. 292,821 (231,613) (121,767) 92,516 25,722 23,355 (2,729)
Cash flows from financing
activities.................. (355,644) 104,310 5,110 (69,715) (47,201) 31,031 (50,046)
Ratio of earnings to fixed
charges(3)(4)............... 37.4x 24.3x 7.5x 5.3x -- -- --
</Table>
- ------------------------------
(1) We use a fiscal year ending on the last Sunday of April in each year.
(2) EBITDA is defined as operating income plus depreciation and amortization
expense. While EBITDA should not be considered as a substitute for net
income, cash flows from operating activities, or other income statement data
or cash flow statement data prepared in accordance with Generally Accepted
Accounting Principles, or GAAP, or as a measure of profitability or
liquidity, our management understands that EBITDA is customarily used as a
measurement in evaluating companies. If EBITDA for fiscal 2001 were adjusted
to include an add-back for goodwill impairment of $165.9 million and other
asset impairment charges of $22.6 million, both of which were non-cash
charges, the adjusted EBITDA would have been $(82.6) million for fiscal
2001. However, these impairment charges are not included in any of the
EBITDA figures reported in the table.
(3) The ratio of earnings to fixed charges is unaudited for all periods
presented. For purposes of computing these ratios, earnings represent income
before income taxes, minority interest, discontinued operations and
cumulative effect of changes in accounting principles and fixed charges less
distributions on existing preferred securities of Fleetwood Capital Trust.
Fixed charges include all interest expense and distributions on the existing
preferred securities.
(4) Our ratios of earnings to fixed charges for the fiscal year ended April 29,
2001 and the fiscal quarters ended July 30, 2000 and July 29, 2001 were not
meaningful since earnings were inadequate to cover fixed charges by
$336.8 million, $30.9 million and $18.5 million, respectively. Similarly,
after giving effect to each of the exchange offer and cash offer, the pro
forma ratios of earnings to fixed charges for fiscal 2001 and the fiscal
quarter ended July 29, 2001 are not meaningful since, on a pro forma basis,
earnings during these periods would have been inadequate to cover fixed
charges by $349.2 million and $21.6 million, respectively.
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RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE YOU DECIDE TO
EXCHANGE YOUR EXISTING PREFERRED SECURITIES FOR EXCHANGE PREFERRED SECURITIES OR
TO BUY CASH OFFER PREFERRED SECURITIES. THE RISKS AND UNCERTAINTIES DESCRIBED
BELOW ARE THE ONES THAT WE BELIEVE TO BE MATERIAL AT THIS TIME.
IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, THEY COULD MATERIALLY
ADVERSELY AFFECT OUR BUSINESS, FINANCIAL CONDITION OR OPERATING RESULTS. IN THAT
CASE, THE TRADING PRICE OF OUR COMMON STOCK AND THE EXISTING PREFERRED
SECURITIES COULD DECLINE.
RISKS RELATING TO OUR BUSINESS
WE MAY BE UNABLE TO COMPLY WITH FINANCIAL CONVENANTS CONTAINED IN OUR SENIOR
DEBT INSTRUMENTS, INCLUDING OUR AMENDED SENIOR SECURED FACILITY, WHICH MAY
RESULT IN A DEFAULT UNDER OUR DEBT OBLIGATIONS.
We recently amended our new senior secured facility because we believed we
would not be able to comply with one of its covenants. In the future, if our
operating results deteriorate significantly due to worsening business or
economic conditions then, as had also been the case with our senior unsecured
notes payable to The Prudential Insurance Company of America, which were repaid
using a portion of the proceeds from our new senior secured facility, we will
breach covenants under our amended senior secured facility, resulting in a
default under the facility.
Our amended senior secured facility is funded by a syndicate of banks led by
the Bank of America and requires us to maintain particular financial ratios and
meet specific financial tests. In amending the terms of our new facility, our
lenders agreed to replace the existing EBITDA covenant with a new covenant based
on the amount of our free cash flow, and to also amend the definition of the
fixed charge coverage ratio in another one of our covenants. In return for
amending these covenants, the lenders have increased the interest rates on our
LIBOR rate and prime rate loans by 0.5% for a period of at least 90 days. We can
give you no assurances, however, that any future discussions with our lenders
under similar circumstances will be successful on acceptable terms if our
operating results deteriorate significantly from the levels that we have
recently experienced. A breach of any of the financial covenants contained in
our senior debt instruments, including our covenant to generate sufficient
earnings, can result in a default under our new senior secured facility, and
also under our retail floor plan debt with Conseco Finance Servicing Corp. In
the event of a future default under our debt obligations, we cannot assure you
that our lenders will agree to forbear from enforcing any remedies otherwise
available to them or that they will grant us waivers or amend our covenants.
Our new facility also ranks senior to the new preferred securities, and is
secured by substantially all of our assets, except for some of our inventories
that are used to secure our Conseco debt, and the cash value of our
company-owned life insurance. The terms of our new facility prohibit all
payments by us in connection with the existing preferred securities and the new
preferred securities while we are in default under the facility. Upon the
occurrence of an event of default under our senior secured facility, our lenders
could elect to declare all amounts outstanding under the facility, together with
accrued interest, to be immediately due and payable and that could result in our
seeking protection from our creditors through bankruptcy proceedings or
otherwise. A default under our senior secured facility could also cause a
default under our retail floor plan debt with Conseco. If we were unable to
repay all outstanding amounts under our senior debt, the lenders could proceed
against our assets, and any proceeds realized upon the sale of assets would be
used first to satisfy all amounts outstanding under our senior debt, and
thereafter, any of our other liabilities, including liabilities relating to the
new preferred securities and the existing preferred securities. We have pledged
substantially all of our assets to fully secure our senior debt lenders. If we
default under our senior secured facility, our senior debt lenders could
foreclose on our assets. In addition, we may be prevented from borrowing
additional amounts under our other existing credit agreements, including our
retail inventory floor plan facility.
25
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IF WE ARE UNABLE TO PAY OUR DEBT OBLIGATIONS WHEN DUE, WE COULD BE IN DEFAULT
UNDER OUR NEW DEBT AGREEMENTS AND OUR LENDERS COULD ACCELERATE OUR DEBT OR TAKE
OTHER ACTIONS WHICH COULD RESTRICT OUR ABILITY TO OPERATE, OR NECESSITATE OUR
SEEKING PROTECTION FROM OUR CREDITORS THROUGH BANKRUPTCY PROCEEDINGS OR
OTHERWISE.
Future cash flows may not be adequate to meet our debt obligations,
resulting in default. As indicated earlier, in July 2001, we entered into a
senior secured facility with Bank of America for a three-year revolving loan of
up to $190 million and a two-year term loan of $30 million. Recently, this
facility was amended because we believed that we would not be able to comply
with one of its covenants, which would have put us in default. Nonetheless, a
default under the amended senior secured facility or our other debt obligations
could result in lender actions which might:
- restrict our investment in working capital and capital expenditures;
- limit our ability to react to changes in market conditions due to a lack
of resources to develop new products;
- hamper the marketing of our products due to a lack of funds to support
advertising expenditures;
- increase our risk of not surviving an extended downturn in the business
compared to other competitors whose capital structures are less highly
leveraged;
- restrict our ability to merge, acquire or sell properties; and
- cause us to seek protection from our creditors through bankruptcy
proceedings or otherwise.
WE HAVE HAD SIGNIFICANT LOSSES IN RECENT QUARTERS AND WE MAY NOT BE ABLE TO
REGAIN PROFITABILITY IN THE FORESEEABLE FUTURE, WHICH COULD CAUSE US TO LIMIT
FUTURE CAPITAL EXPENDITURES AND ALSO RESULT IN A FAILURE TO IMPLEMENT OUR
BUSINESS AND FINANCE STRATEGIES OR MEET OUR OBLIGATIONS WHEN DUE.
We had net losses totaling approximately $284 million for the fiscal year
ended April 29, 2001, after having had net income of $83.5 million and
$107.1 million, respectively, for the fiscal years ended April 30, 2000 and
April 25, 1999. For our fiscal quarter ended July 29, 2001, we had a net loss of
$11.1 million. Continued losses will reduce our liquidity and may cause us to
reduce our expenditures on capital improvements, machinery and equipment, and
research and development. This could have a negative effect on our ability to
maintain production schedules, manufacture products of high quality, and develop
and manufacture new products that will achieve market acceptance. This could, in
turn, have a negative effect on our sales and earnings. In addition, we will not
receive any tax benefit from our interest payments on the new debentures,
whether these payments are made in cash or, at our election, prior to
February 15, 2004, in our common stock. If we continue to suffer losses, we will
be unable to implement our business and financial strategies or meet our
obligations when due. Our losses for fiscal 2001 and the first quarter of fiscal
2002 were principally caused by:
- reduced demand in the manufactured housing and recreational vehicle
industries;
- excess capacity;
- excess retail inventories;
- some wholesale and retail lenders abandoning the manufactured housing
market;
- remaining retail lenders tightening credit standards in the manufactured
housing market;
- relatively high interest rates for manufactured homes as opposed to
site-built homes;
- competition with resellers of repossessed manufactured homes; and
- weaker general economic conditions, stock market declines, and declining
consumer confidence.
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We cannot assure you that the conditions that have resulted in our
substantial losses in fiscal 2001 and the first quarter of fiscal 2002 will not
continue through the remainder of fiscal 2002 and beyond. Our losses in fiscal
2001 were also caused in part by:
- charges related to the impairment of goodwill that originated with our
acquisitions of retail housing businesses in prior years, some of which we
are now closing or downsizing; and
- downsizing initiatives within our manufacturing and retail housing
businesses, including asset impairment charges, writedown of idled
manufacturing facilities, employee severance payments and plant closing
costs.
REDUCED AVAILABILITY OF FINANCING FOR OUR RETAILERS OR CUSTOMERS WOULD CONTINUE
TO AFFECT OUR SALES VOLUME.
Our retailers, as well as retail buyers of our products, generally secure
financing from third party lenders, which have been adversely affected by the
current lending environment. For example, Associates First Capital Corporation,
which had been a very important lender for our retailers in the 1990s, announced
in January 2000 that it was discontinuing its manufactured housing finance
business. Similarly, Conseco Finance Corp., the largest manufactured housing
lender, has also been affected by the harsh lending environment, suffering from
adverse loan experience, higher funding costs and liquidity issues. As a result
of these changes, if third party financing were to become unavailable or were to
be further restricted, this could have a material adverse effect on our results
of operations. Reduced availability of such financing and higher interest rates
are currently having an adverse effect on the manufactured housing business and
our housing sales. These factors are dependent on the lending practices of
financial institutions, governmental policies and economic conditions, all of
which are largely beyond our control. For example, floor-plan lenders have
tightened credit as a result of the events of September 11, 2001. With respect
to our housing business, most states classify manufactured homes as personal
property rather than as real property for purposes of taxation, lien perfection
and length of loan terms. Interest rates for manufactured homes are generally
higher and the terms of the loans shorter than for site-built homes. As the
industry is now experiencing, financing for the purchase of manufactured homes
is sometimes more difficult to obtain than conventional home mortgages. There
can be no assurance that affordable wholesale or retail financing for either
manufactured homes or recreational vehicles will continue to be available on a
widespread basis.
EXCESS INVENTORIES OF OUR PRODUCTS AMONG RETAILERS COULD CONTINUE TO HAVE A
NEGATIVE EFFECT ON OUR SALES VOLUME AND PROFIT MARGINS.
The level of manufactured housing and recreational vehicle retail
inventories and the existence of repossessed homes in the market can have a
significant impact on manufacturing shipments and operating results, as
evidenced in the manufactured housing industry during the past year. For
example, due to the rapid over-expansion of the retail distribution network in
the manufactured housing industry, retailers' overstocking based on inflated
expectations of future business and excessive wholesale financing, there is
currently an imbalance among the number of retail dealers, industry retail
inventories and consumer demand for manufactured homes. Considering current
retail demand, it is estimated that there may be as much as a six month supply
of manufactured homes in retailer inventories industry-wide. The recent
deterioration in the availability of retail financing has already extended the
inventory adjustment period beyond what was originally expected. Competition
from repossessed homes has further extended this inventory adjustment period.
More liberal lending standards in the past resulted in loans to less-qualified
customers. Many of these customers are now defaulting on these loans and the
lenders are repossessing the customers' homes and reselling them, thereby
increasing competition for manufacturers of new homes. If these trends were to
continue, or if retail demand were to significantly weaken further, the
inventory overhang could result in intense price
27
<Page>
competition and pressure on profit margins within the industry and could have an
adverse impact on our operating results.
THE MANUFACTURED HOUSING AND RECREATIONAL VEHICLE INDUSTRIES ARE HIGHLY
COMPETITIVE AND SOME OF OUR COMPETITORS HAVE STRONGER BALANCE SHEETS AND CASH
FLOW, AS WELL AS GREATER ACCESS TO CAPITAL, THAN WE DO. THE RELATIVE STRENGTH OF
OUR COMPETITORS COULD RESULT IN DECREASED SALES VOLUME AND EARNINGS FOR US,
WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
The manufactured housing industry is highly competitive. As of December 31,
2000, there were approximately 70 manufacturers of homes and approximately 8,900
retail sales centers. The 10 largest manufacturers accounted for approximately
79% of the wholesale manufactured housing market in calendar 2000, including our
sales, which represented 18% percent of the market. The manufactured housing
retail market is much more fragmented, with the five largest companies
accounting for approximately 26% of the market in calendar 2000.
Competition with other housing manufacturers on both the manufacturing and
retail levels is based primarily on price, product features, reputation for
service and quality, retail inventory, sales promotions, merchandising and the
terms and availability of wholesale and retail customer financing. Recent growth
in manufacturing capacity in the southern United States has increased
competition at both the manufacturing and retail levels and has resulted in both
regional and national competitors increasing their presence in the region.
Overproduction of manufactured housing in this region could lead to greater
competition and result in decreased margins, which could have a material adverse
effect on our results of operations.
In addition, manufactured homes compete with new and existing site-built
homes, apartments, townhouses and condominiums. The supply of such housing has
increased in recent years with the increased availability of construction
financing, and this reduces the demand for manufactured homes.
Manufactured homes also compete with resales of homes that have been
repossessed by financial institutions as a result of credit defaults by dealers
or customers. Repossession rates for manufactured homes have increased recently
and there can be no assurance that repossession rates will not continue to
increase, thereby adversely affecting our sales volume and profit margins.
The manufactured housing industry, as well as the site-built housing
development industry, have experienced consolidations in recent years, which
could result in the emergence of competitors, including developers of site-built
homes, that are larger than us and have greater financial resources than we
have. This could adversely affect our business.
The recreational vehicle market is also highly competitive. Sales from the
five largest manufacturers represented approximately 59% of the market in
calendar 2000, including our sales, which represented 23.3% of the market.
However, we believe our share of the recreational vehicle market has declined in
calender 2001 as a result of our lower market share in each of the motor home
and travel trailer markets. Competitive pressures, especially in the entry-level
segment of the recreational vehicle market for travel trailers, have recently
resulted in a reduction of profit margins. Sustained increases in competitive
pressures could have a material adverse effect on our results of operations.
There can be no assurance that existing or new competitors will not develop
products that are superior to our recreational vehicles or that achieve better
consumer acceptance, thereby adversely affecting our sales volume and profit
margins.
OUR BUSINESS IS CYCLICAL AND THIS CAN LEAD TO FLUCTUATIONS IN OUR OPERATING
RESULTS.
The industries in which we operate are highly cyclical and there can be
substantial fluctuations in our manufacturing shipments and operating results,
and the results for any prior period may not be indicative of results for any
future period. Companies within both the manufactured housing and
28
<Page>
recreational vehicle industries are subject to volatility in operating results
due to external factors such as economic, demographic and political changes.
Factors affecting the manufactured housing industry include:
- interest rates and the availability of financing, both of which have had a
particularly adverse effect on our business in the past year;
- defaults by retail customers resulting in repossessions, which have also
had a particularly adverse effect on our business since the beginning of
fiscal 2001;
- inventory levels, which have had an adverse effect on our business since
the beginning of fiscal 2001;
- availability of manufactured home sites;
- employment trends;
- consumer confidence; and
- general economic conditions.
Factors affecting the recreational vehicle industry include:
- overall consumer confidence and the level of discretionary consumer
spending, which have had an adverse effect on our business since the
beginning of fiscal 2001 and which have had a further negative effect
since the events of September 11, 2001;
- inventory levels, which have had an adverse effect on our business since
the beginning of fiscal 2001;
- general economic conditions;
- interest rates;
- employment trends; and
- fuel availability and prices.
We cannot assure you that the factors that are currently adversely affecting
our business will not continue to have an adverse effect through fiscal 2002 and
beyond.
OUR BUSINESS IS SEASONAL, AND THIS LEADS TO FLUCTUATIONS IN SALES, PRODUCTION
AND NET INCOME.
We have experienced, and expect to continue to experience, significant
variability in sales, production and net income as a result of seasonality in
our businesses. Demand in both the manufactured housing and recreational vehicle
industries generally declines during the winter season, while sales and profits
are generally highest during the spring and summer months. In addition,
unusually severe weather conditions in some markets may delay the timing of
purchases and shipments from one quarter to another.
WE HAVE REPLACED SOME OF OUR MANUFACTURED HOUSING RETAILERS, AND SOME OF OUR
RETAILERS HAVE BEEN ACQUIRED. THIS MAY LEAD TO A DECREASE IN OUR SALES VOLUME
AND A LOSS OF OUR MARKET SHARE.
Our market share in the manufactured housing market, based on unit
shipments, declined from 21.6% in calendar 1994 to 18.0% in calendar 2000. The
reason for this change was, in part, our reduction of the number of our retail
distribution points from approximately 1,800 to 1,300 during the period from
January 1994 through July 29, 2001, in order to concentrate on larger dealers
that share our approach towards merchandising and customer satisfaction. We have
also, from time to time in the past, lost significant retailers that were
acquired by competitors. Such acquisitions can reduce our retail
29
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distribution network and market share, as these retail outlets may choose not to
sell our products. There can be no assurance that we will be able to adequately
replace retailers acquired by competitors if they cease selling our manufactured
homes, or that we will be able to maintain our sales volume or market share in
these competitive markets.
WE ESTABLISHED A NETWORK OF COMPANY-OWNED RETAIL STORES, WHICH HAS REQUIRED
SIGNIFICANT RESTRUCTURING AND DOWNSIZING, BUT WE MAY NOT SUCCEED IN
RESTRUCTURING THIS NEW BUSINESS IN A SATISFACTORY MANNER AND MAKING IT
PROFITABLE.
We responded to the retail consolidation in the manufactured housing sector,
beginning in fiscal 1998, by forming our own retail business and establishing a
network of company-owned stores to replace distribution points lost to
competitors. We made numerous acquisitions between June 1998 and August 2001,
the largest of which was the purchase of HomeUSA in August 1998, comprising 65
stores. We also originated more than 100 "greenfield" locations, which are
locations that we have started ourselves rather than through the acquisitions of
existing operations of third parties. The combination of the two strategies
carried us to a high of 244 stores in November 2000. Since its inception, this
business segment has operated at a loss, and as the retail market for
manufactured housing has slowed, the losses have grown. During fiscal 2001, we
implemented a downsizing strategy to better match our retail capacity to market
demand. By assigning management of some of our locations to third parties, and
closing and selling other locations, we reduced the number of stores that we own
to 156 at the end of the first quarter of fiscal 2002. These actions have
resulted in restructuring charges and other costs including severance payments
to employees. Given existing industry conditions and the performance of this new
business to date, there can be no assurance that we will be able to complete the
restructuring of our retail network as a successful and profitable part of our
manufactured housing group in the future, or that it will become an important or
successful part of our business strategy. In addition, we may have to undergo
additional downsizing of this business depending on the length of time that the
current factors affecting our business continue to have a negative impact.
CHANGES IN CONSUMER PREFERENCES FOR OUR PRODUCTS OR OUR FAILURE TO GAUGE THOSE
PREFERENCES COULD LEAD TO REDUCED SALES AND ADDITIONAL COSTS.
We cannot be certain that historical consumer preferences for our products
in general, and recreational vehicles in particular, will remain unchanged. We
believe that the introduction of new features, designs and models will be
critical to the future success of our recreational vehicle operations. Delays in
the introduction of new models or product features, or a lack of market
acceptance of new features, designs or models could have a material adverse
effect on our business. For example, we may incur significant additional costs
in designing or redesigning models that are not accepted in the marketplace.
Products may not be accepted for a number of reasons, including changes in
consumer preferences, or our failure to properly gauge consumer preferences. We
cannot be certain that new product introductions will not reduce revenues from
existing models and adversely affect our results of operations. There can be no
assurance that any of these new models or products will be introduced to the
market on time or that they will be successful when introduced.
IF THE FREQUENCY AND SIZE OF PRODUCT LIABILITY AND OTHER CLAIMS AGAINST US,
INCLUDING WRONGFUL DEATH, RISES, OUR BUSINESS, RESULTS OF OPERATIONS AND
FINANCIAL CONDITION MAY BE HARMED.
We are frequently subject, in the ordinary course of business, to litigation
involving product liability and other claims, including wrongful death, against
us related to personal injury and warranties. We partially self-insure our
product liability claims and purchase excess product liability insurance in the
commercial insurance market. We cannot be certain that our insurance coverage
will be sufficient to cover all future claims against us. Any increase in the
frequency and size of these claims, as compared to our experience in prior
years, may cause the premium that we are required to pay for insurance to
30
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rise significantly. It may also increase the amounts we pay in punitive damages,
not all of which are covered by our insurance. We are also presently party to
actions in litigation that the plaintiffs are seeking to have certified as class
actions, and actions where a subclass of plaintiffs has been certified. If any
of these actions is certified as a class action and decided in a manner adverse
to us, the resulting liability may be significant. These factors may have a
material adverse effect on our results of operations and financial condition. In
addition, if these claims rise to a level of frequency or size that is
significantly higher than in the case of similar claims made against our
competitors, our reputation and business will be harmed. For a more detailed
discussion of some of the legal proceedings we are involved in, please see the
section titled "Business--Legal Proceedings in Which We Are Involved," beginning
on page 72 of this prospectus.
WHEN WE INTRODUCE NEW PRODUCTS WE MAY INCUR EXPENSES THAT WE DID NOT ANTICIPATE,
SUCH AS RECALL EXPENSES, RESULTING IN REDUCED EARNINGS.
The introduction of new models is critical to our future success,
particularly in our recreational vehicle business. We may incur unexpected
expenses, however, when we introduce new models. For example, we may experience
unexpected engineering or design flaws that will force a recall of a new
product. In addition, we may make business decisions that include offering
incentives to stimulate the sales of products not accepted by the market. The
costs resulting from these types of problems could be substantial, and would
have a significant adverse effect on our earnings.
FUEL SHORTAGES, OR HIGHER PRICES FOR FUEL, COULD HAVE A NEGATIVE EFFECT ON SALES
OF RECREATIONAL VEHICLES.
Gasoline or diesel fuel is required for the operation of motor homes and
most vehicles used to tow travel trailers and folding trailers. There can be no
assurance that the supply of these petroleum products will continue
uninterrupted, that rationing will not be imposed or that the price of or tax on
these petroleum products will not significantly increase in the future. The
increase in gasoline prices and speculation about potential fuel shortages
appear to have had an unfavorable effect on consumer demand for motor homes in
the past, thereby having an adverse effect on our sales volume.
IF WE DO NOT SUCCESSFULLY UPGRADE OUR COMPUTER SYSTEMS, WE WILL LOSE SALES TO
THOSE OF OUR COMPETITORS THAT HAVE MORE SOPHISTICATED AND BETTER INTEGRATED
SYSTEMS THAN US.
Our computer systems are not as sophisticated as those that are currently
available, and are not fully integrated. We are in the process of upgrading our
computer systems, but we are in the early stages of this process. We must update
our computer systems if we are to remain competitive in our industry.
Competitors with more sophisticated and fully integrated computer systems will
have efficiencies that may lead to lower costs and faster delivery schedules,
and that may make it difficult for us to compete with them. We will be required
to expend significant resources to fully implement a system suitable for a
business as large and complex as ours. It is possible that the cost of building
a computer system of this nature will be higher than budgeted, and that the
system, when built, will not work as originally planned. This would increase our
costs and disrupt our business.
THE MARKET FOR OUR MANUFACTURED HOMES IS HEAVILY CONCENTRATED IN THE SOUTHERN
PART OF THE UNITED STATES, AND A CONTINUED DECLINE IN DEMAND IN THAT AREA COULD
HAVE A MATERIAL NEGATIVE EFFECT ON SALES.
The market for our manufactured homes is geographically concentrated, with
the top 15 states accounting for over 67% of the industry's total shipments in
calendar 2000. The southern United States accounts for a significant portion of
our manufactured housing sales. As is the case with our other markets, we have
experienced a downturn in economic conditions in the southern states, and a
continuing downturn in this region that is worse than that of other regions
could have a disproportionately material adverse effect on our results of
operations. There can be no assurance that the demand for manufactured homes
will not continue to decline in the southern United States or
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other areas in which we experience high product sales and any such decline could
have a material adverse effect on our results of operations.
CHANGES IN ZONING REGULATIONS COULD AFFECT THE NUMBER OF SITES AVAILABLE FOR OUR
MANUFACTURED HOMES, AND ZONING REGULATIONS COULD AFFECT THE MARKET FOR OUR NEW
PRODUCTS, BOTH OF WHICH COULD AFFECT OUR SALES.
Any limitation on the growth of the number of sites available for
manufactured homes, or on the operation of manufactured housing communities,
could adversely affect our sales. In addition, new product opportunities that we
may wish to pursue for our manufactured housing business could cause us to
encounter new zoning regulations and affect the potential market for these new
products. Manufactured housing communities and individual home placements are
subject to local zoning ordinances and other local regulations relating to
utility service and construction of roadways. In the past, there has been
resistance by property owners to the adoption of zoning ordinances permitting
the location of manufactured homes in residential areas, and we believe that
this resistance has adversely affected the growth of the industry. The inability
of the manufactured home industry to change these zoning ordinances could have a
material adverse effect on our results of operations and we cannot be certain
that manufactured homes will receive widespread acceptance or that localities
will adopt zoning ordinances permitting the location of manufactured homes.
POWER OUTAGES MAY ADVERSELY AFFECT OUR CALIFORNIA FACILITIES.
We conduct substantial operations in the state of California and rely on a
continuous power supply to do so. The deregulation of the energy industry
instituted in 1996 by the California government has in the past resulted in
shortages in wholesale electricity supplies and this has led to power outages.
If our electricity supply is interrupted in the future, we may be unable to
supply products to our customers on a timely basis, and this would have a
negative effect on our sales.
WE MAY NOT BE ABLE TO OBTAIN FINANCING IN THE FUTURE, INCLUDING ANY REFINANCING
REQUIRED UPON EXPIRATION OF OUR TWO-YEAR TERM LOAN INCLUDED IN THE SENIOR
SECURED FACILITY, AND THE TERMS OF ANY FUTURE FINANCINGS MAY LIMIT OUR ABILITY
TO MANAGE OUR BUSINESS. DIFFICULTIES IN OBTAINING FINANCING ON FAVORABLE TERMS
WILL HAVE A NEGATIVE EFFECT ON OUR ABILITY TO EXECUTE OUR BUSINESS STRATEGY.
Our operations require significant amounts of cash. In addition to capital
available under the senior secured credit facility, whether or not the exchange
offer is completed, we anticipate that we will be required to seek additional
capital in the future. There can be no assurance that we will be able to obtain
any future financings on acceptable terms, if at all. For instance, the senior
secured facility contains a $30 million two-year term loan that will require
refinancing within two years, with partial amortization beginning at the start
of the second year.
Further, on November 16, 2001, Moody's Investors Services, Inc. announced
that it had lowered its rating on our senior implied debt from B1 to B2, and on
our existing preferred securities from B3 to Caa3, with a negative rating
outlook. In announcing the lowered ratings, Moody's stated that its action
reflected the continuing erosion in our operating performance due to a
protracted decline in the manufactured housing industry and a similar slowdown
in the recreational vehicle business, and that the negative outlook reflects the
highly uncertain intermediate-term outlook for demand in the manufactured
housing and recreational vehicle markets. On December 6, 2001, Standard and
Poor's announced that it had lowered our corporate credit rating from BB+ to
BB-, and Fleetwood Capital Trust's corporate credit rating from B+ to D, with a
negative rating outlook. In announcing the lowered ratings, Standard and Poor's
cited our materially weakened business position due to continued, very
competitive business conditions in both our manufactured housing and
recreational vehicle business segments, and our constrained financial profile,
as reflected by the granting of security to our lenders and the recent
discontinuation and deferral of our common dividends and existing preferred
security distributions, respectively. Standard and Poor's attributed its
negative outlook to the prospects
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for continued weak performance within both of our primary business segments and
the vulnerability of our corporate credit ratings to further downgrades. These
actions could result in lower trading prices for the existing preferred
securities, and could also result in any capital that we might raise in the
future being more expensive or more difficult to raise.
If we are unable to obtain alternative or additional financing arrangements
in the future, or if we cannot obtain financing on acceptable terms, we may not
be able to execute our business strategy. Moreover, the terms of any such
additional financing may restrict our financial flexibility, including the debt
we may incur in the future, or may restrict our ability to manage our business
as we had intended.
OUR REPURCHASE AGREEMENTS WITH FLOOR PLAN LENDERS COULD RESULT IN INCREASED
COSTS.
In accordance with customary practice in the manufactured housing and
recreational vehicle industries, we enter into repurchase agreements with
various financial institutions pursuant to which we agree, in the event of a
default by an independent retailer in its obligation to these credit sources, to
repurchase product at declining prices over the term of the agreements,
typically 12 to 18 months. The difference between the gross repurchase price and
the price at which the repurchased product can then be resold, which is
typically at a discount to the original sale price, is an expense to us. Thus,
if we were obligated to repurchase a substantially greater number of
manufactured homes or recreational vehicles in the future, this would increase
our costs, which could have a negative effect on our earnings. During fiscal
2001, we repurchased 333 manufactured homes and 308 recreational vehicles, at an
aggregate gross purchase price to us of $15.0 million, compared to repurchases
of 220 manufactured homes and 176 recreational vehicles, at an aggregate
purchase price to us of $9.9 million for fiscal 2000. During the first quarter
of fiscal 2002, we repurchased 43 manufactured homes and 22 recreational
vehicles, at an aggregate gross purchase price to us of $3.3 million, compared
to repurchases of 91 manufactured homes and 88 recreational vehicles, at an
aggregate purchase price to us of $3.6 million for the first quarter of fiscal
2001.
INCREASED COSTS, INCLUDING LABOR COSTS AND COSTS OF COMPONENT PARTS, AND CHANGES
IN LABOR RATES AND PRACTICES COULD REDUCE OUR OPERATING INCOME.
Our results of operations may be significantly affected by the availability
and pricing of manufacturing components and labor, as well as changes in labor
rates and practices. Although we attempt to offset the effect of any escalation
in components and labor costs by increasing the sales prices of our products, we
cannot be certain that we will be able to do so without it having an adverse
impact on the demand for our products. Changes in labor rates and practices,
including changes resulting from union activity, could significantly affect our
costs and thereby reduce our operating income. If we cannot successfully offset
increases in our manufacturing costs, this could have a material adverse impact
on our margins, operating income and cash flows. Even if we were able to offset
higher manufacturing costs by increasing the sales prices of our products, the
realization of any such increases often lags behind the rise in manufacturing
costs, especially in our manufactured housing operations, due in part to our
commitment to give our retailers price protection with respect to previously
placed customer orders.
FOR SOME OF OUR COMPONENTS, WE DEPEND ON A SMALL GROUP OF SUPPLIERS, AND THE
LOSS OF ANY OF THESE SUPPLIERS COULD AFFECT OUR ABILITY TO OBTAIN COMPONENTS AT
COMPETITIVE PRICES, WHICH WOULD DECREASE OUR MARGINS.
Most recreational vehicle and manufactured home components are readily
available from a variety of sources. However, a few components are produced by
only a small group of quality suppliers that have the capacity to supply large
quantities on a national basis. Primarily, this occurs in the case of
gasoline-powered motor home chassis, where Ford Motor Company is the dominant
supplier. Shortages, production delays or work stoppages by the employees of
such suppliers could have a
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material adverse effect on our sales. If we cannot obtain an adequate chassis
supply, this could result in a decrease in our sales and earnings.
RISKS RELATING TO THE EXCHANGE OFFER, THE CASH OFFER, THE NEW
PREFERRED SECURITIES AND OUR COMMON STOCK
THE NEW PREFERRED SECURITIES AND NEW PREFERRED SECURITIES GUARANTEES ARE
SUBORDINATED TO OUR SENIOR DEBT, BUT SENIOR IN PAYMENT TO THE EXISTING PREFERRED
SECURITIES AND THE EXISTING PREFERRED SECURITIES GUARANTEE.
The new preferred securities and new preferred securities guarantees are
senior to the existing preferred securities and the existing preferred
securities guarantee, but will be unsecured and subordinated in right of payment
to our senior debt, including our senior secured facility. They are also
effectively subordinated to all indebtedness and other liabilities of our
subsidiaries, including intercompany liabilities to the extent that the
instruments governing these intercompany liabilities provide for subordination.
The new preferred securities and new preferred securities guarantees may also be
subordinated to any debt we may issue in the future. As a result of this
subordination, in the event of our liquidation or insolvency, a payment default
with respect to our senior debt, a covenant default with respect to our senior
debt, or an acceleration of the new preferred securities due to an event of
default, our assets will be available to pay obligations on the new preferred
securities only after all senior debt has been paid in full, and there may not
be sufficient assets remaining to pay amounts due on any or all of the new
preferred securities then outstanding.
As of July 29, 2001, we had approximately $144 million of outstanding senior
debt at the parent level and, in addition, our financial statements reflected
liabilities of our subsidiaries of $170 million, of which $85 million were
accounts payable, excluding amounts due to employees, interest bearing debt and
reserves. Neither we nor our subsidiaries are prohibited under the new
indentures from incurring additional debt.
DISTRIBUTIONS ON OUR NEW PREFERRED SECURITIES AND EXISTING PREFERRED SECURITIES
DEPEND ON OUR RECEIVING DISTRIBUTIONS FROM OUR SUBSIDIARIES.
The new preferred securities are obligations exclusively of Fleetwood
Capital Trust II and Fleetwood Capital Trust III, as the case may be, and, as a
result of the new preferred securities guarantees, of us. Substantially all of
our operations are conducted through our subsidiaries and substantially all of
our earnings and cash flows were generated by our subsidiaries. As a result, our
cash flow and our ability to service our debt, including the new preferred
securities, is dependent on the earnings of our subsidiaries. In addition, we
are dependent on the distribution of our subsidiaries' earnings, loans and other
payments by our subsidiaries to us.
Our subsidiaries are separate and distinct legal entities. They have no
obligation to pay any amounts due on the new preferred securities or to provide
us with funds for our payment obligations, whether by dividends, distributions,
loans or other payments. In addition, any payment of dividends, distributions,
loans or advances by our subsidiaries to us could be subject to statutory or
contractual restrictions, including restrictive covenants contained in our
senior secured facility. Payments to us by our subsidiaries will also be
contingent upon our subsidiaries' earnings and business considerations.
IF AN ACTIVE MARKET FOR THE EXCHANGE PREFERRED SECURITIES FAILS TO DEVELOP OR IS
NOT SUSTAINED, THE TRADING PRICE AND LIQUIDITY OF THE EXCHANGE PREFERRED
SECURITIES COULD BE MATERIALLY ADVERSELY AFFECTED.
Prior to the offering, there has been no trading market for the exchange
preferred securities. The dealer manager, Banc of America Securities LLC, has
advised us that it currently intends to make a market in the exchange preferred
securities. However, Banc of America Securities LLC is not obligated to make a
market and may discontinue this market making activity at any time without
notice. The
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liquidity of the trading market for the exchange preferred securities will
depend in part on the level of participation of the holders of existing
preferred securities in the exchange offer. The greater the participation in the
exchange offer, the greater the liquidity of the trading market for the exchange
preferred securities and the lesser the liquidity of the trading market for the
existing preferred securities not tendered in the exchange offer. The liquidity
of the trading market for the exchange preferred securities may also be
adversely affected by the issuance of the cash offer preferred securities,
especially if the number of cash offer preferred securities is substantially
larger than the number of exchange offer preferred securities. In addition,
market making activity by Banc of America Securities LLC will be subject to the
limits imposed by the Securities Act of 1933 and the Securities Exchange Act of
1934 and disclosed in this prospectus. As a result, we cannot assure you that
any market for the exchange preferred securities will develop or, if one does
develop, that it will be maintained. If an active market for the exchange
preferred securities fails to develop or be sustained, the trading price and
liquidity of the exchange preferred securities could be materially adversely
affected.
IF AN ACTIVE MARKET FOR THE CASH OFFER PREFERRED SECURITIES FAILS TO DEVELOP OR
IS NOT SUSTAINED, THE TRADING PRICE AND LIQUIDITY OF THE CASH OFFER PREFERRED
SECURITIES COULD BE MATERIALLY ADVERSELY AFFECTED.
Prior to the offering, there has been no trading market for the cash offer
preferred securities. The placement agent, Banc of America Securities LLC, has
advised us that it currently intends to make a market in the cash offer
preferred securities. However, Banc of America Securities LLC is not obligated
to make a market and may discontinue this market making activity at any time
without notice. In addition, market making activity by Banc of America
Securities LLC will be subject to the limits imposed by the Securities Act of
1933 and the Securities Exchange Act of 1934 and disclosed in this prospectus.
As a result, we cannot assure you that any market for the cash offer preferred
securities will develop or, if one does develop, that it will be maintained. If
an active market for the cash offer preferred securities fails to develop or be
sustained, the trading price and liquidity of the cash offer preferred
securities could be materially adversely affected. In addition, to the extent
that the cash offer is less than fully subscribed, the liquidity of the cash
offer preferred securities purchased in the cash offer may be adversely
affected.
THE MARKET PRICE OF OUR COMMON STOCK HAS BEEN DEPRESSED, AND MAY DECLINE
FURTHER. THIS DECLINE WOULD AFFECT THE VALUE OF THE COMMON STOCK YOU RECEIVE
UPON CONVERSION OF THE NEW PREFERRED SECURITIES OR AS PAYMENT OF DISTRIBUTIONS
ON THE NEW PREFERRED SECURITIES. THIS DECLINE COULD ALSO ADVERSELY AFFECT THE
TRADING PRICE OF THE NEW PREFERRED SECURITIES. WE EXPECT THE TRADING PRICE OF
THE NEW PREFERRED SECURITIES TO BE HIGHLY VOLATILE.
The market price of our common stock has fluctuated significantly and
generally declined, from a market price of $47.44 per share on March 6, 1998 to
$8.15 per share on April 6, 2001. The market price of our common stock may
decline further as a result of a number of factors, including our ability to pay
principal and interest on our debt when due and the recent downgrade in our debt
ratings by Moody's and Standard and Poor's. Because the new preferred securities
are convertible into common stock, and because we may cause distributions on the
new preferred securities to be paid in common stock beginning as early as the
distribution for February 2002, volatility or depressed prices for our common
stock could have a similar effect on the price of our new preferred securities.
On October 30, 2001, we elected to defer distributions on our existing preferred
securities due to be made on November 15, 2001. In light of our business
environment and recent operating results, we currently anticipate that we will
find it necessary to defer distributions on our existing preferred securities
through at least August 15, 2002. Even though our board of directors has
discontinued the payment of dividends on our common stock for the foreseeable
future, these deferrals of distributions on our existing preferred securities
would further prevent us from declaring or paying any dividends during the
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period of such deferrals. Other factors resulting in fluctuations in the market
price of our common stock, and hence of the exchange preferred securities,
include:
- actual and anticipated variations in our operating results;
- general economic and market conditions;
- interest rates, which directly impact the price of our exchange preferred
securities and indirectly affect the price of our common stock;
- general conditions, including changes in demand, in the manufactured
housing and recreational vehicle industries;
- future issuances of our common stock, including issuances of common stock
in payment of interest on our new debentures and payment of distributions
on the new preferred securities or upon conversion of our new preferred
securities, which could have a dilutive effect on our per share results of
operations and otherwise cause the market price of our common stock to
decline;
- perceptions of the strengths and weaknesses of the manufactured housing
and recreational vehicle industries;
- developments in our relationships with our customers and/or suppliers;
- announcements of alliances, mergers or other relationships by or between
our competitors and/or our suppliers and customers;
- announcements and the introduction of new products and models by us or our
competitors and the success or failure of these new products and models;
- developments related to regulatory and zoning regulations; and
- the effects of the exchange offer and cash offer.
We expect this volatility to continue in the future. In addition, any
shortfall or changes in our revenue, gross margins, earnings or other financial
results could also cause the price of our common stock to fluctuate
significantly. In recent years, the stock market in general has experienced
extreme price and volume fluctuations that have particularly affected the
manufactured housing and recreational vehicle industries and that may be
unrelated to the operating performance of the companies within these industries.
These broad market fluctuations may adversely affect the market price of our
common stock and new preferred securities. Volatility in the price of stocks of
companies in our industries has been particularly high.
IF THE CLOSING PRICE OF OUR COMMON STOCK DECLINES BELOW $7.50 PER SHARE ON THE
DAY THAT WE PRICE THE CASH OFFER, THE CONVERSION PRICE FOR THE CASH OFFER
PREFERRED SECURITIES WILL REPRESENT MORE THAN A 15% PREMIUM OVER THE CLOSING
PRICE OF OUR COMMON STOCK ON THAT DATE.
We have set a minimum conversion price of $8.63 per share for the cash offer
preferred securities. If the market price of our common stock declines so that
the closing price of our common stock on the day that we price the cash offer is
below $7.50 per share, the minimum conversion price of $8.63 will be the initial
conversion price for the exchange preferred securities. This conversion price
will represent a premium of more than 15% over the closing price of our common
stock on the day that we price the cash offer.
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IF THE MARKET PRICE OF OUR COMMON STOCK DECLINES DURING THE COURSE OF THE
EXCHANGE OFFER, THE CONVERSION PRICE FOR THE EXCHANGE PREFERRED SECURITIES MAY
REPRESENT MORE THAN A 15% PREMIUM OVER THE DAILY VOLUME-WEIGHTED AVERAGE OF THE
CLOSING PRICES OF THE COMMON STOCK FOR EACH OF THE FIVE TRADING DAYS IMMEDIATELY
PRECEDING THE FOURTH TRADING DAY PRIOR TO THE EXCHANGE OFFER EXPIRATION DATE.
We have set a minimum conversion price of $8.63 per share for the exchange
preferred securities. If, in the course of the exchange offer, the market price
of our common stock declines so that the daily volume-weighted average of the
closing prices of our common stock for each of the five trading days immediately
preceding the fourth trading day prior to the exchange offer expiration date is
below $7.50 per share, the minimum conversion price of $8.63 will be the initial
conversion price for the exchange preferred securities. This conversion price
will represent a premium of more than 15% over the daily volume-weighted average
of the closing prices of the common stock for each of the five trading days
immediately preceding the fourth trading day prior to the exchange offer
expiration date.
THE LIQUIDITY OF THE MARKET FOR EXISTING PREFERRED SECURITIES THAT ARE NOT
EXCHANGED IN THE EXCHANGE OFFER WILL BE LIMITED AND SPORADIC.
The existing preferred securities are currently traded over-the-counter.
Accordingly, trading in the existing preferred securities has been limited and
sporadic. Any existing preferred securities tendered and accepted for exchange
in the exchange offer will reduce the aggregate number of existing preferred
securities outstanding. Consequently, any existing trading market for the
existing preferred securities that remain outstanding after the exchange offer
will be even more limited and sporadic.
IF WE ISSUE CASH OFFER PREFERRED SECURITIES IN THE CASH OFFER BUT THE EXCHANGE
OFFER IS NOT CONSUMMATED, THIS MAY REDUCE THE LIQUIDITY OF THE MARKET FOR THE
EXISTING PREFERRED SECURITIES.
The cash offer is not subject to, and is expected to close before, the
consummation of the exchange offer. If the minimum conditions to the exchange
offer are not satisfied and we withdraw the exchange offer, we still expect to
issue cash offer preferred securities for cash in the cash offer. Accordingly,
there will be cash offer preferred securities on the market. Trading in the
existing preferred securities in the over-the-counter market has been limited
and sporadic. The introduction of our cash offer preferred securities may reduce
the liquidity of the trading market for the existing preferred securities.
WE MAY NOT ACCEPT FOR EXCHANGE ALL OF A HOLDER'S VALIDLY TENDERED EXISTING
PREFERRED SECURITIES, AND WE MAY NOT MAKE AN OFFER IN THE FUTURE FOR THE
EXISTING PREFERRED SECURITIES THAT REMAIN OUTSTANDING FOLLOWING THIS EXCHANGE
OFFER.
We will accept for exchange validly tendered existing preferred securities
in an aggregate liquidation amount of up to $86.25 million of the
$287.5 million in aggregate liquidation amount of outstanding existing preferred
securities, assuming all conditions to the exchange offer are satisfied. To the
extent that the aggregate liquidation amount of existing preferred securities
tendered for exchange exceeds $86.25 million, we will accept existing preferred
securities for exchange on a pro rata basis. Therefore, we cannot assure you
that we will accept for exchange all of your validly tendered existing preferred
securities. Upon completion of the exchange offer, there will remain at least
$201.25 million in aggregate liquidation amount of existing preferred securities
that have not been accepted for exchange. We do not know whether, in the future,
we will make another offer to exchange these outstanding existing preferred
securities. Holders of these securities will therefore be subject to the risks
relating to existing preferred securities outlined in this section of the
prospectus, including the risk that the liquidity of the market for them will be
limited and sporadic and the risk that we may elect to defer payment of
distributions on existing preferred securities for up to an additional nineteen
consecutive quarters, having already deferred payment of distributions due to be
made on November 15, 2001.
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THE EXCHANGE OFFER MAY NOT REPRESENT A FAIR VALUATION OF THE EXISTING PREFERRED
SECURITIES.
Our board of directors has made no determination that the exchange offer
represents a fair valuation of the existing preferred securities. We have not
obtained a fairness opinion from any financial advisor about the fairness of the
exchange offer to you or us. We cannot assure you that if you tender your
existing preferred securities you will receive more value than if you had chosen
to keep them.
WE MAY NOT BE ABLE TO MEET PAYMENT OBLIGATIONS ON THE NEW PREFERRED SECURITIES
OR OUR EXISTING PREFERRED SECURITIES WHEN DUE, AND WE MAY ELECT TO CONTINUE TO
DEFER MAKING DISTRIBUTIONS ON THE EXISTING PREFERRED SECURITIES.
Our cash resources may not be sufficient to meet the payment obligations on
the new preferred securities. As of July 29, 2001, we had approximately
$144 million of outstanding senior debt at the parent level and in addition our
financial statements reflected liabilities of our subsidiaries of $170 million,
of which $85 million were accounts payable, excluding amounts due to employees,
interest bearing debt and reserves. Our ability to meet the payment obligations
on the new preferred securities, and to meet our other financial obligations,
depends on our operating performance, the availability of cash flow, the
availability of new sources of funding, the state of the financial markets and
other factors, many of which are beyond our control. We may not be able to
generate enough cash flow to meet our payment obligations on existing debt. For
instance, we suffered a loss of $284 million in our combined operations for
fiscal 2001 and a loss of $11.1 million in combined operations for the first
quarter of fiscal 2002, and we may continue to suffer losses. Similarly, our
ratio of earnings to fixed charges for fiscal 2001 and the first quarter of
fiscal 2002 were not meaningful since earnings were inadequate to cover fixed
charges by $336.8 million and $18.5 million, respectively. Accordingly, we
cannot assure you that we will be able to meet our payment obligations on the
new preferred securities when they become due. Our existing preferred securities
are subject to the same risks that we may be unable to meet our payment
obligations when due, as reflected by our current deferral of distributions on
the existing preferred securities. Further, they are ranked junior in right of
payment to the new preferred securities.
In addition, we have the right to elect to defer distributions on our
existing preferred securities, including deferrals for up to twenty consecutive
quarters. On October 30, 2001, we elected to defer distributions on our existing
preferred securities due to be made on November 15, 2001. If our business
environment and our operating results do not significantly improve from those we
have recently experienced, we would likely find it necessary to defer
distributions on our existing preferred securities through at least August 15,
2002. Even though our board of directors has discontinued the payment of
dividends on our common stock for the foreseeable future, these deferrals of
distributions on our existing preferred securities would further prevent us from
declaring or paying any dividends during the period of such deferrals.
WE EXPECT TO USE PART OF THE PROCEEDS FROM THE SALE OF THE CASH OFFER PREFERRED
SECURITIES TO PAY TAXES RESULTING FROM THE EXCHANGE OFFER AND THE PROCEEDS WILL,
TO THAT EXTENT, BE UNAVAILABLE FOR USE IN OUR BUSINESS OPERATIONS.
We expect the exchange of exchange preferred securities for existing
preferred securities to result in a tax liability to us, as a result of the
taxable income generated by the cancellation of existing debentures supporting
the existing preferred securities tendered into the exchange offer. If a maximum
of $86.25 million in aggregate liquidation amount of existing preferred
securities are exchanged for exchange preferred securities, we anticipate
incurring a tax liability of approximately $18.0 million. The proceeds from the
cash offer will be applied first to pay this expected tax liability, after
allowing for expenses incurred in connection with the offers, with one half of
the amount being contributed to our manufacturing company subsidiaries, one half
of which contributed amount will be used to pay down
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our term loan up to $24.0 million, with the balance of that contributed amount,
if any, being applied to the revolving loan under our amended senior secured
credit facility. The remainder of the proceeds from the cash offer, if any, will
be used in the operation of our business. Accordingly, the proceeds from the
sale of the cash offer preferred securities may not result in any benefit to our
business operations.
IF WE BECOME INSOLVENT, A COURT MAY VOID OUR NEW GUARANTEES IN RESPECT OF THE
NEW PREFERRED SECURITIES OR SUBORDINATE THE NEW GUARANTEES TO OUR OTHER
OBLIGATIONS, AND A COURT MAY ALSO PROVIDE THAT THE AMOUNT OF YOUR CLAIM WILL BE
LESS THAN THE LIQUIDATION AMOUNT PER NEW PREFERRED SECURITY.
Under the federal bankruptcy law and comparable provisions of state
fraudulent transfer laws, if a court were to find that, at the time we, as
guarantor of the new preferred securities, incurred the debt evidenced by our
new guarantees, we:
- were insolvent or rendered insolvent by reason of such incurrence; were
engaged in a business or transaction for which our remaining assets
constituted unreasonably small capital; or intended to incur, or believed
that we would incur, debts beyond our ability to pay such debts as they
mature; and
- received less than reasonably equivalent value or fair consideration for
the incurrence of such debt;
then the court could void the new guarantees, or claims by holders of the
securities under those new guarantees could be subordinated to all of our other
debts except the new preferred securities. In addition, any payment by us under
our new guarantees could be required to be returned to us, or to a fund for the
benefit of our creditors.
The measures of insolvency for purposes of the above will vary depending on
the law applied in any proceeding. Generally, however, a guarantor would be
considered insolvent if:
- the sum of its debts, including contingent liabilities, was greater than
the saleable value of all of its assets at a fair valuation; or
- the present fair saleable value of its assets was less than the amount
that would be required to pay its probable liability on its existing
debts, including contingent liabilities, as they become absolute and
mature; or
- it could not pay its debts as they become due.
In addition, if we become insolvent, a court may provide that the amount of
your claim will be less than the liquidation amount per new preferred security,
which is $22 in the case of an exchange preferred security and $50 in the case
of a cash offer preferred security.
THE EXISTING PREFERRED SECURITIES WILL BE SUBORDINATED TO THE NEW PREFERRED
SECURITIES.
The existing preferred securities are unsecured obligations and rank in
right of payment behind:
- all of our existing and future senior debt at the parent level,
aggregating $144 million as of July 29, 2001, which included the notes
payable to Prudential, and in addition our financial statements reflected
liabilities of our subsidiaries of $170 million, of which $85 million were
accounts payable, excluding amounts due to employees, interest bearing
debt and reserves;
- up to an aggregate of $37.95 million in liquidation amount of exchange
preferred securities that may be issued in the exchange offer, and the
offer of up to $150.0 million in cash offer preferred securities.
Also, the existing preferred securities are effectively subordinated to the
liabilities of our subsidiaries, including intercompany liabilities to the
extent that the instruments governing these
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intercompany liabilities provide for subordination. The existing preferred
securities may also be subordinated to any debt we may issue in the future.
We may not make any distributions to holders of, or purchase, redeem or
otherwise retire, the existing preferred securities, if payments on any of our
senior debt or the distributions to holders of the new preferred securities are
not made when due. The owners of our senior debt and new preferred securities
will be entitled to receive payment of all amounts due to them before the owners
of the existing preferred securities upon any payment or distribution of our
assets to our creditors upon our liquidation or other insolvency or
reorganization proceedings.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, including the sections entitled "Summary" and "Risk
Factors," contains forward-looking information. This forward-looking information
is subject to risks and uncertainties including the factors listed under "Risk
Factors," as well as elsewhere in this prospectus. In some cases, you can
identify forward-looking statements by terminology such as "may," "will,"
"should," "expects," "intends," "plans," "anticipates," "believes," "estimates,"
"predicts," "potential" or "continue," or the negative of these terms or other
comparable terminology. These statements are only predictions and may be
inaccurate. Actual events or results may differ materially. In evaluating these
statements, you should specifically consider various factors, including the
risks outlined under "Risk Factors." These factors may cause our actual results
to differ materially from any forward-looking statement. Although we believe
that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. The forward-looking statements made in connection with the
exchange offer pursuant to the registration statement or the Tender Offer
Statement on Schedule TO-I/A are not and have not been protected under the
Securities Litigation Reform Act. Furthermore, any references to the safe harbor
for forward-looking statements made in reports that are incorporated by
reference into this prospectus and filed pursuant to the Securities Exchange Act
of 1934, are specifically not incorporated into this registration statement with
respect to the exchange offer.
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USE OF PROCEEDS
We will not receive any proceeds from the exchange offer. If we consummate
the exchange offer, we will use a portion of the proceeds from the sale of cash
offer preferred securities to pay taxes that we expect to incur as a result of
consummation of the exchange offer, together with the fees and expenses we will
incur as a result of the exchange offer. Assuming that existing preferred
securities in an aggregate liquidation amount of $86.25 million are exchanged in
the exchange offer, which is the maximum amount that we can accept for exchange
in the exchange offer, we anticipate incurring a tax liability of $18.0 million
as a result of the taxable income generated by the cancellation of existing
debentures supporting the existing preferred securities accepted for exchange.
Assuming that cash offer preferred securities are sold in the cash offer having
an aggregate liquidation amount equal to 30% of the aggregate liquidation amount
of the existing preferred securities tendered and accepted for exchange in the
exchange offer, we will use a portion of the proceeds from the sale of that
percentage amount in order to settle the expected tax liability resulting from
consummation of the exchange offer. We will use any proceeds from the sale of
cash offer preferred securities in excess of that percentage for general
corporate purposes, including the repayment of corporate indebtedness.
We expect to consummate the cash offer even if we do not consummate the
exchange offer, since the cash offer is not conditioned upon consummation of the
exchange offer or the sale of a minimum number of cash offer preferred
securities. In that event, and after payment of fees and expenses incurred in
connection with the cash offer, we will use any remaining proceeds from the sale
of cash offer preferred securities for general corporate purposes, including the
repayment of corporate indebtedness.
In addition, as a result of a recent amendment to our senior secured
facility, we have agreed to contribute one half of the amount raised in the cash
offer to our manufacturing company subsidiaries, after allowing for expenses of
the offers and taxes incurred in connection with the exchange offer, with one
half of the contributed amount being used to pay down the term loan up to
$24 million, and the balance of that contributed amount being then applied to
pay down the revolving loan. These payments will not reduce the amount of the
commitment on the revolving loan but the first $6 million applied to the
revolving loan will permanently reduce the amount available to borrow under the
plant, property and equipment sub-facility. Further, if the exchange offer is
not completed by February 28, 2002, then the amount of the cash proceeds that we
are required to contribute to our manufacturing company subsidiaries for
application as described above would be reduced to 43% of the proceeds of the
cash offer, after allowing for expenses of $10.0 million but adding back the
$20.0 million allowance for anticipated taxes that would have otherwise been
generated in connection with the exchange offer.
41
<Page>
PRICE RANGE OF COMMON STOCK
The following table lists the high and low intra-day sales prices for our
common stock during the past two fiscal years as reported on the New York Stock
Exchange Composite Tape, along with information on dividends declared per share
during the same periods. Our common stock is listed on the New York Stock
Exchange and the Pacific Stock Exchange and trades on various regional exchanges
(Ticker Symbol: FLE). Call options are traded on the American Stock Exchange.
<Table>
<Caption>
DIVIDENDS
QUARTER HIGH LOW DECLARED
- ------- -------- -------- ---------
Fiscal 2000
First Quarter.................................... $29.25 $22.00 $0.19
Second Quarter................................... 23.69 18.00 0.19
Third Quarter.................................... 23.13 15.94 0.19
Fourth Quarter................................... 17.25 14.00 0.19
Fiscal 2001
First Quarter.................................... $15.81 $12.94 $0.19
Second Quarter................................... 14.94 10.56 0.19
Third Quarter.................................... 16.00 8.69 0.04
Fourth Quarter................................... 15.05 8.10 0.04
Fiscal 2002
First Quarter.................................... $15.55 $15.25 $0.04
Second Quarter................................... 17.25 9.12 0.04
Third Quarter (through December 10, 2001)........ 13.40 9.25 0.00
</Table>
On October 28, 2001, there were approximately 1,271 shareholders of record
of our common stock.
DIVIDEND POLICY
The declaration and payment of dividends on our common stock is at the
discretion of our board of directors and depends on our results of operations,
financial condition, capital requirements and such other factors as our board of
directors deems relevant. In December 2000, our board of directors approved a
reduction in the quarterly dividend from $0.19 per share to $0.04 per share. Our
board of directors has subsequently discontinued the payment of dividends on our
common stock for the foreseeable future. We have the right to elect to defer
distributions for up to twenty consecutive quarters on our existing preferred
securities and on October 30, 2001 we elected to defer distributions due to be
made on November 15, 2001. If our business environment and our operating results
do not significantly improve from those we have recently experienced, we would
likely find it necessary to defer distributions on our existing preferred
securities through at least August 15, 2002. Even though our board of directors
has discontinued the payment of dividends on our common stock for the
foreseeable future, these deferrals of distributions on our existing preferred
securities would further prevent us from declaring or paying any dividends
during the period of such deferrals.
CAPITALIZATION
The following table sets forth our unaudited consolidated capitalization:
- at July 29, 2001, on an actual basis; and
- as adjusted to:
- give effect to the issuance of the exchange preferred securities in the
exchange offer on the assumption that $86.25 million in aggregate
liquidation amount of the outstanding existing preferred securities
were validly tendered and accepted for exchange, after deducting fees
to the dealer manager and estimated expenses;
42
<Page>
- give effect to the issuance and receipt of approximately
$141.5 million in cash proceeds from the sale of cash offer preferred
securities, after deducting fees of the placement agent and estimated
expenses;
- reflect an increase to capital surplus of $28.1 million on the assumed
early extinguishment of $86.25 million in aggregate liquidation amount
of the outstanding existing preferred securities, net of
$37.95 million in aggregate liquidation amount of exchange preferred
securities issuable in the exchange offer, taxes imputed to us and the
write-off of certain capitalized costs; and
- to reflect drawdowns under the senior secured facility and the
application of proceeds to pay down a portion of the Conseco senior
debt and pay off all of the Prudential senior debt.
To the extent that existing preferred securities are not validly tendered or
accepted in the exchange offer, the amount attributed to the exchange preferred
securities would decrease and the amount attributed to the existing preferred
securities would increase. The financial data at July 29, 2001 in the following
table are derived from our unaudited financial statements for the thirteen weeks
then ended.
<Table>
<Caption>
JULY 29, 2001
------------------------
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
Short-term indebtedness:
Retail flooring liability................................. 60,030 60,030
Motor home chassis inventory financing.................... -- --
Senior unsecured notes payable(1)......................... 68,188 68,188
Total short-term indebtedness........................... $ 128,218 $ 128,218
Long-term debt (less current portion)....................... -- --
Total indebtedness...................................... $ 540,337 $ 553,489
9.5% Convertible Trust II Preferred Securities due 2013
(exchange preferred securities)(2)........................ $ $ 37,950
9.5% Convertible Trust III Preferred Securities due 2013
(cash offer preferred securities)(2)...................... $ -- $ 150,000
6% Convertible Trust Preferred Securities due 2028 (existing
preferred securities)(2).................................. 287,500 201,250
Shareholders' equity:
Preferred stock, par value $1.00 per share, 10,000,000
shares authorized, none issued and outstanding.......... $ -- $ --
Common stock, par value $1.00 per share, 75,000,000 shares
authorized, 32,740,000 issued and outstanding(3)........ 32,759 32,759
Capital surplus(4)........................................ 194,762 222,903
Retained earnings......................................... 49,774 49,774
Accumulated other comprehensive income (loss)............. (2,241) (2,241)
Total shareholders' equity.............................. 275,054 303,195
Total capitalization.................................... $1,102,891 $1,245,884
</Table>
- ------------------------------
(1) At July 29, 2001, because we were in violation of some of the balance sheet
covenants related to our senior unsecured notes payable to Prudential, we
classified those notes as short-term indebtedness. These notes were paid off
in full on July 30, 2001.
(2) We report our operations and those of our subsidiaries on a consolidated
basis. Consequently, the existing preferred securities and new preferred
securities are reported on our balance sheet as company-obligated
mandatorily redeemable convertible preferred securities of Fleetwood Capital
Trust, Fleetwood Capital Trust II or Fleetwood Capital Trust III, as the
case may be, in respect of the debentures that we have issued or will issue
to the existing trust and the new trusts, as the case may be.
(3) Outstanding shares exclude the shares reserved for issuance upon conversion
of the existing preferred securities and the new preferred securities,
payment of interest on the new preferred securities and 2,439,167 shares
exercisable under our stock option and purchase plans. In addition, on
October 25, 2001 we completed the private placement of 2,209,945
unregistered shares of our common stock. See the section titled
"Management's Discussion and Analysis--Recent Developments--Private
Placement," beginning on page 46 of this prospectus.
(4) The increase to capital surplus of $28.1 million reflects the reduction in
the stated value of the existing preferred securities, net of
$37.95 million in aggregate liquidation amount of exchange preferred
securities issuable in the exchange offer, taxes imputed to us and the
write-off of certain capitalized costs, as a result of the early
extinguishment of $86.25 million in aggregate liquidation amount of
outstanding existing preferred securities. This amount is excluded from net
income (loss) and included in income available to common shareholders in a
manner similar to a preferred stock dividend.
43
<Page>
SELECTED CONSOLIDATED FINANCIAL DATA
The consolidated operating data for the three years in the period ended
April 29, 2001 and the balance sheet data at April 29, 2001 and April 30, 2000
are derived from our consolidated financial statements audited by Arthur
Andersen LLP, independent public accountants, which are incorporated by
reference in this prospectus. The consolidated operating data for the fiscal
quarters ended July 29, 2001 and July 30, 2000 and the balance sheet data at
July 29, 2001 and July 30, 2000 are derived from our unaudited interim condensed
financial statements, which are incorporated by reference in this prospectus.
Please refer to the complete consolidated financial statements and related notes
incorporated by reference in this prospectus for more information. The
consolidated operating data for the fiscal years ended April 26, 1998 and
April 27, 1997 and the balance sheet data at April 25, 1999, April 26, 1998 and
April 27, 1997, have been derived from our consolidated financial statements
audited by Arthur Andersen LLP that are not included or incorporated by
reference in this prospectus. Specific reclassifications have been made in the
financial data below in order to more clearly present the distributions on the
existing preferred securities as a minority interest in the existing preferred
securities of Fleetwood Capital Trust. The distributions were previously
included in other income in our consolidated financial statements incorporated
by reference in this prospectus. These results are not necessarily indicative of
the results that may be expected for future periods and have been adjusted to
reflect Emerging Issues Task Force No. 00-10 "Accounting for Shipping and
Handling Costs" and No. 00-14 "Accounting for Certain Sales Incentives," which
we adopted in the fourth quarter of fiscal 2001.
<Table>
<Caption>
FISCAL QUARTER ENDED
FISCAL YEAR(1) -----------------------
-------------------------------------------------------------- JULY 30, JULY 29,
1997 1998 1999 2000 2001 2000 2001
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
OPERATING DATA:
Net sales
Manufactured housing........ $1,490,084 $1,550,926 $1,631,076 $1,517,681 $ 981,366 $ 317,499 $ 216,232
Recreational vehicles....... 1,402,890 1,525,216 1,735,016 1,921,604 1,206,790 317,514 266,308
Housing--retail............. --(2) -- 332,309 591,895 552,904 157,554 108,511
Supply operations, corporate
and other................. 52,803 47,660 48,306 54,253 35,413 9,335 8,393
Adjustments and
eliminations.............. --(2) (2,524) (191,188) (315,899) (245,010) (81,781) (35,312)
---------- ---------- ---------- ---------- ---------- ---------- ----------
$2,945,777 $3,121,278 $3,555,519 $3,769,534 $2,531,463 $ 720,121 $ 564,132
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) from continuing
operations before income
taxes, minority interest,
discontinued operations and
cumulative effect of
accounting change........... $ 147,050 $ 178,885 $ 196,415 $ 159,059 $ (319,231) $ (26,567) $ (14,164)
Benefit (provision) for income
taxes....................... (56,998) (67,841) (78,146) (64,461) 57,575 9,413 5,826
Minority interest in Fleetwood
Capital Trust, net of income
taxes....................... -- (2,499) (11,148) (11,104) (11,158) (2,787) (2,789)
Income (loss) from continuing
operations.................. 90,052 108,545 107,121 83,494 (272,814) (19,941) (11,127)
Income from discontinued
operations, net of income
taxes....................... 34,778 -- -- -- -- -- --
Income (loss) before
cumulative effect of
accounting change........... 124,830 108,545 107,121 83,494 (272,814) (19,941) (11,127)
Cumulative effect of
accounting change, net of
income taxes................ -- -- -- -- (11,176) (11,176) --
Net income (loss) for basic
earnings per share.......... 124,830 108,545 107,121 83,494 (283,990) (31,117) (11,127)
Effect of dilutive securities:
Minority interest in
Fleetwood Capital Trust... -- 2,499 11,148 11,104 --(3) --(3) --(3)
Net income (loss) for diluted
earnings per share.......... 124,830 111,044 118,269 94,598 (283,990) (31,117) (11,127)
</Table>
44
<Page>
<Table>
<Caption>
FISCAL QUARTER ENDED
FISCAL YEAR(1) -----------------------
-------------------------------------------------------------- JULY 30, JULY 29,
1997 1998 1999 2000 2001 2000 2001
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Earnings (loss) per share--
diluted:
Continuing operations....... 2.30 3.01 2.94 2.41 (8.33) (.61) (.34)
Discontinued operations, net
of income taxes........... .89 -- -- -- -- -- --
Cumulative effect of
accounting change, net of
income taxes.............. -- -- -- -- (.34) (.34) --
Net income (loss) per share... $ 3.19 $ 3.01 $ 2.94 $ 2.41 $ (8.67) $ (.95) $ (.34)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Weighted average common
shares--diluted............. 39,162 36,933 40,171 39,194 32,755 32,758 32,756
---------- ---------- ---------- ---------- ---------- ---------- ----------
BALANCE SHEET DATA AT END OF
PERIOD:
Cash and investments.......... $ 110,434 $ 305,722 $ 267,133 $ 135,142 $ 73,103 $ 110,675 $ 87,551
Property, plant and equipment,
net......................... 278,331 277,211 303,934 312,067 294,813 309,876 292,062
Total assets.................. 871,547 1,129,480 1,531,184 1,536,693 1,142,461 1,524,759 1,102,891
Total liabilities............. 428,452 465,954 656,981 664,388 568,813 688,863 540,337
Capital Trust Preferred
Securities.................. -- 287,500 287,500 287,500 287,500 287,500 287,500
Shareholders' equity.......... 443,095 376,026 586,703 584,805 286,148 548,396 275,054
OTHER DATA:
Gross profit margin........... 17.6% 18.3% 20.5% 21.0% 19.0% 20.4% 19.6%
Operating income (loss)
margin...................... 4.7% 5.5% 5.4% 4.3% (12.2)% (3.3)% (1.7)%
Depreciation and
amortization................ $ 27,579 $ 27,799 $ 31,841 $ 35,080 $ 36,546 $ 8,942 $ 6,892
Capital expenditures.......... 56,184 37,809 49,757 55,078 36,921 8,759 3,186
EBITDA(4)..................... 167,138 197,994 222,152 197,256 (271,080) (15,136) (2,721)
Cash flows from operations.... 85,138 118,152 114,522 (4,757) 15,520 (46,398) 66,779
Cash flows from investing
activities.................. 292,821 (231,613) (121,767) 92,516 25,722 23,355 (2,729)
Cash flows from financing
activities.................. (355,644) 104,310 5,110 (69,715) (47,201) 31,031 (50,046)
Ratio of earnings to fixed
charges(5)(6)............... 37.4x 24.3x 7.5x 5.3x -- -- --
</Table>
- ------------------------------
(1) We use a fiscal year ending on the last Sunday of April in each year.
(2) Prior to fiscal 1998, we did not report retail sales and adjustments and
eliminations as separate segments or line items.
(3) The effect of the distributions on preferred securities was anti-dilutive in
the fiscal year ended April 29, 2001 and the fiscal quarters ended July 30,
2000 and July 29, 2001 and was, therefore, not added back to determine
diluted earnings (loss).
(4) EBITDA is defined as operating income plus depreciation and amortization
expense. While EBITDA should not be considered as a substitute for net
income, cash flows from operating activities, or other income statement data
or cash flow statement data prepared in accordance with Generally Accepted
Accounting Principles, or GAAP, or as a measure of profitability or
liquidity, our management understands that EBITDA is customarily used as a
measurement in evaluating companies. If EBITDA for fiscal 2001 were adjusted
to include an add-back for goodwill impairment of $165.9 million and other
asset impairment charges of $22.6 million, both of which were non-cash
charges, the adjusted EBITDA would have been $(82.6) million for fiscal
2001. However, these impairment charges are not included in any of the
EBITDA figures reported in the table.
(5) The ratio of earnings to fixed charges is unaudited for all periods
presented. For purposes of computing these ratios, earnings represent income
before income taxes, minority interest, discontinued operations and
cumulative effect of changes in accounting principles and fixed charges less
distributions on existing preferred securities of Fleetwood Capital Trust.
Fixed charges include all interest expense and distributions on the existing
preferred securities.
(6) Our ratios of earnings to fixed charges for the fiscal year ended April 29,
2001 and the fiscal quarters ended July 30, 2000 and July 29, 2001 were not
meaningful since earnings were inadequate to cover fixed charges by
$336.8 million, $30.9 million and $18.5 million, respectively. Similarly,
after giving effect to each of the exchange offer and cash offer, the pro
forma ratios of earnings to fixed charges for fiscal 2001 and the fiscal
quarter ended July 29, 2001 are not meaningful since, on a pro forma basis,
earnings during these periods would have been inadequate to cover fixed
charges by $349.2 million and $21.6 million, respectively.
Because the new trusts are wholly-owned, special purpose subsidiaries with
no independent operations, separate financial statements for the new trusts are
not included in this prospectus. Any assets generated by the new trusts, such as
assets from the sale of the cash offer preferred securities, are paid to us to
purchase our new debentures, and any liabilities incurred by the new trusts are
effectively fully and unconditionally guaranteed by us. Accordingly, our
financial statements should provide all necessary and material information
regarding the assets, liabilities and operations of the new trusts.
45
<Page>
MANAGEMENT'S DISCUSSION AND ANALYSIS
THIRTEEN WEEKS ENDED JULY 29, 2001 COMPARED TO THE THIRTEEN WEEKS ENDED
JULY 30, 2000
CONSOLIDATED RESULTS
We incurred a net loss in the first quarter of fiscal 2001 of $11.1 million
or 34 cents per diluted share compared to a loss of $31.1 million or 95 cents
per diluted share in last fiscal year's first quarter. The loss in the current
period primarily resulted from a 22% decrease in sales, along with an erosion in
gross profit margin from 20.4% to 19.6%. Partially offsetting the lower sales
and reduced margin was a 24% decline in operating expenses before other charges.
In addition, last year's loss included restructuring and impairment charges of
$13.5 million and an $11.2 million (after tax) charge for the cumulative effect
of a change in accounting policy related to revenue recognition. In terms of
earnings per share for the prior fiscal year, the restructuring and impairment
charges and the cumulative effect of the change in accounting amounted to 27
cents and 34 cents, respectively.
Consolidated revenues fell $156.0 million to $564.1 million compared to
$720.1 million in last fiscal year's first quarter. All business segments
experienced lower sales due to weak market conditions, with the housing business
suffering additional adverse effects from restrictive financing.
Manufacturing gross margin fell from 18.1% to 17.6% mainly due to lower
recreational vehicle margins. Gross profit for the recreational vehicle segment
declined from 13.4% to 10.8% of sales in the current fiscal year, due to higher
freight and direct labor costs resulting from new product introductions. Gross
margins for the manufactured housing segment improved from 22.5% to 25.3% due to
lower material costs.
Operating expenses decreased $51.3 million to $119.9 million, and fell as a
percentage of sales from 23.8% to 21.3%. The dollar decrease was primarily due
to lower sales, downsizing of manufacturing and retail operations and the
absence of $13.5 million of other charges related to restructuring and
impairment from the prior fiscal year. Selling expenses decreased
$17.9 million, or 26%, due to lower warranty and advertising costs. General and
administrative expenses declined $19.9 million and decreased as a percentage of
sales from 12.1% to 12.0% due to staff reductions resulting from manufacturing
plant and retail store closures.
Non-operating expense rose $2.1 million to $4.6 million, mainly due to
higher interest expense on the unsecured debt and lower investment income.
Included in the $3.9 million of interest on senior unsecured notes payable was
$2.3 million for yield maintenance charges related to executing the new loan
agreement with Bank of America on July 27, 2001, and the early retirement of the
senior unsecured notes on July 30, 2001. Investment income was down 49% from the
prior fiscal year as a result of lower interest rates and lower invested
balances.
MANUFACTURED HOUSING
Gross manufacturing revenues of $216.2 million were off 32% from the prior
fiscal year and included $34.7 million of intercompany sales to our
company-owned retail home centers. Manufacturing unit volume declined 35% to
7,769 homes, but the number of sections was off a lesser 32% to 14,082 due to
the continuing shift in sales mix toward multi-section homes. Multi-section
homes represented 78% of factory sales versus 70% last fiscal year.
Sales volume was below the prior fiscal year because of a weaker
manufactured housing market, which has been adversely affected by excessive
retail inventories, competition from repossessed units and restrictive retail
financing conditions. During the past 30 months, lenders have increased credit
standards and down payment requirements for retail buyers. These actions,
combined with an increase in interest rates, have eliminated many potential
buyers of manufactured homes. We anticipate that
46
<Page>
industry wholesale shipments will continue to be weak until the current
inventory imbalance is resolved, the timing of which depends on the availability
and terms of retail financing.
Operating income, before elimination of intercompany profit, increased from
$2.1 million to $16.2 million, and operating margin rose from less than 0.7% to
7.5% of sales. Excluding asset impairment charges from the prior fiscal year's
results, operating margin for the housing group would have been 3.6% of sales.
Last fiscal year, asset impairment charges related to plant closings reduced
operating earnings by $9.4 million. The increase to earnings, despite the
decline in volume due to the aforementioned weak market conditions, was due to
improved gross margin and reduced operating expenses. Gross profit margin for
the housing group improved from 22.5% to 25.3% of sales, mainly as a result of
lower raw material costs. More efficient material usage and improved product
pricing contributed to the higher gross margin. Housing group operating costs,
excluding the asset impairment charge, fell 35% as a result of reductions in
product warranty costs and advertising expenses.
RETAIL HOUSING OPERATIONS
Retail housing revenues decreased 31% to $108.5 million in the first fiscal
quarter. Last fiscal year, sales were adjusted downward by approximately
$18.0 million due to a change in accounting for credit retail sales. Also as a
result of the accounting change, we incurred a one-time cumulative charge
against earnings of $11.2 million after taxes. Unit sales from Fleetwood retail
stores declined from last fiscal year by about 29% to 2,646 homes. The retail
division incurred an operating loss of $12.0 million for the current fiscal
quarter compared to a loss of $5.4 million a year ago. The increased operating
loss was the result of a weak market environment and lower gross margins
stemming from competitive conditions and discounting aged inventory. Operating
expenses declined 23% due to lower volume, store closures and reduced staffing.
Interest expense on inventory financing decreased by 50% from $3.0 million to
$1.5 million, reflecting the 37% drop in inventories and lower interest rates.
The retail housing segment was operating 156 stores at the end of July 2001
compared to 240 at the end of July 2000.
RECREATIONAL VEHICLES
Recreational vehicle sales declined 16% to $266.3 million compared to
$317.5 million for last fiscal year's first quarter. Travel trailer revenues
were $106.6 million, down $35.3 million or 25% on a 28% decline in unit volume,
reflecting weak market conditions and a delayed introduction of new fifth-wheel
floor plans. Motor home revenues for the quarter fell 9% to $134.1 million on a
16% drop in shipments. Deliveries of Class A products rose 8% to 1,572 units
while Class C shipments fell 73% to 161 units, reflecting the closure of two
Class C manufacturing plants toward the end of the fourth fiscal quarter and the
related lag in achieving full production in the facility to which the product
was transferred. Folding trailer sales fell 10% to $25.7 million on a 19% dip in
unit volume. The disproportionate drop in folding trailer shipments to revenues
reflects the introduction of the larger, higher-priced Caravan into the sales
mix since last July.
The recreational vehicle group incurred an operating loss of $17.8 million
in the first fiscal quarter compared to a loss of $13.3 million a year ago. The
$4.5 million increase was primarily caused by the decline in sales and gross
profit margin erosion, largely due to lower travel trailer margins. Operating
expenses declined $9.3 million and decreased from 17.6% of sales to 17.5% in the
current fiscal year. The largest decline was in employee compensation due to
staff reductions resulting from downsizing efforts.
47
<Page>
SUPPLY OPERATIONS
The supply group contributed first fiscal quarter revenues of $7.8 million
compared to $8.5 million a year ago. Operating income remained constant at
$2.2 million despite lower sales due to improved gross margins resulting from
lower cost of materials as a percentage of sales.
FISCAL 2001 COMPARED TO FISCAL 2000
CONSOLIDATED RESULTS
We incurred a net loss in fiscal 2001 of $284 million or $8.67 per diluted
share, the majority of which was attributable to other charges related to
goodwill impairment, restructuring and downsizing initiatives. This compares
with a profit of $83.5 million or $2.41 per diluted share for fiscal 2000. The
loss also stems from significantly reduced sales volume in both manufactured
housing and recreational vehicles caused by a weak market environment. A change
in accounting for credit retail housing sales, which was adopted in the first
quarter, also contributed to the loss. In terms of fiscal 2001 earnings per
share, the impairment of goodwill, other charges and the cumulative effect of
the change in accounting amounted to approximately $5.63 and $0.34,
respectively.
We incurred a $165.9 million non-cash charge in fiscal 2001 related to the
impairment of goodwill that originated with acquisitions of retail housing
businesses in prior fiscal years. In addition, we recorded other charges
totaling $34.9 million, which were related to the downsizing of manufactured
housing, recreational vehicle and retail housing operations. The latter category
included $13.3 million for asset impairment charges related to downsizing of the
retail housing business and $9.4 million for the write-down of manufacturing
facilities, as well as employee severance payments and other plant closing
costs.
Consolidated revenues fell 33% to $2.53 billion in fiscal 2001 compared to
$3.77 billion in the prior fiscal year. Fiscal 2000 included 53 weeks compared
to 52 weeks in fiscal 2001. The revenue decline reflects continued market
weakness in the demand for both recreational vehicles and manufactured housing.
Gross profit margin in fiscal 2001 declined to 19% of sales from 21% in
fiscal 2000, reflecting lower manufacturing and retail margins. Manufacturing
gross margin fell to 17.2% of sales compared to fiscal 2000's 19.3% margin.
Lower recreational vehicle gross margins were only partially offset by improved
margins from manufactured housing. Gross margins were adversely impacted by
higher direct labor wage and benefits and inefficiencies due to lower volume.
Reduced retail housing margins reflect very competitive market conditions and
declining industry sales, as well as a $7.5 million inventory write-down to net
realizable value.
Operating expenses in fiscal 2001, excluding other charges, declined
$42 million or 7% from the prior fiscal year to $588 million. As a percentage of
sales, however, these costs rose from 16.7% in fiscal 2000 to 23.1% in fiscal
2001 due to lower sales. Selling expenses declined 11% to $247 million in fiscal
2001, but rose as a percentage of sales from 7.4% to 9.8% on the lower sales
volume. Most of the dollar reduction in selling costs resulted from reduced
expenditures for advertising, sales compensation and product warranty and
service costs. The bulk of these cost reductions occurred within the
manufactured housing segment. These reductions can be attributed not only to
volume, but enhanced cost controls.
General and administrative expenses declined 4% to $341 million in fiscal
2001, but rose as a percentage of sales from 9.3% to 13.4%. Reduced costs in the
manufacturing sector were partially offset by higher expenses for the retail
housing business, which was in an expansion mode until mid-fiscal 2001. Most of
the reduction in general and administrative costs stems from lower profit-based
incentive compensation and reduced staffing levels.
48
<Page>
Fiscal 2001's non-operating expenses of $11.6 million were significantly
higher than fiscal 2000's $3.1 million, mainly due to higher interest expense
and lower investment income. Interest expense was higher due to additional
short-term and long-term borrowings and higher interest rates. Investment income
was down 28% from fiscal 2000 as a result of reduced invested balances.
Our effective income tax rate declined from 40.5% in fiscal 2000 to 18% in
fiscal 2001. The decrease primarily reflects the impact of the impairment of
goodwill, which is not deductible for tax purposes.
MANUFACTURED HOUSING
Gross manufacturing revenues of $981.4 million for fiscal 2001 were off 35%
from fiscal 2000, and included $243 million of intercompany sales to retail home
centers owned by us. Manufacturing unit volume declined 39% from fiscal 2000 to
36,201 homes from 59,458 homes, but the number of sections was off a lesser 36%
for the same period to 63,944 sections from 99,329 sections, due to the
continuing shift in sales mix toward multi-section homes. Multi-section homes
represented 74% of factory sales in fiscal 2001 versus 64% in fiscal 2000.
The lower housing volume reflects a weak manufactured housing market that
has deteriorated over the past year. During the past two years, the industry has
been adversely affected by excessive retail inventories and restrictive retail
financing conditions. Lenders have imposed more stringent credit standards,
higher down payment requirements for retail buyers and higher spreads between
their cost of funds and retail financing rates. Additionally, several key
lenders have reduced their financing budgets, which has limited the amount of
funding available to the industry. These actions, compounded with higher
interest rates, have eliminated many potential buyers of manufactured homes. We
anticipate that industry wholesale shipments will continue to be weak until the
current inventory imbalance is resolved, the timing of which depends largely on
the availability and terms of retail financing.
Housing operating income, before the adjustment for intercompany
manufacturing profit, declined 67% from $83.8 million in fiscal 2000 to $27.4
million in fiscal 2001, and operating margin fell from 5.5% to 2.8% of sales.
Most of the decline was volume-related. About $12 million or 21% of the profit
decline resulted from other restructuring and impairment charges related to
plant closings and downsizing initiatives. Excluding these other charges,
operating margin for the housing group was 4% in fiscal 2001. The other charges
for fiscal 2001 included $9.4 million for the write-down of plant facilities,
$2.1 million for employee severance benefits and $700,000 of other costs. Gross
profit margin for the housing group improved slightly in fiscal 2001 from 21.5%
to 22.8% of sales as a result of lower raw material costs. More efficient
material usage, improved product pricing and lower lumber costs all contributed
to the higher gross margin percentage. Housing group operating costs, excluding
the other charges, fell 25%, mainly as a result of lower product warranty and
service costs, reduced selling expenses and lower employee compensation.
Compensation costs reflect lower profit-based incentive compensation and
staffing reductions resulting from downsizing efforts.
RETAIL HOUSING OPERATIONS
The retail housing division generated revenues of $553 million in fiscal
2001, 7% less than fiscal 2000 revenues. Unit sales from our retail stores fell
12% in fiscal 2001 to 12,752 homes. As a result of a change in accounting for
retail credit sales, we incurred a one-time cumulative charge against earnings
of $11.2 million after taxes. We had 188 retail stores in operation at the end
of fiscal 2001 compared to 243 in the prior fiscal year's end. The retail
division incurred an operating loss of $77.1 million compared to a nominal
profit of $3.8 million in fiscal 2000. The current year loss includes asset
impairment charges totaling $13.3 million related to downsizing initiatives.
Earnings were also adversely affected by a $7.5 million inventory write-down in
fiscal 2001, which increased cost of sales
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and reduced the gross profit margin. Excluding these unusual charges, the larger
operating loss in fiscal 2001 was due to the weaker market environment and lower
gross margins stemming from extremely competitive market conditions, along with
higher overhead costs related to the expansion of retail locations in the early
part of the fiscal year. Interest expense on inventory financing increased from
$10.8 million to $11.3 million for fiscal 2001 due to higher interest rates.
RECREATIONAL VEHICLES
Recreational vehicle sales declined 37% to $1.2 billion in fiscal year 2001
compared to $1.9 billion for the prior fiscal year, primarily as a result of
sharply lower motor home sales. Motor home revenues fell 47% from $1.2 billion
to $638 million in fiscal 2001, on a 50% drop in shipments from 16,294 units to
8,148 units. This drop mainly reflects softening retail demand and high dealer
inventories at the beginning of the fiscal 2001. Sales were also weaker for
towable recreational vehicle products. In the towable recreational vehicle
categories, travel trailer sales declined 25% from $599 million in fiscal 2000
to $452 million in fiscal 2001 and folding trailer sales eased down 9% from $129
million to $117 million for the same period. Fiscal 2001 unit shipments for
travel trailers and folding trailers were 32,987 and 19,090 respectively,
representing decreases of 21% and 13%, respectively.
The recreational vehicle group incurred a $73.1 million operating loss for
fiscal 2001, mainly as a result of the significant decline in sales and slimmer
gross margins. Other significant factors that influenced results included
inefficiencies from lower operating rates, inventory writedowns, increased
dealer incentives implemented to stimulate sales and higher than normal
operating costs for the motor home division. Also, the recreational vehicle
group incurred non-recurring costs related to a plant closing and other
downsizing initiatives, which totaled $6.4 million for fiscal 2001. Gross profit
margin declined sharply to 12.3% of sales from 17.2% in fiscal 2000, largely due
to lower motor home and travel trailer margins. Both motor homes and travel
trailers experienced higher raw material and direct labor costs, which reflect
unfavorable product mix changes, higher wage and benefit costs and production
inefficiencies at lower volume levels. Recreational vehicle operating costs for
fiscal 2000 were 2% lower than operating costs for fiscal 2000, mainly due to
reduced selling expenses related to the decline in volume. General and
administrative expenses for the recreational vehicle group were 8% below
expenses for fiscal 2000, mainly due to staffing reductions and lower levels of
profit-based management incentive compensation.
SUPPLY OPERATIONS
Our supply group contributed revenues of $33 million in fiscal 2001 compared
to $50 million in fiscal 2000. Operating income fell 70% to $6.1 million mainly
due to reduced sales volume, which was adversely affected by lower internal
sales and declining external sales to the heavy truck building industry.
GOODWILL AND ASSET IMPAIRMENT
Conditions in the manufactured housing market have been in a state of
decline for the past two fiscal years, but further deteriorated in the last two
quarters of fiscal 2001. Excess retail locations and inventory, combined with
tightened consumer credit standards and high consumer repossession levels,
resulted in lower sales volume as well as retail store closings. This prompted
the evaluation of the recoverability of goodwill. Based on the evaluation, a
$165.9 million impairment to reduce the value of goodwill related to prior
acquisitions of retail businesses was recorded in fiscal 2001. The impairment
was measured by calculating the fair value of each retail location based on
discounted future cash flows using a 9.5% discount rate for 15 years and
comparing the result to the carrying amount of the goodwill. The excess of the
carrying amount over fair value was recorded as a charge. Some of the factors
considered in the determination of the 15 years were:
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- the effect of market and economic conditions on the business;
- the ease of entering and exiting the business;
- the sensitivity to interest rates and financing availability; and
- sustainability of the factors that contributed to paying the seller an
amount in excess of book value.
We also reduced the amortization period for goodwill from 40 years to 15 years.
The effect of this change was to increase the net loss in fiscal 2001 by
$887,000 or $0.03 per share.
In addition, we evaluated the net book values of 10 closed manufactured
housing plants, four recreational vehicle plants, one retail housing
administrative office and all of the active and closed retail sales centers. We
determined that the net book values of five of the manufacturing housing plants,
the retail housing administrative office and 98 retail sales centers exceeded
estimated future cash flows. In the first quarter of fiscal 2001 we recognized a
$9.4 million impairment charge related to the five housing plants. In the third
quarter of fiscal 2001 we recorded a long-lived asset impairment charge of
$10.6 million related to the retail housing administrative office and in the
fourth quarter we recorded a $2.7 million charge in connection with the sale of
retail stores.
FISCAL 2000 COMPARED TO FISCAL 1999
CONSOLIDATED RESULTS
Earnings for fiscal 2000 declined 22% to $83.5 million or $2.41 per diluted
share compared to $107.1 million and $2.94 per diluted share for the prior
fiscal year. The earnings contraction mainly reflects reduced profits from our
housing business as a result of weakening demand for manufactured housing. An
increase in non-operating expenses also contributed to the earnings decline.
Consolidated operating income fell 15% to $162 million compared to
$190 million in fiscal 1999, largely as a result of an 18% decrease in combined
housing profits from manufacturing and retail operations. A 5% decrease in
recreational vehicle earnings and a significant increase in health insurance
costs also reduced operating income.
Revenues for fiscal 2000 rose 6% to an all-time high of $3.77 billion
compared to $3.56 billion in fiscal 1999. This revenue growth resulted from
healthy sales of recreational vehicles and the continuing expansion of our
retail housing business.
Gross profit margin for fiscal 2000 rose to 21% from 20.5% for the prior
fiscal year, primarily due to the favorable effect of the growing retail housing
business. The retail operation generally carries higher gross margins, and there
was a positive impact on the consolidated gross profit percentage with the
addition of retail gross profits combined with the elimination of intercompany
manufacturing sales to retail. Manufacturing gross margin declined slightly from
19.7% to 19.3% of sales as a result of lower recreational vehicle margins.
Operating expenses rose 17% to $630 million, and also increased as a
percentage of sales from 15.1% to 16.7%. The rapidly expanding retail housing
business accounted for about $60 million or 64% of the increase in operating
costs in fiscal 2000. Selling expenses rose 11% to $278 million, with the retail
housing operation accounting for about 44% of the increase. Higher selling costs
were incurred in manufacturing operations for sales promotion and product
warranty and service. General and administrative expenses of $352 million were
up 23%, primarily due to the addition of $52 million in retail costs, which
represented about 78% of the overall increase. The increase attributable to
manufacturing was primarily due to higher costs for employee health benefits,
casualty insurance and recreational vehicle product development activities. Most
of the rise in the "Corporate and other" operating loss as shown in the business
segment information was attributable to the cost increases in
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health benefits and casualty insurance. As a percentage of sales, selling
expenses increased from 7.1% to 7.4% and general and administrative expenses
rose from 8% to 9.3%.
Non-operating items totaled a net expense of $3.1 million compared to net
income of $6.1 million for the prior fiscal year. The change was mainly caused
by a 33% reduction in investment income and a $4.5 million increase in interest
expense on retail inventory floor plan financing. Investment income was lower
because of reduced cash balances available for investment purposes. The rise in
interest expense on inventory financing largely reflected the growth in retail
inventories associated with the expansion of retail operations.
Our effective income tax rate rose from approximately 39.8% in fiscal 1999
to 40.5% in fiscal 2000. The increase primarily reflected the impact of the
amortization of goodwill recorded in conjunction with retail acquisitions, which
is not deductible for tax purposes. The impact of the higher tax rate on
earnings per share amounted to approximately three cents per share.
MANUFACTURED HOUSING
Factory sales of manufactured housing declined 7% to $1.52 billion in fiscal
2000 from the prior fiscal year's record $1.63 billion. Sales figures include
intercompany sales to our retail housing division of $312 million in fiscal 2000
and $187 million in fiscal 1999. Factory shipments for the year were off 10% to
59,458 homes.
Weak market conditions in the manufactured housing industry reduced sales
volume and factory operating efficiencies in fiscal 2000. Industry wholesale
shipments to retailers declined since May 1999, mainly as a result of too much
manufacturing and retail capacity and excess inventories in the retail sector.
The imbalance between supply and demand was exacerbated by unfavorable
developments in the financing area. During fiscal 2000, lenders increased credit
standards and down payment requirements for retail buyers. These actions and
higher interest rates prevented many potential buyers from purchasing
manufactured homes.
Operating income for our housing group, before the adjustment for
intercompany manufacturing profit, declined 16% in fiscal 2000 to $83.8 million
due to the lower sales volume. Gross profit margin improved slightly from 21.4%
to 21.5% of sales, mainly as a result of modest selling price increases and
stable raw material costs. As a percentage of sales, operating income in fiscal
2000 was slightly below 5.5% compared to over 6.1% in fiscal 1999.
RECREATIONAL VEHICLES
Recreational vehicle revenues in fiscal 2000 were up 11% to a record
$1.92 billion. As a result of a healthy market environment, all three of our
recreational vehicle divisions posted record sales in fiscal 2000. Motor home
sales increased 13% to a new high of $1.19 billion, as shipments rose 9% to
16,294 units. Towable recreational vehicle products also performed well in
fiscal 2000, with travel trailer sales rising 8% to $599 million and folding
trailer sales also increasing 8% to $129 million. Travel trailer shipments were
up 9% to 41,936 units, while folding trailer unit volume increased 3% to 21,890.
Recreational vehicle operating income in fiscal 2000 was $104.1 million, off
5% from the prior fiscal years record $109.9 million. As a percentage of sales,
operating income fell from 6.3% to 5.4% due to lower gross profit margins and
higher selling costs. Gross margins were adversely affected by changes in
product mix within the motor home and travel trailer divisions, reflecting
increased sales of competitively-priced products with lower profit margins. This
change mainly reflects our decision to expand our product offerings to include
lower-priced entry-level travel trailers and Class C motor homes, both of which
represent a significant and growing part of the market. The rise in recreational
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vehicle selling expenses was mainly driven by higher product warranty costs for
all recreational vehicle divisions and motor home sales promotion programs.
SUPPLY OPERATIONS
Revenue for our supply group rose 15% to $50 million in fiscal 2000, up from
$44 million in fiscal 1999. The increase mainly reflects higher sales from
fiberglass manufacturing operations. Operating income of $20.5 million in fiscal
2000 was up 26% from fiscal 1999 as a result of the higher fiberglass sales, as
well as volume increases related to imported parts and components.
RETAIL HOUSING OPERATIONS
Fleetwood's retail housing division recorded revenues of $592 million in
fiscal 2000 on the sale of 14,528 homes relative to revenues of $332 million on
the sale of 8,255 homes in fiscal 1999. Operating income, before interest
expense on inventory floor plan financing, declined to $3.8 million from
$4.9 million in fiscal 1999. Although sales volume improved with the continuing
expansion in the number of retail outlets, profits were constrained by the
challenging market environment and higher operating costs. As expected, higher
operating costs were incurred for new store openings and the building of
infrastructure and systems for this new business. The retail business commenced
operations in fiscal 1999, and grew rapidly to 244 retail sales centers as of
November 2000. Interest expense for inventory financing, a non-operating
expense, increased to $10.8 million in fiscal 2000 from $6.3 million in fiscal
1999.
LIQUIDITY AND CAPITAL RESOURCES
We have historically relied upon internally generated cash flows to satisfy
working capital needs and to fund capital expenditures. In recent periods,
however, we have accessed external funding sources to supplement internal cash
flows. Cash totaling $66.8 million was generated from operating activities
during the first quarter of fiscal 2002 compared to cash used of $46.4 million
for the first quarter of fiscal 2001. The increased cash flow from operations
resulted primarily from a $50.3 million refund of Federal taxes paid in prior
periods. In addition, a $12.2 million reduction in inventories in the first
quarter contributed to the positive cash flow. Cash provided from operating
activities totaled $15.5 million in fiscal 2001, compared to a use of
$4.8 million in fiscal 2000. Decreases to receivables ($146 million) and
inventories ($90 million), largely a result of the decline in volume, were the
primary sources of cash from operating activities in fiscal 2001. Cash and cash
equivalents increased from $73.1 million as of the end of fiscal 2001 to
$87.6 million at the end of the first quarter of fiscal 2002. The increase in
cash and cash equivalents occurred despite reducing retail inventory financing
by $25.8 million, paying $11.8 million of principal to Prudential and paying off
the $11.1 million balance due on motor home chassis financing. Additional cash
outlays during the first quarter of fiscal 2002 included $1.3 million in
dividends to shareholders, distributions on the existing preferred securities of
$4.3 million and $3.2 million in capital expenditures. Dividends during the
first quarter of fiscal 2001 were $6.2 million, distributions on the existing
preferred securities amounted to $4.3 million and capital expenditures totaled
$8.8 million. Cash and cash equivalents declined from $135.1 million as of
April 30, 2000, to $73.1 million at the end of fiscal 2001. The reduced level of
cash and cash equivalents during this period primarily resulted from the loss
from operations of $58.9 million, adjusted for non-cash charges. Other
significant cash outlays during fiscal 2001 included $36.9 million for capital
expenditures, $43.3 million in paydowns of retail inventory financing,
$17.3 million in distributions on existing preferred securities and
$15.1 million in dividends to holders of our common stock.
As discussed in greater detail below in the section entitled "Management's
Discussion and Analysis--Recent Developments--Senior Debt Refinancing,"
beginning on page 56 of this prospectus, we entered into a new senior secured
facility. We used a portion of the proceeds from this facility to
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retire our senior notes payable to Prudential and to reduce our existing
inventory flooring liability to $40 million at July 30, 2001. We also expect to
use proceeds from this facility to support our future working capital needs.
The revolving credit facility and term loan are collateralized by
substantially all of our existing and future acquired assets and those of our
subsidiaries and impose various restrictions and compliance with financial
covenants upon us and our subsidiaries. As a condition of the loan, we are
subject to cash dominion under which most cash receipts will be swept daily as
payment against the revolver. In addition, we will utilize zero-balance bank
disbursement accounts to which advances on the line of credit will be deposited
to cover checks clearing each day. Because the balance of the bank disbursement
account returns to zero at the end of each day the outstanding checks will be
reflected as a liability. The outstanding check liability will be combined with
any positive cash balance accounts to reflect a net book overdraft or a net cash
balance for financial reporting.
The senior secured facility provides funding for the purchase of retail
housing inventory at stores we own in seven states. The majority of the retail
housing inventory is intended to be financed through one or more wholesale floor
plan arrangements. Simultaneous with the signing of the senior secured facility,
we entered into a new floor plan agreement with Conseco. We believe that the
combination of the senior secured facility and the floor plan financing will
provide sufficient capital to sustain and ultimately expand the retail housing
business.
In addition to liquidity from the senior secured facility, as a result of
the significant net loss in fiscal 2001, we received $50 million from a Federal
tax refund late in the first quarter of fiscal 2002.
We will continue to explore other possible offerings of junior capital if
our management determines that funding will be available from these sources on
acceptable terms, although we cannot give you any assurance that such funds will
be available on acceptable terms, or at all. We believe the combination of
estimated future cash flows from operations, the tax refund, available lines of
credit and the $20 million of proceeds from the recent sale of our common stock
will be sufficient to satisfy our foreseeable cash requirements for the next
12 months, including up to $35 million for capital expenditures. If conditions
deteriorate significantly, however, we may find it necessary to raise additional
cash.
We may conserve cash by causing distributions to be paid on our new
preferred securities in shares of our common stock, and by electing to defer
distributions on our existing preferred securities for up to an additional
nineteen consecutive quarters, having already deferred payment of distributions
due to be made on November 15, 2001. When we defer distributions on our existing
preferred securities, we are also prevented from declaring or paying dividends
on our common stock during the period of the deferral. In light of our business
environment and recent operating results, we currently anticipate that we will
find it necessary to defer distributions on our existing preferred securities
through at least August 15, 2002. Even though our board of directors has
discontinued the payment of dividends on our common stock for the foreseeable
future, these deferrals of distributions on our existing preferred securities
would further prevent us from declaring or paying any dividends during the
period of such deferrals. We cannot be certain at this time whether we will
elect to cause distributions to be paid on our new preferred securities in
shares of our common stock. However, in light of our business environment and
recent operating results, we currently anticipate that we will find it necessary
to do so as early as the February 2002 distributions on our new preferred
securities.
RECENT DEVELOPMENTS
PRELIMINARY EARNINGS RESULTS
On December 10, 2001, we announced results for the second quarter and first
six months of fiscal 2002. We reported a net loss for the second quarter of
fiscal 2002 of $12.3 million, or $0.38 per diluted
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share. The loss included an accrual of $8.3 million for the pending settlements
of two class-action lawsuits, and also reflected reduced sales volume in both
our recreational vehicle and manufactured housing businesses. We lost $3.4
million, or 10 cents per diluted share, in the second quarter of fiscal 2001.
For the first six months of fiscal 2002, we incurred a net loss of $23.5
million, or $0.72 per diluted share. This compares with a loss of $34.5 million,
or $1.05 per diluted share, for the corresponding period in fiscal 2001, which
included a one-time cumulative charge to earnings of $11.2 million after taxes,
or 34 cents per diluted share, related to a change in accounting for retail
housing credit sales.
Consolidated revenues for the second quarter of fiscal 2002 totaled $591
million, down 21% from $749 million in the second quarter of fiscal 2001.
Six-month revenues also fell 21% to $1.15 billion for the first half of fiscal
2002, from $1.47 billion for the first half of fiscal 2001.
The manufacturing division of our manufactured housing group showed profits
of $16.6 million during the second quarter of fiscal 2002, up 11% from the
corresponding quarter of the prior fiscal year, but the retail division lost
$8.9 million, compared with $6.1 million for the corresponding quarter in the
prior year, due to a 51% drop in sales. The sales decline was largely due to our
actions to rightsize this division for the current market environment by closing
or selling stores, or by transferring management responsibility to a third
party.
Manufactured housing revenues in the second quarter of fiscal 2002 fell 27%
to $285.6 million, from $391.0 million in the corresponding quarter of the prior
fiscal year. Housing revenues included $198.0 million of wholesale factory sales
and $87.6 million of retail sales from company-owned sales centers, compared
with $211.4 million and $179.6 million, respectively, in the second quarter of
the prior fiscal year. Gross manufacturing revenues declined to $240.1 million
for the second quarter of fiscal 2002 from $284.3 million in the same quarter of
fiscal 2001. For the second quarter of fiscal 2002, gross manufacturing revenues
included $42.1 million of intercompany sales to company-owned stores.
Manufacturing unit volume for the quarter declined 18% from volume for the same
period in the prior fiscal year, to 8,703 homes, and homes sold at our
company-owned retail stores in the quarter declined 45% over the corresponding
quarter in fiscal 2001 to 2,212.
For the first half of fiscal 2002, manufactured housing revenues were down
27% to $575.6 million, from $785.1 million in the corresponding period of the
prior fiscal year. Revenues included $379.5 million of wholesale factory sales
and $196.1 million of sales to company-owned stores, down from $448.0 million
and $337.1 million respectively in the first half of the prior fiscal year.
Gross manufacturing revenues, including intercompany sales, were $456.3 million
for the first half of fiscal 2002 compared with $601.8 million for the first
half of fiscal 2001. Unit shipments from manufacturing plants declined 27% to
16,472 for the first half of fiscal 2002 over the corresponding period for the
prior year, while company-owned retail store sales dropped by 37% to 4,858 for
the first half of fiscal 2002 over the corresponding period for fiscal 2001.
Our recreational vehicle group showed an operating loss of $10.1 million for
the second quarter of fiscal 2002, compared to a loss of $139,000 for the
corresponding quarter of the prior fiscal year, due principally to a decline in
sales of travel trailers.
Revenues for the recreational vehicle group were down 15% for the second
quarter of fiscal 2002 to $297 million, from $349 million for the same period of
the prior fiscal year. Motor home sales for the second quarter of fiscal 2002
declined to $172 million from $189 million for the same period in the prior
fiscal year. In the towable category, travel trailer and folding trailer sales
declined to $93 million and $32 million, respectively, for the second quarter of
fiscal 2002, compared to $128 million and $33 million, respectively, for the
same quarter in the prior fiscal year.
For the first half of fiscal 2002, revenues for the recreational vehicle
group declined 16% to $563.2 million compared to $666.8 million for the first
half of the prior fiscal year. Motor home revenues fell
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to $306 million in the first half of fiscal 2002 versus $336 million in the
first half of fiscal 2001. Travel trailer sales declined to $200 million from
$270 million for the corresponding period in the prior fiscal year, while
folding trailer revenues dropped slightly to $58 million from last fiscal year's
$62 million.
RATING ANNOUNCEMENTS
On November 16, 2001, Moody's Investors Services, Inc. announced that it had
lowered its rating on our senior implied debt from B1 to B2, and on our existing
preferred securities from B3 to Caa3, with a negative rating outlook. In
announcing the lowered ratings, Moody's stated that its action reflected the
continuing erosion in our operating performance due to a protracted decline in
the manufactured housing industry and a similar slowdown in the recreational
vehicle business, and that the negative outlook reflects the highly uncertain
intermediate-term outlook for demand in the manufactured housing and
recreational vehicle markets. On December 6, 2001, Standard and Poor's announced
that it had lowered our corporate credit rating from BB+ to BB-, and Fleetwood
Capital Trust's corporate credit rating from B+ to D, with a negative rating
outlook. In announcing the lowered ratings, Standard and Poor's cited our
materially weakened business position due to continued, very competitive
business conditions in both our manufactured housing and recreational vehicle
business segments, and our constrained financial profile, as reflected by the
granting of security to our lenders and the recent discontinuation and deferral
of our common dividends and existing preferred security distributions,
respectively. Standard and Poor's attributed its negative outlook to the
prospects for continued weak performance within both of our primary business
segments and the vulnerability of our corporate credit ratings to further
downgrades. These actions could result in lower trading prices for the existing
preferred securities, and could also result in any capital that we might raise
in the future being more expensive or more difficult to raise.
BUSINESS OUTLOOK
We do not expect to operate profitably during the third quarter of fiscal
2002. In addition to the normal seasonal weakness, results for the third quarter
are expected to be adversely affected by continuing softness in the manufactured
housing and recreational vehicle markets. For more than two years, the
manufactured housing industry has been impacted by excess capacity, high retail
inventories and a slowing of retail sales caused by restrictive financing
conditions. Encouraging progress has occurred with respect to reducing industry
inventory levels and production capacity, but significant improvements in market
conditions are unlikely until the inventory imbalance is fully resolved. Within
the recreational vehicle sector, retail demand for motor homes began to soften
late in fiscal 2000 and dealers began to reduce their relatively high
inventories to more appropriate levels for the existing market conditions. This
led to a slowdown in factory shipments, which has persisted through the first
half of fiscal 2002. Retail and wholesale demand has also slowed for towable
recreational vehicle products. The rate of decline in travel trailer shipments
began about one year ago, and has accelerated over the past six months. Prior to
the tragic events of September 11, 2001, consumer confidence was softening.
Subsequent to the terrorist attacks, a further decline in the economy affected
our businesses, especially the recreational vehicle market. Until the economy
and consumer demand improves, we cannot predict when recreational vehicle sales
will show meaningful improvement. We expect that lower recreational vehicle
volume levels experienced in the first half of fiscal 2002 will continue in the
third quarter. We believe that the combination of reduced sales and margin
pressure will have a noticeable adverse impact on RV group profitability in the
third quarter.
SENIOR DEBT REFINANCING
As part of a larger program to restructure our debt obligations and to
improve liquidity and enhance our balance sheet, on July 27, 2001 we entered
into a new senior secured facility funded by a syndicate of banks led by Bank of
America. We used part of the proceeds of this facility to retire our
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senior unsecured notes payable to The Prudential Insurance Company of America,
with whom we had previously entered into a forbearance agreement with respect to
defaults under certain covenants governing these notes.
The new senior secured facility was funded on July 30, 2001. As amended, the
facility is structured as a three-year, syndicated revolving credit facility of
$190 million with an additional two-year term loan of $30 million. The borrowers
under the facilities are substantially all of our subsidiaries and we are a
guarantor of the senior secured facility. The revolving credit facility and the
related guaranties are secured by substantially all of our and our subsidiaries'
existing and future assets, excluding assets securing the term loan (upon which
a second priority lien secures the revolving credit facility), assets of our
retail subsidiaries subject to a floor plan financing agreement with another
lender, those assets at our retail subsidiaries' sites managed by a third party,
and the cash value of our company-owned life insurance. The term loan is secured
by first priority liens on real estate owned by certain of our manufacturing
subsidiaries, stock in our folding trailer subsidiary and the current and future
fixed assets of our folding trailer subsidiary, as well as a second lien on the
assets securing the revolving credit facility. Under the revolving credit
facility, letters of credit totaling up to $75 million may be issued.
Advances under the revolving credit facility are available based on our
subsidiaries' accounts receivable, inventories, real estate and equipment
subject to certain exclusions for aged accounts, slow moving inventory and other
similar items. Borrowing availability under the revolving credit facility is
further limited by required minimum excess availability under the facility. The
minimum excess availability required as of the July 27, 2001 closing date was
$80 million, reducing immediately thereafter to $50 million. This required
minimum excess availability will be further reduced to $30 million if we
maintain certain financial ratio requirements for prescribed periods. The
applicable minimum excess availability requirement must be met at all times,
except during any period in which we have met liquidity requirements and obtain
the lowest interest rate margin available under the revolving credit facility,
during which periods the minimum excess availability requirements will not be
tested.
Revolving loans bear interest, at our option, at a base rate of Bank of
America's prime rate or one, two or three month LIBOR, plus a margin. For
purposes of determining the interest rate under the revolving credit facility,
the applicable margin is adjusted monthly, based on our liquidity and a fixed
charge coverage test, within a range of 0% to 1.5% for prime rate loans and
within a range of 2.25% to 3.75% for LIBOR rate loans. Borrowings under the term
loan initially bear interest at Bank of America's prime rate plus 3% for the
first year of the loan, with escalations and amortizations for the remainder of
the term.
We are required to pay a monthly facility fee for any unused portion of the
revolving credit facility and for outstanding letters of credit, such fees to be
based upon our liquidity margin then in effect.
Our senior secured facility contains a number of affirmative and negative
covenants. These covenants place restrictions on the operation of our
businesses, and if our business environment or operating results do not
significantly improve over the levels that we have recently experienced, we will
breach covenants under our senior secured facility, resulting in a default under
the facility. We and our lenders have amended our senior secured facility to
enable us to comply with certain of these covenants in the near future. In
amending the terms of the facility, our lenders agreed to replace the existing
EBITDA covenant with a new covenant based on the projected amount of our free
cash flow, and also to amend the definition of the fixed charge coverage ratio
in the existing fixed charge coverage ratio covenant. The interest rates on our
LIBOR rate loans and prime rate loans have also been increased by 0.5% for a
period of at least 90 days post-closing, while remaining within the interest
rate ranges indicated above. The covenants governing our amended senior secured
facility include the following:
- CAPITAL EXPENDITURES. We and our subsidiaries have agreed not to make or
incur any capital expenditure if, after giving effect to the expenditure,
the aggregate amount of all capital
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expenditures by us and our subsidiaries, on a consolidated basis,
including the capitalized amount of all capital leases and the principal
amount of all purchase money debt incurred in connection with the capital
leases, would exceed $35 million in fiscal 2002, $31.3 million in fiscal
2003 or $34.5 million in fiscal 2004;
- FIXED CHARGE COVERAGE RATIO. We have agreed to maintain, on a consolidated
and rolling four-fiscal-quarter basis, 1.10:1.00 for the period ending
October 27, 2002, 1.15:1.00 for the period ending January 26, 2003, and
1.25:1.00 for the period ending April 27, 2003 and for each rolling
four-fiscal-quarter period thereafter;
- FREE CASH FLOW. Starting on October 28, 2001, we have agreed to maintain,
on a consolidated basis, free cash flow of at least $(5) million for the
fiscal quarter ended October 28, 2001, $(21) million for the two fiscal
quarters ended January 27, 2002, $(14) million for the three fiscal
quarters ended April 28, 2002, and $(3) million for the four fiscal
quarters ended July 28, 2002 and for each rolling four-fiscal-quarter
period thereafter;
- MINIMUM AVAILABILITY. We have agreed to maintain, at all times, a minimum
availability under the senior secured facility of $50 million in funds, as
determined on a weekly basis. On or after January 1, 2002, if Bank of
America, N.A., as agent to our lenders, requires us to determine minimum
availability on a daily basis, we have agreed to maintain a minimum
availability of $40 million or $45 million, depending on the day of the
week that the minimum availability is calculated;
- DEBT. We and our subsidiaries have agreed, subject to certain narrow and
limited exceptions, not to incur or maintain any debt or voluntarily
prepay any debt;
- PAYMENTS ON SUBORDINATED DEBT; TRUST PREFERRED SECURITIES. We have agreed
not to, and will not permit any of our subsidiaries to:
- make any payments or prepayments with respect to obligations
subordinated to the obligations under our senior secured facility;
PROVIDED, HOWEVER, we may make payments in accordance with the existing
debentures and the new debentures as long as no default or event of
default has occurred and is continuing on the date of payment, both
before and after giving effect to such payment, and as long as we have
not exercised our option to defer payments in accordance with the
existing debentures or new debentures; or
- amend or otherwise modify the terms of the existing debentures, the new
debentures, the existing preferred securities, the new preferred
securities, the existing preferred securities guarantee or the new
preferred securities guarantees; PROVIDED, HOWEVER, we may enter into
the proposed exchange offer subject to specific conditions and subject
to other terms of the exchange offer being acceptable to holders of a
majority of the debt under our senior secured facility;
- OTHER RESTRICTIONS ON DISTRIBUTIONS. We and our subsidiaries have agreed
not to declare or make, or incur any liability to make, any distribution,
other than:
- distributions by our subsidiaries to us that allow us to make payments
of interest on the existing debentures to the existing trust, which, in
turn, may pay distributions on the existing preferred securities;
PROVIDED, THAT, there is no default or event of default that has
occurred and is continuing under our senior secured facility, both
before and after giving effect to the distribution, and we have not
given notice to defer payments under the existing debentures;
- distributions by our subsidiaries to us that allow us to make payments
of interest on the new debentures to the new trusts, which, in turn,
may pay distributions on the new preferred securities; PROVIDED, THAT,
there is no default or event of default that has occurred and is
continuing under our senior secured facility, both before and after
giving effect to the
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distribution, and we have not given notice to defer payments under the
applicable new debentures;
- distributions by our subsidiaries to us, including certain intercompany
loans and retention of management fees, to pay consolidated taxes,
employee related expenses and up to $6 million in other general
corporate overhead and operating expenses per fiscal year;
- cash dividends on our common stock that do not exceed $0.04 per fiscal
quarter; PROVIDED, THAT, there is no default or event of default that
has occurred and is continuing under our senior secured facility, both
before and after giving effect to the dividend payment;
- payments of management fees by our subsidiaries to us, consistent with
any agreement in existence prior to July 27, 2001;
- distributions by our subsidiaries to us that allowed us to pay our debt
obligations to The Prudential Insurance Company of America and Pruco
Life Insurance Company; and
- purchases of existing preferred securities by the existing trust or
exchange preferred securities by the new trust to effect an exchange
offer;
- RESTRICTED INVESTMENTS. We and our subsidiaries have also agreed not to
declare or make, or incur any liability to make, among other things, any
investment, other than certain:
- hedge agreements with some of our lenders;
- loans or advances by some of our subsidiaries that, in the aggregate,
do not exceed $10,000,000 during the term of our senior secured
facility;
- advances by Fleetwood Retail Corp. to some of our subsidiaries for
operating expenses that the subsidiaries have an obligation to
reimburse and the aggregate amount of which is restricted to
$1 million at any time;
- capital contributions, loans or advances by us to some of our
subsidiaries that, in the aggregate, may not exceed $4 million during
the term of our senior secured facility;
- additional capital contributions, loans or advances by us to some of
our subsidiaries that may exceed the above $4 million limitation;
PROVIDED, THAT, there is no default or event of default that has
occurred and is continuing under our senior secured facility, both
before and after giving effect to the capital contribution, and the
average amount of liquidity for each of the three most recent calendar
months minus the capital contribution is at least $80 million; and
- USE OF PROCEEDS. We may not use proceeds from the revolving credit
facility to pay down our term loan obligations if an event of default has
occurred and is continuing under our senior secured facility and, in
certain circumstances, if we are unable to maintain specific minimum
liquidity and availability requirements.
We also recently amended our senior secured facility to provide that half of
the amount raised in the cash offer, after allowing for expenses and anticipated
taxes of the exchange offer of $30.0 million, would be contributed to our
manufacturing company subsidiaries, with half of the amount of that
contribution, or $24.0 million, whichever is less, to be applied to pay down the
term loan, with the balance of the amount contributed being then applied to pay
down the revolving loan. These payments will not reduce the amount of the
commitment on the revolving loan but the first $6 million applied to the
revolving loan will permanently reduce the amount available to borrow under the
plant, property and equipment sub-facility. Further, if the exchange offer is
not completed by February 28, 2002, then the amount of the cash proceeds that we
are required to contribute to our manufacturing company subsidiaries for
application as described above would be reduced to 43% of the proceeds of the
cash
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offer, after allowing for expenses of $10.0 million but adding back the
$20.0 million allowance for anticipated taxes that would have otherwise been
generated in connection with the exchange offer.
On July 27, 2001, concurrent with the closing of the senior secured
facility, we designated an initial borrowing of $83 million. At the close of
business on July 30, 2001, the funding date, after the posting of bank clearings
and application of a portion of our cash reserves, the net outstanding loan was
$55.6 million. As of October 28, 2001, the net outstanding loan was
$66.0 million. The net borrowings plus our cash reserves were applied as
follows:
- to retire the $68 million remaining principal balance of the Prudential
notes, along with payment of interest and a yield maintenance penalty;
- to reduce the outstanding retail flooring liability to Conseco Finance
Servicing Corp. to approximately $40 million; and
- to secure standby letters of credit that primarily underwrite self-insured
workers' compensation programs at manufacturing plants in various states.
At October 28, 2001, gross excess availability was approximately
$90 million. After consideration of the $50 million required minimum excess
availability, approximately $40 million was available to be used for general
corporate purposes.
PRIVATE PLACEMENT
On October 25, 2001, we completed the private placement of 2,209,945
unregistered shares of our common stock with Acqua Wellington Private Placement
Fund, Ltd. for gross proceeds of $20.0 million. We plan to use the proceeds of
the sale for general corporate purposes. We have granted registration rights to
the investor and on November 19, 2001, we filed a registration statement to
register such shares under the Securities Act for resale by the investor.
NEW ACCOUNTING PRONOUNCEMENTS
During the first quarter of fiscal 2001, the Emerging Issues Task Force
(EITF) issued pronouncement No. 00-14 "Accounting for Certain Sales Incentives."
EITF No. 00-14 addresses the recognition, measurement and statement of earnings
classification of various sales incentives such as coupons, rebates and other
discounts and we adopted this pronouncement during the fourth quarter of fiscal
2001. As a result, some of our sales incentives that were previously accounted
for as selling expenses were treated as a reduction in revenue.
During the second quarter of fiscal 2001, the EITF also issued pronouncement
No. 00-10 "Accounting for Shipping and Handling Fees and Costs." EITF No. 00-10
governs the accounting treatment and classification of our delivery revenues and
some of our delivery expenses and was also adopted by us during the fourth
quarter of fiscal 2001. The adoption of this EITF affected the classification of
revenues from shipments to customers and specific expenses related to shipping
and handling of our product and did not affect our net income (loss). Sales
figures as reported above in the section entitled "Management's Discussion and
Analysis--Fiscal 2001 Compared to Fiscal 2000," beginning on page 48 of this
prospectus, have been adjusted to incorporate EITF No. 00-10 and EITF
No. 00-14. The net effect has been an overall increase in reported sales figures
of approximately 1% for fiscal 2001 and 2% for fiscal 2000. Sales figures
reported elsewhere in this prospectus have been adjusted to incorporate EITF
No. 00-10 and EITF No. 00-14.
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 requires companies
to record derivatives on the balance sheet as assets or liabilities measured at
fair value. Effective as of fiscal 2002, we have adopted SFAS No. 133 and
concurrently (as
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permitted by SFAS No. 133) have reclassified our held-to-maturity investment
portfolio to an available-for-sale portfolio. The adoption of SFAS No. 133 has
not had a material impact on our results of operations or financial condition.
In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 142 addresses financial accounting and reporting for acquired
goodwill and other intangible assets and was adopted by us effective April 30,
2001. The statement requires that goodwill not be amortized but instead be
tested at least annually for impairment and expensed against earnings when the
implied fair value of a reporting unit, including goodwill, is less than its
carrying amount. We are permitted six months from the adoption date to complete
a preliminary review of goodwill for impairment and will record any necessary
adjustments prior to the end of fiscal 2002. We engaged outside consultants to
assist with the determination of the estimated fair value for our two reporting
units with goodwill. Based on preliminary findings, it is likely that the
estimated fair value of one of the reporting units, retail housing, may be less
than its carrying amount. Although it is not possible at this time to determine
whether the impairment is substantial, it is likely that this process will
result in a non-cash writedown. We would expect to finalize this process in the
fourth quarter of fiscal 2002. In the future, we will evaluate the estimated
fair value of the two subject reporting units at the end of each fiscal year and
whenever circumstances dictate that a review should be completed.
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BUSINESS
GENERAL
We are the nation's largest manufacturer of recreational vehicles, including
motor homes, travel trailers, folding trailers and slide-in truck campers, and
one of the nation's largest producers and retailers of manufactured housing. For
the fiscal year ended April 29, 2001 and the fiscal quarter ended July 29, 2001,
we sold 60,225 and 13,006 recreational vehicles, respectively. In calendar 2000,
we had a 23% share of the overall recreational vehicle market, consisting of a
22% share of the motor home market, a 19% share of the travel trailer market and
a 40% share of the folding trailer market. We believe our share of the
recreational vehicle market has declined in calendar 2001 as a result of our
lower market share in each of the motor home and travel trailer markets. For the
fiscal year ended April 29, 2001 and the fiscal quarter ended July 29, 2001, we
shipped 36,201 and 7,769 manufactured homes, respectively, and were the second
largest producer of HUD-Code homes in the United States in terms of units sold.
In calendar 2000, we also had a 3% share of the single-family housing market and
an 18% share of the manufactured housing market.
MANUFACTURED HOUSING
INDUSTRY OVERVIEW. A manufactured home is a single-family house constructed
entirely in a factory environment rather than at the home site, and is
constructed in accordance with HUD construction and safety standards. There are
two basic categories of manufactured housing: single-section and multi-section.
The manufactured housing industry has grown significantly since 1991. According
to the Manufactured Housing Institute, domestic shipments increased from 170,713
homes in calendar 1991 to 372,843 homes in calendar 1998, before declining to
250,550 in calendar 2000. Total retail sales increased from approximately
$4.7 billion in calendar 1991 to more than $12 billion in calendar 2000. In
addition, the manufactured housing industry's share of new single-family housing
increased significantly, from about 17% in calendar 1991 to 24% in calendar
1997, before declining to 17% in calendar 2000. We believe that the growth in
the last decade resulted from increasing consumer acceptance of and preference
for manufactured housing, which was driven by the following:
- improved product quality and design, and enhanced features;
- the significant disparity in the average price per square foot between
site-built housing and manufactured housing;
- favorable demographic and regional economic trends;
- improving business practices in the manufactured home retail industry; and
- increased attractiveness of financing terms available to manufactured
housing retailers and consumers.
As acceptance of manufactured housing has increased among higher income
buyers, demand has shifted toward larger, multi-section homes, which accounted
for 64% of industry shipments in calendar 2000, up from 47% in calendar 1991.
The overall industry decline over the past two calendar years reflects excessive
retail inventories and constricted availability of retail financing.
Approximately 68% of the manufactured homes produced in the United States
are placed on individually owned lots. The balance are located on leased sites
in manufactured housing communities. Most manufactured housing is sold in rural
regions and towns outside of major urban areas.
Today's manufactured homes offer customers similar quality to many
site-built homes at a much more affordable price. Manufactured homes are
constructed in a factory environment utilizing assembly line techniques, which
allows for volume purchases of materials and components and more efficient use
of labor. The quality of manufactured homes has increased significantly over the
past 20 years, as manufactured home producers offer most of the amenities of
site-built housing and generally build
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homes with the same materials as site-built homes. Many features associated with
new site-built homes are included in manufactured homes, such as central
heating, name brand appliances, carpeting, cabinets, walk-in closets, vaulted
ceilings, wall coverings and porches. In addition, optional features include
such amenities as fireplaces, wet bars, spa tubs and garages, as well as
retailer-installed options such as central air conditioning and furniture
packages.
The manufactured housing industry is cyclical, and is affected by general
economic conditions and consumer confidence. It has also, however, been
adversely affected for the past two years by excess capacity, high retail
inventories and a slowing of retail sales. This has largely been caused by
restrictive financing conditions. High inventories have also been caused by the
rapid over-expansion of the retail distribution network and retailers' inflated
expectation of future business. With respect to financing conditions, interest
rates are generally higher and the terms of loans shorter than for site-built
homes. In addition, some lenders have abandoned the business of extending loans
to finance the purchase of manufactured homes. Thus, financing for manufactured
homes has become more expensive and more difficult to obtain than financing for
site-built homes. Similarly, a large number of defaults on loans that were
previously made by retail lenders to less-qualified applicants has resulted in
an excessive number of repossessions, and manufacturers must compete with
resellers of these repossessed homes. Further, relatively higher interest rates
in the first quarter of calendar 2001 contributed to a decrease in consumer
demand for new manufactured housing. Industry manufacturing and retail capacity
have been reduced in response to this inventory imbalance, but we expect weak
market conditions will continue until the retail imbalance is resolved, and this
will depend to a large degree on the continued availability of retail financing,
as well as on a reduction in the number of retail dealers.
OUR MANUFACTURED HOUSING BUSINESS. We are the second largest producer of
HUD-Code manufactured housing in the United States in terms of units sold, and
distribute our products through a network of approximately 1,300 retailers in 48
states. At the end of the first quarter of fiscal 2002, we operated 156 retail
locations under the name Fleetwood Retail Corp., with the balance of
approximately 1,150 locations owned and operated by independent retailers. In
calendar 2000, approximately 88% of our manufactured homes were shipped to
retailers in the 20 states with the highest retail sales, including Texas, North
Carolina, Georgia, Florida and Tennessee. Our share of the manufactured housing
market, based on shipments to retailers, was 18% in calendar 2000 and we are a
leading producer of both single-section and multi-section manufactured homes.
We held a 17% share of the single-section manufactured housing market in
calendar 2000, as measured by shipments to retailers. Our single-section homes
range in size from 550 square feet to 1,290 square feet. For the fiscal year
ended April 29, 2001, our average single-section home retailed for approximately
$23,000 (excluding land costs), and single-section homes represented
approximately 26% of our manufactured housing unit shipments. Our single-section
homes are designed for the affordable housing market that includes first-time,
retiree and value-oriented buyers.
We held an 18% share of the multi-section manufactured housing market in
calendar 2000, as measured by shipments to retailers. Our multi-section homes
range in size from 930 square feet to 2,340 square feet. For the fiscal year
ended April 29, 2001, our multi-section homes sold for an average retail price
of approximately $41,000 (excluding land costs), and multi-section homes
represented approximately 74% of our manufactured housing unit shipments.
MANUFACTURED HOUSING--RETAIL
INDUSTRY OVERVIEW. With the exception of several vertically integrated
entities, most companies in the manufactured housing industry, including us,
traditionally marketed their homes through independent retailers. In recent
years, however, a few manufactured housing producers began to acquire retailers.
These acquisitions occurred for a variety of reasons, including manufacturers'
desire to control retail distribution and upgrade marketing and merchandising
efforts, including brand name development. Additionally, a number of financial
consolidators and residential developers have entered
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the manufactured housing industry by acquiring retailers. For instance, in the
first half of calendar 1998, some of our competing manufacturers acquired
several of our important retailers, which collectively accounted for
approximately $277 million in purchases from us. These developments created a
risk that independent distribution channels for our homes would not be as
readily available as they had been in the past.
One factor leading to the current imbalance between retail inventories and
consumer demand in the manufactured housing industry is the large number of
retail dealers, each of which must maintain adequate inventory at its dealer
location to appeal to potential customers. A further reduction in the number of
financially weaker dealers likely would be a factor in resolving this retail
imbalance. In addition, the acquisition of retailers by manufactured housing
producers may result in an increase in the number of retail outlets having an
exclusive relationship with a particular manufacturer.
OUR MANUFACTURED HOUSING--RETAIL BUSINESS. In order to protect our
distribution channels and to take advantage of business opportunities in the
manufactured housing retail industry, we acquired HomeUSA, Inc., the nation's
largest independent retailer of manufactured homes. In addition, we completed
several other acquisitions of independent retailers between June 1998 and August
2001. We also expanded our company-owned retail network through the development
of new "greenfield" locations. The combination of these two strategies carried
us to a high of 244 stores in November 2000. Since then, as the retail market
for manufactured housing has continued to slow down and losses in our retail
operation have risen, we have implemented a downsizing strategy to better match
our retail capacity to market demand. By assigning retail store operations of
particular locations to a third party and closing and selling other locations,
we reduced the number of stores that we operate to 156 at the end of the first
quarter of fiscal 2002. We expect that these downsizing efforts will extend into
fiscal 2002 until we achieve a target level of about 150 stores.
RECREATIONAL VEHICLES
INDUSTRY OVERVIEW. Recreational vehicles include motor homes, travel
trailers, folding trailers and slide-in truck campers. Recreational vehicles are
either driven or towed and are primarily used for vacations, camping trips and
other leisure activities.
A motor home is a self-propelled mobile unit used primarily as a temporary
dwelling during vacation and camping trips. It consists of a truck or bus
chassis with a living unit built onto it. The living area and driver's
compartment on Class A models are designed and produced by the recreational
vehicle manufacturer. Motor homes are classified by the Recreational Vehicle
Industry Association (RVIA) into three categories: Class A, Class B and
Class C. Conventional, or Class A, motor homes are constructed directly on
medium-duty truck chassis which include the engine and drive train components.
They are fully self-contained, typically include a driver area and kitchen,
bathroom, dining and sleeping accommodations for four to eight people, and have
such optional features as air conditioning, an auxiliary power generator and
home electronics such as a stereo, television and VCR. Class B models are
panel-type trucks to which sleeping, kitchen and toilet facilities are added.
These models also have a top extension added to them for more head room. Since
we do not manufacture Class B motor homes, the Class B motor home comparison is
not included in this prospectus. Compact, or Class C, models are mini motor
homes, built on a cut-away van-type chassis, onto which the manufacturer
constructs a living area with access to the driver's compartment. Class C models
have basically the same features and options as Class A products.
RVIA reported factory shipments of 41,000 Class A motor homes and 16,500
Class C motor homes for calendar 2000. These figures compare to shipments of
23,500 Class A motor homes and 15,200 Class C motor homes as reported by RVIA
for calendar 1991. There are numerous competitors and potential competitors in
this industry. The five largest manufacturers, including us, represented
approximately 69% of the combined Class A and Class C motor home markets for
calendar 2000. Our
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sales represented approximately 22% of the combined Class A and Class C markets
for calendar 2000. However, we believe our motor home market share has declined
in calendar 2001.
There are two major classes of towable recreational vehicles: travel
trailers and folding trailers. Travel trailers are designed to be towed by
pickup trucks, vans or other tow vehicles, and are similar to motor homes in use
and features. Typically, travel trailers include sleeping, eating and bathroom
facilities and are self-contained units with their own lighting, heating,
refrigeration, fresh water storage tanks and sewage holding tanks so that they
can be used for short periods without being attached to utilities. RVIA
identifies travel trailers as being either conventional or fifth-wheel trailers.
For calendar 2000, RVIA reported factory shipments of 114,500 conventional
trailers and 62,300 fifth-wheel trailers, compared to shipments of 49,300 and
28,300, respectively, for calendar 1991. The five largest manufacturers in
calendar 2000, including us, represented approximately 61% of the total travel
trailer market.
The other major class of towable recreational vehicles, folding trailers,
are smaller and lighter than their travel trailer counterparts and are
consequently less expensive and easier to tow. Folding trailers typically
include sleeping and eating facilities, fresh water storage and either a
built-in icebox or a refrigerator. RVIA reported shipments of 51,300 folding
trailers in calendar 2000, which number was significantly higher than the 33,900
shipments in calendar 1991. Of all of the markets for recreational vehicles, the
folding trailer market is the most concentrated, with the five largest
manufacturers, including us, holding almost 84% of the market in calendar 2000.
Slide-in truck campers represent another class of towable recreational
vehicles, but have a less significant presence in the towable sector. Slide-in
truck campers are similar to travel trailers in terms of use and features, but
are designed to fit in the bed of a pickup truck. For calendar 2000, RVIA
reported factory shipments of 11,100 slide-in truck campers, compared to
shipments of 9,600 for calendar 1991.
Sales of recreational vehicles tend to be a leading economic indicator, and
indeed sales started to decline when the stock market began to show signs of
weakness late in fiscal 2000. Dealers began to reduce inventories of motor homes
at that time. Demand for towable recreational vehicles also began to soften in
early fiscal 2001. Recreational vehicles typically are a discretionary purchase
for consumers, and sales are therefore affected principally by general economic
conditions and consumer confidence, and to a lesser extent by fuel availability
and prices. Retail financing conditions have historically been a somewhat less
significant factor affecting the recreational vehicle industry than the
manufactured housing industry since the finance industry has continued to
participate in this market at substantially the same levels as previously. In
addition, purchasers of recreational vehicles generally present a more affluent
profile than purchasers of manufactured homes, such that purchasers of
recreational vehicles are more likely to obtain satisfactory financing and are
less likely to default on their loans than are purchasers of manufactured homes.
OUR RECREATIONAL VEHICLE BUSINESS. We are the leading producer of
recreational vehicles in the United States and distribute our products through a
network of approximately 1,140 independent retailers in 49 states and Canada. In
calendar 2000, approximately 80% of our recreational vehicles were shipped to
retailers in the 25 states with the highest retail sales, including California,
Texas, Michigan, Florida and Ohio. In the same period, we were the market share
leader in terms of units sold in all but one of the top 25 recreational vehicle
states. However, we believe our market share has declined in calendar 2001 in
each of the motor home and travel trailer markets. Our total unit sales for
Class A motor homes and Class C motor homes were 11,100, 16,000 and 14,400,
which represented a market share of 19%, 24% and 24% for the calendar years
2000, 1999 and 1998, respectively.
We manufacture motor homes under the brand names FLAIR, STORM, TERRA,
FIESTA, BOUNDER, PACE ARROW, SOUTHWIND, PACE ARROW VISION, EXPEDITION, BOUNDER
DIESEL, DISCOVERY, REVOLUTION, AMERICAN TRADITION, AMERICAN DREAM, AMERICAN
EAGLE, AMERICAN HERITAGE, TIOGA and JAMBOREE. Our Class A motor
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homes are available in a variety of models ranging in length from 25 to 45 feet
and retail for an average price of approximately $118,000. Class C units are
available in various models ranging in length from 19 to 31 feet and retail for
an average price of approximately $54,000. For calendar 2000, four of the
industry's 10 top-selling Class A motor homes were manufactured by us, as well
as two of the top five Class C motor homes.
We manufacture a variety of travel trailers under the PROWLER, TERRY,
WILDERNESS, MALLARD, PIONEER and AVION brand names. Most of our travel trailers
are 8 feet wide, vary in length from 18 to 39 feet (including trailer hitch) and
retail for an average price of approximately $17,500. For calendar 2000, three
of the industry's five top-selling travel trailers were manufactured by us.
We are the largest manufacturer of folding trailers under the
industry-leading trademarks, Coleman-Registered Trademark- and Coleman
Parallelogram with Lantern Logo-Registered Trademark-. Our folding trailers
range in length from 17 to 26 feet when deployed and retail for an average price
of approximately $7,350.
We also produce slide-in truck campers at one of our travel trailer
factories under the brand names CARIBOU, ELKHORN and ANGLER. Most of our
slide-in truck campers vary in length from 8 to 11 feet and retail for an
average price of approximately $13,000.
COMPETITIVE ADVANTAGES
We believe that we have specific competitive advantages as described below.
COMMITMENT TO QUALITY AND CUSTOMER SATISFACTION. Our quality improvement
process focuses on increasing customer satisfaction by improving the quality and
design of Fleetwood products and enhancing the customer's shopping experience.
In this regard, we have developed a number of ongoing processes, including:
- designing our products with materials that frequently exceed government
requirements and industry standards;
- training both our employees and our retailers' employees in customer
satisfaction techniques and quality improvement procedures;
- providing additional services, such as comprehensive training of our
retailers' employees and contractors regarding proper installation
techniques for manufactured homes;
- offering some of the most extensive warranties in the manufactured housing
and recreational vehicle industries; and
- responding quickly and effectively to customer inquiries and concerns.
We use independent consumer surveys to determine whether retail customers
are satisfied with the quality of our products and the level of service provided
by us and the retailer. An independent consumer research firm conducts telephone
surveys and communicates customer responses to our manufacturing entities and
retailers to reinforce quality performance and minimize customer problems. Each
year, specific customer satisfaction goals are established for our manufacturing
operations and independent retailers. Retailers who meet these performance
standards are recognized with our Circle of Excellence Award, and our
manufacturing centers are similarly honored for meeting targeted levels of
customer satisfaction. We believe that these efforts have resulted in increased
awareness by our employees and retailers of the importance of product quality
and service, which in turn has significantly improved our customer satisfaction
ratings.
FOCUS ON ENGINEERING AND INNOVATIVE PRODUCT DEVELOPMENT. We conduct our
product development activities on a national basis for recreational vehicles and
on a regional basis, in order to reflect regional preferences and trends, for
manufactured housing. As a result of our approach to product development in our
manufactured housing business, for instance, we have introduced multi-story
housing in some urban communities in select regions. During fiscal 2001, our
recreational vehicle group
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invested significant time and resources into the redesign and reengineering of
our product development function. With the assistance of an outside consulting
firm, specializing in the Product Development Process (PDP) that is patterned
largely after methodologies employed by Japanese automobile manufacturers, we
undertook a comprehensive review of our approach to the development of new
products. Upon completion of the review, the consulting firm issued a broad set
of recommendations calling for comprehensive changes to our approach. To ensure
successful implementation of the recommendations, we recruited and employed the
seasoned consultant that headed up the outside team, leveraging his significant
automotive experience. We have appointed this individual to the position of vice
president of recreational vehicle product development, with overall
responsibility for both travel trailer and motor home product development
functions.
Our new system, which is currently being phased in, is designed to
facilitate a faster response to market changes. Under this system, product
development projects will be carefully evaluated throughout the process from a
business perspective, and we are developing new products and product
enhancements through an integrated approach that involves cross-functional teams
including engineering, manufacturing and marketing personnel. We also integrate
feedback received through our customer surveys into our product development
process. As a result, we believe that we are able to proactively design and
manufacture products that address both industry trends and specific customer
requirements in an efficient, cost-effective and timely manner. The system is
designed to enforce the disciplines required to deliver quality products.
Amounts spent on engineering and product development totaled approximately
$19 million for fiscal 2001 and $22 million for fiscal 2000.
EXPERIENCED MANAGEMENT TEAM. We and our manufactured housing and
recreational vehicle group's benefit from the significant experience of our
senior managers, many of whom have over 20 years of operating expertise with us.
As previously noted, both of our core businesses are subject to significant
cyclical swings, similar to the one we are presently experiencing. Current
circumstances in our industries are not unlike those encountered in previous
downturns in the 1979-80 and 1990-91 periods. Many of our managers have
previously executed through times such as these and possess valuable know-how
and skills that are uniquely suited to our current challenges.
OUR BUSINESS STRATEGY
Our goals are to enhance our position as the leading provider of affordable,
high quality manufactured homes and recreational vehicles, to sustain long-term
profitable growth, and to enhance shareholder value by generating returns in
excess of our cost of capital. The key components of our business strategy are
described below.
PROVIDING THE BEST PRODUCT AND VALUE PROPOSITION TO OUR CUSTOMER. We remain
committed to consistently offering the highest quality product at an attractive
value that is not necessarily price driven. Recognizing the differences between
the buyer populations of each of the segments of our business, but not
differences in expectations of high quality standards, we aim to achieve the
value proposition by focusing on the individual needs and preferences of the
buyer populations at different price points by product and at scale. We employ
our competitive advantages of commitment to loyalty and satisfaction at the
front-end of the consumer experience in areas such as design and quality
manufacturing as evidenced by our thorough customer service and warranty
follow-up practices. We also believe that we are effective at controlling cost
factors despite high quality standards because of our critical mass at the
production level in such areas as volume cost absorption, purchasing
efficiencies, and a leverageable fixed infrastructure. Our focus on engineering
and innovative product development enables us to design and produce products
that address ever-changing consumer preferences at the business unit level for
recreational vehicles and at the regional factory floor for manufactured
housing. For example, because of the affluence of the recreational vehicle buyer
and the discretionary nature of the recreational vehicle purchase, the design
process is critical and is embedded throughout the development, manufacturing
and marketing cycle and those costs are absorbed over
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significant unit volumes because of the economies of our market penetration and
volumes. Our customers expect consistency and quality because of the brand
reputation and awareness in the market of our products. Finally, we believe that
the customer's experience with our products remains consistent through changing
economic and social cycles because of the depth and background of our management
who have extraordinary experience at managing in different environments and
quickly responding to change.
UPGRADING AND EXPANDING OUR RETAIL DISTRIBUTION NETWORKS. Since 1991, we
have reduced the number of independent retail distribution centers approved to
sell our manufactured housing products from approximately 1,800 to about 1,300
at July 29, 2001. We believe that this action has allowed us to focus our
efforts on larger retailers that share our approach to merchandising homes and
customer satisfaction. Historically, we have not focused on exclusive retailer
arrangements and most retailers sold competitive lines; however, in recent
years, we have developed exclusive retailer arrangements. Currently,
approximately 56% of our manufactured housing retailers are exclusive, up from
approximately 30% five years ago. During fiscal 2000, our housing group
introduced the Pinnacle Retailer Program, which is designed to encourage more
exclusive retailer relationships. This program includes a number of attractive
retailer incentives, including funding for signage and additional marketing
support not available to non-exclusive retailers. We have increased our efforts
to develop and implement retail "best practices" for our retailers through our
sponsored training programs and manuals. Topics of recent training seminars have
included professional selling techniques and proper home installation
procedures. We actively seek to expand our manufactured housing retail network
by adding retailers that meet our criteria.
With respect to recreational vehicles, we are actively implementing "best
practices" across our retail network and developing programs to increase the
share of our products sold by independent retailers. This last initiative also
includes increasing the number of exclusive recreational vehicle retailers. In
addition, we have developed private label recreational vehicle programs to
expand retail sales through distribution channels that traditionally have not
sold recreational vehicles.
PROMOTING AND EXPANDING RECOGNITION OF THE "FLEETWOOD" BRAND NAME. We seek
to expand consumer awareness of the "Fleetwood" name in both our manufactured
housing and recreational vehicle operations. Beginning in fiscal 1997, we began
working with selected manufactured housing retailers to develop "Fleetwood Home
Centers," which exclusively carry our products, have consistent signage
identifying the location as a Fleetwood Home Center and meet our highest
standards for home presentation and customer satisfaction. As of July 29, 2001,
we had facilitated the opening of 140 Fleetwood Home Centers, 78 of which were
owned by us. We have promoted the Fleetwood Homes "Quality for Life" theme
through a major national advertising campaign, including television, radio,
direct marketing, print, billboards and outdoor advertising.
In the recreational vehicle group, we have leading brand names in each
segment. However, we seek to promote each individual brand as a part of the
Fleetwood family of recreational vehicles. As an example, we are sponsoring a
NASCAR driver and team, Dale Jarrett and the Robert Yates Racing Team. As part
of the sponsorship arrangement, we have our logo on Dale Jarrett's race car and
equipment. We have also been involved in other NASCAR promotions and believe
that the large NASCAR audience, estimated at 90 million, aligns with our
targeted customer categories for recreational vehicles.
SALES AND DISTRIBUTION OF OUR PRODUCTS
Consistent with industry practice, we have historically marketed our
products through many independent retailers, none of which individually
accounted for a material part of our total sales. We expect this industry
practice to continue with respect to recreational vehicles. However, the
acquisition activity in recent years in the retail sector of the manufactured
housing industry has prompted us to modify our manufactured housing sales and
distribution strategies. We have responded to this industry
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trend by upgrading our manufactured home retail distribution network, developing
alternatives to replace retailers purchased by competitors, and promoting and
expanding recognition of the Fleetwood brand name through exclusive "Fleetwood
Home Centers" and through our own retail strategies, including acquisitions and
the opening of stores owned by us. Our entry into the manufactured housing
retail business required that we maintain an inventory of finished homes for
purposes of display and immediate sale to retail homebuyers. This is a distinct
departure from our manufacturing policy of building homes to order and not
maintaining factory inventories of completed homes. Largely as a result of the
move into the retail business, inventories increased sharply during fiscal 2000,
rising from $257 million at April 25, 1999 to $343 million at April 30, 2000.
Reflecting weaker market conditions, inventories declined to $273 million at
April 29, 2001. At July 29, 2001, inventories declined to $261 million.
As part of the sales process, we offer purchasers of our recreational
vehicles comprehensive one-year warranties against defects in materials and
workmanship, excluding only particular components separately warranted by a
supplier. The warranty period for motor homes is one year or until the unit has
been driven 15,000 miles, whichever occurs first, except for structural items,
which are covered for three years. Our recreational vehicle group has recently
installed an electronic dealer communications network that facilitates the
processing of product warranty claims and parts ordering. With respect to
manufactured homes, our warranty now covers a two-year period, and includes
coverage for factory-installed appliances. Prior to March 1, 2000, our home
warranty covered a one-year period, except for structural, plumbing, heating and
electrical systems, which were covered for five years. Beginning in fiscal 2001,
we have been offering an optional three-year extended warranty service contract
under the name "Fleetguard" for our home buyers who wish to purchase it. Our
annual expenses for product warranties and service were approximately
$132 million for the fiscal year ended April 29, 2001, $151 million for the
fiscal year ended April 30, 2000, $28 million for the fiscal quarter ended
July 29, 2001 and $38 million for the fiscal quarter ended July 30, 2000. We
believe that our warranty program is an investment that enhances our reputation
for quality and reliability.
FINANCING OF OUR PRODUCTS
Sales of recreational vehicles and manufactured housing are generally made
to retailers under commitments by financial institutions that have agreed to
finance retailer purchases. Product financing for recreational vehicles is
currently readily available from a variety of sources including commercial
banks, savings and loan institutions, credit unions and consumer finance
companies. With respect to manufactured housing, wholesale and retail financing
has historically been provided by similar lending sources, although highly
concentrated with a few very large institutions. Our experience is that Conseco
Finance Corp., GreenPoint Financial Corp. and Associates First Capital
Corporation provided approximately two-thirds of our retail financing and our
management believes that this level of lender concentration is representative of
the manufactured housing industry. Associates, which had been a very important
lender for our retailers during the 1990s, announced in January 2000 that it was
discontinuing its manufactured housing finance business. In addition, several
other smaller lenders have exited the business during the past 18 months.
Conseco, which acquired Green Tree Financial Corp. and is the largest
manufactured housing lender, has recently been affected by adverse loan
experience, higher funding costs and liquidity issues. Repossessions have
increased in past months due to the fact that some lenders had made loans 18 to
36 months earlier to less qualified applicants, and a significant number of
these borrowers had begun to default on their loans, resulting in a large number
of repossessions of these homes. The result has been a reduction in Conseco's
manufactured housing finance volume, along with less favorable financing terms
for wholesale and retail borrowers. Therefore, manufactured housing lenders in
general have recently experienced higher loan losses and a more difficult
funding environment. Access to the asset-backed securities market as a source of
funding similarly has been constricted and the cost of funds has risen sharply.
Lenders have reacted by tightening credit standards for manufactured housing
borrowers and by increasing interest rate spreads
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significantly. These unfavorable developments have created a very restrictive
retail financing environment which in turn has constrained sales activity at
both the wholesale and retail levels. The adverse economic impact of the events
of September 11, 2001 have contributed to these unfavorable developments and
have caused floor-plan lenders, for example, to tighten credit.
Until May 1996, we owned Fleetwood Credit Corp., which provided a
substantial portion of the wholesale and retail financing for sales of our
recreational vehicles. We sold Fleetwood Credit Corp. to Associates in
May 1996. In connection with the sale, an agreement was signed to assure
continuing cooperation between us and Associates and to facilitate wholesale and
retail financing for our retailers and customers. Early in calendar 1999,
Fleetwood Credit Corp. was sold by Associates to Bank of America. We agreed to
an assignment of the operating agreement to the new owner. Under the agreement,
we agreed not to promote any other finance company's recreational vehicle
financing programs so long as Fleetwood Credit Corp. remains competitive, as
defined in the agreement.
OUR PRINCIPAL PROPERTIES
We own our executive offices which are located at 3125 Myers Street in
Riverside, California. The corporate administrative offices, which occupy
173,500 square feet, are situated on parcels of land owned by us, totaling
approximately 18.1 acres. Our manufactured housing regional offices are located
in California, Florida and Texas and occupy a total of 16,400 square feet of
leased office space. We also own additional property and buildings utilized for
manufacturing, research and development and administrative purposes, which, for
the most part, are owned by us.
At July 29, 2001, we operated 156 retail sales locations in 25 states, of
which 15 were owned and 141 were leased from third parties. For the fiscal year
ended April 29, 2001 and for the fiscal quarter ended July 29, 2001, the lease
expense related to these properties was approximately $13 million and
$1 million, respectively.
At July 29, 2001, we had 56 active facilities, 52 of which were
manufacturing operations (28 manufactured housing, 13 travel trailers, 5 motor
homes, 1 folding trailer and 5 supply) and 4 that were service facilities (2
manufactured housing and 2 motor homes). One of the motor home service
facilities in Riverside, California is currently being converted for partial use
as a manufacturing operation. At the end of fiscal 2000, we had 63 active
facilities, 61 of which were manufacturing operations (36 manufactured housing,
14 travel trailers, 5 motor homes, 1 folding trailer and 5 supply) and 2 motor
home service facilities.
We also had 20 idle manufactured housing facilities at the end of fiscal
2001 and 10 idle facilities, including a deactivated service facility, at the
end of fiscal 2000. During fiscal 2001, active manufacturing capacity for the
manufactured housing group was reduced by the closure of facilities in Alma,
Georgia; Douglas, Georgia; Pearson, Georgia; Lexington, Mississippi;
Mooresville, North Carolina; Roxboro, North Carolina; Waco, Texas and Rocky
Mount, Virginia; and a facility in Cushing, Oklahoma that had been previously
leased was idled. Capacity in the recreational vehicle group was downsized by
the closure of travel trailer facilities in Omaha, Nebraska and Winchester,
Virginia, and a motor home facility in Decatur, Indiana. During the year, an
idle travel trailer facility in Longview, Texas was activated to produce the
Avion product previously built in Omaha, Nebraska, an idle motor home service
facility in Paxinos, Pennsylvania was activated as an addition to manufacturing
capacity and an idle motor home manufacturing facility in Riverside, California
was activated as a combination manufacturing/service facility. An idle
manufactured housing facility in Hamilton, Alabama, and a building previously
used as a motor home service facility in Riverside, California, were sold during
fiscal 2001.
COMPETITION IN OUR BUSINESS
The manufactured housing industry is highly competitive. For calendar 2000,
there were approximately 70 manufacturers, with the 10 largest companies
accounting for 79% of the market,
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including our sales which represented 18% of the market. Manufactured homes
compete with new and existing site-built homes, apartments, townhomes and
condominiums. Competition exists on both the manufacturing and retail levels and
is based primarily on price, product features, reputation for service and
quality, depth of field inventory, sales promotions, merchandising, and the
terms and availability of dealer and retail customer financing. Recent growth in
the manufactured housing market in the southern United States has increased
competition at both the manufacturing and retail levels and has resulted in both
regional and national competitors increasing their presence in the region.
The recreational vehicle market is also highly competitive and we have
numerous competitors and potential competitors in this industry. The five
largest manufacturers represented approximately 59% of the market in calendar
2000, including our sales, which represented 23% of the market. However, we
believe our share of the recreational vehicle market has declined in calendar
2001 as a result of our lower market share in each of the motor home and travel
trailer markets. There can be no assurance that either existing or new
competitors, will not develop products that are superior to our recreational
vehicles or achieve better consumer acceptance.
REGULATORY ISSUES APPLICABLE TO OUR BUSINESS AND PRODUCTS
Our manufactured housing operations are subject to provisions of the Housing
and Community Development Act of 1974, under which the U.S. Department of
Housing and Urban Development establishes construction and safety standards for
manufactured homes, and also may require manufactured housing producers to send
notifications to customers of noncompliance with standards or to repair or
replace manufactured homes that contain specific hazards or defects. Our
recreational vehicle operations are subject to a variety of Federal, state and
local regulations, including the National Traffic and Motor Vehicle Safety Act,
under which the National Highway Traffic Safety Administration may require
manufacturers to recall recreational vehicles that contain safety-related
defects, and numerous state consumer protection laws and regulations relating to
the operation of motor vehicles, including so-called "Lemon Laws." Amendments to
any of these regulations and the implementation of new regulations could
significantly increase the costs of manufacturing, purchasing, operating or
selling our products and could have a material adverse effect on our results of
operations.
Our failure to comply with present or future regulations could result in
fines being imposed on us, potential civil and criminal liability, suspension of
sales or production, or cessation of operations. In addition, a major product
recall could have a material adverse effect on our results of operations.
Certain U.S. tax laws currently afford favorable tax treatment for the
purchase and sale of recreational vehicles that are used as the equivalent of
second homes. These laws and regulations have historically been amended
frequently, and it is likely that further amendments and additional regulations
will be applicable to us and our products in the future. Amendments to these
laws and regulations and the implementation of new regulations could have a
material adverse effect on our results of operations.
Our operations are subject to a variety of Federal and state environmental
regulations relating to the use, generation, storage, treatment, emission and
disposal of hazardous materials and wastes and noise pollution. Although we
believe that we are currently in material compliance with applicable
environmental regulations, our failure to comply with present or future
regulations could result in fines being imposed on us, potential civil and
criminal liability, suspension of production or operations, alterations to the
manufacturing process, or costly cleanup or capital expenditures.
OUR INTELLECTUAL PROPERTY
FLEETWOOD, FLEETWOOD HOMES and the principal brand and series names utilized
by us in connection with our recreational vehicles and manufactured homes are
registered trademarks of ours. The trademarks Coleman-Registered Trademark- and
Coleman Parallelogram with Lantern Logo-Registered Trademark- are utilized by us
in connection with our folding trailers, in accordance with a license from The
Coleman Company, Inc., which extends
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through June 2005 with an option in our favor to renew through June 2010. We
have no reason to believe that a further extension cannot be obtained. We
believe that our trademarks and trade names are significant to our business, and
vigorously protect them against infringement. Aside from design patents on some
of the distinctive features of our most prominent motor home models and patents
on certain unique features of our recreational vehicles, we have not typically
obtained patent protection on our products. In addition to our trademarks and
patents, we have developed numerous trade secrets in connection with the design,
manufacture, sales and marketing of our products. We believe that these trade
secrets are of great significance to our business success and take reasonable
steps to prevent their disclosure to competitors.
OUR RELATIONSHIP WITH OUR EMPLOYEES
As of July 29, 2001, we and our subsidiaries had approximately 14,000
employees. Most full-time employees are provided with paid annual vacations,
group life insurance, medical and hospitalization benefits, a retirement plan
and other fringe benefits. Approximately 550 of these employees hold management
or supervisory positions.
As of July 29, 2001, collective bargaining agreements were in effect at two
of our manufacturing locations covering a total of approximately 1,000
employees. Expiration dates for these agreements are in September 2003 and
October 2005. Except for employees at these plants, none of our other employees
are represented by a certified labor organization. In recent years, we have
experienced labor union organizing activity at several other manufacturing
locations, but employees at all these locations voted against union
representation.
LEGAL PROCEEDINGS IN WHICH WE ARE INVOLVED
We are a defendant in a class action in the case of MCMANUS V. FLEETWOOD
ENTERPRISES, INC., which was filed on April 9, 1999 and is pending in the U.S.
District Court for the Western District of Texas, San Antonio Division. The
complaint attempts to establish a class of purchasers of our Class A motor homes
for the model years 1994-1999 and makes claims with respect to the alleged
breach of express and implied warranties, negligent misrepresentation,
fraudulent concealment, and violation of various state statutes in connection
with the ability of such motor homes to tow an automobile or other vehicle or
cargo. On September 24, 2001, the court certified a subclass of Texas residents
who purchased a subject motor home from a Texas dealer and who still own the
motor home. We appealed this certification to the 5th Circuit Court of Appeals
on October 4, 2001, which appeal was accepted on October 26, 2001, and expect
that a hearing on this matter will be scheduled within 8 or 9 months. We
continue to deny the material allegations in the complaint while asserting a
vigorous defense to that end. It is not possible at this time to properly assess
the risk of an adverse verdict or the magnitude of possible exposure.
As discussed in our Annual Report on Form 10-K for fiscal 2000, we initiated
a recall under the National Highway Traffic Safety Act with respect to
approximately 3,400 of our luxury American Coach Class A motor homes because
owners of some of the motor homes had experienced front-tire blowouts, several
of which have resulted in accidents and serious injuries, including deaths.
Under the recall, we provided two new larger capacity front tires to owners of
the motor homes, adjusted the weight distribution on the front axle of some
motor homes to correct a weight imbalance and provided reinforcement of consumer
education about the importance of proper tire maintenance, especially with
respect to proper tire pressure. Insurance subrogation lawsuits have been filed
with respect to three of the accidents involving motor homes subject to the
recall, and several claims with respect to such accidents have been resolved.
Plaintiffs filed the case of CINCINATTI INSURANCE CO. V. FLEETWOOD ENTERPRISES,
INC. on February 21, 2001 in the Circuit Court for Madison County, Kentucky,
requesting compensatory damages and litigation expenses. Similarly, in ENGLAND
V. FLEETWOOD ENTERPRISES, INC., filed on April 16, 2001 in the U.S. District
Court in South Dakota, Western Division, the plaintiffs requested
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compensatory damages, litigation expenses and attorneys' fees. PROGRESSIVE
INSURANCE/ALDERMAN V. FLEETWOOD ENTERPRISES, INC., was also filed on July 27,
2001 in Guadelupe County, New Mexico, Fourth Judicial District Court, seeking
compensatory damages, litigation expenses and attorneys' fees. In addition, two
lawsuits have been filed concerning an accident involving two motor homes not
involved in the recall that resulted in two deaths allegedly caused by a
front-tire blowout in one of the motor homes. WRIGHT V. FLEETWOOD MOTOR HOMES OF
INDIANA, INC., was filed on February 25, 2000 in the District Court of Johnson
County, Texas, and was brought by the plaintiffs who owned the motor home that
had the alleged blowout. We subsequently settled this case on May 17, 2001. The
other plaintiff filed suit on July 23, 2001 in the case of BEELDENS, ETC., ET
AL., V. FLEETWOOD MOTOR HOMES OF INDIANA, INC., ET AL., in the District Court of
Johnson County, Texas, seeking compensatory damages, litigation expenses and
attorneys' fees. In addition, a further lawsuit, MEL AND JOY LAYDEN V. FLEETWOOD
ENTERPRISES, INC. AND FLEETWOOD MOTOR HOMES OF INDIANA, INC., was filed recently
in the Circuit Superior Court of Marion County, Indiana, on October 12, 2001,
alleging that the front tire failure of a motor home was the cause of a traffic
accident and seeking damages. We expect to provide a vigorous defense to the
insurance subrogation lawsuits, and believe that they and any remaining claims
related to the other accidents are covered by adequate insurance.
On February 21, 2000, we and two of our subsidiaries were served with a
purported class action filed on behalf of nine present or former associates of
our Idaho manufactured housing facility. The complaint in the matter of BRISTOW
ET AL., V. FLEETWOOD ENTERPRISES, INC. ET AL., was filed in the U.S. District
Court in Idaho and alleges that, as a result of our management incentive pay
system and other policies, associates have been permitted or encouraged to work
off the clock and through lunch and rest breaks and that overtime pay claims
have been suppressed in violation of the Federal Fair Labor Standards Act and
state laws. The plaintiffs were attempting to establish a national class action
and are requesting compensatory damages, litigation expenses and injunctive
relief requiring us to pay overtime rates and keep accurate records. On
February 20, 2001, the Magistrate Judge conditionally certified a class of
plaintiffs comprised of certain production associates and supervisors of our
housing and recreational vehicle groups. During July 2001, notice of the action
was issued to potential class members. While we continue to deny the material
allegations in the complaint and assert a vigorous defense, we are in
discussions regarding a pending settlement, which would include a possible cash
payment of up to $7.35 million.
On August 14, 2000, another purported class action complaint was filed by
Ms. Bristow along with a Jane Doe alleging sexual harassment. On January 19,
2001, an amended complaint, entitled BOGEN, ET AL., V. FLEETWOOD
ENTERPRISES, INC., was filed in the U.S. District Court in Idaho by six
plaintiffs, including Ms. Bristow, alleging gender discrimination and sexual
harassment as a result of a sexually hostile environment at four manufacturing
centers. The plaintiffs are attempting to establish a national class action and
are requesting compensatory and punitive damages, litigation expenses and
attorneys' fees. While we continue to deny the material allegations in the
amended complaint and plan to assert a vigorous defense, we are in discussions
regarding a pending settlement, which would include a possible cash payment of
up to $1.0 million.
We are also subject to other litigation from time to time in the ordinary
course of business. Our liability under some of this litigation is covered in
whole or in part by insurance. Although the amount of any liability with respect
to such claims and litigation over and above our insurance coverage cannot
presently be determined, in the opinion of our management such liability is not
expected to have a material adverse effect on our financial condition or results
of operations.
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THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; REASONS FOR THE EXCHANGE OFFER; PERIOD FOR
TENDERING EXISTING PREFERRED SECURITIES
We are offering to exchange $22 in liquidation amount of exchange preferred
securities for each $50 in liquidation amount of a maximum of $86.25 million in
aggregate liquidation amount of existing preferred securities that are validly
tendered on the terms and subject to the conditions set forth in this prospectus
and in the accompanying letter of transmittal. If existing preferred securities
in an aggregate liquidation amount of more than $86.25 million are validly
tendered, we will accept for exchange validly tendered existing preferred
securities on a pro rata basis, subject to the other terms and conditions in
this prospectus. Therefore, the entire aggregate liquidation amount of existing
preferred securities that you may tender in the exchange offer may not be
accepted for exchange even if it is validly tendered.
Holders must tender existing preferred securities in a liquidation amount of
$50 and any integral multiple of $50.
You may tender all, some or none of your existing preferred securities. The
exchange offer will be open for twenty business days from commencement of the
offer, unless extended by us.
The exchange offer is not being made to, and we will not accept tenders for
exchange from, holders of existing preferred securities in any jurisdiction in
which the exchange offer or the acceptance of the offer would not be in
compliance with the securities or blue sky laws of that jurisdiction.
Our board of directors and officers do not make any recommendation to the
holders of existing preferred securities as to whether or not to tender all or
any portion of their existing preferred securities. In addition, we have not
authorized anyone to make any recommendation. You must make your own decision
whether to tender your existing preferred securities and, if so, the amount of
existing preferred securities to tender.
We are making the exchange offer and the cash offer to enhance liquidity and
to improve our balance sheet by increasing shareholders' equity, which will
increase our capacity to carry senior debt. If we raise only the minimum amount
in our cash offer necessary to consummate the exchange offer, we will have also
reduced the outstanding aggregate liquidation amount of our trust preferred
securities. Our trust preferred securities include the existing preferred
securities and will include the new preferred securities. The trust preferred
securities are classified on our balance sheet as minority interest. Upon
consummation of the exchange offer, and assuming we (1) accept a maximum of
$86.25 million in aggregate liquidation amount of existing preferred securities
for tender in the exchange offer, and (2) receive proceeds in the cash offer in
an amount equal to 30% of the aggregate liquidation amount of the existing
preferred securities tendered and accepted for exchange in the exchange offer,
then the aggregate liquidation amount of trust preferred securities will be
reduced from $287.5 million to $265.1 million. If the exchange offer is fully
subscribed, we will have enhanced our shareholders' equity by approximately
$28.1 million. We may however raise in the cash offer more than the minimum
proceeds required as one of the conditions to the exchange offer, or we may
consummate the cash offer without consummating the exchange offer, which would
result in an increase in the outstanding liquidation amount of trust preferred
securities. If we raise $150.0 million in the cash offer and accept
$86.25 million in aggregate liquidation amount of existing preferred securities
for exchange in the exchange offer, the outstanding aggregate liquidation amount
of trust preferred securities would increase to $389.2 million.
If we consummate the exchange offer, we intend to use a portion of the
proceeds from the cash offer to pay the taxes we expect to incur as a result of
the cancellation of the existing debentures that support the existing preferred
securities tendered and accepted for exchange in the exchange offer. We will
also use a portion of the proceeds to pay the fees and expenses incurred in
connection with the exchange offer and the cash offer. We will use the remainder
of the proceeds from the cash offer, if any, for general corporate purposes,
including the possible repayment of corporate indebtedness. If
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$86.25 million in aggregate liquidation amount of the existing preferred
securities are tendered and accepted for exchange, we anticipate incurring a tax
liability of approximately $18.0 million.
In the event that the conditions to the exchange offer are not satisfied or
we do not otherwise consummate the exchange offer, we nonetheless expect to
consummate the cash offer and will use all proceeds received in the cash offer,
after payment of fees and expenses, for general corporate purposes, including
the repayment of corporate indebtedness.
The effect of the exchange offer on our cash flow will be positive, assuming
we raise only the minimum amount in our cash offer, which is a condition to the
exchange offer. If we raise more than the minimum amount, or if we do not
consummate the exchange offer but we do consummate the cash offer, our cash
balance will increase; however, the effect on our cash earnings in future
periods may be negative. However, in any of the circumstances described in the
two previous sentences, we anticipate that the effect of either or both of the
exchange offer or the cash offer on our balance sheet will be to provide us with
greater flexibility in executing our strategic plan and exploring financing
opportunities in the future, by enhancing liquidity and increasing our capacity
to carry senior debt.
MINIMUM CONDITIONS
The exchange offer is subject to there being tendered in the exchange offer,
and not withdrawn, a minimum of $50.0 million in aggregate liquidation amount of
existing preferred securities. The exchange offer is also subject to the receipt
of proceeds in the cash offer of cash offer preferred securities in an amount
equal to at least 30% of the aggregate liquidation amount of the existing
preferred securities tendered and accepted for exchange in the exchange offer.
If an aggregate liquidation amount of a minimum of $50.0 million of existing
preferred securities is tendered and accepted for exchange, and assuming we
raise only $15.0 million in the cash offer, which would be 30% of the aggregate
liquidation amount of existing preferred securities tendered and accepted for
exchange in the exchange offer, we will have reduced our aggregate liquidation
amount of outstanding trust preferred securities by approximately $13.0 million
and enhanced our shareholders' equity by approximately $16.3 million. However,
if we raise $150.0 million in proceeds from the sale of the cash offer preferred
securities and we accept $86.25 million in aggregate liquidation amount of
existing preferred securities for exchange in the exchange offer, our aggregate
liquidation amount of outstanding trust preferred securities would increase by
$101.7 million to $389.2 million and our shareholders' equity would be enhanced
by approximately $28.1 million.
EXPIRATION DATE
The expiration date for the exchange offer is 5:00 p.m., New York City Time,
on January 4, 2002, unless we extend the exchange offer. We may extend this
expiration date for any reason. The last date and time on which tenders will be
accepted, whether at 5:00 p.m., New York City Time, on January 4, 2002 or at
5:00 p.m., New York City Time, on any later date to which the exchange offer may
be extended, is referred to as the expiration date.
EXTENSIONS; AMENDMENTS
We expressly reserve the right, in our discretion, for any reason to:
- delay the acceptance of existing preferred securities for exchange,
- extend the time period during which the exchange offer is open, by giving
oral or written notice of an extension to the holders of existing
preferred securities in the manner described below. During any extension,
all existing preferred securities previously tendered and not withdrawn
will remain subject to the exchange offer, and
- amend the terms of the exchange offer other than the condition that the
registration statement becomes effective under the Securities Act.
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If we consider an amendment to the exchange offer to be material, or if we
waive a material condition of the exchange offer, we will promptly disclose the
amendment in a prospectus supplement, and if required by law, we will extend the
exchange offer for a period of 5 to 10 business days.
We will give oral or written notice of any extension, amendment,
non-acceptance or termination to the holders of the existing preferred
securities as promptly as practicable. In the case of any extension, we will
issue a press release or other public announcement no later than 9:00 a.m., New
York City Time, on the next business day after the previously scheduled
expiration date.
PROCEDURES FOR TENDERING EXISTING PREFERRED SECURITIES
Your tender to us of existing preferred securities and our acceptance of
your tender will constitute a binding agreement between you and us upon the
terms and subject to the conditions set forth in this prospectus and in the
accompanying letter of transmittal.
TENDER OF EXISTING PREFERRED SECURITIES HELD THROUGH A CUSTODIAN. If you
are a beneficial holder of the existing preferred securities that are held of
record by a custodian bank, depository institution, broker, dealer, trust
company or other nominee, you must instruct the custodian to tender the existing
preferred securities on your behalf. Your custodian will provide you with their
instruction letter which you must use to give these instructions. Any beneficial
owner of existing preferred securities held of record by The Depository Trust
Company, also referred to as the DTC, or its nominee, through authority granted
by DTC may direct the DTC participant, through which the beneficial owner's
existing preferred securities are held in DTC, to tender on the beneficial
owner's behalf.
TENDER OF EXISTING PREFERRED SECURITIES HELD THROUGH DTC. To effectively
tender existing preferred securities that are held through DTC, DTC participants
should transmit their acceptance through the Automated Tender Offer Program, or
ATOP, for which the transaction will be eligible, and DTC will then edit and
verify the acceptance and send an agent's message to the exchange agent for its
acceptance. Delivery of tendered existing preferred securities must be made to
the exchange agent pursuant to the book-entry delivery procedures set forth
below or the tendering DTC participant must comply with the guaranteed delivery
procedures set forth below. No letters of transmittal will be required to tender
existing preferred securities through ATOP.
In addition, the exchange agent must receive:
- a completed and signed letter of transmittal or an electronic confirmation
pursuant to DTC's ATOP system indicating the liquidation amount of
existing preferred securities to be tendered and any other documents, if
any, required by the letter of transmittal, and
- prior to the expiration date, a confirmation of book-entry transfer of
such existing preferred securities into the exchange agent's account at
DTC, in accordance with the procedure for book-entry transfer described
below, or
- the holder must comply with the guaranteed delivery procedures described
below.
Your existing preferred securities must be tendered by book-entry transfer.
The exchange agent will establish an account with respect to the existing
preferred securities at DTC for purposes of the exchange offer within two
business days after the commencement of the exchange offer. Any financial
institution that is a participant in DTC must make book-entry delivery of
existing preferred securities by having DTC transfer such existing preferred
securities into the exchange agent's account at DTC in accordance with DTC's
procedures for transfer. Although your existing preferred securities will be
tendered through the DTC facility, the letter of transmittal, or facsimile, or
an electronic confirmation pursuant to DTC's ATOP system, with any required
signature guarantees and any other required documents, if any, must be
transmitted to and received or confirmed by the exchange agent at its address
set forth in the section titled "The Exchange Offer--Exchange Agent," beginning
on page 83 of this prospectus, prior to 5:00 p.m., New York City Time, on the
expiration date. You or your broker
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must ensure that the exchange agent receives an agent's message from DTC
confirming the book-entry transfer of your existing preferred securities. An
agent's message is a message transmitted by DTC and received by the exchange
agent that forms a part of the book-entry confirmation that states that DTC has
received an express acknowledgment from the DTC participant tendering the shares
that such participant agrees to be bound by the terms of the letter of
transmittal.
Delivery of documents to DTC in accordance with its procedures does not
constitute delivery to the exchange agent.
If you are an institution that is a participant in DTC's book-entry transfer
facility, you should follow the same procedures that are applicable to persons
holding existing preferred securities through a financial institution.
Do not send letters of transmittal or other exchange offer documents to us,
Banc of America Securities LLC, or D.F. King & Co., Inc., the information agent.
It is your responsibility that all necessary materials get to the exchange
agent before the expiration date. If the exchange agent does not receive all of
the required materials before the expiration date, your existing preferred
securities will not be validly tendered.
Any existing preferred securities not accepted for exchange for any reason
will be returned without expense to the tendering holder as promptly as
practicable after the expiration or termination of the exchange offer.
We will have accepted the validity of tendered existing preferred securities
if and when we give oral or written notice to The Bank of New York, the exchange
agent. The exchange agent will act as the new trust's agent for purposes of
receiving the exchange preferred securities from us. If we do not accept any
tendered existing preferred securities for exchange because of an invalid tender
or the occurrence of any other event, The Bank of New York will return those
existing preferred securities to you, without expense, promptly after the
expiration date via book-entry transfer through DTC.
OUR INTERPRETATIONS ARE BINDING
We will determine, in our sole discretion, all questions as to the validity,
form, eligibility and acceptance of existing preferred securities tendered for
exchange. Our determination will be final and binding. We reserve the absolute
right to reject any and all tenders of any particular existing preferred
securities not properly tendered or to not accept any particular existing
preferred security which acceptance might, in our judgment or our counsel's
judgment, be unlawful. We also reserve the absolute right to waive any defects
or irregularities or conditions of the exchange offer as to any particular
existing preferred securities either before or after the expiration date,
including the right to waive the ineligibility of any holder who seeks to tender
existing preferred securities in the exchange offer. All conditions will be
waived or satisfied prior to the expiration date and we will either issue
exchange preferred securities in return for tendered existing preferred
securities or return the tendered existing preferred securities, promptly after
the termination or withdrawal of the exchange offer. Our interpretation of the
terms and conditions of the exchange offer as to any particular existing
preferred security either before or after the expiration date, including the
letter of transmittal and the instructions to such letter of transmittal, will
be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of existing preferred securities for
exchange must be cured within such reasonable period of time as we shall
determine. Neither we, the exchange agent nor any other person shall be under
any duty to give notification of any defect or irregularity with respect to any
tender of existing preferred securities for exchange, nor shall any of them
incur any liability for failure to give such notification.
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ACCEPTANCE OF EXISTING PREFERRED SECURITIES FOR EXCHANGE; DELIVERY OF EXCHANGE
PREFERRED SECURITIES
Once all of the conditions to the exchange offer are satisfied or waived, we
will accept, promptly after the expiration date, up to $86.25 million in
aggregate liquidation amount of existing preferred securities properly tendered,
and will issue the exchange preferred securities promptly after acceptance of
the existing preferred securities. If existing preferred securities in an
aggregate liquidation amount of more than $86.25 million are validly tendered,
they will only be accepted for exchange on a pro rata basis, in an aggregate
liquidation amount per holder equal to:
- a fraction, the numerator of which is the aggregate liquidation amount of
existing preferred securities validly tendered for exchange by such holder
and the denominator of which is the aggregate liquidation amount of all
existing preferred securities validly tendered by all holders, multiplied
by
- $86.25 million.
The discussion under the section titled "The Exchange Offer--Conditions for
Completion of the Exchange Offer," beginning on page 80 of this prospectus,
provides further information regarding the conditions to the exchange offer. For
purposes of the exchange offer, we shall be deemed to have accepted properly
tendered existing preferred securities for exchange when, as and if we have
given oral or written notice to the exchange agent, with written confirmation of
any oral notice to be given promptly after giving such notice.
For each $50 liquidation amount of existing preferred securities accepted
for exchange, the holder of such existing preferred security will receive an
exchange security having a liquidation amount of $22. The exchange preferred
securities will bear interest from the issue date. Existing preferred securities
accepted for exchange will cease to accrue interest from and after the date of
consummation of the exchange offer. Holders of existing preferred securities
whose existing preferred securities are accepted for exchange will not receive
any payment in respect of accrued interest on those existing preferred
securities.
In all cases, issuance of exchange preferred securities for existing
preferred securities that are accepted for exchange in the offer will be made
only after timely receipt by the exchange agent of:
- a timely book-entry confirmation of such existing preferred securities
into the exchange agent's account at the book-entry transfer facility,
- a properly completed and duly executed letter of transmittal or an
electronic confirmation of the submitting holder's acceptance through
DTC's ATOP system, and
- all other required documents, if any.
If we do not accept any tendered existing preferred securities for any
reason set forth in the terms and conditions of the exchange offer, or if
existing preferred securities are submitted for a greater liquidation amount
than the holder desires to exchange, the unaccepted or non-exchanged existing
preferred securities tendered by book-entry transfer into the exchange agent's
account at the book-entry transfer facility will be returned in accordance with
the book-entry procedures described above, and the existing preferred securities
that are not exchange preferred securities will be credited to an account
maintained with DTC, as promptly as practicable after the expiration or
termination of the exchange offer.
Any validly tendered existing preferred securities acquired in the exchange
offer will be retired and will not be reissuable.
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GUARANTEED DELIVERY PROCEDURES
If you desire to tender your existing preferred securities and you cannot
complete the procedures for book-entry transfer set forth above on a timely
basis, you may still tender your existing preferred securities if:
- your tender is made through an eligible institution,
- prior to the expiration date, the exchange agent received from the
eligible institution a properly completed and duly executed letter of
transmittal, or a facsimile of such letter of transmittal or an electronic
confirmation pursuant to DTC's ATOP system, and notice of guaranteed
delivery, substantially in the form provided by us, by facsimile
transmission, mail or hand delivery, that:
- sets forth the name and address of the holder of existing preferred
securities and the amount of existing preferred securities tendered,
- states that the tender is being made thereby, and
- guarantees that within three New York Stock Exchange trading days after
the expiration date a book-entry confirmation and any other documents
required by the letter of transmittal, if any, will be deposited by the
eligible institution with the exchange agent; and
- book-entry confirmation and all other documents, if any, required by the
letter of transmittal are received by the exchange agent within three New
York Stock Exchange trading days after the expiration date.
WITHDRAWAL RIGHTS
You may withdraw your tender of existing preferred securities at any time
prior to 5:00 p.m., New York City Time, on the expiration date. You may also
withdraw a tender of your existing preferred securities after the expiration of
40 business days from the commencement date of the exchange offer if your tender
has not yet been accepted for exchange.
For a withdrawal to be effective, the exchange agent must receive a written
notice of withdrawal at the address or, in the case of eligible institutions, at
the facsimile number, set forth under the section titled "The Exchange
Offer--Exchange Agent," beginning on page 83 of this prospectus, prior to
5:00 p.m., New York City Time, on the expiration date. Any notice of withdrawal
must:
- specify the name of the person who tendered the existing preferred
securities to be withdrawn;
- specify the existing preferred securities to be withdrawn, if not all of
the existing preferred securities tendered by the holder;
- contain a statement that you are withdrawing your election to have your
existing preferred securities exchanged;
- be signed by the holder in the same manner as the original signature on
the letter of transmittal by which the existing preferred securities were
tendered, including any required signature guarantees; and
- specify, on the notice of withdrawal, the name and number of the account
at DTC to be credited with the withdrawn existing preferred securities and
otherwise comply with the procedures of such facility, if you tendered
your existing preferred securities in accordance with the procedure for
book-entry transfer described above.
Any existing preferred securities that have been tendered for exchange, but
which are not exchanged for any reason, will be credited to an account
maintained with the book-entry transfer facility for the existing preferred
securities, as soon as practicable after withdrawal, rejection of tender or
termination of the exchange offer. Properly withdrawn existing preferred
securities may be
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retendered by following the procedures described under "Procedures for Tendering
Existing Preferred Securities" above at any time on or prior to 5:00 p.m., New
York City Time, on the expiration date.
CONDITIONS FOR COMPLETION OF THE EXCHANGE OFFER
We will not accept existing preferred securities for exchange and may
terminate or not complete the exchange offer if:
- the registration statement and any post-effective amendment to the
registration statement covering the exchange preferred securities is not
effective under the Securities Act;
- an aggregate liquidation amount of a minimum of $50.0 million of existing
preferred securities is not tendered into the exchange offer without being
withdrawn; and
- we do not receive cash proceeds from the sale of cash offer preferred
securities in our cash offer in an amount equal to at least 30% of the
aggregate liquidation amount of existing preferred securities tendered and
accepted for exchange in the exchange offer.
We may not accept existing preferred securities for exchange and may
terminate or not complete the exchange offer if:
- any action, proceeding or litigation seeking to enjoin, make illegal or
delay completion of the exchange offer or otherwise relating in any manner
to the exchange offer is instituted or threatened;
- any order, stay, judgment or decree is issued by any court, government,
governmental authority or other regulatory or administrative authority and
is in effect, or any statute, rule, regulation, governmental order or
injunction shall have been proposed, enacted, enforced or deemed
applicable to the exchange offer, any of which would or might restrain,
prohibit or delay completion of the exchange offer or impair the
contemplated benefits of the exchange offer to us;
- any of the following occurs and the adverse effect of such occurrence
shall, in our reasonable judgment, be continuing:
- any general suspension of trading in, or limitation on prices for,
securities on any national securities exchange or in the
over-the-counter market in the United States;
- any extraordinary or material adverse change in U.S. financial markets
generally, including, without limitation, a decline of at least twenty
percent in either the Dow Jones Average of Industrial stocks or the
Standard & Poor's 500 Index from December 5, 2001;
- a declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States;
- any limitation, whether or not mandatory, by any governmental entity
on, or any other event that would reasonably be expected to materially
adversely affect, the extension of credit by banks or other lending
institutions;
- a commencement of a war or other national or international calamity
directly or indirectly involving the United States, which would
reasonably be expected to affect materially and adversely, or to delay
materially, the completion of the exchange offer; or
- if any of the situations described above existed at the time of
commencement of the exchange offer and that situation deteriorates
materially after commencement of the exchange offer;
- any tender or exchange offer, other than this exchange offer by us, with
respect to some or all of our outstanding common stock or any merger,
acquisition or other business combination proposal involving us shall have
been proposed, announced or made by any person or entity;
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- any event or events occur that have resulted or may result, in our
judgment, in an actual or threatened change in the business condition,
income, operations, stock ownership or prospects of us and our
subsidiaries, taken as a whole;
- as the term "group" is used in Section 13(d)(3) of the Securities Exchange
Act,
- any person, entity or group acquires more than 5% of our outstanding
shares of common stock, other than a person, entity or group that had
publicly disclosed such ownership with the Securities and Exchange
Commission, or SEC, prior to December 5, 2001,
- any such person, entity or group that had publicly disclosed such
ownership prior to such date shall acquire additional common stock
constituting more than 2% of our outstanding shares, or
- any new group shall have been formed that beneficially owns more than
five percent of our outstanding shares of common stock, that in our
judgment in any such case, and regardless of the circumstances, makes it
inadvisable to proceed with the exchange offer or with such acceptance
for exchange of existing preferred securities.
If any of the above events occur, we may:
- terminate the exchange offer and as promptly as practicable return all
tendered existing preferred securities to tendering security holders;
- extend the exchange offer and, subject to the withdrawal rights described
in "The Exchange Offer--Withdrawal Rights" on page 79, retain all tendered
existing preferred securities until the extended exchange offer expires;
- amend the terms of the exchange offer, which may result in an extension of
the period of time for which the exchange offer is kept open; or
- waive the unsatisfied condition and, subject to any requirement to extend
the period of time during which the exchange offer is open, complete the
exchange offer.
LEGAL LIMITATION
The above conditions are for our sole benefit. We may assert these
conditions with respect to all or any portion of the exchange offer regardless
of the circumstances giving rise to them. We may waive, in our discretion, any
condition, in whole or in part, at any time prior to the expiration date of the
exchange offer. Our failure at any time to exercise our rights under any of the
above conditions does not represent a waiver of these rights. Each right is an
ongoing right that may be asserted at any time prior to the expiration date of
the exchange offer. Any determination by us concerning the conditions described
above will be final and binding upon all parties.
If a stop order issued by the SEC is threatened or in effect with respect to
the registration statement of which this document is a part, or with respect to
the qualification of the new indenture under the Trust Indenture Act of 1939, we
will not:
- accept for exchange any existing preferred securities tendered, or
- issue any exchange preferred securities in exchange for any existing
preferred securities.
FEES AND EXPENSES
Banc of America Securities LLC is acting as the dealer manager in connection
with the exchange offer. Banc of America Securities LLC will receive a fee in
the manner described below for its services as dealer manager, in addition to
being reimbursed for its reasonable out-of-pocket expenses, including attorneys'
fees, incurred in connection with the exchange offer. The fees will be payable
if and when the exchange offer is completed.
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Banc of America Securities LLC will receive a fee in the amount of 1.25% of
the aggregate liquidation amount of existing preferred securities tendered for
exchange, which will amount to approximately $1.08 million, assuming an
aggregate of $86.25 million in liquidation amount of existing preferred
securities is tendered.
We have agreed to indemnify Banc of America Securities LLC against specified
liabilities relating to or arising out of the offer, including civil liabilities
under the federal securities laws, and to contribute to payments that Banc of
America Securities LLC may be required to make in respect thereof. However, in
the opinion of the SEC, such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. Banc of
America Securities LLC may, from time to time, hold existing preferred
securities, exchange preferred securities, cash offer preferred securities and
our common stock in its proprietary accounts, and to the extent it owns existing
preferred securities in these accounts at the time of the exchange offer, Banc
of America Securities LLC may tender these existing preferred securities.
We have retained D.F. King & Co., Inc. to act as the information agent and
The Bank of New York to act as the exchange agent in connection with the
exchange offer. The information agent may contact holders of existing preferred
securities by mail, telephone, facsimile transmission and personal interviews
and may request brokers, dealers and other nominee stockholders to forward
materials relating to the exchange offer to beneficial owners. The information
agent and the exchange agent each will receive reasonable compensation for their
respective services, will be reimbursed for reasonable out-of-pocket expenses
and will be indemnified against liabilities in connection with their services,
including liabilities under the federal securities laws.
Neither the information agent nor the exchange agent has been retained to
make solicitations or recommendations. The fees they receive will not be based
on the liquidation amount of existing preferred securities tendered under the
exchange offer.
We will not pay any fees or commissions to any broker or dealer or any other
person, other than Banc of America Securities LLC, for soliciting tenders of
existing preferred securities under the exchange offer. Brokers, dealers,
commercial banks and trust companies will, upon request, be reimbursed by us for
reasonable and necessary costs and expenses incurred by them in forwarding
materials to their customers. The cash expenses to be incurred in connection
with the exchange offer will be paid by us. We estimate these expenses in the
aggregate to be approximately $2.175 million.
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EXCHANGE AGENT
The Bank of New York has been appointed as the exchange agent for the
exchange offer. All executed letters of transmittal should be directed to the
exchange agent at the address set forth below. Questions, requests for
assistance, requests for additional copies of this prospectus or of the letter
of transmittal and requests for notices of guaranteed delivery should be
directed to the exchange agent addressed as follows:
The Bank of New York, Exchange Agent
By Hand or Mail:
The Bank of New York
15 Broad Street, 16th Floor
New York, New York 10286
Attention: Ms. Carolle Montriul
Reorganization Unit
By Facsimile Transmission (for Eligible Institutions only):
(212) 235-2261
Attention: Ms. Carolle Montriul
For Information or Confirmation by Telephone call:
(212) 235-2354
If you deliver the letter of transmittal to an address other than as set
forth above or transmit instructions via facsimile other than as set forth
above, then such delivery or transmission does not constitute a valid delivery
of the letter of transmittal.
CONSEQUENCES OF EXCHANGING OR FAILING TO EXCHANGE EXISTING PREFERRED SECURITIES
If you tender your existing preferred securities for exchange you will not
be obligated to pay any related transfer taxes. If you do not exchange your
existing preferred securities in the exchange offer, our obligation to make
payments that are distributed to you as holders of the existing preferred
securities will be subordinated to our obligation to make payments that are
distributed to holders of the exchange preferred securities. Further, the
liquidity of the trading market for existing preferred securities not tendered
for exchange, or tendered for exchange but not accepted, could be adversely
affected to the extent that existing preferred securities are tendered and
accepted for exchange in the exchange offer.
In addition, we have the right to elect to defer distributions on our
existing preferred securities, including deferrals for up to twenty consecutive
quarters. On October 30, 2001, we elected to defer the distributions on our
existing preferred securities due to be made on November 15, 2001. If our
business environment and our operating results do not significantly improve from
those we have recently experienced, we would likely find it necessary to defer
distributions on our existing preferred securities through at least August 15,
2002. Even though our board of directors has discontinued the payment of
dividends on our common stock for the foreseeable future, these deferrals of
distributions on our existing preferred securities would further prevent us from
declaring or paying any dividends during the period of such deferrals.
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CASH OFFER FOR CASH OFFER PREFERRED SECURITIES
In addition to the exchange offer, we will offer cash offer preferred
securities for cash, which we refer to as the "cash offer." The cash offer
preferred securities are substantially identical to the exchange preferred
securities as described in the section titled "Description of Preferred
Securities--Description of the New Preferred Securities," beginning on page 88
of this prospectus, except that the cash offer preferred securities will have a
different conversion price and a different liquidation amount, and will be
issued by a different trust.
Banc of America Securities LLC is the placement agent for the cash offer and
is undertaking its duties on a best efforts basis only. Banc of America
Securities LLC is not making a commitment to purchase cash offer preferred
securities from us and has not assured us that these securities will be placed
successfully in the cash offer. Offers to purchase cash offer preferred
securities must be in denominations of liquidation amount of $50 and any
integral multiple of $50.
The exchange offer is subject to the receipt of proceeds in the cash offer
of cash offer preferred securities in an amount equal to at least 30% of the
aggregate liquidation amount of the existing preferred securities tendered and
accepted for exchange in the exchange offer. The cash offer is not subject to a
minimum number of cash offer preferred securities being sold in the cash offer
or the consummation of the exchange offer. The cash offer is expected to close
prior to the expiration date of the exchange offer.
You may indicate your interest in purchasing cash offer preferred securities
by contacting Banc of America Securities LLC directly at (212) 583-8206 or (888)
292-0070 (toll-free).
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FLEETWOOD CAPITAL TRUST
Fleetwood Capital Trust, which is referred to as the existing trust, is a
statutory business trust formed under the Delaware Business Trust Act. It was
created under a trust agreement between us and the existing trust's initial
trustees, and the filing of a certificate of trust with the Secretary of State
of Delaware. The trust agreement was amended and restated in its entirety on
February 10, 1998. The existing trust was organized for the sole purpose of
issuing the existing preferred securities and the existing common securities and
investing the proceeds of that issuance in an equivalent amount of convertible
subordinated debentures, referred to as the existing debentures. We issued the
existing debentures under an indenture dated February 10, 1998, referred to as
the existing indenture, between us and The Bank of New York, as indenture
trustee. We guaranteed the payment of distributions and other payments on the
existing preferred securities to the extent that we had made corresponding
interest and other payments, as and to the extent set forth in a guarantee
agreement dated February 10, 1998. The trust agreement, the existing indenture
and the existing preferred securities guarantee are qualified under the Trust
Indenture Act of 1939.
The capital stock of the existing trust consists of the existing preferred
securities and the existing common securities, collectively referred to as the
"existing trust securities." We have acquired existing common securities in an
amount equal to approximately 3% of the total capital of the existing trust and
we directly own all of the issued and outstanding existing common securities.
The rights of the holders of the existing trust securities are as set forth
in the trust agreement, the Delaware Business Trust Act and the Trust Indenture
Act. The trust agreement does not permit the existing trust to borrow money or
make any investment other than in the existing debentures. In the existing
indenture we have agreed to pay for:
- all debts, obligations, costs and expenses of the existing trust, other
than with respect to the existing trust securities, and
- all costs and expenses of the existing trust, including:
- the fees and expenses of the trustees, and
- any income taxes, duties and other governmental charges, and all costs
and expenses related to these charges, to which the existing trust may
become subject, except for United States withholding taxes.
The existing trust has five trustees. Three of them, referred to as
administrative trustees, are employees or officers of or are otherwise
affiliated with us. The Bank of New York (Delaware) is the existing trust's
Delaware Trustee and The Bank of New York is the property trustee. Also, for
purposes of compliance with the Trust Indenture Act, The Bank of New York acts
as guarantee trustee under the guarantee and as debenture trustee under the
existing indenture. We, as the holder of all of the existing common securities,
have the right to appoint, remove or replace any of the trustees and to increase
or decrease the number of trustees. The existing trust has a term of
approximately 30 years but may terminate earlier as provided in the trust
agreement.
The property trustee has legal title to and holds the existing debentures
for the benefit of the existing trust and the holders of the existing trust
securities, and the property trustee has the power to exercise all rights,
powers and privileges under the existing indenture as the holder of the existing
debentures. In addition, the property trustee maintains exclusive control of a
segregated non-interest bearing "property account" to hold all payments made in
respect of the existing debentures for the benefit of the holders of the
existing trust securities. The property trustee will, as soon as practicable,
make distributions and payments on liquidation, redemption and otherwise to the
holders of the existing trust securities out of funds from the property account.
The guarantee trustee holds the guarantee for the benefit of the holders of the
existing preferred securities.
The rights of the holders of the existing preferred securities, including
economic rights, rights to information and voting rights, are set forth in the
trust agreement, the Delaware Business Trust Act
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and the Trust Indenture Act. For financial reporting purposes, the existing
trust is treated as a subsidiary of ours and, accordingly, the financial
statements of the existing trust are included in our consolidated financial
statements as a minority interest. Under GAAP, the existing preferred securities
are shown in our balance sheet entitled "Company-obligated mandatorily
redeemable convertible preferred securities of Fleetwood Capital Trust holding
solely 6% Convertible Subordinated Debentures of the Company" and appropriate
disclosures about the existing preferred securities, the existing preferred
securities guarantee and the existing debentures are included in the notes to
our consolidated financial statements. For financial reporting purposes, we
record distributions payable on the existing preferred securities as a minority
interest in the consolidated statements of operations.
FLEETWOOD CAPITAL TRUST II AND FLEETWOOD CAPITAL TRUST III
Each of Fleetwood Capital Trust II and Fleetwood Capital Trust III is a
statutory business trust formed under the Delaware Business Trust Act. We refer
to these trusts as the new trusts. Each new trust was created under a trust
agreement between us and the new trust's initial trustees, and the filing of a
certificate of trust with the Secretary of State of Delaware. Each new trust
agreement will be amended and restated in its entirety as of the date the new
trust initially issues the applicable new preferred securities and the
description of the new trusts and the new trust agreements included in this
prospectus contemplates this amendment and restatement. Each new trust agreement
will be qualified as an indenture under the Trust Indenture Act.
The capital stock of each new trust consists of the applicable new preferred
securities and the applicable new common securities, collectively referred to as
the "new trust securities." We will acquire new common securities in an amount
equal to approximately 3% of the total capital of each new trust and will
initially own, directly or indirectly, all of the issued and outstanding new
common securities of each new trust.
Each new trust's assets consist principally of the applicable series of new
debentures and payments under the new debentures are its sole revenue. Each new
trust exists for the purposes of:
- issuing exchange preferred securities in exchange for the existing
preferred securities, in the case of Trust II, or issuing cash offer
preferred securities for cash, in the case of Trust III;
- issuing and selling its new common securities to us;
- purchasing and owning the applicable series of new debentures; and
- engaging in any other lawful business or activity that may be engaged in
by a business trust formed under the Delaware Business Trust Act.
The rights of the holders of the new trust securities are as set forth in
the new trust agreements for Trust II and Trust III, as applicable, the Delaware
Business Trust Act and the Trust Indenture Act. The new trust agreements do not
permit the new trusts to borrow money or make any investment other than in the
applicable series of new debentures. We have agreed to pay for:
- all debts and obligations of each new trust, other than with respect to
the new trust securities; and
- all costs and expenses of each new trust, including:
- the fees and expenses of each new trust's new trustees, and
- any income taxes, duties and other governmental charges, and all costs
and expenses related to these charges, to which each new trust may
become subject, which shall not include United States withholding taxes
but shall include liabilities imposed on the trust as withholding
agent.
Each new trust will initially have five trustees. In each case, three of
them, referred to as administrative trustees, are employees or officers of or
otherwise affiliated with us. Initially, The Bank of New York (Delaware) will
serve as each new trust's Delaware trustee and The Bank of New York
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will serve as each new trust's property trustee. Also, for the purpose of
compliance with the Trust Indenture Act, The Bank of New York will act as
guarantee trustee under the exchange preferred securities guarantee, under the
cash offer preferred securities guarantee and as indenture trustee under the
exchange indenture and the cash offer indenture, collectively referred to as the
"new indentures."
We, as the direct or indirect holder of all the new common securities, will
have the right to appoint, remove or replace any of the new trustees and to
increase or decrease the number of new trustees in each new trust. Each new
trust has a term of approximately 17 years but may terminate earlier as provided
in the applicable new trust agreement.
In each case, the property trustee will hold the applicable series of new
debentures for the benefit of the holders of the new trust securities, and will
have the power to exercise all rights, powers and privileges under the new
indentures as the holder of the applicable series of new debentures. In
addition, the property trustee will maintain exclusive control of a segregated
non-interest bearing "property account" to hold all payments made in respect of
the applicable series of new debentures for the benefit of the holders of the
new trust securities. The property trustee will, as soon as practicable, make
distributions and payments on liquidation, redemption and otherwise to the
holders of the new trust securities out of funds from the property account. The
guarantee trustee of Trust II will hold the exchange preferred securities
guarantee for the benefit of the holders of the exchange preferred securities.
The guarantee trustee of Trust III will hold the cash offer preferred securities
guarantee for the benefit of the holders of the cash offer preferred securities.
We will pay all fees and expenses related to the new trusts and the offering
of the new trust securities.
For financial reporting purposes, the new trusts are treated as our
subsidiaries and, accordingly, the financial statements of each new trust are
included in our consolidated financial statements as a minority interest. Under
GAAP, the exchange preferred securities will be shown in our balance sheet
entitled "Company-obligated mandatorily redeemable convertible preferred
securities of Fleetwood Capital Trust II holding solely 9.5% Convertible Trust
II Subordinated Debentures of the Company" and the cash offer preferred
securities will be shown on our balance sheet entittled "Company-obligated
mandatorily redeemable convertible preferred securities of Fleetwood Capital
Trust III holding solely 9.5% Convertible Trust III Subordinated Debentures of
the Company." Appropriate disclosures about the exchange preferred securities,
the exchange preferred securities guarantee, the exchange debentures, the cash
offer preferred securities, the cash offer preferred securities guarantee and
the cash offer debentures will be included in the notes to our consolidated
financial statements. For financial reporting purposes, we will record
distributions payable on the new preferred securities as a minority interest in
the consolidated statements of operations.
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DESCRIPTION OF PREFERRED SECURITIES
DESCRIPTION OF THE NEW PREFERRED SECURITIES
Each new trust will issue the applicable new preferred securities pursuant
to the terms of the applicable new trust agreement. Each new trust agreement
incorporates by reference the terms of the Delaware Business Trust Act and the
Trust Indenture Act. The Bank of New York, as property trustee, will act as
indenture trustee in each new trust agreement for the new preferred securities
for purposes of compliance with the Trust Indenture Act. The terms of the new
preferred securities include those stated in the applicable new trust agreement
and those made part of the new trust agreement by the Trust Indenture Act and
the Delaware Business Trust Act. The new trust agreements are substantially
identical except for certain provisions which are described below. We have
summarized the material provisions of the new trust agreements and the new
preferred securities below. This summary may omit a term or provision that you
would consider important. For a complete description of the exchange preferred
securities and the cash offer preferred securities, we encourage you to read the
new trust agreements. We have filed a form of each new trust agreement with the
SEC.
GENERAL
The new trust agreements authorize the applicable new trust to issue the
applicable new preferred securities and new common securities. The applicable
new preferred securities represent preferred undivided beneficial interests in
the assets of the applicable new trust. The applicable new common securities
represent common undivided beneficial interests in the assets of the applicable
new trust. We will own all the new common securities in each new trust. The new
preferred securities and the new common securities issued by the applicable new
trust will rank equal with each other, and will generally have equivalent terms.
Payments on the applicable new common securities will be made on a pro rata
basis with the applicable new preferred securities. However, the terms of the
new preferred securities and the new common securities will differ in the
following two respects:
- if an event of default under either new trust agreement occurs and is
continuing, the rights of the holders of the new common securities of the
applicable new trust to payments in respect of periodic distributions and
payments upon liquidation, redemption and otherwise will be subordinated
to the rights of the holders of the new preferred securities of that new
trust; and
- the holders of the new common securities will have the exclusive right to
appoint, remove or replace the trustees and to increase or decrease the
number of trustees.
The new trusts may not:
- issue any securities other than the applicable new preferred securities
and the applicable new common securities,
- incur any indebtedness, or
- make any investment other than in the applicable series of new debentures.
In each new trust, the property trustee will own and hold the applicable
series of new debentures as trust assets for the benefit of the holders of the
applicable new preferred securities and the new common securities. We will
guarantee the payment of distributions and payments on redemption or liquidation
of the applicable new trust on a subordinated basis, but only if, and to the
extent, we have made corresponding payments to the new trust on the applicable
series of new debentures. Please read the section titled "Description of
Preferred Securities--Description of the New Preferred Securities Guarantees,"
beginning on page 112 of this prospectus, for a more detailed discussion.
DISTRIBUTIONS
If you purchase exchange preferred securities, you will be entitled to
receive distributions at an annual rate of 9.5% of the stated liquidation amount
of $22 per exchange preferred security. If you purchase cash offer preferred
securities, you will be entitled to receive distributions at an annual rate of
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9.5% of the stated liquidation amount of $50 per cash offer preferred security.
Distributions will be paid in cash or, at our election, prior to February 15,
2004, in our common stock. Holders of the applicable new preferred securities
will be given notice of our election to pay interest in common stock instead of
cash no later than the relevant record date, which will be the 15th day before
the relevant distribution payment date. If distributions are paid in common
stock, the shares of common stock will be valued at 90% of the average of the
closing prices for the five trading days immediately preceding the second
trading day prior to the distribution payment date. Our ability to pay any
distributions in shares of our common stock is contingent on satisfaction of
certain conditions. See the section titled "Description of Preferred
Securities--Description of the New Preferred Securities--Conditions to
Distributions in Common Stock," beginning on page 91 of this prospectus. In this
prospectus, when we refer to "distributions," we are also referring to
additional redemption distributions, if any.
To the extent permitted by applicable law, distributions in arrears for more
than one quarter will accumulate additional distributions at the annual rate of
9.5%, compounded quarterly. We use the term "distributions" in this prospectus
to mean the quarterly distributions and any additional distributions, unless we
state otherwise. The amount of distributions payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months and, for any
period of less than a full calendar month, the actual number of days elapsed in
that month.
Distributions are cumulative, will accumulate from the date of original
issuance of the applicable new preferred securities, and will be payable
quarterly in arrears on February 15, May 15, August 15 and November 15 of each
year, commencing February 15, 2002 unless we defer interest payments on the
applicable series of new debentures, as described below. Distributions will be
made by the property trustee for each new trust, except as otherwise described
below.
OPTION TO DEFER DISTRIBUTIONS
At any time after February 15, 2004, we may, on one or more occasions, defer
interest payments on the applicable series of new debentures for up to 20
consecutive quarterly periods, unless an event of default with respect to those
debentures has occurred and is continuing. Interest payments will not be due and
payable on the applicable series of new debentures during a deferral period. If
we defer interest payments on a series of new debentures, the applicable new
trust will defer distribution payments on the applicable new preferred
securities and the applicable new common securities. Distributions will continue
to accumulate on the applicable new preferred securities and the applicable new
common securities at an annual rate of 9.5% of the applicable liquidation amount
during a deferral period. Also, additional distributions will accumulate on any
deferred distributions at the annual rate of 9.5%, compounded quarterly.
Additional distributions will only accumulate, however, to the extent permitted
by applicable law, but not at a rate greater than the rate at which interest is
then accruing on the applicable series of new debentures.
We will be subject to restrictions during a deferral period on our ability
to pay dividends on, take other payments with respect to, or redeem, purchase or
acquire our capital stock or to make payments on, or repay, repurchase or redeem
other debt securities that are equal with or junior to the new debentures. For a
more detailed discussion please read the section titled "Description of
Preferred Securities--Description of the New Debentures--Option to Extend
Interest Payment Period," beginning on page 120 of this prospectus.
Because we have the right to defer payments of interest on the new
debentures after February 15, 2004, the new debentures will be considered to
have been issued with original issue discount. The holders of new debentures
will thus be required to accrue their pro rata share of original issue discount,
even in the absence of cash distributions with respect to the new debentures.
For a more detailed discussion, see the section titled "United States Federal
Income Tax Considerations--Tax Treatment of the Ownership and Disposition of New
Preferred Securities and Common Stock--Original Issue Discount and Stated
Interest on the New Preferred Securities," beginning on page 137 of this
prospectus.
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We may extend a deferral period prior to the period's termination. We may
not, however, extend a deferral period, including all previous and further
extensions of the period, beyond 20 consecutive quarterly interest periods or
beyond the maturity date of the applicable series of new debentures. A deferral
period may not end on a date other than a distribution payment date. Once a
deferral period ends and we make all payments due on the applicable series of
new debentures, we can commence a new deferral period. We may also prepay all or
any portion of the interest accrued during a deferral period at any time.
Consequently, there could be multiple deferral periods of varying lengths
throughout the term of a series of new debentures. Please read the section
titled "Description of Preferred Securities--Description of the New
Debentures--Option to Extend Interest Payment Period," beginning on page 120 of
this prospectus, for a more detailed discussion.
If distributions are deferred, the property trustee will pay the deferred
distributions and, to the extent permitted by law, interest accrued on the
distributions, to holders of record of the applicable new preferred securities
as they appear on the books and records of the applicable new trust at the close
of business on the record date for the distribution payment date upon which the
deferral period terminates.
PAYMENT OF DISTRIBUTIONS
Each new trust must pay distributions on the applicable new preferred
securities on the distribution payment dates to the extent that the property
trustee has cash or common stock on hand to make distributions. The only funds
or common stock the property trustee will have to distribute to the holders of
the applicable new preferred securities will be from payments received from us
on the applicable series of new debentures. If we do not make interest payments
on the new debentures, the property trustee will not have funds or common stock
available to make distributions to you on the applicable new preferred
securities. If and to the extent that we make interest payments on a series of
new debentures, the property trustee is obligated to make distributions on the
applicable new preferred securities and new common securities on a pro rata
basis. We will guarantee the payment of distributions and other payments on the
new preferred securities on a subordinated basis, but only if, and to the extent
that, we have made corresponding payments to the applicable new trust on the
applicable series of new debentures and, as a result, the property trustee has
funds available to make distributions on the applicable new preferred
securities. Please read the section titled "Description of Preferred
Securities--Description of the New Preferred Securities Guarantees," beginning
on page 112 of this prospectus, for a more detailed discussion.
METHOD OF PAYMENT OF DISTRIBUTIONS
Each new trust will pay distributions to the holders of the applicable new
preferred securities as they appear on the books and records of the applicable
new trust on the relevant record date, which will be the 15th day before the
relevant distribution payment date.
If the applicable new trust fails to punctually pay distributions on the
applicable new preferred securities on any distribution payment date as a result
of our failure to make the corresponding interest payments on the applicable
series of new debentures, then the distributions will no longer be payable to
the registered holders of the applicable new preferred securities on the
relevant record date for those new preferred securities. The new trust will
instead make any such defaulted distribution payments to the registered holders
of the applicable new preferred securities on a special record date established
by the administrative trustees. The special record date will correspond to the
special record date or other specified date determined in accordance with the
applicable new indenture. Distributions will not be payable on any distribution
payment date falling within a deferral period unless we have elected to make a
full or partial payment of interest accrued on the applicable series of new
debentures on that distribution payment date.
The property trustee will pay distributions on the applicable new preferred
securities out of payments received on the applicable series of new debentures
and held for the benefit of the holders of
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the applicable new preferred securities and the applicable new common
securities. Subject to any applicable laws and regulations and the provisions of
the applicable new trust agreement, each such payment with respect to the
applicable new preferred securities will be made as described under the section
titled "Description of Preferred Securities--Description of the New Preferred
Securities--Book-Entry Only Issuance; The Depository Trust Company," beginning
on page 108 of this prospectus. The property trustee will pay any cash
distributions on new preferred securities that are not in book-entry form at the
option of the applicable new trust by check mailed to the address of the holder
entitled to it as it appears on the register or by wire transfer to an account
in the United States appropriately designated by the holder entitled to it,
prior to the record date for the corresponding distribution payment date. Any
distribution payments in common stock on new preferred securities that are not
in book-entry form will be made by mailing a stock certificate to the address of
the holder entitled to those payments as it appears on the register. A holder of
new preferred securities having an aggregate liquidation amount of $1,000,000 or
more may instruct the applicable new trust to make the payment by wire transfer.
If a distribution payment date is not a business day, the applicable new
trust will make distributions on:
- the next succeeding day that is a business day without any interest or
other payment in respect of any such delay, or
- the immediately preceding business day, if the next succeeding day that is
a business day is in the next succeeding calendar year,
in each case with the same force and effect as if the distribution was made on
the date it was originally payable. A "business day" is a day other than:
- a Saturday or Sunday;
- a day on which banking institutions in New York City are authorized or
required by law or executive order to remain closed; or
- a day on which the property trustee's corporate trust office or the
debenture trustee's corporate trust office is closed for business.
The payment dates and record dates for the new preferred securities will be
the same as the payment dates and record dates for the applicable series of new
debentures.
CONDITIONS TO DISTRIBUTIONS IN COMMON STOCK
We may elect to pay distributions by delivery of shares of our common stock
if and only if the following conditions shall have been satisfied:
- the shares of our common stock deliverable in payment of the distribution
shall have a fair market value that is not less than the value of the
distribution as of the applicable interest payment date (with respect to
interest distributions) or conversion date (with respect to additional
redemption distributions). In making this determination, the fair market
value of shares of our common stock shall be determined by us and shall be
equal to 90% of the average of the Closing Prices (as defined in the
section titled "Description of Preferred Securities--Description of the
New Preferred Securities--Fundamental Change," beginning on page 95 of
this prospectus) for each of the five consecutive trading days immediately
preceding the second trading day prior to the applicable interest payment
date or conversion date;
- distributions shall be paid only in cash in the event any shares of our
common stock to be issued for the payment of the distribution (1) require
registration under any federal securities law before such shares may be
freely transferable without being subject to any transfer restrictions
under the Securities Act upon issuance and if such registration is not
completed or does not become effective prior to the applicable interest
payment date (with respect to interest distributions) or conversion date
(with respect to additional redemption distributions), and/or
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(2) require registration with or approval of any governmental authority
under any state law or other federal law before such shares may be validly
issued or delivered upon issuance and if such registration is not
completed or does not become effective or such approval is not obtained
prior to the applicable interest payment date (with respect to interest
distributions) or conversion date (with respect to additional redemption
distributions);
- our common stock is, or shall have been, approved for quotation on the
Nasdaq National Market or listing on the New York Stock Exchange, in
either case, prior to the applicable interest payment date (with respect
to interest distributions) or conversion date (with respect to additional
redemption distributions); and
- all shares of our common stock which may be issued with respect to the
payment of the distribution will be issued out of our authorized but
unissued common stock and, will upon issuance, be duly and validly issued
and fully paid and non-assessable and free of any preemptive rights.
If all of the conditions set forth in the bullets immediately above are not
satisfied in accordance with the terms thereof, we will be required to pay
distributions in cash only.
CONVERSION RIGHTS
Holders of new preferred securities may convert them into shares of our
common stock at any time prior to:
- the close of business on February 15, 2013, or
- in the case of new preferred securities called for redemption, the close
of business on the business day prior to the redemption date.
The exchange preferred securities will be convertible into common stock at
an initial conversion price that is equal to the higher of:
- the equivalent of a 15% premium over the daily volume-weighted average of
the closing prices of our common stock for each of the five trading days
immediately preceding the fourth trading day prior to the exchange offer
expiration date, or
- $8.63 per share,
subject to adjustment.
The cash offer preferred securities will be convertible into common stock at an
initial conversion price that is equal to the higher of:
- the equivalent of a 15% premium over the closing price of our common stock
on the day that we price the cash offer, or
- $8.63 per share,
subject to adjustment.
The daily volume-weighted average of the closing prices shall mean the daily
volume-weighted average of the closing prices of our common stock, based on a
trading day from 9:00 a.m. to 4:00 p.m., on the New York Stock Exchange as
reported by Bloomberg Financial.
We will notify holders of the applicable conversion price after such
determination. The initial conversion price is subject to adjustment as
described under the sections titled "Description of Preferred
Securities--Description of the New Preferred Securities--Conversion Price
Adjustments--General" and "--Fundamental Change" set forth below.
Accumulated distributions will not be paid on new preferred securities that
are converted into shares of our common stock, except that holders of new
preferred securities at the close of business on a record date for a
distribution will receive the distribution on the distribution payment date even
though the new preferred securities are converted after the record date but on
or prior to the
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distribution payment date. We will make no payment or allowance for
distributions on the shares of our common stock issued upon conversion of new
preferred securities, except to the extent that the shares are held of record on
the record date for any such distributions. Each conversion will be deemed to
have been effected immediately prior to the close of business on the date on
which the related conversion notice was received by the conversion agent.
If you wish to exercise your conversion right, you must surrender your new
preferred securities together with an irrevocable conversion notice to the
applicable property trustee, as conversion agent. The conversion agent will, as
soon as practicable, exchange your new preferred securities for an equivalent
principal amount of new debentures and promptly convert those new debentures
into shares of our common stock. You may obtain copies of the required form of
the conversion notice from the conversion agent. If a book-entry system for the
applicable new preferred securities is in effect, however, procedures for
converting the new preferred securities into shares of our common stock will
differ. Please read the section titled "Description of Preferred
Securities--Description of the New Preferred Securities--Book-Entry Only
Issuance; The Depository Trust Company," beginning on page 108 of this
prospectus.
We will not issue any fractional shares of our common stock as a result of
any conversion of new preferred securities. We will pay cash in lieu of a
fractional share of common stock. The cash payment will be based on the current
market price of our common stock on the date the new preferred securities are
surrendered for conversion or, if not a trading day, on the next trading day.
CONVERSION PRICE ADJUSTMENTS
The conversion price of the exchange preferred securities and the conversion
price of the cash offer preferred securities are subject to adjustment for some
events, including:
(1) the issuance of shares of our common stock as a dividend or distribution
on our common stock;
(2) any subdivision, combination or reclassification of shares of our common
stock;
(3) the issuance to all holders of shares of our common stock of certain
rights or warrants to subscribe for or purchase shares of our common
stock at less than the then current market price;
(4) the distribution to all holders of our common stock of shares of our
capital stock, other than our common stock, evidences of our indebtedness
and/or other assets, including preferred securities, but excluding:
- any rights or warrants referred to in (3) above,
- any rights or warrants to acquire any capital stock of any entity other
than us or any of our subsidiaries,
- any dividends or distributions in connection with our liquidation,
dissolution or winding-up,
- any dividends or distributions payable solely in cash that may from
time to time be fixed by our board of directors, and
- any dividends or distributions referred to in (1) or (2) above;
(5) dividends or distributions to all holders of our common stock consisting
solely of cash, excluding:
- any cash dividends to the extent that the aggregate cash dividends per
share of our common stock in any consecutive 12-month period do not
exceed the greater of (1) the amount per share of our common stock of
the cash dividends paid on our common stock in the immediately
preceding 12-month period, to the extent that such dividends for the
immediately preceding 12-month period did not require an adjustment of
the conversion price pursuant to this bullet (as adjusted to reflect
subdivisions or combinations of our
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common stock), and (2) 15% of the average of the current market price
of our common stock for 10 consecutive trading days prior to the date
of declaration of such dividend, and
- any dividend or distribution in connection with our liquidation,
dissolution or winding-up or a redemption of any rights issued under a
rights agreement; provided that no adjustment will be made pursuant to
this bullet if that distribution would otherwise constitute a
fundamental change and be reflected in a resulting adjustment described
below; and
(6) payment to holders of our common stock in respect of a tender or
exchange offer by us or any of our subsidiaries for shares of our common
stock in excess of 110% of the current market price of our common stock
as of the trading day next succeeding the last date tenders or exchanges
may be made in the tender or exchange offer.
If any adjustment is required by (5) above as a result of a distribution that is
a dividend described in the first bullet of (5) above, that adjustment would be
based upon the amount by which the distribution exceeds the amount of the
dividend permitted to be excluded pursuant to the first bullet of (5). If an
adjustment is required to be made as described in (5) above as a result of a
distribution that is not such a dividend, such adjustment would be based upon
the full amount of such distribution. Any adjustment required by (6) above would
be calculated based upon the amount by which the aggregate consideration paid
for our common stock acquired in the tender or exchange offer exceeds 110% of
the value of such shares based on the first reported sale price of our common
stock on the trading day next succeeding the last date tenders or exchanges may
be made in the tender or exchange offer.
In the case of certain dividends or distributions, instead of adjusting the
conversion price, we may provide that upon the conversion of the applicable new
preferred securities, the holder converting such new preferred securities will
receive, in addition to the shares of our common stock (if any) to which the
holder is entitled, the cash, preferred securities or other property that the
holder would have received if it had, immediately prior to the record date for
such dividend or distribution, converted its new preferred securities into
shares of our common stock.
If any action would require adjustments of the conversion price under more
than one of the provisions described above, only one adjustment will be made and
that adjustment will be the amount of adjustment that has the highest absolute
value to the holders of the exchange preferred securities. No adjustment in the
conversion price will be required unless the adjustment would require a change
of at least 1% in the conversion price then in effect. However, any adjustment
that would otherwise be required to be made will be carried forward and taken
into account in any subsequent adjustment.
There will be no adjustment of the conversion price in the event of the
issuance of rights pursuant to a stockholder rights plan or similar plan or the
repurchase or redemption of those rights or the issuance of common stock,
options or other preferred securities under any officer, director or employee
benefit plan in existence on the date of this prospectus.
From time to time we may, to the extent permitted by law, reduce the
conversion price by any amount for any period of at least 20 business days, in
which case we will give at least 15 days' notice of the reduction. In addition,
we have the option to make reductions in the conversion price, in addition to
those described above, as we deem advisable to avoid or diminish any income tax
to holders of our common stock resulting from any dividend or distribution of
stock (or rights to acquire stock) or from any event treated as such for tax
purposes. Please read the section titled "United States Federal Income Tax
Considerations--Tax Treatment of the Ownership and Disposition of New Preferred
Securities and Common Stock--Adjustment of Conversion Price," beginning on
page 139 of this prospectus, for a more detailed discussion.
Except as stated above, the conversion price will not be adjusted for the
issuance of our common stock or any preferred securities convertible into or
exchangeable for our common stock or carrying the right to purchase our common
stock or any preferred securities convertible into or exchangeable for our
common stock.
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FUNDAMENTAL CHANGE
If we are a party to any transaction or series of transactions that results
in shares of our common stock being converted into the right to receive, or
being exchanged for, securities, cash or other property of a third party, the
conversion price of either the exchange offer preferred securities or the cash
offer preferred securities, as applicable, may be adjusted as described below.
In the event we are a party to:
- any recapitalization or reclassification of our common stock, other than a
change in par value or a change from par value to no par value or from no
par value to par value, or as a result of a subdivision or combination of
our common stock;
- any consolidation or merger with or into another corporation, other than a
merger that does not result in a reclassification, conversion, exchange or
cancellation of our outstanding common stock;
- any sale or transfer of all or substantially all of our assets; or
- any compulsory share exchange;
in each case, as a result of which shares of our common stock will be converted
into the right to receive other securities, cash or other property, then we will
ensure that appropriate provision is made so that the holder of each new
preferred security then outstanding will have the right thereafter to convert
the applicable new preferred securities only into:
- in the case of any transaction other than a transaction involving a Common
Stock Fundamental Change (as defined below), the kind and amount of the
securities, cash or other property that would have been receivable upon
the consummation of the transaction by a holder of the number of shares of
our common stock issuable upon conversion of such new preferred securities
immediately prior to the transaction, or
- in the case of a transaction involving a Common Stock Fundamental Change,
shares of common stock of the kind received by holders of our common stock
as a result of the Common Stock Fundamental Change,
but in each case after giving effect to any adjustment discussed below relating
to a Fundamental Change if the transaction constitutes a Fundamental Change.
If any Fundamental Change occurs, the applicable conversion price in effect
will be adjusted immediately after the Fundamental Change as follows:
- in the case of a Non-Stock Fundamental Change (as defined below), the
conversion price per share of our common stock immediately following such
Non-Stock Fundamental Change will be the lower of:
- the conversion price in effect immediately prior to such Non-Stock
Fundamental Change, but after giving effect to any other adjustments
effected pursuant to the preceding paragraphs; and
- the result obtained by multiplying the greater of the Applicable Price
(as defined below) or the then applicable Reference Market Price (as
defined below) by a fraction of which the numerator will be 100.0 and
the denominator will be an amount based on the date such Non-Stock
Fundamental Change occurs. For the period beginning on the date of
issuance of the applicable new preferred securities and ending
February 14, 2003, the denominator will be 109.50, and the denominator
will decrease by 1.583 during each successive 12-month period;
provided, that the denominator shall in no event be less than 100.0;
and
- in the case of a Common Stock Fundamental Change, the conversion price per
share of our common stock immediately following the Common Stock
Fundamental Change will be the conversion price in effect immediately
prior to the Common Stock Fundamental Change, but after giving effect to
any other adjustments effected pursuant to the preceding paragraphs,
multiplied by a fraction, the numerator of which is the Purchaser Stock
Price (as defined below) and the denominator of which is the Applicable
Price.
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However, in the event of a Common Stock Fundamental Change in which:
- 100% of the value of the consideration received by a holder of our common
stock is shares of common stock of the successor, acquirer or other third
party (and cash, if any, paid with respect to any fractional interests in
the shares of common stock resulting from the Common Stock Fundamental
Change), and
- all of our common stock will have been exchanged for, converted into, or
acquired for, shares of common stock (and cash, if any, with respect to
fractional interests) of the successor, acquirer or other third party,
the conversion price per share of our common stock immediately following the
Common Stock Fundamental Change will be the conversion price in effect
immediately prior to the Common Stock Fundamental Change divided by the number
of shares of common stock of the successor, acquirer, or other third party
received by a holder of one share of our common stock as a result of the Common
Stock Fundamental Change.
Depending upon whether a Fundamental Change is a Non-Stock Fundamental
Change or a Common Stock Fundamental Change, a holder may receive significantly
different consideration upon conversion of the new preferred securities. For
example, in the event of a Non-Stock Fundamental Change, the holder has the
right to convert new preferred securities into the kind and amount of the
securities, cash or other property as is determined by the number of shares of
our common stock that would have been receivable upon conversion of new
preferred securities at the conversion price as adjusted in the manner described
above. However, in the event of a Common Stock Fundamental Change in which less
than 100% of the value of the consideration received by a holder of our common
stock is common stock of the successor, acquirer or other third party, a holder
of new preferred securities who converts the new preferred securities following
the Common Stock Fundamental Change will receive consideration in the form of
that common stock only. A holder who converted the new preferred securities
prior to the Common Stock Fundamental Change would have received consideration
in the form of that common stock as well as any other securities or assets
(which may include cash) received by holders of our common stock in the
transaction.
The conversion price adjustments described above are designed, in some
circumstances, to reduce the conversion price that would be applicable in
Fundamental Change transactions where all or substantially all of our common
stock is converted into securities, cash, or property and not more than 50% of
the value received by the holders of our common stock consists of stock listed
or admitted for listing subject to notice of issuance on a national securities
exchange or quoted on the NASDAQ National Market of the NASDAQ Stock
Market, Inc. (a Non-Stock Fundamental Change, as defined below). This reduction
would result in an increase in the amount of the securities, cash or property
into which each new preferred security is convertible over that which would have
been obtained in the absence of those conversion price adjustments. However, the
maximum amount of the increase will be limited in cases where the relevant
Applicable Price is lower than the applicable Reference Market Price.
In a Common Stock Fundamental Change transaction, the adjustments described
above are designed to provide in effect that:
- where our common stock is converted partly into that listed or NASDAQ
National Market-traded common stock and partly into other securities,
cash, or property, each new preferred security will be convertible solely
into a number of shares of that common stock determined so that the
initial value of such shares (measured as described in the definition of
Purchaser Stock Price below) equals the value of the shares of our common
stock into which that new preferred security was convertible immediately
before the transaction (measured as described above), and
- where our common stock is converted solely into that listed or NASDAQ
National Market-traded common stock, each new preferred security will be
convertible into the same number of
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shares of the common stock receivable by a holder of the number of shares
of our common stock into which that new preferred security was convertible
immediately before that transaction.
In determining the amount and type of consideration received by a holder of
our common stock in the event of a Fundamental Change, we will disregard
consideration received by a holder of our common stock pursuant to a statutory
right of appraisal.
The term "Applicable Price" means:
- in the case of a Non-Stock Fundamental Change in which the holders of our
common stock receive only cash, the amount of cash receivable by a holder
of one share of our common stock; and
- in the case of any other Fundamental Change, the average of the Closing
Prices (as defined below) for one share of our common stock during the 10
trading days immediately prior to the record date for the determination of
the holders of our common stock entitled to receive cash, securities,
property or other assets in connection with that Fundamental Change or, if
there is no record date, prior to the date on which the holders of our
common stock will have the right to receive such cash, securities,
property or other assets.
The term "Closing Price" means on any day, the last reported sales price on
that day or, if no sales take place on that day, the average of the reported
closing bid and asked prices on that day, in each case on the New York Stock
Exchange, or, if the common stock is not listed or admitted to trading on the
New York Stock Exchange, on the principal national securities exchange or
quotation system on which the common stock is listed or admitted to trading or,
if not quoted or listed or admitted to trading on any national securities
exchange or quotation system, the average of the closing bid and asked prices of
the common stock in the over-the-counter market on that day as reported by the
National Quotation Bureau Incorporated, or a similarly generally accepted
reporting service or, if not available in that manner, as furnished by any New
York Stock Exchange member firm, selected by us under the new indenture for that
purpose.
The term "Common Stock Fundamental Change" means any Fundamental Change in
which more than 50% of the value, as determined in good faith by our board of
directors, of the consideration received by holders of our common stock consists
of shares of common stock that for each of the 10 consecutive trading days
immediately prior to the Fundamental Change has been admitted for listing or
admitted for listing subject to notice of issuance on a national securities
exchange or quoted on the NASDAQ National Market; provided, however, that a
Fundamental Change will not be a Common Stock Fundamental Change unless either:
- we continue to exist after the occurrence of that Fundamental Change and
the outstanding new preferred securities continue to exist as outstanding
new preferred securities, or
- the outstanding new preferred securities continue to exist as new
preferred securities and are convertible into shares of common stock of
our successor.
The term "Fundamental Change" means the occurrence of any transaction or
event or series of transactions or events, pursuant to which all or
substantially all of our common stock is exchanged for, converted into, acquired
for or constitutes solely the right to receive cash, securities, property or
other assets (whether by means of an exchange offer, liquidation, tender offer,
consolidation, merger, combination, reclassification, recapitalization or
otherwise). However, in the case of any of these series of transactions or
events, for purposes of adjustment of the conversion price, the Fundamental
Change will be deemed to have occurred when substantially all of our common
stock has been exchanged for, converted into, or acquired for or constitutes
solely the right to receive cash, securities, property or other assets but the
adjustment will be based upon the consideration that the holders of our common
stock received in the transaction or event as a result of which more than 50% of
the our common stock shall have been exchanged for, converted into or acquired
for, or shall constitute solely the right to receive cash, securities,
properties or other assets.
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The term "Non-Stock Fundamental Change" means any Fundamental Change other
than a Common Stock Fundamental Change.
The term "Purchaser Stock Price" means, with respect to any Common Stock
Fundamental Change, the average of the Closing Prices for one share of common
stock received by holders of our common stock in the Common Stock Fundamental
Change during the 10 trading days immediately prior to the record date for the
determination of the holders of our common stock entitled to receive such shares
of common stock or, if there is no record date, prior to the date upon which the
holders of our common stock will have the right to receive the shares of common
stock.
The term "Reference Market Price" with respect to an adjustment of the
conversion price of the exchange preferred securities will initially mean
two-thirds of the last reported sale price per share of our common stock on the
New York Stock Exchange on the fourth trading day prior to the exchange offer
expiration date. In the event of any adjustment to the conversion price other
than as a result of a Fundamental Change, the Reference Market Price will also
be adjusted so that the ratio of the Reference Market Price to the conversion
price after giving effect to any adjustment will always be the same as the ratio
of the initial Reference Market Price to the initial conversion price of the
exchange preferred securities.
The term "Reference Market Price" with respect to an adjustment of the
conversion price of the cash offer preferred securities, will initially mean
two-thirds of the last reported sale price per share of our common stock on the
New York Stock Exchange on the day we price the cash offer. In the event of any
adjustment to the conversion price other than as a result of a Fundamental
Change, the Reference Market Price will also be adjusted so that the ratio of
the Reference Market Price to the conversion price after giving effect to any
adjustment will always be the same as the ratio of the initial Reference Market
Price to the initial conversion price of the cash offer preferred securities.
Conversions of the new preferred securities may be effected by delivering
them to the office or agency maintained by us for that purpose.
Conversion price adjustments may, in specified circumstances, result in
constructive distributions that could be taxable as dividends under the Internal
Revenue Code of 1986, as amended, to holders of the applicable new preferred
securities or, in the case of a failure to make those adjustments, to holders of
our common stock issued upon conversion of the applicable new preferred
securities. Please read the section titled "United States Federal Income Tax
Considerations--Tax Treatment of the Ownership and Disposition of New Preferred
Securities and Common Stock--Adjustment of Conversion Price," beginning on
page 139 of this prospectus, for a more detailed discussion.
We could, in the future, enter into certain transactions, including certain
recapitalizations or distributions, that would not constitute a Fundamental
Change, but that would increase the amount of our consolidated indebtedness or
reduce the amount of our shareholders' equity.
OPTIONAL REDEMPTION
Each series of new debentures matures on February 15, 2013. In addition, we
have the option to redeem each series of new debentures:
- in whole or in part, at any time on or after February 15, 2004;
- in whole but not in part, prior to February 15, 2004, if our common stock
price has exceeded 200% of the conversion price for at least 20 trading
days during a 30-day trading period ending five trading days prior to the
notice of redemption; and
- in whole but not in part, at any time, under specified circumstances, upon
the occurrence of a tax event as described below.
Upon the repayment of the applicable series of new debentures, whether at
stated maturity or upon redemption, the proceeds from the repayment will
simultaneously be applied to redeem applicable new preferred securities and
applicable new common securities having an aggregate
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liquidation amount equal to the aggregate principal amount of the new debentures
repaid or redeemed at the applicable redemption price, plus accumulated and
unpaid distributions. However, except in the case of redemption upon maturity of
the new debentures and redemption prior to February 15, 2004, holders of the
applicable new preferred securities and new common securities will be given not
less than 30 nor more than 60 days' notice of the redemption. The applicable
redemption price per $22 in liquidation amount of exchange preferred securities
will be equal to the redemption price per $22 in liquidation amount of exchange
debentures and the applicable redemption price per $50 in liquidation amount of
cash offer preferred securities will be equal to the redemption price per $50 in
liquidation amount of cash offer debentures. Please read the section titled
"Description of Preferred Securities--Description of the New
Debentures--Optional Redemption," beginning on page 119 of this prospectus, for
a more detailed discussion.
If fewer than all of the outstanding exchange preferred securities or cash
offer preferred securities, as the case may be, and related new common
securities are to be redeemed, such applicable securities will be redeemed on a
pro rata basis and, in that case, the redemption of applicable new preferred
securities will be made as described under "Description of Preferred
Securities--Description of the New Preferred Securities--Book-Entry Only
Issuance; The Depository Trust Company," beginning on page 108 of this
prospectus. However, if an event of default under the applicable new trust
agreement has occurred and is continuing, the applicable new preferred
securities will have a priority over the new common securities with respect to
the payment of the redemption price.
In the case of redemption prior to February 15, 2004, notice must be
delivered not more than 30 and not less than 15 days prior to the date of
redemption. Prior to the redemption date, holders of the applicable new
preferred securities will have the right to convert their new preferred
securities into shares of our common stock at the conversion price in effect at
the time. If we deliver a notice of redemption to exercise our right to redeem
the applicable series of new debentures at any time prior to February 15, 2004
and a holder of those debentures converts its new debentures into shares of our
common stock during the period following a notice of redemption and prior to the
redemption date, then we will pay such holder an additional redemption
distribution. In the case of such a redemption prior to February 15, 2004, we
will pay additional interest in cash or our common stock, at our election, in an
amount equal to the total distributions payable on the applicable new preferred
securities through February 15, 2004, less any interest actually paid prior to
the date of conversion. Our ability to pay any additional redemption
distribution in shares of our common stock is contingent on satisfaction of
certain conditions. See the section titled "Description of Preferred
Securities--Description of the New Preferred Securities--Conditions to
Distributions in Common Stock," beginning on page 91 of this prospectus.
In this prospectus, when we refer to "distributions," we are also referring
to additional redemption distributions, if any.
SPECIAL EVENT DISTRIBUTION; TAX EVENT REDEMPTION
A "tax event" occurs if the administrative trustees receive an opinion of
nationally recognized independent tax counsel experienced in these matters to
the effect that as a result of:
- any amendment to, or change, including any announced prospective change,
in the laws or any regulations thereunder, of the United States or any
political subdivision or taxing authority of the United States or any
political subdivision,
- any amendment to, or change in, an interpretation or application of any
such laws or regulations by any legislative body, court or governmental or
regulatory agency or authority, including the enactment of any legislation
and the publication of any judicial decision or regulatory determination,
or
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- any official interpretation or pronouncement by any legislative body,
court or governmental or regulatory agency or authority that provides for
a position with respect to such laws or regulations that differs from its
previously generally accepted position,
in each case on or after the date of this prospectus, there is more than an
insubstantial risk that:
- the applicable new trust is, or will be within 90 days of the date of the
opinion, subject to federal income tax with respect to interest accrued or
received on the applicable series of new debentures, or
- the applicable new trust is, or will be within 90 days of the date of the
opinion, subject to more than a de minimis amount of other taxes, duties
or other governmental charges.
An "investment company event" occurs if the administrative trustees receive
an opinion of a nationally recognized independent counsel experienced in these
matters to the effect that, as a result of the occurrence of a change in law or
regulation or a change in interpretation or application of law or regulation by
any legislative body, court, governmental agency or regulatory authority, there
is more than an insubstantial risk that the applicable new trust is or will be
considered an investment company that is required to be registered under the
Investment Company Act of 1940.
If a tax event or investment company event has occurred and is continuing,
at any time, the applicable new trust may, with our prior written consent,
unless the applicable series of new debentures are redeemed in the limited
circumstances described below, be dissolved. As a result, after satisfaction of
liabilities to creditors of the new trust, if any, new debentures of the
applicable series with:
- an aggregate principal amount equal to the aggregate stated liquidation
amount of,
- an interest rate identical to the annual rate of distributions on, and
- accrued and unpaid interest equal to accumulated and unpaid distributions
on,
the applicable new preferred securities and applicable new common securities
outstanding at that time would be distributed to the holders of the applicable
new preferred securities and applicable new common securities in liquidation of
their interests in the applicable new trust, on a pro rata basis, within
90 days following the occurrence of the tax event or investment company event.
However, in the case of a tax event, as a condition of the dissolution and
distribution, the administrative trustees will have received an opinion of
nationally recognized independent tax counsel experienced in these matters,
which opinion may rely on published revenue rulings of the Internal Revenue
Service, to the effect that the holders of the applicable new preferred
securities will not recognize any gain or loss for federal income tax purposes
as a result of the dissolution and distribution of the applicable series of new
debentures. If, at the time, the applicable new trust has the opportunity to
eliminate, within the 90-day period, the tax event or investment company event
by taking some ministerial action, such as filing a form or making an election,
or pursuing some other similar reasonable measure that in our sole judgment
would not adversely affect the applicable new trust, the holders of the
applicable new preferred securities, or us, and will involve no material cost,
the applicable new trust will pursue that measure instead of dissolving itself.
Further, if, in the case of a tax event, the administrative trustees have
been informed by nationally recognized independent tax counsel experienced in
these matters that they cannot deliver an opinion to the effect that the holders
of the applicable new preferred securities will not recognize any gain or loss
for federal income tax purposes as a result of the dissolution and distribution
of such new debentures, we will have the right, upon not less than 30 nor more
than 60 days' notice, to redeem the new debentures. In that event, we can redeem
the applicable series of new debentures, in whole but not in part, for cash at a
redemption price equal to 100% of their principal amount plus accrued and unpaid
interest to the redemption date, within 90 days following the occurrence of the
tax event. Promptly following the redemption, the applicable new preferred
securities will be redeemed by the applicable new trust at a redemption price
equal to the liquidation amount of the applicable new preferred securities plus
accumulated and unpaid distributions. However, if, at the time, either we or the
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applicable new trust has the opportunity to eliminate, within the 90-day period,
the tax event by taking some ministerial action, such as filing a form or making
an election, or pursuing some other similar reasonable measure that in our sole
judgment would not adversely affect the applicable new trust, the holders of the
applicable new preferred securities, or us, and will involve no material costs,
we or the applicable new trust will pursue that measure instead of redeeming the
applicable series of new debentures and the applicable new preferred securities.
If we decline to consent to a dissolution of the applicable new trust and
distribution of the applicable series of new debentures or decline to redeem the
applicable series of new debentures as described above, the applicable preferred
securities will remain outstanding and we may be obligated to pay additional
interest described under the section titled "Description of Preferred
Securities--Description of the New Debentures--Additional Interest," beginning
on page 122 of this prospectus.
After the date fixed for any distribution of new debentures upon dissolution
of the applicable new trust:
- the applicable new preferred securities will no longer be deemed to be
outstanding,
- the depository or its nominee, as the record holder of the global
certificates, will receive a registered global certificate or certificates
representing the applicable series of new debentures to be delivered upon
such distribution, and
- any certificates representing new preferred securities not held by the
depository or its nominee will be deemed to represent the applicable
series of new debentures having an aggregate principal amount equal to the
aggregate stated liquidation amount of the applicable new preferred
securities, with an interest rate identical to the annual rate of
distributions on, and accrued and unpaid interest equal to accumulated and
unpaid distributions on, these new preferred securities, until the
certificates are presented to us or our agent for transfer, exchange or
reissuance.
We cannot give you any assurance as to the market price for the new
debentures that may be distributed in exchange for such preferred securities if
a dissolution and liquidation of a new trust were to occur. Accordingly, the new
debentures that you may subsequently receive on dissolution and liquidation of a
new trust may trade at a discount to the price of the applicable new preferred
securities exchanged. If the applicable series of new debentures is distributed
to the holders of the applicable new preferred securities upon the dissolution
of the applicable new trust, we will use our reasonable best efforts to list
such new debentures on the New York Stock Exchange or on another national
securities exchange or similar organization.
PROCEDURES FOR REDEMPTION BY A NEW TRUST
After February 15, 2004, a new trust may not redeem fewer than all of the
outstanding applicable new preferred securities unless all accumulated and
unpaid distributions have been or contemporaneously are paid on all of that
trust's new preferred securities for all quarterly distribution periods
terminating on or prior to the date of redemption.
If the applicable new trust gives notice of redemption in respect of new
preferred securities, which notice will be irrevocable, then on the redemption
date, provided that we have paid to the property trustee a sufficient amount of
cash in connection with the related redemption of the applicable series of new
debentures, this new trust will irrevocably deposit with the depository funds
sufficient to pay the applicable redemption price and irrevocable instructions
and authority to pay the redemption price to the holders of the applicable new
preferred securities. Please read the section titled "Description of Preferred
Securities--Description of the New Preferred Securities--Book-Entry Only
Issuance; The Depository Trust Company," beginning on page 108 of this
prospectus.
If notice of redemption shall have been given and funds deposited as
required, then, on the date fixed for redemption, distributions will cease to
accumulate and all rights of holders of the applicable
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new preferred securities called for redemption will cease, except for the right
of holders of the applicable new preferred securities to receive the redemption
price and all accumulated and unpaid distributions. In the event of a redemption
prior to February 15, 2004, holders that convert their new preferred securities
after the applicable notice of redemption is given will receive distributions in
an amount equal to the total distributions payable on their new preferred
securities through February 15, 2004, less any distributions actually paid on
those new preferred securities prior to the date of conversion.
If the redemption date is not a business day, then payment of the redemption
price payable on that date will be made on the next succeeding day that is a
business day, and without any interest or other payment in respect of any such
delay. If that business day falls in the next calendar year, however, the
payment will be made on the immediately preceding business day.
In the event that we or the applicable new trust, pursuant to the applicable
new preferred securities guarantee described in the section titled "Description
of Preferred Securities--Description of the New Preferred Securities Guarantee,"
improperly withhold or refuse to pay the applicable redemption price, then
distributions on the applicable new preferred securities will continue to
accumulate at the then applicable rate, from the original redemption date to the
date the redemption price is actually paid. Under these circumstances, the
actual payment date will be considered the date fixed for redemption for
purposes of calculating the redemption price.
In the event that fewer than all of the outstanding applicable new preferred
securities and applicable new common securities are to be redeemed, then the new
preferred securities and new common securities will be redeemed on a pro rata
basis and, in that case, the redemption of the applicable new preferred
securities will be made as described in the section titled "Description of
Preferred Securities--Description of the New Preferred Securities--Book-Entry
Only Issuance; The Depository Trust Company," beginning on page 108 of this
prospectus.
In the event of any redemption in part, the applicable new trust will not:
- issue, register the transfer of, or exchange, any certificated security
during a period beginning at the opening of business 15 days before any
applicable new securities are selected for redemption and ending at the
close of business on the earliest date on which the relevant notice of
redemption is deemed to have been given to all holders of those new
preferred securities to be redeemed, or
- register the transfer of, or exchange, any certificated preferred
securities selected for redemption, in whole or in part, except for the
unredeemed portion of any certificated preferred securities being redeemed
in part.
Subject to the provisions described above and applicable law, including
United States federal securities laws, we or any of our subsidiaries may at any
time, and from time to time, purchase outstanding new preferred securities by
tender, in the open market or by private agreement.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary dissolution of a new trust, the
then holders of the applicable new preferred securities will be entitled to
receive out of the assets of that new trust, after satisfaction of liabilities
to creditors, distributions in an amount equal to the aggregate of the stated
liquidation amount of $22 per exchange preferred security or $50 per cash offer
preferred security, as the case may be, plus accumulated and unpaid
distributions to the date of payment unless, in connection with the liquidation,
the applicable series of new debentures in an aggregate stated principal amount
equal to the aggregate stated liquidation amount of, with an interest rate
identical to, the annual rate of distributions on, and accrued and unpaid
interest equal to accumulated and unpaid distributions on, the applicable new
preferred securities, have been distributed on a pro rata basis to the holders
of those new preferred securities and new common securities.
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If, upon any dissolution, the liquidation distribution can be paid only in
part because the applicable new trust has insufficient assets available to pay
in full the aggregate liquidation distribution, then the amounts payable
directly by the new trust on the applicable new preferred securities shall be
paid on a pro rata basis. The holders of the applicable new common securities
will be entitled to receive distributions upon any such dissolution pro rata
with the holders of the new preferred securities, except that if an event of
default under the applicable new trust agreement has occurred and is continuing,
the applicable new preferred securities will have priority over the applicable
new common securities.
Each new trust will dissolve:
- on February 15, 2018, the expiration of its term,
- upon our bankruptcy or the bankruptcy of the holder of its new common
securities,
- upon the filing of a certificate of dissolution or its equivalent with
respect to us or the holder of its new common securities, after obtaining
the consent of the holders of at least a majority in liquidation amount of
its new preferred securities and new common securities voting together as
a single class, to the filing of a certificate of cancellation with
respect to the new trust, or the revocation of our charter and the
expiration of 90 days after the date of revocation without a reinstatement
of the charter,
- upon the occurrence of a tax event or investment company event except in
the limited circumstance described in the section titled "Description of
Preferred Securities--Description of the New Preferred Securities--Special
Event Distribution; Tax Event Redemption," beginning on page 99 of this
prospectus,
- upon the entry of a decree of a judicial dissolution of us or the new
trust,
- upon the redemption of all of the its new preferred securities and new
common securities, or
- upon the conversion of all of its outstanding new preferred securities
pursuant to the new trust agreement.
EVENTS OF DEFAULT
An event of default under the new indentures constitutes an event of default
under the related new trust agreements. Pursuant to the new trust agreements,
the holder of new common securities will be deemed to have waived any event of
default with respect to the new common securities until all events of default
with respect to the applicable new preferred securities have been cured, waived
or otherwise eliminated. Until all events of default with respect to the
applicable new preferred securities have been cured, waived, or otherwise
eliminated, the property trustee will be deemed to be acting solely on behalf of
the holders of the applicable new preferred securities and only the holders of
the applicable new preferred securities will have the right to direct the
property trustee with respect to specific matters under such new trust
agreement, and therefore such new indenture.
If the property trustee fails to enforce its rights under the applicable
series of new debentures, holders of applicable new preferred securities, to the
fullest extent permitted by law, may institute a legal proceeding against us to
enforce the property trustee's rights under the exchange debentures. However, if
an event of default has occurred and is continuing under the new trust agreement
and the event is attributable to our failure to pay interest or principal on the
applicable series of new debentures on the date the interest or principal is
otherwise payable, or in the case of redemption, the redemption date, a holder
of the applicable new preferred securities may institute a direct action for
enforcement of payment to the holder directly of the principal of or interest on
the applicable series of new debentures having an aggregate principal amount
equal to the aggregate liquidation amount of the applicable new preferred
securities of the holder on or after the respective due date specified in such
new debentures. In connection with that direct action, we will remain obligated
to pay the principal or interest on the applicable new debentures and will be
subrogated to the rights of such holders of new
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preferred securities under the new trust agreement to the extent of any payment
made by us to such holder of new preferred securities in the direct action. The
holders of the applicable series of new preferred securities will not be able to
exercise directly any other remedy available to the holders of new debentures.
The property trustee is required to notify holders of the applicable new
preferred securities, within 90 days of an event of default under the applicable
new trust agreement, of all defaults with respect to the applicable new
preferred securities actually known to the property trustee. Except in the case
of a default in the payment of principal or interest, or in the case of a
redemption, the property trustee may withhold that notice if the board of
directors, the executive committee, a trust committee of directors or the
property trustee itself determines in good faith that the withholding of notice
is in the interests of the holders of the applicable new preferred securities.
Upon the occurrence of an event of default under the applicable new trust
agreement, the property trustee as the sole holder of the applicable series of
new debentures will have the right under the applicable new indenture to declare
the principal of and interest on such new debentures to be immediately due and
payable.
We and each new trust are required to provide to each property trustee
annually an officer's certificate as to our compliance with all conditions and
covenants under the new trust agreement.
VOTING RIGHTS
Except as described below, under the Delaware Business Trust Act, the Trust
Indenture Act and under the section titled "Description of Preferred
Securities--Description of the New Preferred Securities Guarantee--Modification
of the New Preferred Guarantee; Assignment," and as otherwise required by law
and the applicable new trust agreement, the holders of the applicable new
preferred securities will have no voting rights. In the event that we elect to
defer payments of interest on any series of new debentures, as described in the
section titled "Description of Preferred Securities--Description of the New
Preferred Securities--Distributions," the holders of the applicable new
preferred securities do not have the right to appoint a special representative
or trustee to protect their interests.
Subject to the requirement that the trustees of a new trust obtain a tax
opinion under specific circumstances described below, the holders of a majority
in aggregate liquidation amount of the applicable new preferred securities have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the property trustee, or the exercise of any trust or
power conferred upon the property trustee under the applicable new trust
agreement, as long as the holders giving such direction have given the property
trustee indemnification or security acceptable to it. This includes the right to
direct the property trustee, as holder of the applicable series of new
debentures, to:
- exercise the remedies available under the applicable new indenture,
- waive any past event of default under the applicable new indenture and its
consequences, to the extent they can be waived,
- exercise any right to rescind or annul a declaration that the principal of
the applicable series of new debentures shall be due and payable, or
- consent to any amendments, modifications or termination of the applicable
new indenture or series of new debentures requiring the consent of the
holders of those debentures.
However, if an event of default has occurred and is continuing under the
applicable new indenture, the holders of 25% of the aggregate liquidation amount
of the applicable new preferred securities then outstanding may direct the
property trustee to declare the principal and interest of the applicable series
of new debentures immediately due and payable.
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Where a consent or action under the applicable new indenture would require
the consent of:
(1) holders of the applicable series of new debentures representing a
specified percentage greater than a majority in principal amount of the
applicable series of new debentures, or
(2) each holder of new debentures affected by the consent,
no such consent will be given by the property trustee without the prior consent
of, in the case of (1) above, holders of the applicable new preferred securities
representing at least that specified percentage of the aggregate liquidation
amount of such new preferred securities, or, in the case of (2) above, each
holder of new preferred securities affected by the consent.
The property trustee will notify all holders of the applicable new preferred
securities of any notice of default received from the applicable indenture
trustee with respect to the applicable series of new debentures. The notice will
state that the event of default under the applicable new indenture also
constitutes an event of default under the applicable new trust agreement. Except
with respect to directing the time, method and place of conducting a proceeding
for a remedy, the property trustee will not take any of the actions described
above unless it has obtained an opinion of nationally recognized tax counsel
experienced in these matters to the effect that, following those actions, the
new trust will be classified as a grantor trust for United States federal income
tax purposes and each holder will be treated as owning an undivided beneficial
interest in the applicable series of new debentures.
In the event that the consent of the property trustee, as the holder of the
applicable series of new debentures, is required under the applicable new
indenture with respect to any amendment, modification or termination of such
indenture, the property trustee will request the direction of the holders of the
applicable new preferred securities and new common securities with respect to
that amendment, modification or termination and will vote with respect to that
amendment, modification or termination as directed by a majority in liquidation
amount of the applicable new preferred securities and new common securities
voting together as a single class. However, where a consent under the applicable
new indenture would require the consent of holders of the applicable series of
new debentures representing a specified percentage greater than a majority in
principal amount of such series of new debentures, the property trustee may only
give such consent at the direction of the holders representing such specified
percentage in liquidation amount of the applicable new preferred securities and
new common securities. The property trustee will be under no obligation to take
any such action in accordance with the directions of the holders of the
applicable new preferred securities and new common securities unless each of the
new trustees has obtained an opinion of nationally recognized tax counsel
experienced in those matters to the effect that for United States federal income
tax purposes, the new trust will not be classified as other than a grantor
trust.
A waiver of an event of default under the applicable new indenture will
constitute a waiver of the corresponding event of default under the applicable
new trust agreement.
Any required approval or direction of holders of the applicable new
preferred securities may be given at a separate meeting of holders of such new
preferred securities convened for that purpose, at a meeting of all of the
holders of the applicable new preferred securities and new common securities, or
pursuant to written consent. The administrative trustees will cause a notice of
any meeting at which holders of the applicable new preferred securities are
entitled to vote, or of any matter upon which action by written consent of those
holders is to be taken, to be mailed to each holder of record of the applicable
new preferred securities. Each notice will include a statement setting forth:
- the date of the meeting or the date by which the action is to be taken,
- a description of any resolution proposed for adoption at such meeting on
which such holders are entitled to vote or of such matter upon which
written consent is sought, and
- instructions for the delivery of proxies or consents.
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No vote or consent of the holders of new preferred securities will be
required for the applicable new trust to redeem and cancel the applicable new
preferred securities or distribute the applicable series of new debentures in
accordance with the applicable new trust agreement.
Notwithstanding that holders of new preferred securities are entitled to
vote or consent under any of the circumstances described above, any of the new
preferred securities that are owned at that time by us or by an affiliate of
ours, will not be entitled to vote or consent and will, for purposes of such
vote or consent, be treated as if they were not outstanding.
The procedures by which holders of new preferred securities in book-entry
form may exercise their voting rights are described in the section titled
"Description of Preferred Securities--Description of the New Preferred
Securities--Book-Entry Only Issuance; The Depository Trust Company," beginning
on page 108 of this prospectus.
Holders of new preferred securities will have no rights to increase or
decrease the number of the new trustees, or to appoint or remove trustees, who
may be appointed, removed or replaced solely by us as the indirect or direct
holder of all of the new common securities of the applicable new trust.
MODIFICATION OF THE NEW TRUST AGREEMENTS
The administrative trustees (and under specific circumstances the property
trustee or the Delaware trustee) may modify and amend the applicable new trust
agreement, provided that if any proposed amendment provides for, or the
administrative trustees otherwise propose to effect:
- any action that would adversely affect the powers, preferences or special
rights of the applicable new preferred securities or new common
securities, whether by way of amendment to the applicable new trust
agreement or otherwise, or
- the dissolution, winding-up or termination of the applicable new trust
other than pursuant to the terms of the applicable new trust agreement,
then the holders of the applicable new preferred securities and new common
securities voting together as a single class will be entitled to vote on the
amendment or proposal and the amendment or proposal will not be effective except
with the approval of at least two-thirds in liquidation amount of the new
preferred securities and new common securities affected by it, voting together
as a single class. If any amendment or proposal referred to in the first bullet
above would adversely affect only the new preferred securities or the new common
securities, then only the affected class will be entitled to vote on the
amendment or proposal and the amendment or proposal will not be effective except
with the approval of at least two-thirds in liquidation amount of the new
preferred securities or the new common securities, as the case may be.
Notwithstanding the foregoing, no amendment or modification may be made to
the applicable new trust agreement if the amendment or modification would:
- cause the new trust to be classified for United States federal income tax
purposes as other than a grantor trust,
- reduce or otherwise adversely affect the powers of the property trustee in
contravention of the Trust Indenture Act, or
- cause the new trust to be deemed an "investment company" which is required
to be registered under the Investment Company Act.
MERGERS, CONSOLIDATIONS OR AMALGAMATIONS
The new trusts may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease their respective properties and assets
substantially as an entirety to, any corporation or
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other body, except as described below or as otherwise provided in the applicable
new trust agreement. Each new trust may, with the consent of a majority of the
administrative trustees and without the consent of the holders of the applicable
new preferred securities and new common securities, the property trustee or the
Delaware trustee, consolidate, amalgamate, merge with or into, or be replaced by
a trust organized as such under the laws of any state of the United States,
provided that:
- if the new trust is not the survivor, the successor entity either
- expressly assumes all of the obligations of the new trust under the
applicable new preferred securities and new common securities, or
- substitutes for such new preferred securities other preferred
securities having substantially the same terms as the applicable new
preferred securities, so long as the successor preferred securities
rank the same as the applicable new preferred securities rank with
respect to distributions and payments upon liquidation, redemption and
otherwise,
- if the new trust is not the survivor, we expressly acknowledge or appoint
a trustee of the successor entity possessing the same powers and duties as
the property trustee as the holder of the applicable series of new
debentures,
- the applicable new preferred securities or any successor preferred
securities are listed, or any successor preferred securities will be
listed upon notification of issuance, on any national securities exchange
or with another organization on which those new preferred securities are
then listed or quoted,
- the merger, consolidation, amalgamation or replacement does not cause the
applicable new preferred securities, including any successor preferred
securities, to be downgraded by any nationally recognized statistical
rating organizations,
- the merger, consolidation, amalgamation or replacement does not adversely
affect the rights, preferences and privileges of the holders of the
applicable new preferred securities and new common securities, including
any successor preferred securities, in any material respect (other than
with respect to any dilution of the holders' interest in the new entity,
if any),
- the successor entity has a purpose substantially identical to that of the
new trust,
- prior to the merger, consolidation, amalgamation or replacement, we have
received an opinion of a nationally recognized independent counsel to the
new trust experienced in these matters to the effect that:
- the merger, consolidation, amalgamation or replacement does not
adversely affect the rights, preferences and privileges of the holders
of the applicable new preferred securities and the applicable new
common securities, including any successor preferred securities, in any
material respect (other than with respect to any dilution of the
holders' interest in the new entity),
- following the merger, consolidation, amalgamation or replacement,
neither the new trust nor the successor entity, if any, will be
required to register as an investment company under the Investment
Company Act,
- following the merger, consolidation, amalgamation or replacement, the
new trust, or the successor entity, will be treated as a grantor trust
for United States federal income tax purposes, and
- if the new trust is not the survivor, we guarantee the obligations of
the successor entity under the successor preferred securities at least
to the extent provided by the new preferred securities guarantee.
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Notwithstanding the general provisions described above, a new trust will
not, except with the consent of holders of 100% in liquidation amount of the
applicable new preferred securities and new common securities, consolidate,
amalgamate, merge with or into, or be replaced by any other entity or permit any
other entity to consolidate, amalgamate, merge with or into, or replace it, if
the consolidation, amalgamation, merger or replacement would cause the new trust
or the successor entity to be classified as other than a grantor trust for
United States federal income tax purposes.
BOOK-ENTRY ONLY ISSUANCE; THE DEPOSITORY TRUST COMPANY
The new preferred securities will be issued in the form of registered
preferred securities in global form. Each global security will be deposited
with, or on behalf of, The Depository Trust Company, or DTC, and registered in
the name of Cede & Co., as nominee of DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act. DTC holds securities that its direct participants deposit with DTC. DTC
also facilitates the settlement among direct participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in direct participants' accounts,
thereby eliminating the need for physical movement of securities certificates.
Direct participants include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations. DTC is owned
by a number of its direct participants and by the New York Stock Exchange, Inc.,
the American Stock Exchange LLC, and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to indirect
participants, such as securities brokers and dealers, banks and trust companies
that clear transactions through or maintain a custodial relationship with a
direct participant, either directly or indirectly. The rules applicable to DTC
and its direct and indirect participants are on file with the SEC.
Purchases of new preferred securities under the DTC system must be made by
or through direct participants, which will receive a credit for the applicable
new preferred securities on DTC's records. The ownership interest of each actual
purchaser of each new preferred security, to which we refer in this prospectus
as the beneficial owner, is in turn to be recorded on the direct and indirect
participants' records. Beneficial owners will not receive written confirmation
from DTC of their purchases, but are expected to receive written confirmations
providing details of the transactions, as well as periodic statements of their
holdings, from the direct or indirect participant through which the beneficial
owner purchased new preferred securities. Transfers of ownership interests in
the new preferred securities are to be accomplished by entries made on the books
of direct and indirect participants acting on behalf of beneficial owners.
Beneficial owners will not receive certificates representing their ownership
interests in the applicable new preferred securities, except in the event that
use of the book-entry system for such new preferred securities is discontinued
or in certain other limited circumstances.
So long as DTC, or its nominee, is the registered owner or holder of a
global security, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the new preferred securities represented thereby for all
purposes under the applicable new trust agreement and the applicable new
preferred securities. No beneficial owner of an interest in a global certificate
will be able to transfer that interest except in accordance with DTC's
applicable procedures, in addition to those provided for under the applicable
new trust agreement.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in same-day funds. If a holder
requires physical delivery of new preferred securities in fully registered,
certificated form for any reason, including to sell new preferred securities to
persons in states which require such delivery of the new preferred securities or
to pledge the new
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preferred securities, the holder must transfer its interest in the global
security in accordance with the normal procedures of DTC and the procedures set
forth in the applicable new trust agreement.
To facilitate subsequent transfers, all new preferred securities deposited
by direct participants with DTC are registered in the name of Cede & Co. The
deposit of new preferred securities with DTC and their registration in the name
of Cede & Co. do not effect any change in beneficial ownership. DTC has no
knowledge of the actual beneficial owners of the new preferred securities; DTC's
records reflect only the identity of the direct participants to whose account
such new preferred securities are credited, which may or may not be the
beneficial owners. The direct and indirect participants will remain responsible
for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to direct
participants, by direct participants to indirect participants and by direct and
indirect participants to beneficial owners will be governed by arrangements
among them, subject to any statutory or regulatory requirements that may be in
effect from time to time.
Redemption notices in respect of new preferred securities held in book-entry
form will be sent to DTC. If less than all of the applicable new preferred
securities are being redeemed, DTC will reduce the amount of the interest of
each direct participant in such new preferred securities in accordance with its
procedures.
Although voting with respect to the new preferred securities is limited, in
those cases where a vote is required, neither DTC nor Cede & Co. will itself
consent or vote with respect to any new preferred securities. Under its usual
procedures, DTC would mail an omnibus proxy to the applicable new trust as soon
as possible after the record date. The omnibus proxy assigns the consenting or
voting rights of Cede & Co. to those direct participants to whose accounts new
preferred securities are credited on the record date (identified in a listing
attached to the omnibus proxy).
Any distribution payments in cash or redemption proceeds on the new
preferred securities held in book-entry form will be made to Cede & Co. in
immediately available funds. DTC's practice is to credit direct participants'
accounts on the relevant payment date in accordance with their respective
holdings shown on DTC's records unless DTC has reason to believe that it will
not receive payments on such payment date. Payments by participants to
beneficial owners will be governed by standing instructions and customary
practices, as is the case with preferred securities held for the account of
customers in bearer form or registered in "street name," and such payments will
be the responsibility of the participant and not of DTC, the applicable new
trust or us, subject to any statutory or regulatory requirements to the contrary
that may be in effect from time to time. Payment of distributions or redemption
proceeds to Cede & Co. is the responsibility of the applicable new trust,
disbursement of such payments to direct participants is the responsibility of
DTC, and disbursement of such payments to the beneficial owners is the
responsibility of direct and indirect participants.
Although DTC has agreed to the procedures described above in order to
facilitate transfers of interests in the global new preferred securities among
participants of DTC, DTC is under no obligation to perform or continue to
perform these procedures, and these procedures may be discontinued at any time.
None of us, the new trusts, the indenture trustee or the new trustees will have
any responsibility for the performance by Cede & Co., DTC or its participants or
indirect participants under the rules and procedures governing DTC. DTC may
discontinue providing its services as securities depository with respect to the
new preferred securities at any time by giving reasonable notice to the
applicable new trust. Under those circumstances, in the event that a successor
securities depository is not obtained, new preferred securities certificates are
required to be printed and delivered. Additionally, the administrative trustees
(with our consent) may decide to discontinue use of the system of book-entry
transfers through DTC (or any successor depository) with respect to the new
preferred securities. In that event, certificates for the applicable new
preferred securities will be printed and
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delivered. In each of the above circumstances, if no paying agent has previously
been appointed, we will appoint a paying agent with respect to the applicable
new preferred securities.
Except as described herein, a beneficial owner in a global new preferred
securities certificate will not be entitled to receive physical delivery of new
preferred securities. Accordingly, each beneficial owner must rely on the
procedures of DTC to exercise any rights under the new preferred securities.
The information in this section and elsewhere in this prospectus concerning
DTC and DTC's book-entry system has been obtained from sources that we and the
new trusts believe to be reliable, but neither we nor the new trusts take
responsibility for the accuracy of this information.
PAYMENTS IN RESPECT OF THE NEW PREFERRED SECURITIES
Payments in respect of the new preferred securities will be made to DTC,
which will credit the relevant accounts at DTC on the applicable distribution
dates or, in the case of certificated new preferred securities, the payments
will be made by check mailed to the address of the holder entitled to the
payments as the address will appear on the register.
DISCONTINUANCE OF THE DEPOSITORY'S SERVICES
DTC is under no obligation to provide services as depository for the global
new preferred securities and may discontinue providing those services at any
time. None of us, the new trusts, the indenture trustees nor the trustees of the
new trusts will have any responsibility for the performance by DTC or its direct
or indirect participants under the rules and procedures governing DTC.
In the event that:
- DTC notifies the applicable new trust that it is unwilling or unable to
continue as a depository for a global new preferred security and no
successor depository has been appointed within 90 days of that new trust
being notified, or
- in a new trust's sole discretion, the new trust executes and delivers to
the property trustee an order to the effect that a global new preferred
security shall be so exchangeable,
the new trust will prepare and deliver certificates for the new preferred
securities in exchange for beneficial interests in the global new preferred
security. Any global new preferred security that is exchangeable as described in
the preceding sentence will be exchangeable for new preferred securities
registered in such names as the depository will direct. We expect that those
instructions will be based upon directions received by the depository from its
participants with respect to ownership of beneficial interests in the global new
preferred security.
In addition, if an event of default has occurred and is continuing with
respect to applicable new preferred securities or if DTC ceases to be a clearing
agency registered as such under the Securities Exchange Act, a beneficial owner
in a global new preferred security certificate will receive in exchange for its
beneficial interest an equivalent amount of new preferred securities in
certificated form, upon request and in accordance with the terms of the
applicable new trust agreement.
INFORMATION CONCERNING THE PROPERTY TRUSTEE, TRANSFER AGENT, REGISTRAR AND
PAYING AGENT, AND CONVERSION AGENT
The Bank of New York will initially act as property trustee, transfer agent,
registrar and paying agent, and conversion agent for the new preferred
securities, but the applicable new trust may designate an additional or
substitute transfer agent, registrar and paying agent, or conversion agent. The
paying agent will be permitted to resign as paying agent upon 30 days' written
notice to the administrative trustees. In the event that The Bank of New York
will no longer be the paying agent, the
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applicable new trust will appoint a successor to act as paying agent (which must
be a bank or trust company).
In the event that the new preferred securities do not remain in
book-entry-only form, registration of transfers of new preferred securities will
be effected without charge by or on behalf of the applicable new trust, but upon
payment of any tax or other governmental charges that may be imposed in
connection with the transfer and/or the giving of such indemnity as the
applicable new trust may require with respect to the transfer. Exchanges of new
preferred securities for the applicable series of new debentures will be
effected without charge by or on behalf of the applicable new trust, but upon
payment of any tax or other governmental charges which may be imposed and/or the
giving of such indemnity as such new trust may require with respect to the
exchange in connection with the issuance of any new debentures in the name of
any person other than the registered holder of the new preferred security for
which the new debenture is being exchanged or for any reason other than the
exchange. The applicable new trust will not be required to register or cause to
be registered the transfer of new preferred securities after the new preferred
securities have been called for redemption or exchange.
The property trustee, prior to the occurrence of a default with respect to
the new preferred securities or new common securities and after the curing of
any defaults that may have occurred, undertakes to perform only the duties that
are specifically set forth in the applicable new trust agreement and, after
default, will exercise the same degree of care as a prudent individual would
exercise in the conduct of his or her own affairs. Subject to these provisions,
the property trustee is under no obligation to exercise any of the powers vested
in it by the applicable new trust agreement at the request of any holder of the
applicable new preferred securities, unless it is offered indemnity satisfactory
to it by the holder against the costs, expenses and liabilities that it might
incur. The holders of new preferred securities will not be required to offer
such indemnity in the event that those holders, by exercising their voting
rights, direct the property trustee to take any action it is empowered to take
under the applicable new trust agreement following an event of default under the
applicable new trust agreement. The property trustee also serves as trustee
under the new preferred securities guarantees and the new indentures.
We may maintain banking and other commercial relationships with the property
trustee and its affiliates in the ordinary course of business.
GOVERNING LAW
Delaware law will govern the new trust agreements and the new preferred
securities.
MISCELLANEOUS
The administrative trustees are authorized and directed to conduct the
affairs of and to operate the new trusts in such a way so that:
- the new trusts will not be required to register as an "investment company"
under the Investment Company Act,
- the new trusts will not be characterized as other than a grantor trust for
United States federal income tax purposes, and
- the new debentures will be treated as our indebtedness for United States
federal income tax purposes.
In this connection, we and the administrative trustees are authorized to
take any action, not inconsistent with applicable law or the new trust
agreements, that each of us and the administrative trustees determine in our
respective discretion to be necessary or desirable to achieve that end, as long
as the action does not adversely affect the interests of the holders of new
preferred securities or vary the terms or the new preferred securities.
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The holders of the new preferred securities have no preemptive rights.
DESCRIPTION OF THE NEW PREFERRED SECURITIES GUARANTEES
We have summarized below the material provisions of the guarantees that we
will execute and deliver, from time to time, for the benefit of the holders of
the new preferred securities. This summary may omit a term or provision that you
would consider important. For complete descriptions of the new preferred
securities guarantees, we encourage you to read the guarantees, forms of which
are filed with the SEC. Each new preferred securities guarantee incorporates by
reference the terms of the Trust Indenture Act. Each new preferred securities
guarantee will be qualified under the Trust Indenture Act. The Bank of New York,
as the guarantee trustee, will hold each new preferred securities guarantee for
the benefit of the holders of the applicable new preferred securities.
GENERAL
To the extent described below, we will agree to pay the following amounts in
full if they are not paid by the applicable new trust:
- any accumulated and unpaid distributions that are required to be paid on
the new preferred securities to the extent we have made corresponding
payments on the applicable series of new debentures to the property
trustee;
- the amount payable upon redemption of the applicable new preferred
securities, to the extent we have made corresponding payments on the
applicable series of new debentures to the property trustee; and
- upon a liquidation of the new trust, the lesser of:
- the aggregate of the liquidation amount and all accumulated and unpaid
distributions on the applicable new preferred securities to the date of
payment, to the extent the new trust has funds available for those
payments, and
- the amount of assets of the new trust remaining available for
distribution to holders of the applicable new preferred securities.
We may satisfy our obligation to make a guarantee payment by either making
payments directly to the holders of applicable new preferred securities or by
causing the applicable new trust to make the payments to them.
Each new preferred securities guarantee is a guarantee from the time of
issuance of the applicable new preferred securities. We will be obligated to
make the guarantee payments when due, regardless of any defense, right of
set-off or counterclaim that the applicable new trust may have or assert. The
new preferred securities guarantees do not cover any payment of distributions
and other payments on the new preferred securities when the applicable new trust
does not have sufficient funds to make those distributions or other payments. If
we do not make interest payments on the new debentures of the applicable series
held by the property trustee, the applicable new trust will not pay
distributions on the new preferred securities and will not have funds available
for those payments. Please read the section titled "Description of Preferred
Securities--Description of the New Debentures--Our Covenants Applicable to the
New Debentures," beginning on page 125 of this prospectus, for a more detailed
description.
We have also agreed to irrevocably guarantee the obligations of each new
trust with respect to the new common securities to the same extent as the
guarantee with respect to the new preferred securities, except that if an event
of default under the applicable new indenture has occurred and is continuing,
holders of new preferred securities will have priority over holders of new
common securities with respect to distributions and payments on liquidation,
redemption or otherwise.
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MODIFICATION OF THE NEW PREFERRED SECURITIES GUARANTEES; ASSIGNMENT
We may amend each new preferred securities guarantee without the consent of
any holder of new preferred securities if the amendment does not adversely
affect the rights of the holders in any material respect. In all other cases, we
may amend the applicable new preferred securities guarantee only with the prior
approval of the holders of at least two-thirds in aggregate stated liquidation
amount of the outstanding applicable new preferred securities.
All guarantees and agreements contained in the applicable new preferred
securities guarantee will bind our successors, assigns, receivers, trustees and
representatives and will inure to the benefit of the holders of the applicable
new preferred securities then outstanding. Except in connection with any merger
or consolidation of us with or into another entity or any sale, transfer or
lease of our assets to another entity permitted under the applicable new
indenture, we may not assign our rights or delegate our obligations under the
applicable new preferred securities guarantee without the prior approval of the
holders of at least two-thirds of the aggregate stated liquidation amount of the
related new preferred securities then outstanding.
TERMINATION
Each new preferred securities guarantee will terminate upon:
- full payment of the redemption price of, plus accumulated and unpaid
distributions on, all applicable new preferred securities,
- distribution of the applicable series of new debentures held by the
applicable new trust to the holders of the applicable new preferred
securities or the conversion, if applicable, of all of the applicable new
preferred securities into our common stock or other preferred securities,
or
- full payment of the amounts payable upon liquidation of the applicable new
trust.
Each new preferred securities guarantee will continue to be effective or
will be reinstated if at any time any holder of the applicable new preferred
securities must repay any amounts paid on those new preferred securities or
under such new preferred securities guarantee.
EVENTS OF DEFAULT
An event of default under the new preferred securities guarantee will occur
upon:
- our failure to perform any of our payment or other obligations under such
new preferred securities guarantee, or
- our failure to deliver common stock or other applicable preferred
securities upon an appropriate election by the holder or holders of the
applicable new preferred securities to convert such new preferred
securities into shares of our common stock or other applicable preferred
securities, as the case may be.
In each new preferred securities guarantee, we will agree that, so long as
the applicable new preferred securities remain outstanding, we will not make the
payments and distributions described below if:
- we have elected to defer interest payments on the applicable series of new
debentures and that deferral period is continuing,
- we are in default with respect to our payment or other obligations under
such new preferred securities guarantee,
- any event of default under the applicable new trust agreement has
occurred, or
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- any event has occurred and is continuing that, with the giving of notice
or the lapse of time or both, would constitute an event of default under
the applicable new indenture.
In the above circumstances, we will agree that we will not:
- declare or pay dividends on, or make distributions with respect to, or
redeem, purchase or acquire, or make a liquidation payment with respect
to, any of our capital stock, other than:
(1) purchases or acquisitions of shares of our capital stock (or capital
stock equivalents) relating to existing benefit plans (or any options
or other instruments issued under those plans) or relating to any
existing contract or security requiring us to purchase shares of our
capital stock (or capital stock equivalents),
(2) purchases of shares of our capital stock (or capital stock
equivalents) from our officers, directors or employees or those of
our subsidiaries under existing employment agreements or upon
termination of employment or retirement,
(3) as a result of a reclassification, combination or subdivision of our
capital stock or the exchange or conversion of one class or series of
our capital stock for another class or series of our capital stock,
(4) dividends or distributions of shares of common stock on common stock,
(5) the purchase of fractional interests in shares of our capital stock
pursuant to the conversion or exchange provisions of the capital
stock or any security being converted or exchanged into the capital
stock,
(6) purchases or other acquisitions of common stock relating to an
existing dividend reinvestment or other similar plan,
(7) any dividend or distribution of capital stock (or capital stock
equivalents) relating to an existing stockholders rights plan, or the
issuance of stock under any such plan in the future, or the
redemption or repurchase of any such rights under the plan, or
- guarantee payments with respect to any of (1) through (7) above;
- make any payment of interest, principal or premium, if any, on or repay,
repurchase or redeem any debt issued by us that rank PARI PASSU with or
junior to the applicable series of new debentures; or
- make any guarantee payments with respect to the two bullets above, other
than pursuant to the new preferred securities guarantees or our guarantees
of the new common securities.
We will provide to the guarantee trustee, in the form of an officer's
certificate or otherwise, evidence of compliance with any conditions provided
for in the applicable new preferred securities guarantee. The guarantee trustee
will notify holders of the applicable new preferred securities, within 90 days
of any event of default under the applicable new preferred securities guarantee,
of all defaults known to the guarantee trustee. However, under some
circumstances, the guarantee trustee may withhold the notice if it determines in
good faith that the withholding of notice is in the interests of the holders of
these new preferred securities.
The holders of a majority in liquidation amount of the applicable new
preferred securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the guarantee trustee or
to direct the exercise of any trust or power the guarantee trustee has under the
applicable new preferred securities guarantee. If the guarantee trustee fails to
enforce the applicable new preferred securities guarantee, any holder of
applicable new preferred securities may institute a legal proceeding directly
against us to enforce the guarantee trustee's rights, without first instituting
a legal proceeding against the applicable new trust, the guarantee trustee or
any other
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person or entity. We will waive any right or remedy to require that any action
be brought first against the applicable new trust or any other person or entity
before proceeding directly against us.
SUBORDINATED STATUS OF THE NEW PREFERRED SECURITIES GUARANTEES
Our obligation under the new preferred securities guarantees to make
guarantee payments will be unsecured and will rank:
- subordinate and junior in right of payment to all our senior debt,
- pari passu in right of payment with the most senior preferred or
preference stock issued by us now or in the future, if any, with any
guarantee entered into by us relating to any preferred or preference stock
of any of our affiliates, with the new debentures and with one another
and,
- senior in right of payment to:
- our common stock, and
- the existing debentures and the existing preferred securities
guarantee.
The term "senior debt" means:
(1) any liability of ours:
- for borrowed money or under any reimbursement obligation relating to a
letter of credit, surety bond or similar instrument,
- evidenced by a bond, note, debenture or similar instrument,
- for obligations to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course
of business,
- for the payment of money relating to a capitalized lease obligation, or
- for the payment of money under any swap agreement;
(2) any liability of others described in (1) that we have guaranteed or that
is otherwise our legal liability; and
(3) any deferral, renewal, extension or refunding of any liability of the
types referred to in (1) and (2) above.
However, senior debt will not include:
- the existing debentures or the existing preferred securities guarantee;
- the new debentures;
- the new preferred securities guarantees;
- any other indebtedness or guarantees between or among us and our
affiliates, unless the instrument creating or evidencing those obligations
expressly provides otherwise; or
- any liabilities made equal or subordinate to the new debentures by their
terms.
Our obligations under the new preferred securities guarantees will be
effectively junior to all debt and other liabilities and preferred stock of our
subsidiaries. By your acceptance of the new preferred securities, you agree to
the subordination provisions and other terms of the applicable new preferred
securities guarantee.
The new indenture does not limit or prohibit us from incurring liabilities
that will be senior in right of payment to the new preferred securities
guarantees. Upon our bankruptcy, liquidation or winding-up, our obligations
under the new preferred securities guarantees will rank junior to all of our
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other liabilities, except as described above. In those circumstances, funds may
not be available for payment under the new preferred securities guarantees.
We will deposit each preferred securities guarantee with the guarantee
trustee to be held for the benefit of the holders of the applicable preferred
securities. The guarantee trustee will have the right to enforce the applicable
new preferred securities guarantee on behalf of those holders. Each new
preferred securities guarantee will constitute a guarantee of payment and not
merely of collection. This means that you may institute a legal proceeding
directly against us to enforce the rights of the guarantee trustee under the
applicable new preferred securities guarantee without first instituting a legal
proceeding against any other person or entity. Please read the section titled
"Description of Preferred Securities--Description of the New Preferred
Securities Guarantee--Events of Default," beginning on page 113 of this
prospectus, for a more detailed description.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The guarantee trustee, prior to the occurrence of a default with respect to
the applicable new preferred securities guarantee, will perform only those
duties specifically given to it in that new preferred securities guarantee.
After default, the guarantee trustee will exercise the same degree of care as a
prudent individual would exercise in the conduct of his or her own affairs. The
guarantee trustee will become obligated to exercise any of its powers under the
applicable new preferred securities guarantee at the request of any holder of
the applicable new preferred securities only if it is offered indemnity
satisfactory to it against the costs, expenses and liabilities that it might
incur. The guarantee trustee also serves as property trustee and indenture
trustee.
DESCRIPTION OF THE NEW DEBENTURES
We will issue the exchange debentures and the cash offer debentures under
separate new indentures between us and The Bank of New York, as indenture
trustee. Each new indenture will be qualified under the Trust Indenture Act. The
terms of each series of new debentures include those stated in the applicable
new indenture and those made part of that new indenture by the Trust Indenture
Act. The financial terms for the new debentures are the same as those for the
applicable new preferred securities, including the right to convert to shares of
common stock. We have summarized the material terms of the new indentures and
the new debentures below. This summary may omit a term or provision that you
would consider important. For a complete description of the new debentures, we
encourage you to read the applicable new indenture. We have filed a form of each
new indenture with the SEC.
You may receive new debentures if we exercise our right to terminate the
applicable new trust. Therefore, you should carefully review all the information
regarding the new debentures contained in this prospectus. Please read the
section titled "Description of Preferred Securities--Description of the New
Preferred Securities--Special Event Distribution; Tax Event Redemption,"
beginning on page 99 of this prospectus.
If you receive new debentures, we will use our best efforts to have the new
debentures listed on the New York Stock Exchange or on another national
securities exchange or similar organization.
GENERAL
The new debentures will be unsecured and rank junior and subordinate in
right of payment to all of our senior debt. The exchange debentures will be
limited in aggregate principal amount to approximately $39.12 million, which is
the sum of:
- the aggregate stated liquidation amount of the outstanding exchange
preferred securities, and
- the capital contributed by us in exchange for the new common securities.
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The cash offer debentures will be limited in aggregate principal amount to
approximately $154.6 million, which is the sum of:
- the aggregate stated liquidation amount of the outstanding cash offer
preferred securities, and
- the capital contributed by us in exchange for the new common securities.
The new debentures will not be subject to a sinking fund provision. The
entire principal amount of each series of new debentures will mature and become
due and payable, together with any accrued and unpaid interest, if any, on
February 15, 2013.
If a series of new debentures is distributed to the holders of the
applicable new preferred securities in liquidation of their interests in the
applicable new trust, those new debentures will, unless held in certificated
form, initially be issued as a global security. As described in the section
titled "Description of Preferred Securities--Description of the New
Debentures--Book-Entry and Settlement," under specific limited circumstances, a
series of new debentures may be issued in certificate form in exchange for a
global security. In the event that the exchange debentures are issued in
certificated form, they will be in denominations of $22 and integral multiples
of $22. In the event that the cash offer debentures are issued in certificated
form they will be issued in denominations of $50 and integral multiples of $50.
The new debentures may be transferred or exchanged at the corporate trust office
of the indenture trustee in New York, New York.
Payments on new debentures issued as a global security will be made to DTC,
a successor depository or, in the event that no depository is used, to a paying
agent for the new debentures. In the event new debentures are issued in
certificated form, principal and interest will be payable, the transfer of the
new debentures will be registrable and the new debentures will be new debentures
of the same series in other denominations of a like aggregate principal amount
at the corporate trust office of the indenture trustee in New York, New York.
However, payment of interest may be made at our option by check mailed to the
address of the holder entitled thereto or by wire transfer to an account in the
United States appropriately designated by the holder prior to the record date
for the corresponding interest payment date. Notwithstanding that provision, so
long as the holder of any new debentures is the property trustee, the payment of
principal and interest, if in cash, on the new debentures held by the property
trustee will be made by wire transfer at the place and to the account in the
United States designated by the property trustee.
SUBORDINATION
Payment of principal of, or any premium and interest on, the new debentures
will generally be subordinated in right of payment to the prior payment in full
of all of our current and future senior debt. In addition, payments of principal
and interest on the new debentures will be effectively junior to all debt and
other liabilities and preferred stock of our subsidiaries.
We may make no payment of principal (including redemption payments) of, or
any premium or interest on, the new debentures if:
- we are in default of our obligation to pay principal of, or any premium,
sinking funds, or interest on, any of our senior debt, or
- the maturity of any senior debt has been accelerated because of a default.
This restriction on payment will continue until the default is cured or
waived or ceases to exist, or until we have discharged or paid the accelerated
senior debt in full.
If our assets are distributed upon any dissolution, winding-up, liquidation
or reorganization:
- all senior debt will first be paid in full before any payment on account
of the principal of, or any premium or interest on, the new debentures is
made,
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- any payment or distribution of our assets to which the holders of the new
debentures would be entitled except for the subordination provisions of
the applicable new indenture will be paid directly to the holders of our
senior debt, to the extent necessary to make payment in full of all
remaining unpaid senior debt, after giving effect to any concurrent
payment or distribution to the holders of the senior debt, and
- in the event that, notwithstanding the provisions described above, any
payment or distribution of our assets is received by the applicable
property trustee or the holders of any of the new debentures before all of
our senior debt is paid in full, the payment or distribution will be paid
over to those holders of senior debt for application to the payment of all
the remaining unpaid senior debt until all the senior debt has been paid
in full, after giving effect to any concurrent payment or distribution to
the holders of the senior debt.
Subject to the payment in full of all senior debt upon any such distribution
of our assets, the holders of the new debentures will be subrogated to the
rights of the holders of the senior debt to receive payments or distributions of
our cash, property or preferred securities applicable to senior debt until the
principal of, and any premium and interest on, the new debentures will be paid
in full.
As a result of this subordination, in the event of any distribution of our
assets upon dissolution, winding-up, liquidation, reorganization or other
similar proceedings:
- holders of our senior debt will be paid in full before payments may be
made on the new debentures and the holders of new debentures will be
required to pay over their share of the distribution, to the extent it
related to the new debentures, to the holders of senior debt until all the
senior debt is paid in full, and
- our creditors who are neither holders of new debentures nor holders of
senior debt may recover less, on a proportionate basis, than holders of
senior debt and may recover more, ratably, than the holders of the new
debentures.
As a result, payments to the holders of new debentures may be reduced or
eliminated. These subordination provisions will not apply to any money and new
preferred securities held in trust pursuant to the discharge, defeasance and
covenant defeasance provisions of the new indentures. The term "senior debt"
means:
(1) any liability of ours:
- for borrowed money or under any reimbursement obligation relating to a
letter of credit, surety bond or similar instrument,
- evidenced by a bond, note, debenture or similar instrument,
- for obligations to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course
of business,
- for the payment of money relating to a capitalized lease obligation, or
- for the payment of money under any swap agreement;
(2) any liability of others described in (1) that we have guaranteed or that
is otherwise our legal liability; and
(3) any deferral, renewal, extension or refunding of any liability of the
types referred to in (1) and (2) above.
However, senior debt will not include:
- the existing debentures or the existing preferred securities guarantee;
- the new debentures;
- the new preferred securities guarantees;
- any other indebtedness or guarantees between or among us and our
affiliates unless the instrument creating or evidencing those obligations
expressly provides otherwise; or
- any liabilities made equal or subordinate to the new debentures by their
terms.
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Our obligations under the new debentures will be effectively junior to all
debt and other liabilities and preferred stock of our subsidiaries.
The new indentures do not limit the amount of senior debt that we may incur.
As a result of the subordination of the new debentures, if we became insolvent,
holders of new debentures may receive less on a proportionate basis than other
creditors.
OPTIONAL REDEMPTION
We will have the right to redeem the new debentures, in whole or in part,
from time to time, on or after February 15, 2004, upon not less than 30 nor more
than 60 days' notice, at the following redemption prices (expressed as
percentages of the principal amount of the new debentures) together with accrued
and unpaid interest, including, to the extent permitted by applicable law,
compound interest to, but excluding, the redemption date, if redeemed during the
12-month period beginning:
<Table>
<Caption>
REDEMPTION
YEAR PRICE
- ---- -----------
2004........................................................ 106.333%
2005........................................................ 104.750%
2006........................................................ 103.167%
2007........................................................ 101.583%
2008 and thereafter......................................... 100.000%
</Table>
If we redeem the new debentures on any date in the period beginning on any
record date and ending on the next February 15, May 15, August 15 or
November 15, accrued and unpaid interest will be payable to holders of record on
the relevant record date.
Prior to February 15, 2004, we also have the right to redeem the new
debentures in certain circumstances when our common stock price has exceeded
200% of our conversion price for a specified period of time. Please read the
section titled "Description of Preferred Securities--Description of the New
Preferred Securities--Optional Redemption," beginning on page 98 of this
prospectus, for a more detailed discussion.
We will also have the right to redeem the new debentures in some
circumstances upon the occurrence of a tax event. Please read the section titled
"Description of Preferred Securities--Description of the New Preferred
Securities--Special Event Distribution; Tax Event Redemption," beginning on
page 99 of this prospectus, for a more detailed discussion.
So long as the corresponding new preferred securities and new common
securities are outstanding, the applicable new trust will use the proceeds from
the redemption of any of the applicable new debentures to redeem the applicable
new preferred securities and the new common securities.
We may not redeem any new debentures unless all accrued and unpaid interest
has been paid in full on all outstanding new debentures of the applicable series
for all quarterly interest payment periods terminating on or prior to the date
of notice of redemption.
If a partial redemption of the new preferred securities resulting from a
partial redemption of the applicable new debentures would result in the
delisting of those new preferred securities from any national securities
exchange on which those new preferred securities are then listed, we may only
redeem the applicable new debentures in whole.
INTEREST
Each new debenture bears interest at the annual rate of 9.5% from the first
date of issuance, payable quarterly in arrears on February 15, May 15,
August 15, and November 15 of each year, commencing February 15, 2002. We will
pay interest in cash or, at our election, prior to February 15, 2004, in our
common stock. If we elect to pay interest in shares of our common stock, the
shares of
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common stock will be valued at 90% of the average of the closing prices for the
five trading days immediately preceding the second trading day prior to the
interest payment date. Interest will generally be paid to the person in whose
name the new debenture is registered at the close of business on the business
day next preceding an interest payment date. We will provide notice of our
election to pay interest in common stock instead of cash no later than the
record date prior to such interest payment date. The record date with respect to
each interest payment date will be 15 days prior to the related interest payment
date. The amount of interest payable for any period will be computed on the
basis of a 360-day year of twelve 30-day months and, for any period of less than
a full calendar month, the actual number of days elapsed in such 30-day month.
If an interest payment date is not a business day, interest will be paid on:
- the next succeeding day that is a business day without any interest or
other payment in respect of any such delay, or
- the immediately preceding business day, if the next succeeding day that is
a business day is in the next succeeding calendar year,
in each case with the same force and effect as if the interest was paid on the
date it was originally payable.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as we are not in default on the payment of interest on the new
debentures, we have the right at any time after February 15, 2004, and from time
to time after that date, during the term of the applicable new debentures, to
defer interest payments for up to 20 consecutive quarterly periods. At the end
of each deferral period, we will pay all interest then accrued and unpaid,
together with interest on that interest at the stated annual rate, which is
9.5%, compounded quarterly, to the extent permitted by applicable law.
During any deferral period, we will not:
- declare or pay dividends on, make any distribution with respect to, or
redeem, purchase, acquire or make a liquidation payment with respect to,
any of our capital stock, other than:
(1) purchases or acquisitions of shares of our capital stock (or capital
stock equivalents) relating to benefit plans (or any options or other
instruments issued under those plans) or relating to any contract or
security requiring us to purchase shares of our capital stock (or
capital stock equivalents);
(2) purchases of shares of our capital stock (or capital stock
equivalents) from our officers, directors or employees or those of
our subsidiaries under existing employment agreements or upon
termination of employment or retirement;
(3) as a result of a reclassification, combination or subdivision of our
capital stock or the exchange or conversion of one class or series of
our capital stock for another class or series of our capital stock;
(4) dividends or distributions of shares of common stock on common stock;
(5) the purchase of fractional interests in shares of our capital stock
pursuant to the conversion or exchange provisions of the capital
stock or any security being converted or exchanged into the capital
stock;
(6) dividends or distribution in shares of our capital stock of the same
class on which the dividend or distribution is being made and
conversions or exchanges of common stock of one class into common
stock of another class;
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(7) purchases or other acquisitions of common stock relating to a
dividend reinvestment or other similar plan;
(8) any dividend or distribution of capital stock (or capital stock
equivalents) relating to a stockholders' rights plan, or the issuance
of stock under any such plan in the future, or the redemption or
repurchase of rights under the plan; or
(9) guarantee payments made with respect to any of (1) through
(8) above;
- make any payment of interest, principal or premium, if any, on or repay,
repurchase or redeem any debt securities issued by us that rank PARI PASSU
with or junior to the new debentures; or
- make any guarantee payments with respect to the two bullets above, other
than pursuant to the new preferred securities guarantees or our guarantees
of the new common securities.
We may extend a deferral period prior to the period's termination. We may
not, however, extend a deferral period, including all previous and further
extensions of the period, beyond 20 consecutive quarterly interest periods, or
beyond the maturity of the new debentures. A deferral period may not end on a
date other than an interest payment date.
Upon the termination of any deferral period and the payment of all amounts
then due on the applicable new debentures, we may commence a new deferral
period, on the terms described in this section. No interest will be due or
payable on those applicable new debentures during a deferral period, except at
the end of the period.
We must give the property trustee, the administrative trustees and the
indenture trustee of each new trust and each new indenture notice of our
election to begin a deferral period at least one business day prior to the
earliest of:
- the date the distribution on the applicable new preferred securities would
have otherwise been payable,
- the date the administrative trustees are required to give notice to the
New York Stock Exchange, the NASDAQ National Market or other applicable
self-regulatory organization or to holders of the applicable new preferred
securities of the record date, or
- the date the distribution is payable, but in any event not less than one
business day prior to the record date.
The indenture trustee will give notice of our election to begin a deferral
period to the holders of the applicable new debentures, and the administrative
trustees will give notice of our election to the holders of the applicable new
preferred securities.
CONVERSION OF THE NEW DEBENTURES
Holders of the new debentures may convert them into our common stock at any
time prior to:
- the close of business on February 15, 2013, or
- the close of business on the business day prior to the redemption date, in
the case of new debentures called for redemption,
at the initial conversion price, subject to the conversion price adjustments
described in the section titled "Description of Preferred
Securities--Description of the New Preferred Securities--Conversion Rights,"
beginning on page 92 of this prospectus. The new trusts have agreed not to
convert new debentures held by them except pursuant to a notice of conversion
delivered to the conversion agent by an applicable holder of new preferred
securities or new common securities.
Upon surrender of a new preferred security to the conversion agent for
conversion, the applicable new trust will distribute the applicable new
debentures to the conversion agent on behalf of the holder
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of the applicable new preferred securities so converted. Upon such delivery, the
conversion agent will convert the new debentures to our common stock on behalf
of the holder. Our delivery to the holders of the new debentures, through the
conversion agent, of the fixed number of shares of our common stock into which
the new debentures are convertible, together with the cash payment, if any, in
lieu of fractional shares, will be deemed to satisfy our obligation to pay the
principal amount of the new debentures so converted, and the accrued and unpaid
interest, including compounded interest, accrued on the new debentures at the
time of the conversion.
If any new debenture is surrendered for conversion after the close of
business on a record date for payment of interest and on or before the
corresponding interest payment date, then, notwithstanding such conversion, the
interest payable on the interest payment date with respect to the new debenture
will be paid to the applicable new trust, which will distribute that interest to
the holder of the applicable new preferred securities or new common securities
at the close of business on the record date, or to such other person in whose
name the new debentures are registered at the close of business on the record
date, as the case may be.
We will make no payment or allowance for distributions on the shares of our
common stock issued upon such conversion, except to the extent that such shares
of our common stock are held of record on the record date for any such
distributions. Each conversion will be deemed to have been effected immediately
prior to the close of business on the day on which the related conversion notice
was received by the conversion agent.
ADDITIONAL REDEMPTION
Prior to February 15, 2004, we may elect to redeem the new debentures if the
price of our common stock has exceeded 200% of the conversion price for at least
20 trading days during a 30-day trading period ending five trading days prior to
the notice of redemption. We must give the holders of the new debentures and the
applicable indenture trustee notice of the redemption not more than 30 and not
less than 15 days before the date of redemption.
In the case of such a redemption prior to February 15, 2004, we will pay
additional interest in cash or common stock, at our election, on new debentures
converted after the notice of redemption. This additional interest will be in an
amount equal to the total disbributions on the applicable new preferred
securities through February 15, 2004, less any interest actually paid prior to
the date of conversion. Our ability to pay any distributions in shares of our
common stock is contingent on satisfaction of certain conditions. See the
section titled "Description of Preferred Securities--Description of the New
Preferred Securities--Conditions to Distributions in Common Stock," beginning on
page 91 of this prospectus.
COMPOUNDED INTEREST
Payments of compounded interest, if any, on the new debentures held by the
new trusts, will make funds available for the payment of additional
distributions on distributions in arrears in respect of the new preferred
securities, pursuant to the terms of those new preferred securities and to the
extent permitted by law.
ADDITIONAL INTEREST
If at any time when the property trustee of a new trust is the holder of any
new debentures, the applicable new trust or the applicable property trustee is
required to pay any taxes, duties, assessments or governmental charges of
whatever nature other than withholding taxes imposed on distributions to holders
of new preferred securities, imposed by the United States, or any other taxing
authority, then we will pay as additional interest on the applicable series of
new debentures held by the property trustee, to the extent permitted by
applicable law, the additional amounts required so that the net amounts received
and retained by the applicable new trust and the property trustee after paying
those
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taxes, duties, assessments or other governmental charges will be equal to the
amounts the applicable new trust and the property trustee would have received
had no such taxes, duties, assessments or other governmental charges been
imposed.
EVENTS OF DEFAULT IN THE NEW INDENTURES
If any new indenture event of default occurs and is continuing, the
applicable property trustee, as the holder of the applicable series of new
debentures, or the holders of not less than 25% in principal amount of the
outstanding applicable series of new debentures, may declare the principal of
and the interest on the applicable series of new debentures to be due and
payable.
The following are events of default with respect to the new debentures:
- failure to pay interest on the new debentures for 30 days past the date
specified for payment;
- failure to pay principal of or any premium, if any, on any new debenture
when due;
- failure by us to deliver shares of our common stock upon an appropriate
election by a holder of new debentures to convert those new debentures;
- failure to comply with any other covenant or warranty in the new
indentures for a period after 90 days after written notice to us by the
applicable indenture trustee or the holders of at least 25% in aggregate
principal amount of the applicable series of new debentures then
outstanding;
- the dissolution, winding-up or termination of the applicable new trust,
except in connection with the distribution of the applicable series of new
debentures to the holders of applicable new preferred securities and new
common securities in liquidation of the new trust:
- upon the occurrence of a tax event or an investment company event,
- upon the redemption of all outstanding applicable new preferred
securities,
- upon the conversion of all outstanding applicable new preferred
securities, or
- in connection with specific mergers, consolidations or amalgamations
permitted by the new trust agreements; or
- certain events of bankruptcy, insolvency or reorganization of us.
An event of default under the new indentures also constitutes an event of
default under the new trust agreements. The holders of new preferred securities
under specific circumstances have the right to direct the applicable property
trustee to exercise its rights as the holder of the applicable series of new
debentures, which are described in the sections titled "Description of Preferred
Securities--Description of the New Preferred Securities--Events of Default" and
"--Voting Rights."
Notwithstanding the provisions described above, a holder of new preferred
securities may directly institute a proceeding against us for enforcement of
payment to that holder of interest or principal if:
- an event of default under the new trust agreements has occurred and is
continuing, and
- that event is attributable to our failure to pay interest or principal on
the applicable series of new debentures on the date the interest or
principal is otherwise payable or, in the case of redemption, the
redemption date.
In any such proceeding, we will be subrogated to the rights of the holder
under the applicable new trust agreement to the extent of any payment we make to
the holder in the proceeding. The holders of the applicable new preferred
securities will not be able to exercise directly any other remedy available to
the holders of the the applicable series of new debentures.
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BOOK-ENTRY AND SETTLEMENT
If any new debentures are distributed to holders of new preferred
securities, the new debentures will, except under the limited circumstances
described below, be issued in the form of one or more global certificates, which
we refer to as global debentures, registered in the name of the depository or
its nominee. Except under the limited circumstances described below, new
debentures represented by the applicable global debenture will not be
exchangeable for, and will not otherwise be issuable as, new debentures in
definitive form. The global debentures may not be transferred except by the
depository to a nominee of the depository, or by a nominee of the depository to
the depository or another nominee of the depository or to a successor depository
or its nominee.
The laws of some jurisdictions may require that particular purchasers of
preferred securities take physical delivery of such preferred securities in
definitive form. Such laws may impair the ability to transfer or pledge
beneficial interests in a global debenture.
Except as provided below, owners of beneficial interests in a global
debenture will not be entitled to receive physical delivery of the applicable
new debentures in definitive form and will not be considered the holders (as
defined in the new indentures) of new debentures for any purpose under the new
indenture and no global debenture representing new debentures will be
exchangeable, except for another global debenture of like denomination and tenor
to be registered in the name of the depository or its nominee or a successor
depository or its nominee. Accordingly, each beneficial owner must rely on the
procedures of the depository or if that person is not a participant, on the
procedures of the participant or indirect participant through which that person
owns its interest to exercise any rights of a holder under the new indenture.
THE DEPOSITORY
If new debentures are distributed to holders of new preferred securities in
liquidation of the interests of those holders in the new trusts, DTC will act as
securities depository for the applicable new debentures. For a description of
DTC and the specific terms of the depository arrangements, please read the
section titled "Description of Preferred Securities--Description of the New
Preferred Securities--Book-Entry Only Issuance; The Depository Trust Company,"
beginning on page 108 of this prospectus. As of the date of this prospectus, the
description in that section of DTC's book-entry system and DTC's practices as
they relate to purchases, transfers, notices and payments with respect to the
new preferred securities apply in all material respects to any debt obligations
represented by one or more global debentures held by DTC. We may appoint a
successor to DTC or any successor depository in the event that DTC or its
successor depository is unable or unwilling to continue as a depository for the
global debentures.
None of us, the new trusts, the property trustees, the indenture trustees,
any paying agent, any transfer agent or any other agent of ours or the indenture
trustees will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests in
global debentures for the new debentures or for maintaining, supervising or
reviewing any records relating to those beneficial ownership interests.
DISCONTINUANCE OF THE DEPOSITORY'S SERVICES
DTC is under no obligation to provide services as depository for the global
debenture and may discontinue providing those services at any time. Neither we,
the new trusts, the indenture trustees nor the trustees of the new trusts will
have any responsibility for the performance by DTC or its participants or
indirect participants under the rules and procedures governing DTC.
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In the event that:
- DTC notifies us that it is unwilling or unable to continue as a depository
for the global debenture and no successor depository has been appointed
within 90 days of us being notified, or
- in our sole discretion, we execute and deliver to the indenture trustees
an order to the effect that the applicable global debenture shall be so
exchangeable,
we will prepare and deliver certificates for the applicable series of new
debentures in exchange for beneficial interests in the applicable global
debenture. Any global debenture that is exchangeable as described in the
preceding sentence will be exchangeable for new debentures registered in such
names as the depository will direct. We expect that those instructions will be
based upon directions received by the depository from its participants with
respect to ownership of beneficial interests in the global debenture. In
addition, if an event of default has occurred and is continuing with respect to
the new debentures or if DTC ceases to be a clearing agency registered as such
under the Securities Exchange Act, a beneficial owner in a global exchange
debenture certificate will receive in exchange for its beneficial interest an
equivalent amount of the applicable series of new debentures in certificated
form, upon request and in accordance with the terms of a supplemental new
indenture.
OUR COVENANTS APPLICABLE TO THE NEW DEBENTURES
The new indentures do not limit the amount of indebtedness, guarantees or
lease obligations that we may incur. They do not contain provisions that would
give holders of the new debentures the right to require us to repurchase their
new debentures in the event of a decline in the credit rating of our debt
securities resulting from a takeover, recapitalization or similar restructuring.
In each new indenture we will agree that, so long as any series of new
debentures are outstanding, if:
- an event of default has occurred and is continuing, or an event of default
has occurred that, with the giving of notice or the lapse of time or both,
would constitute an event of default, or
- we are in default on our guarantee payments or other payment obligations
under the applicable new preferred securities guarantee,
then we will not:
- declare or pay dividends on, make any distribution with respect to, or
redeem, purchase, acquire or make a liquidation payment with respect to
any of our capital stock, other than:
(1) purchases or acquisitions of shares of our common stock relating to
employee benefit plans or relating to any existing contract or
security requiring us to purchase shares of our common stock;
(2) as a result of a reclassification of our capital stock or the
exchange or conversion of one class or series of our capital stock
for another class or series of our capital stock;
(3) the purchase of fractional interests in shares of our capital stock
pursuant to the conversion or exchange provisions of the capital
stock or the security being converted or exchanged; or
(4) making guarantee payments with respect to (1) through (3) above; and
- make any payment of interest, principal or premium, if any, on or repay,
repurchase or redeem any debt securities issued by us that rank equally
with or junior to the applicable series of new debentures.
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We may, however, declare and pay a stock dividend where the dividend stock
is the same stock as that on which the dividend is paid.
So long as the applicable new preferred securities and new common securities
remain outstanding, we will agree to:
- directly or indirectly maintain 100% ownership of the new common
securities of each of the new trust, provided that any permitted successor
of ours under the applicable new indenture may succeed to our ownership of
the new common securities;
- not cause, as sponsor of the new trusts, or permit, as the holder of the
new common securities, the termination, dissolution or winding-up of the
new trusts, except in connection with a distribution of the applicable
series of new debentures under the applicable new trust agreement and in
connection with certain mergers, consolidations or amalgamations as
permitted by the new trust agreement; and
- use our reasonable efforts to cause each new trust to:
- remain a statutory business trust, except in connection with the
distribution of new debentures to the holders of new preferred
securities and new common securities in liquidation of the applicable
new trust, the redemption of all of the applicable new preferred
securities and new common securities, or certain mergers,
consolidations or amalgamations, as permitted by the applicable new
trust agreement, and
- continue to be classified as a grantor trust for United States federal
income tax purposes.
We will be required to provide annually to each indenture trustee a
certificate as to whether or not we are in compliance with all the conditions
and covenants under each applicable new indenture.
CONSOLIDATION, MERGER AND SALE
We will agree under the new indentures that we will consolidate with or
merge into any entity or dispose of all or substantially all of our properties
and assets only if:
- we are the continuing corporation;
- if we are not the continuing corporation, the successor is a corporation
organized and existing under the laws of any United States jurisdiction
and assumes all of our obligations under the applicable new indenture; and
- in either case, immediately after giving effect to the transaction, no
event of default under the applicable new indenture or the applicable new
trust agreement, and no event which, after notice or lapse of time or
both, would become an event of default, has occurred and is continuing.
MODIFICATIONS AND WAIVERS
We and the applicable indenture trustee may amend the new indentures from
time to time if the holders of a majority in principal amount of the applicable
outstanding new debentures consent to it. Without the consent of the holder of
each applicable outstanding new debenture affected, however, no amendment or
supplement of the applicable indenture may:
- change the stated maturity of the principal of, or any premium or
installment of interest on, the applicable new debentures,
- reduce the principal amount of any exchange debentures or any redemption
premium on the applicable new debentures,
- reduce the rate or extend the time for payment of interest on the
applicable new debentures,
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- change any place where, or the currency in which, the applicable series of
new debentures or interest on them is payable,
- impair the right to institute suit to enforce the payment of the
applicable series of new debentures on or after the stated maturity of
those debentures (as extended under the terms of the exchange debentures),
- make any change that adversely affects the right to convert the applicable
new debentures,
- reduce the percentage of the applicable series of new debentures whose
holders must consent to a modification, amendment or waiver,
- reduce the requirements for a quorum or voting at a meeting of holders of
the applicable series of new debentures, or
- modify any of the provisions of the applicable new indenture relating to
subordination of the applicable series of new debentures or the definition
of senior debt in a manner adverse to the holders of the applicable series
of new debentures.
If either of the new trusts or either of the property trustees hold new
debentures, no amendment, modification or waiver that requires approval of
holders of a certain percentage in principal amount of the applicable
outstanding series of new debentures will be effective as to those new
debentures, without the approval of the holders of at least the same percentage
of aggregate liquidation amount of the applicable outstanding new preferred
securities and new common securities.
We and the indenture trustee may amend or supplement each new indenture
without the consent of the holders of any new debentures of a series issued
under such new indenture:
- to add to the events of default or our covenants for the benefit of the
holders of the new debentures of that series, and
- to cure any ambiguity or correct or supplement any provision in the new
indenture that may be defective or inconsistent with other provisions in
the new indenture, or to make any other provisions with respect to matters
or questions arising under the new indenture that are not inconsistent
with the provisions of the new indenture, in each case without adversely
affecting the interests of the holders of new debentures of that series.
The holders of at least two-thirds in aggregate principal amount of the
outstanding series of new debentures may, on behalf of the holders of all of the
new debentures of that series, waive any past default, except a default:
- in the payment of principal, premium, if any, or interest on the series of
new debentures, and
- in respect of a covenant or provision that cannot be modified or amended
without the consent of the holder of each outstanding new debenture of
that series.
However, while any of the applicable new preferred securities are
outstanding, the new indentures will not permit the waiver of any event of
default with respect to the applicable series of new debentures without the
consent of holders of at least two-thirds in aggregate liquidation amount of the
applicable new preferred securities then outstanding.
SATISFACTION AND DISCHARGE
Upon our direction, either or both of the new indentures shall cease to be
of further effect with respect to the applicable series of new debentures,
except for the survival of provisions relating to
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conversion and registration of transfer or exchange of the applicable series of
new debentures, and the obligation to pay additional amounts to the extent
described below, when:
- either:
- an entire series of outstanding new debentures has been delivered to
the applicable indenture trustee for cancellation, subject to specific
exceptions, or
- all applicable new debentures have become due and payable or will
become due and payable at their stated maturity within one year or are
to be called for redemption within one year, and we have deposited, in
trust, funds in United States dollars with respect to the new
debentures in an amount sufficient to pay the entire indebtedness on
the new debentures in respect of principal (and premium, if any) and
interest, including additional payments, if any, to the date of the
deposit, if the new debentures have become due and payable, or to the
maturity of the new debentures, as the case may be; and
- we have paid all other sums payable under the applicable new indenture
with respect to the new debentures.
GOVERNING LAW
New York law will govern the new indentures and the new debentures.
MISCELLANEOUS
We may maintain banking and other commercial relationships with each
indenture trustee and its affiliates in the ordinary course of business.
We will pay all fees and expenses related to:
- the offering of the new preferred securities and the new debentures,
- the organization, maintenance and dissolution of the new trusts,
- the retention of the property trustee for each trust, and
- the enforcement by the property trustee of the rights of the holders of
the new preferred securities.
We will fully and unconditionally guarantee the payment of these fees and
expenses.
RELATIONSHIP AMONG THE NEW PREFERRED SECURITIES, THE NEW DEBENTURES AND THE NEW
PREFERRED SECURITIES GUARANTEE
When taken together, the terms of the applicable new preferred securities,
the applicable new debentures, the applicable new trust agreement and the
applicable new preferred securities guarantee provide a full, irrevocable and
unconditional guarantee by us of the payments due on the applicable series of
new preferred securities. No single document standing alone or operating in
conjunction with fewer than all the other documents constitutes the applicable
full guarantee. The following summary briefly explains the interrelationship
between the applicable new preferred securities, the applicable new debentures
and the applicable new preferred securities guarantee.
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THE APPLICABLE NEW TRUST WILL BE ABLE TO MAKE PAYMENTS ON THE APPLICABLE NEW
PREFERRED SECURITIES IF WE MAKE PAYMENTS ON THE APPLICABLE NEW DEBENTURES
As long as we make payments of interest and other payments when due on the
applicable new debentures, the applicable new trust will have sufficient funds
to make distribution and other payments when due on the applicable preferred
securities for the following reasons:
- the new trust will hold applicable new debentures in an aggregate
principal amount equal to the aggregate stated liquidation amount of the
applicable new preferred securities and the applicable new common
securities;
- the interest rate and the interest and other payment dates on the
applicable new debentures will match the distribution rate and
distribution and other payment dates for the applicable new preferred
securities;
- we have agreed to pay for all of each new trust's debt and obligations,
other than with respect to each new trust's new preferred securities and
new common securities, and costs and expenses, including the fees and
expenses of the new trustees, except for United States withholding taxes;
and
- the new trustees may not cause or permit each new trust to engage in any
activity that is not consistent with its limited purposes.
WE WILL GUARANTEE THAT PAYMENTS WILL BE MADE ON THE APPLICABLE NEW PREFERRED
SECURITIES IF WE MAKE PAYMENTS ON THE APPLICABLE NEW DEBENTURES
If we make interest or other payments on the applicable new debentures, the
property trustee will be obligated to make corresponding distributions or other
payments on the applicable new preferred securities. We will guarantee, on a
subordinated basis, such payments if the applicable new trust fails to make
them. If we do not make interest payments on the applicable series of new
debentures purchased by the applicable new trust, such new trust will not have
sufficient funds to pay distributions on the applicable new preferred
securities. The applicable preferred securities guarantees only cover the
payment of distribution and other payments on the new preferred securities if
and to the extent that we have made corresponding payments on the new
debentures. The applicable guarantee trustee will have the right to enforce the
new preferred securities guarantee on behalf of the holders of the applicable
new preferred securities if we fail to make any required guarantee payments. If
the guarantee trustee fails to enforce the applicable new preferred securities
guarantee, the guarantee provides a mechanism whereby the holders of the
applicable new preferred securities may direct the guarantee trustee to enforce
its rights under the guarantee. If the guarantee trustee fails to enforce the
applicable new preferred securities guarantee, you may institute a legal
proceeding directly against us to enforce the guarantee trustee's rights under
the applicable new securities guarantee without first instituting a legal
proceeding against the applicable new trust, the guarantee trustee, or any other
person or entity. Please read the section titled "Description of Preferred
Securities--Description of the New Preferred Securities Guarantees," beginning
on page 112 of this prospectus, for a more detailed discussion.
THE PROPERTY TRUSTEE MAY INSTITUTE LEGAL PROCEEDINGS AGAINST US IF WE FAIL TO
MAKE PAYMENTS ON THE NEW DEBENTURES
If we do not make interest or other payments on the new debentures when due
(taking account of any deferral period), the new trust agreements provide a
mechanism whereby a holder of the applicable new preferred securities, using the
procedures described in the sections titled "Description of Preferred
Securities--Description of the New Preferred Securities--Voting Rights" and
"--Book-Entry Only Issuance; The Depository Trust Company," may direct the
property trustee to enforce its rights under the applicable series of new
debentures. Notwithstanding these provisions, in such circumstances, a holder of
new preferred securities may institute a legal proceeding directly against us
for payment on
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or after the respective due dates specified in the applicable series of new
debentures. In connection with that proceeding, we will remain obligated to pay
the principal or interest on the applicable series of new debentures and will be
subrogated to the rights of the holder of applicable series of new preferred
securities to the extent of any payment made by us to that holder of exchange
preferred securities in the proceeding. Please read the section titled
"Description of Preferred Securities--Description of the New Preferred
Securities," beginning on page 88 of this prospectus, for a more detailed
discussion.
IN THE EVENT OF ANY DISSOLUTION OF A NEW TRUST, EACH HOLDER OF THE APPLICABLE
NEW PREFERRED SECURITIES OR NEW COMMON SECURITIES WILL BE ENTITLED TO RECEIVE
NEW DEBENTURES OR DISTRIBUTIONS FROM THE APPLICABLE NEW TRUST
In the event of any voluntary or involuntary dissolution of a new trust, the
then holders of the applicable new preferred securities or the new common
securities will be entitled to receive, after satisfaction of liabilities to
creditors, distributions in an amount equal to the aggregate of the stated
liquidation amount of $22 per exchange preferred security, or distributions in
an amount equal to the aggregate of the stated liquidation amount of $50 per
cash offer preferred security plus accumulated and unpaid distributions to the
date of payment unless, in connection with the liquidation, the applicable new
debentures in an aggregate stated principal amount equal to the aggregate stated
liquidation amount of, with an interest rate identical to, the annual rate of
distributions on, and accrued and unpaid interest equal to accumulated and
unpaid distributions on, the applicable new preferred securities, have been
distributed on a pro rata basis to the holders of the applicable new preferred
securities and the new common securities.
Upon any voluntary or involuntary liquidation or bankruptcy of us, the
applicable property trustee, as holder of the applicable series of new
debentures, would be subordinated in right of payment to all senior debt as set
forth in the new indentures, but entitled to receive payment in full of
principal (and premium, if any) and interest, before any of the holders of our
existing debentures and existing preferred securities guarantee, and our
stockholders receive payments or distributions. Because we will be the guarantor
under the new preferred securities guarantees and will agree to pay for all
costs, expenses and liabilities of the new trusts, the positions of a holder of
new preferred securities and a holder of new debentures relative to other
creditors and to our stockholders in the event of our liquidation or bankruptcy
are expected to be substantially the same.
DESCRIPTION OF THE EXISTING PREFERRED SECURITIES, EXISTING DEBENTURES AND THE
EXISTING PREFERRED SECURITIES GUARANTEE
The existing preferred securities were issued by the existing trust under a
trust agreement amended and restated as of February 10, 1998. We own all of the
existing common securities representing common undivided beneficial interests in
the assets of the existing trust. The existing trust was organized for the sole
purpose of issuing the existing preferred securities and the existing common
securities and investing the proceeds of that issuance in an equivalent amount
of convertible subordinated debentures, referred to as the existing debentures.
We issued the existing debentures under the existing indenture, dated as of
February 10, 1998, between us and The Bank of New York, as indenture trustee. We
guaranteed the payment of distributions and other payments on the existing
preferred securities to the extent that we had made corresponding interest and
other payments, as and to the extent set forth in a guarantee agreement dated as
of February 10, 1998.
The existing preferred securities, existing common securities, trust
agreement, debentures, existing indenture and existing preferred securities
guarantee referred to above are respectively identical, in all material
respects, to the new preferred securities, new common securities, new trust
agreements, new indentures and new preferred securities guarantee described in
the sections titled "Fleetwood Capital Trust II and Fleetwood Capital Trust
III," "Description of Preferred Securities--Description of the New Preferred
Securities," "Description of Preferred Securities--Description of the New
Preferred
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Securities Guarantees" and "Description of Preferred Securities--Description of
the New Debentures," except in the following respects:
- DISTRIBUTION/INTEREST RATE. Distributions on the new preferred securities,
and corresponding interest payments on the new debentures, are payable at
an annual rate of 9.5%, whereas distributions on the existing preferred
securities, and corresponding interest payments on the existing
debentures, are payable at an annual rate of 6%.
- DISTRIBUTION/INTEREST PAYMENTS. Distributions on the new preferred
securities, and corresponding interest payments on the new debentures, may
be in cash or, at our election, prior to February 15, 2004, in our common
stock at a rate of 9.5% per year of the liquidation amount of $22 per
exchange preferred security and at a rate of 9.5% per year of the
liquidation amount of $50 per cash offer preferred security, whereas
distributions on the existing preferred securities, and corresponding
interest payments on the existing debentures, will only be in cash.
- LIQUIDATION AMOUNT PER PREFERRED SECURITY. The liquidation amount per
exchange preferred security is $22 and the liquidation amount per cash
offer preferred security is $50, whereas the liquidation amount per
existing preferred security is $50.
- CONVERSION PRICE. The exchange preferred securities, and the corresponding
exchange debentures, are convertible into our common stock at an initial
conversion price that is the higher of:
- the equivalent of a 15% premium over the daily volume-weighted average
of the closing prices of our common stock for each of the five trading
days immediately preceding the fourth trading day prior to the exchange
offer expiration date, or
- $8.63 per share,
subject to adjustment.
The cash offer preferred securities and the corresponding cash offer
debentures, are convertible into our common stock at an initial
conversion price that is the higher of:
- the equivalent of a 15% premium on the closing price of our common
stock on the day that we price the cash offer, or
- $8.63 per share,
subject to adjustment.
The existing preferred securities, and the corresponding existing
debentures, are convertible into our common stock at an initial conversion
price of $48.72 per share of our common stock, which is equivalent to a
conversion rate of 1.03 shares of our common stock for each existing
preferred security, subject to the same provisions that require adjustment
of the conversion price for the new preferred securities and the new
debentures. The conversion price of the existing preferred securities on
December 7, 2001 was $48.72 per share of common stock, which is equivalent
to a conversion rate of 1.03 shares of common stock for each existing
preferred security. This conversion price remains subject to further
adjustment.
- OPTIONAL REDEMPTION. Prior to February 15, 2004, we also have the right to
redeem the new debentures under specific circumstances when our common
stock price has exceeded 200% of our conversion price for a specified
period, whereas there is no such right with respect to the existing
debentures or existing preferred securities. Please read the section
titled "Description of Preferred Securities--Description of the New
Preferred Securities--Optional Redemption," beginning on page 98 of this
prospectus, for a more detailed discussion.
- OPTIONAL REDEMPTION. We may redeem the new debentures on or after
February 15, 2004, in whole or in part, on not less than 30 but not more
than 60 days' notice, at the redemption prices set forth in the section
titled "Description of Preferred Securities--Description of the New
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Debentures--Optional Redemption," beginning on page 119 of this
prospectus. We may redeem the existing debentures on or after
February 15, 2001, in whole or in part, subject to the same notice
requirement that applies to optional redemption of the exchange
debentures, at the redemption prices below:
<Table>
<Caption>
REDEMPTION
YEAR PRICE
- ---- -----------
2001........................................................ 103.75%
2002........................................................ 103.00%
2003........................................................ 102.25%
2004........................................................ 101.50%
2005........................................................ 100.75%
2006 and thereafter......................................... 100.00%
</Table>
- SUBORDINATION/RANKING. The new preferred securities guarantees and the new
debentures are senior in right of payment to the existing preferred
securities guarantee and the existing debentures.
Currently, there is no established trading market for the existing preferred
securities and the new preferred securities.
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DESCRIPTION OF OUR CAPITAL STOCK
CAPITAL STOCK
Our authorized capital stock consists of 75,000,000 shares of common stock
and 10,000,000 shares of preferred stock, each with a par value of $1.00 per
share. At October 31, 2001, we had outstanding:
- 34,969,141 shares of common stock (as well as the same number of "rights"
to purchase junior participating preferred shares under the terms of our
rights plan discussed below);
- exercisable stock options to purchase an aggregate of approximately
2,467,609 shares of our common stock;
- warrants to purchase up to an aggregate of 150,000 shares of our common
stock;
- no shares of preferred stock; and
- an aggregate of approximately $287.5 million in liquidation amount of
existing preferred securities. Holders of these existing preferred
securities have the right to convert their securities into an aggregate of
5,901,053 shares of our common stock, subject to adjustment.
Subject to the rights of holders of our existing preferred securities, our
common stock holders are entitled to receive dividends if and when they are
declared by our board of directors from legally available funds and, in the
event of liquidation, to receive pro rata all assets remaining after payment of
all obligations. Each holder of our common stock is entitled to one vote for
each share held and to cumulate his votes for the election of directors. Our
stockholders do not have preemptive rights.
The authorized shares of our preferred stock are issuable, without further
stockholder approval, in one or more series as determined by our board of
directors. Our board of directors also determines the voting rights,
designations, powers, preferences, and the relative participating, optional or
other rights of each series of our stock, as well as any qualifications,
limitations or restrictions.
Our certificate of incorporation provides for a classified board of
directors, approximately one-third of which is elected annually for a three-year
term. Our certificate of incorporation also requires a vote of holders of at
least 80% of our voting stock to adopt or modify our bylaws, or to approve a
merger, a sale of substantially all of our assets or certain other transactions
between us and any other corporation holding directly or indirectly more than 5%
of our voting stock, unless the merger, sale or other transaction was approved
by our board of directors prior to the other corporation's acquisition of more
than 5% of our voting stock. The above provisions cannot be changed unless the
change is approved by the affirmative vote of at least 80% of our voting stock.
EquiServe, L.P. is the transfer agent and registrar for our common stock.
RIGHTS
On September 15, 1998, our board of directors declared a dividend
distribution on each then outstanding share of our common stock of one right to
acquire one one-thousandth of a share of our series A junior participating
preferred stock at an exercise price of $160.00, subject to adjustment. These
rights are also issued with any shares of our common stock that are issued after
the initial dividend distribution and before the occurrence of specified events.
The rights may only be exercised:
- 10 days after public announcement that a person or group of affiliated
persons has acquired or obtained the right to acquire beneficial ownership
of 15% or more of our outstanding common stock;
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- 10 business days after commencement of a tender offer or exchange offer
that would result in a person or group of affiliated persons beneficially
owning 15% or more of our common stock; or
- 10 business days after our board of directors determines that any person,
alone or together with its affiliates and associates, has become the
beneficial owner of an amount of our common stock that our board
determines to be substantial, which amount shall in no event be less than
15% of our shares of common stock outstanding, and at least a majority of
our board of directors who are not officers, after reasonable inquiry and
investigation, determine that such beneficial ownership is for the purpose
of greenmail or is reasonably likely to cause a material adverse impact on
us (any such person being referred to as an "acquiring person").
If a party acquires 15% or more of our outstanding shares of common stock in
accordance with certain defined terms or our board of directors determines that
any person has become an acquiring person, each right will entitle its holder to
purchase, at the right's then current exercise price, a number of shares of our
common stock having a market value of twice the right's then current exercise
price.
The rights do not have voting or dividend rights and expire on
September 15, 2008, if not redeemed, exchanged or tendered prior to this date.
The rights may be redeemed in whole, but not in part, by us at a price of $0.002
per right at any time prior to the earlier of:
- the expiration of the rights;
- 10 days following a person or group's acquisition of 15% or more of our
outstanding common stock; or
- our board of directors' determination of a person to be an acquiring
person.
If we are acquired, under certain circumstances each right entitles the
holder to purchase, at the right's then current exercise price, a number of the
acquiring company's common shares having a market value of twice the right's
then current exercise price.
Unless and until the rights become exercisable, the rights trade only with
our shares of common stock and are represented by the stock certificates
representing our common stock. If the rights become exercisable, separate
certificates representing the rights will be delivered to the holders of our
common stock at that time, and the rights will then trade separately from our
shares of common stock. Upon conversion of the new preferred securities and
existing preferred securities, the holders of these securities will receive, in
addition to the common stock issuable upon such conversion, the rights that
would have attached to the shares of our common stock if the rights had not
become separated from the common stock. The rights will not become exercisable
or separately tradable as a result of this offering.
WARRANTS
On August 30, 2001, we issued common stock warrants to our business
consultant covering the right to purchase up to 150,000 shares of our common
stock through a private placement, subject to upward or downward adjustment.
The warrants do not have voting or dividend rights and are exercisable at
any time from the date of issuance until they expire on January 2, 2005. We have
granted registration rights to the business consultant and on November 19, 2001,
we filed a registration statement to register for resale under the Securities
Act the shares underlying the warrants.
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UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Gibson, Dunn & Crutcher LLP, counsel to us and the new
trusts, the following discussion sets forth the material United States federal
income tax consequences relating to the exchange offer and the ownership and
disposition of the new preferred securities and common stock received upon a
conversion of new preferred securities by holders that receive their exchange
preferred securities in the exchange offer or purchase their cash offer
preferred securities in the cash offer. This discussion does not address all
aspects of United States federal income taxation that may be relevant to certain
types of holders subject to special treatment under the Code, or the effect of
any applicable state, local or foreign tax laws. The discussion assumes that the
existing preferred securities are held, and the new preferred securities will be
held, as "capital assets" within the meaning of Section 1221 of the Internal
Revenue Code of 1986, as amended (the "Code").
This discussion is based upon provisions of the Code, the Treasury
Regulations, and judicial and administrative interpretations of the Code and
Treasury Regulations, all as in effect as of the date hereof, and all of which
are subject to change (possibly on a retroactive basis) or different
interpretation. There can be no assurance that the Internal Revenue Service (the
"Service") will not challenge one or more of the tax consequences described
herein, and we have not obtained, nor do we intend to obtain, a ruling from the
Service with respect to the federal income tax consequences of the exchange
offer, the treatment of the new debentures as debt for federal income tax
purposes, or whether the new trusts will be classified as grantor trusts for
federal income tax purposes.
Investors considering the exchange of existing preferred securities in the
exchange offer or the purchase of cash offer preferred securities in the cash
offer are urged to consult their own tax advisors to determine their particular
tax consequences of the exchange offer and the ownership and disposition of the
new preferred securities under federal and applicable state, local and foreign
tax laws.
If a partnership (including for this purpose any entity treated as a
partnership for U.S. tax purposes) is a beneficial owner of the new preferred
securities or the shares of our common stock into which the new preferred
securities are converted, the treatment of a partner in the partnership will
depend on the status of the partner and upon the activities of the partnership.
A holder of new preferred securities that is a partnership and partners in such
partnership should consult their tax advisors about the U.S. federal income tax
consequences of holding and disposing of the new preferred securities or the
shares of our common stock into which the new preferred securities are
converted.
As used herein, a "U.S. holder" means a beneficial holder of existing
preferred securities, exchange preferred securities received in the exchange
offer, or cash offer preferred securities purchased in the cash offer that is a
citizen or resident (within the meaning of Section 7701(b) of the Code) of the
United States, a corporation or other entity taxed as a corporation for federal
income tax purposes formed under the laws of the United States or any political
subdivision thereof, an estate, the income of which is subject to United States
federal income taxation regardless of its source, and a trust subject to the
primary supervision of a court within the United States and the control of a
United States fiduciary as described in Section 7701(a)(30) of the Code or any
other person whose income or gain with respect to a new debenture is effectively
connected with the conduct of a United States trade or business. A "non-U.S.
holder" is any holder other than a U.S. holder.
CLASSIFICATION OF THE NEW DEBENTURES
In connection with the issuance of new preferred securities, Gibson, Dunn &
Crutcher LLP, counsel to us and the new trusts, will render its opinion that the
new debentures will be classified for United States federal income tax purposes
as indebtedness under current law. We, the new trusts, and the holders of the
new preferred securities (by acceptance of a beneficial interest in a new
preferred security) will agree to treat the new debentures as indebtedness and
the new preferred securities as evidences of a beneficial ownership interest in
the new debentures for all United States federal income
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tax purposes. No assurance can be given, however, that such position will not be
challenged by the Service. The remainder of this discussion assumes that the new
debentures will be classified for United States federal income tax purposes as
indebtedness. No portion of the amounts received on the new preferred securities
will be eligible for the dividends-received deduction.
CLASSIFICATION OF THE NEW TRUSTS
In connection with the issuance of the new preferred securities, Gibson,
Dunn & Crutcher LLP, counsel to us and the new trusts, will render its opinion
that, under then current law and assuming full compliance with the terms of the
new trust agreements and the new indentures (and certain other documents), and
based on certain facts and assumptions contained in such opinion, the new trusts
will be classified for United States federal income tax purposes as grantor
trusts and not as partnerships or as associations taxable as corporations.
Accordingly, each holder of new preferred securities will be considered the
owner of a pro rata portion of the new debentures held by the new trusts and
will be required to include in gross income its pro rata share of income paid or
accrued on the new debentures.
TREATMENT OF EXCHANGE OFFER
As discussed above under "Classification of the New Trusts," each holder of
new preferred securities will be considered the owner of a pro rata portion of
the new debentures. Similarly, each holder of existing preferred securities is
considered the owner of a pro rata portion of the existing debentures. Thus, the
exchange of existing preferred securities for exchange preferred securities
pursuant to the exchange offer will be treated for United States federal income
tax purposes as an exchange of existing debentures for exchange debentures.
The tax treatment of a U.S. holder's exchange of existing debentures for
exchange debentures pursuant to the exchange offer will depend on whether that
exchange is treated as a recapitalization. The exchange will be treated as a
recapitalization only if both the existing debentures and the exchange
debentures constitute "securities" within the meaning of the provisions of the
Code governing reorganizations. This, in turn, depends upon the facts and
circumstances surrounding the origin and nature of these debt instruments and
upon the interpretation of numerous judicial decisions. Based on these
considerations, we believe that the exchange offer will be treated as a
recapitalization for United States federal income tax purposes. As such, a U.S.
holder will not recognize gain or loss on the exchange. A U.S. holder's tax
basis in the exchange preferred securities and in its pro rata share of the
underlying exchange debentures will equal the U.S. holder's adjusted tax basis
in the existing preferred securities and in its pro rata share of the underlying
existing debentures. The U.S. holder's holding period for the exchange preferred
securities and for its pro rata share of the underlying exchange debentures will
include the period in which the U.S. holder held the existing preferred
securities and its pro rata share of the underlying existing debentures.
A non-U.S. holder generally will not recognize gain or loss for United
States federal income tax purposes on the exchange of existing debentures for
exchange debentures, irrespective of whether gain or income realized on the
disposition of exchange debentures or our common stock acquired upon a
conversion is effectively connected with the non-U.S. holder's conduct of a
United States trade or business, as described in "Non-U.S. Holders."
TAX TREATMENT OF THE OWNERSHIP AND DISPOSITION OF NEW PREFERRED SECURITIES AND
COMMON STOCK
The following discussion is a summary of the principal United States federal
income tax consequences resulting from the ownership and disposition of new
preferred securities and common stock by U.S. holders.
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ORIGINAL ISSUE DISCOUNT AND STATED INTEREST ON THE NEW PREFERRED SECURITIES
We anticipate that the new debentures (whether acquired in the exchange or
acquired in the cash offer) will be issued with original issue discount on
account of our ability to defer the payment of interest at any time after
February 15, 2004, and from time to time after that date during the term of the
new debentures.
The amount of original issue discount on a debt instrument generally is
equal to the difference between the stated redemption price at maturity of the
debt instrument and the debt instrument's issue price. The stated redemption
price at maturity of a debt instrument will equal the sum of all amounts
provided under the debt instrument, regardless of whether denominated as
principal or interest, other than "qualified stated interest" payments. For such
purposes, "qualified stated interest" generally means stated interest that is
"unconditionally payable" in cash or property, other than debt instruments of
the issuer, at least annually at a single fixed rate.
Interest is considered to be "unconditionally payable" only if reasonable
legal remedies exist to compel timely payment or the debt instrument otherwise
provides terms and conditions that make the likelihood of late payment (other
than late payment that occurs within a reasonable grace period) or nonpayment a
"remote contingency."
Under the new indentures, we have the right, at any time after February 15,
2004, and from time to time after that date during the term of the new
debentures, to defer payments of interest by extending the interest payment
period for a period not exceeding 20 consecutive quarterly periods with respect
to each extension period. See the section titled "Description of Preferred
Securities--Description of the New Debentures--Option to Extend Interest Payment
Period," beginning on page 120 of this prospectus.
While we do not currently intend to defer interest payments on the new
debentures, we have nevertheless determined that the likelihood of exercise of
such right to defer is not remote, thereby causing all stated interest on the
new debentures to fail to be unconditionally payable and, therefore, to fail to
qualify as "qualified stated interest." As a result, all stated interest will be
added to the new debentures' stated redemption price at maturity for purposes of
computing the amount of original issue discount on the new debentures.
A U.S. holder, other than a holder with amortizable bond premium, must
include any original issue discount on the new debentures as ordinary interest
income as it accrues (potentially in advance of the receipt of any cash payments
attributable to such income) in accordance with a constant yield method based on
a compounding of interest, regardless of such U.S. holder's regular method of
tax accounting. A U.S. holder may elect to include all interest that accrues or
is to be paid on the new debentures in income under the constant yield method
applicable to original issue discount, subject to limitations and exceptions.
Because the stated interest (whether paid in cash at any time or, at our
election, prior to February 15, 2004, in our common stock) paid in each
quarterly period pursuant to the terms of the new debentures is generally
expected to equal the amount of original issue discount required to be taken
into account for such quarterly period, the timing of a holder's income
inclusions with respect to the new debentures under the original issue discount
rules is not expected to differ materially from the timing of cash received.
Nevertheless, in the event that we exercise our right to defer payments of
interest on the new debentures, a holder will still be required to include
original issue discount into income on a constant yield method notwithstanding
that we will not make any distributions on the new preferred securities during
such extension period.
AMORTIZABLE BOND PREMIUM
Under the amortizable bond premium rule, a holder that "purchases" a debt
instrument at a premium does not include any original issue discount in income.
The exchange of existing debentures
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for exchange debentures will be such a "purchase," and a U.S. holder may have
amortizable bond premium with respect to the holder's beneficial interest in the
exchange debentures acquired in the exchange. A U.S. holder will have
amortizable bond premium if the holder's basis in its pro rata share of the
underlying exchange debentures immediately after the exchange exceeds the sum of
all amounts payable on the exchange debentures (other than payments of qualified
stated interest) after the exchange date.
As discussed above under the section titled "Treatment of Exchange Offer," a
U.S. holder will receive a tax basis in the exchange debentures equal to the
U.S. holder's adjusted tax basis in the existing debentures exchanged for the
exchange debentures. A holder's basis in the exchange debentures for purposes of
determining the amount of amortizable bond premium will be this carryover basis
reduced by an amount equal to the value of the conversion option a holder
possesses with respect to the exchange debentures.
If a holder has amortizable bond premium, it can make an election to
amortize the premium by offsetting interest income with bond premium in the
holder's timely filed federal income tax return for the first taxable year to
which the holder desires the election to apply. The holder should attach to the
return a statement that the holder is making such an election under Section 171
of the Code. In general, a holder with amortizable bond premium amortizes the
premium by offsetting the interest allocable to an accrual period with the bond
premium allocable to the accrual period. Bond premium is allocable to an accrual
period under the constant yield method.
MARKET DISCOUNT
A debt instrument will be considered to be a market discount instrument if
the stated redemption price at maturity of the debt instrument at the time of
acquisition exceeds the initial tax basis of the debt instrument immediately
after its acquisition by the holder by more than 1/4 of 1% of the stated
redemption price of the debt instrument multiplied by the number of complete
years to maturity (after the holder acquired the debt instrument).
For U.S. holders that acquire exchange debentures pursuant to the exchange
offer, accrued market discount on existing debentures will carry over to the
exchange debentures received in the exchange offer. Any gain recognized on the
receipt of payments on or disposition of exchange debentures will be treated as
ordinary income to the extent that this gain does not exceed the accrued market
discount on the exchange debentures.
A U.S. holder that exchanges existing debentures for exchange debentures
pursuant to the exchange offer will have unaccrued market discount on the
exchange debentures only if the existing debentures exchanged by the U.S. holder
had market discount and only if the U.S. holder's tax basis in the exchange
debentures immediately after the exchange is less than the issue price of the
exchange debentures. The amount of the unaccrued market discount in such case
would be the excess of the issue price of the exchange debentures over the sum
of the U.S. holder's tax basis in the exchange debentures immediately after the
exchange and the accrued market discount on the existing debentures not
previously included in the holder's gross income and which carries over to the
exchange debentures.
DISTRIBUTION OF NEW DEBENTURES TO HOLDERS OF THE NEW PREFERRED SECURITIES
Under current law, a distribution by the new trusts of the new debentures
will be nontaxable as described under the section titled "Description of
Preferred Securities--Description of the New Preferred Securities--Special Event
Distribution; Tax Event Redemption," beginning on page 99 of this prospectus,
and will result in the holder receiving directly its pro rata share of the new
debentures previously held indirectly through the applicable new trust, with a
holding period and tax basis equal to the holding period and adjusted tax basis
such holder was considered to have had in its pro rata share of the underlying
new debentures prior to such distribution. If, however, the new trusts were
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characterized for United States federal income tax purposes as associations
taxable as corporations at the time of their dissolution, the distribution of
the new debentures would constitute a taxable event to holders of new preferred
securities and a holder's holding period for the new debentures would begin on
the date the new debentures were received.
DISPOSITION OF THE NEW PREFERRED SECURITIES
Upon a sale, new or other disposition of the new preferred securities
(including a distribution of cash in redemption of a holder's new preferred
securities upon redemption or repayment of the underlying new debentures, but
excluding the distribution of new debentures), a holder will be considered to
have disposed of all or part of its pro rata share of the new debentures, and
will recognize gain or loss equal to the difference between the amount realized
and the holder's adjusted tax basis in its pro rata share of the underlying new
debentures deemed disposed. A holder's adjusted tax basis in the new debentures
will generally equal its initial purchase price of the existing preferred
securities, if the exchange preferred securities are acquired in the exchange,
or the initial purchase price of the cash offer preferred securities, if the
cash offer preferred securities are acquired in the cash offer. A holder's
adjusted tax basis (generally its initial purchase price) will be increased by
any accrued and unpaid original issue discount. Such gain or loss will be
long-term capital gain or loss if the new preferred securities have been held by
the holder for more than one year.
The new preferred securities may trade at a price that does not fully
reflect the value of accrued but unpaid interest with respect to the underlying
new debentures. A holder that uses the accrual method of accounting (and a cash
method holder if the new debentures are issued with original issue discount) and
that disposes of its new preferred securities between record dates for payments
of distributions thereon will nevertheless be required to include in income
accrued but unpaid interest on the new debentures through the date of
disposition, and to add such amount to its adjusted tax basis in its pro rata
share of the underlying new debentures deemed disposed. Accordingly, such a
holder will recognize a capital loss to the extent the selling price (which may
not fully reflect the value of accrued but unpaid interest) is less than the
holder's adjusted tax basis (which will include accrued but unpaid interest).
Subject to certain limited exceptions, capital losses cannot be applied to
offset ordinary income for United States federal income tax purposes.
CONVERSION OF THE NEW PREFERRED SECURITIES TO OUR COMMON STOCK
A holder of new preferred securities will not recognize income, gain or loss
upon the conversion through the conversion agent of new debentures into our
common stock, except with respect to any amount treated as paid with respect to
interest. A holder of new preferred securities will, however, recognize gain
upon the receipt of cash in lieu of a fractional share of our common stock equal
to the amount of cash received less such holder's tax basis in such fractional
share. Such holder's tax basis in our common stock received upon conversion will
be equal to such holder's tax basis in the new preferred securities delivered to
the conversion agent for exchange, less the basis allocated to any fractional
share for which cash is received. Such holder's holding period in our common
stock received upon conversion will generally include the holder's holding
period of the new preferred securities delivered to the conversion agent for
exchange, except with respect to our common stock received in respect of
interest, the holding period of which will generally begin the day following
receipt.
ADJUSTMENT OF CONVERSION PRICE
Treasury Regulations promulgated under section 305 of the Code would treat
holders of new preferred securities as having received a constructive
distribution from us in certain events pursuant to which the conversion price of
the new debentures is adjusted. Thus, under certain circumstances, a reduction
in the conversion price for the new debentures may result in deemed dividend
income to holders of new preferred securities to the extent of our current or
accumulated earnings and profits, if
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any. Holders of new preferred securities are advised to consult their tax
advisors as to the income tax consequences of adjustments in the conversion rate
of new preferred securities.
COMMON STOCK
Distributions, if any, paid on our common stock after a conversion, to the
extent made from our current or accumulated earnings and profits, will be
included in a U.S. holder's income as ordinary income as they are paid. Gain or
loss realized on a sale or exchange of common stock will equal the difference
between the amount realized on such sale or exchange and the holder's adjusted
tax basis in such stock. Such gain or loss will generally be long-term capital
gain or loss if the U.S. holder's holding period in the common stock is more
than one year. However, under the market discount rules, any gain recognized by
a U.S. holder will be ordinary income to the extent of the accrued market
discount that has not previously been included in income. For these purposes,
any market discount that the U.S. holder had in the existing preferred
securities that carried over to the new preferred securities, and has not been
previously included in income, will be considered to be market discount with
respect to the common stock.
NON-U.S. HOLDERS
The following summary discusses the United States federal income tax
consequences to non-U.S. holders.
We will not withhold on payments of principal and interest to you on the new
debentures, provided that: (a) you do not actually (or constructively) own 10%
or more of the total combined voting power of all classes of our voting stock
within the meaning of the Code and the Treasury Regulations; (b) you are not a
controlled foreign corporation that is related to us through stock ownership;
(c) you are not a bank whose receipt of interest on the new debentures is
described in section 881(c)(3)(A) Code; and (d) either (A) you provide your name
and address on an IRS Form W-8BEN, and certify, under penalty of perjury, that
you are not a United States person or (B) a financial institution holding the
new preferred securities on your behalf certifies, under penalty of perjury,
that it has received an IRS Form W-8BEN from the beneficial owner and provides
us with a copy.
We will withhold tax at a rate of 30% on the dividends paid on the shares of
our common stock acquired upon a conversion. You may reduce the 30% withholding
tax applicable to you on dividends if you provide us with a properly executed
IRS Form W-8BEN claiming a reduction of or an exemption from withholding under
an applicable tax treaty.
Any gain or income realized on the disposition of a new preferred security,
or our common stock acquired upon a conversion generally will not be subject to
United States federal income or withholding tax unless: (a) that gain or income
is effectively connected with your conduct of a trade or business in the United
States; (b) you are an individual who is present in the United States for
183 days or more in the taxable year of that disposition, and certain other
conditions are met; or (c) we are or have been a "U.S. real property holding
corporation" for United States federal income tax purposes.
We believe that it is unlikely that we are or will become a "U.S. real
property holding corporation" for United States federal income tax purposes. If
we were or became a U.S. real property holding corporation, so long as our
common stock continues to be regularly traded on an established securities
market, you would not be subject to U.S. federal income tax on the disposition
of a new preferred security or our common stock if you held at all times less
than 5% of the total outstanding new preferred securities or shares of our
common stock, respectively.
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Special rules may apply to you if you are a "controlled foreign
corporation," "passive foreign investment company" or "foreign personal holding
company" and are subject to special treatment under the Code. If you are such an
entity, you should consult your own tax advisor to determine the United States
federal, state, local and other tax consequences that may be relevant to you.
INFORMATION REPORTING AND BACKUP WITHHOLDING
If you are a non-U.S. holder, no backup withholding will be required with
respect to payments made by us if a statement described above under "Non-U.S.
Holders" has been received and we do not have actual knowledge or reason to know
that you are a U.S. holder.
Amounts withheld under the backup withholding rules may be allowed as a
refund or a credit against your United States federal income tax liability
provided the required information is furnished to the IRS.
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PLAN OF DISTRIBUTION
We have engaged Banc of America Securities LLC as the dealer manager in
connection with our offer to exchange an aggregate of up to $37.95 million in
liquidation amount of exchange preferred securities for up to $86.25 million in
aggregate liquidation amount of existing preferred securities. We have also
engaged Banc of America Securities LLC to use its best efforts to find
purchasers for any or all of the $150.0 million of cash offer preferred
securities to be issued by us pursuant to the cash offer. Banc of America
Securities LLC is not making a commitment to take or purchase cash offer
preferred securities from us and has not assured us that these securities will
be placed successfully in the cash offer. The purchase price for the cash offer
preferred securities is 100% of the liquidation amount of the cash offer
preferred securities, plus accrued distributions, if any, from the original
issue date. As compensation for its services as dealer manager, we are paying
Banc of America Securities LLC a dealer manager fee in connection with the
exchange offer which is discussed in the section titled "The Exchange
Offer--Fees and Expenses," beginning on page 81 of this prospectus. As
compensation for its services as placement agent, we are paying Banc of America
Securities LLC a placement agent fee of 5% of the aggregate liquidation amount
of cash offer preferred securities sold in the cash offer.
We have entered into a dealer manager agreement with Banc of America
Securities LLC in connection with the exchange offer. We have also entered into
a distribution agreement with Banc of America Securities LLC in connection with
the cash offer. The dealer manager agreement provides that the obligations of
Banc of America Securities LLC are subject to the fulfillment of certain
customary conditions precedent and other conditions precedent, including the
tender, without being withdrawn, of an aggregate liquidation amount of a minimum
of $50.0 million of existing preferred securities pursuant to the exchange offer
and the purchase, pursuant to the cash offer, of cash offer preferred securities
having an aggregate liquidation amount equal to at least 30% of the aggregate
liquidation amount of the existing preferred securities tendered and accepted
for exchange in the exchange offer. See the section titled "The Exchange
Offer--Conditions for Completion of the Exchange Offer," beginning on page 80 of
this prospectus.
We intend to offer the cash offer preferred securities in the cash offer on
a best efforts basis to investors. The cash offer is not conditioned upon a
minimum number of cash offer preferred securities being sold nor upon
consummation of the exchange offer.
Each of the dealer manager agreement and the distribution agreement provides
that we will indemnify Banc of America Securities LLC against specific
liabilities, including liabilities under the Securities Act.
As a further condition to the obligations of Banc of America Securities LLC
under each of the dealer manager agreement and the distribution agreement, all
of our executive officers and directors have entered into lock-up agreements
with Banc of America Securities LLC. Under those agreements, our executive
officers and directors may not, without the prior written consent of Banc of
America Securities LLC, which consent may be withheld in its sole discretion,
directly or indirectly sell, offer, contract or grant any option to sell
(including any short sale), pledge, transfer, establish an open "put equivalent
position" within the meaning of Rule 16a-1(h) under the Securities Exchange Act
or otherwise dispose of any rights to, or interests in, any shares of our common
stock, any options or warrants to acquire any shares of our common stock or any
preferred securities convertible into, exercisable for or exchangeable for
shares of our common stock owned as of the date of this prospectus or
subsequently owned either of record or beneficially by them, or publicly
announce the intention to do any of the actions described above, for a period
commencing on the date of this prospectus and continuing through the close of
trading on the date 90 days after that date. However, Banc of America Securities
LLC, may, in its sole discretion and at any time without notice, release all or
any portion of the preferred securities subject to lock-up agreements.
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In addition, we and each new trust have agreed that during the period
commencing on the date of this prospectus and continuing through the close of
trading on the date 90 days after that date, we will not, nor will we publicly
announce our intention to, without the prior written consent of Banc of America
Securities LLC, which consent may be withheld in its sole discretion, issue,
directly or indirectly sell, offer, contract or grant any option to sell
(including any short sale), pledge, transfer or otherwise dispose of any rights
to, or interests in, any shares of our common stock, any options or warrants to
acquire any shares of our common stock or any preferred securities convertible
into, exercisable for or exchangeable for shares of our common stock, other than
our issuance and sale of new preferred securities in this offering, the issuance
of shares of our common stock upon the exercise of outstanding options or
warrants and the grant of options to purchase shares of common stock under our
existing employee stock option, stock ownership or equity incentive plans, or
the issuance of shares of common stock upon conversion of the existing preferred
securities, the exchange preferred securities and the cash offer preferred
securities. We have also agreed not to enter into any transaction, including a
derivative transaction, having an economic effect similar to that of a sale of
any of our shares or any of our preferred securities that are substantially
similar to the shares or which are convertible into, exercisable for or
exchangeable for, or represent the right to receive, shares or preferred
securities that are substantially similar to the shares, subject to certain
exceptions, without the prior consent of Banc of America Securities LLC.
Prior to this offering, there has been no market for the new preferred
securities. We have been advised by Banc of America Securities LLC that it
presently intends to make a market in the new preferred securities as permitted
by applicable laws and regulations. Banc of America Securities LLC has no
obligation, however, to make a market in the new preferred securities and may
discontinue market making at any time without notice. As a result, we can give
you no assurance regarding the liquidity of the new preferred securities or
trading markets for the new preferred securities.
We have been advised by Banc of America Securities LLC that certain persons
participating in this offering may engage in transactions, including stabilizing
bids that may have the effect of stabilizing or maintaining the market price of
the new preferred securities. Stabilization bids are bids for, or the purchase
of, new preferred securities on behalf of Banc of America Securities LLC for the
purpose of fixing or maintaining the price of the new preferred securities.
This offering is being made in compliance with the requirements of "Direct
Participation Programs" of the provisions of Rule 2810 of the National
Association of Securities Dealers, Inc. Conduct Rules. Accordingly, sales will
not be made to a discretionary account without the prior written consent of a
purchaser.
On July 27, 2001 we entered into a senior secured facility funded by a
syndicate of banks for which Bank of America, N.A., acts as agent. This senior
secured facility was amended on December 4, 2001 and December 7, 2001. Bank of
America, N.A., is an affiliate of Banc of America Securities LLC. See the
section titled "Management's Discussion and Analysis--Recent
Developments--Senior Debt Refinancing," beginning on page 56 of this prospectus.
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IDENTITY AND BACKGROUND OF FILING PERSONS AND SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth specific information as of October 31, 2001
(except as noted otherwise) regarding ownership of our shares of common stock
by:
- each of our executive officers or directors, and
- each of the new trust's trustees.
Unless otherwise stated, the address of each of the foregoing persons is c/o
Fleetwood Enterprises, Inc., 3125 Myers Street in Riverside, California 92503.
None of the persons listed below owns any of the existing preferred securities.
<Table>
<Caption>
AMOUNT AND
NATURE OF PERCENT OF
BENEFICIAL OUTSTANDING
NAME AND ADDRESS TITLE OWNERSHIP(1) SHARES(2)
- ---------------- ---------------------------------------- ------------- -------------
Glenn F. Kummer(3).......... Chairman of the Board 755,000 2.2%
Nelson W. Potter(4)......... President, Chief Executive Officer and 253,000 *
Director
Douglas M. Lawson(5)........ Director 26,000 *
Walter F. Beran(6).......... Director 33,510 *
Dr. James L. Doti(7)........ Director 24,658 *
Thomas Pitcher(8)........... Director 17,037 *
Paul D. Borghesani(9)....... Director 14,188 *
Loren K. Carroll(10)........ Director 16,188 *
David S. Engelman(11)....... Director 15,688 *
John T. Montford(12)........ Director 12,927 *
Margaret S. Dano(13)........ Director 8,000 *
Charles A. Wilkinson(14).... Executive Vice President--Operations 40,500 *
Boyd R. Plowman(15)......... Senior Vice President--Finance, Chief 31,000 *
Financial Officer, Assistant Secretary
and Regular Trustee for Fleetwood
Capital Trust II and Fleetwood Capital
Trust III
Forrest D. Theobald(16)..... Vice President--General Counsel and 1,010 *
Secretary
Lyle N. Larkin(17).......... Vice President--Treasurer and Assistant 82,500 *
Secretary
Todd L. Inlander............ Vice President--Information Technology 0 0
James F. Smith(18).......... Vice President--Controller 6,000 *
Larry L. Mace(19)........... Vice President--Administration and 54,500 *
Supply Subsidiaries
The Bank of New York ....... Delaware Trustee for Fleetwood Capital 0 0
(Delaware) Trust II and Fleetwood Capital Trust
101 Barclay Street III
21 West
New York, NY 10286
</Table>
- --------------------------
* Less than 1 percent
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(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. Unless otherwise noted, and subject to
applicable community property laws, each individual has sole voting and
investment power with respect to the shares indicated. Shares of common
stock subject to options currently exercisable or exercisable within
60 days after October 31, 2001, are deemed outstanding for computing the
share amount and the percentage ownership of the person holding such stock
options, but are not deemed outstanding for computing the percentage of any
other person.
(2) Applicable percentage of ownership is based on 34,969,141 shares of our
common stock outstanding on October 31, 2001.
(3) Includes 705,000 shares subject to options held by Mr. Kummer that are
currently exercisable or will become exercisable within 60 days of
October 31, 2001. Mr. Kummer, as sole trustee, holds the voting and
dispositive power of 50,000 shares held in The Glenn F. Kummer Trust.
(4) Includes 250,000 shares subject to options held by Mr. Potter that are
currently exercisable or will become exercisable within 60 days of
October 31, 2001. Mr. Nelson shares the voting and dispositive power of
1,000 shares with his wife as joint tenant, and shares the voting and
dispositive power of 2,000 shares with Ms. Nelson as co-trustee, in The
Potter Family Trust.
(5) Includes 24,000 shares subject to options held by Mr. Lawson that are
currently exercisable or will become exercisable within 60 days of
October 31, 2001.
(6) Includes 22,510 shares subject to options held by Mr. Beran that are
currently exercisable or will become exercisable within 60 days of
October 31, 2001. Mr. Beran individually holds 3,000 shares in a pension
plan and shares the voting and dispositive power of 4,000 shares with his
wife as co-trustee of The Beran Family Trust.
(7) Includes 18,658 shares subject to options held by Dr. Doti that are
currently exercisable or will become exercisable within 60 days of
October 31, 2001. Dr. Doti holds 2,000 shares in The James & Lynne Pierson
Doti Revocable Living Trust, for which he holds, as sole trustee, the
voting and dispositive power of these shares.
(8) Includes 12,537 shares subject to options held by Mr. Pitcher that are
currently exercisable or will become exercisable within 60 days of
October 31, 2001.
(9) Includes 9,688 shares subject to options held by Mr. Borghesani that are
currently exercisable or will become exercisable within 60 days of
October 31, 2001. Mr. Borghesani jointly holds with his wife the voting and
dispositive power of 500 shares of common stock.
(10) Includes 9,688 shares subject to options held by Mr. Carroll that are
currently exercisable or will become exercisable within 60 days of
October 31, 2001. Mr. Carroll shares with his wife, as a tenant in common,
the voting and dispositive power of 2,500 shares of common stock.
(11) Includes 9,688 shares subject to options held by Mr. Engelman that are
currently exercisable or will become exercisable within 60 days of
October 31, 2001.
(12) Includes 12,887 shares subject to options held by Mr. Montford that are
currently exercisable or will become exercisable within 60 days of
October 31, 2001.
(13) Includes 4,000 shares subject to options held by Ms. Dano that are
currently exercisable or will become exercisable within 60 days of
October 31, 2001.
(14) Includes 40,500 shares subject to options held by Mr. Wilkinson that are
currently exercisable or will become exercisable within 60 days of
October 31, 2001.
(15) Includes 26,000 shares subject to options held by Mr. Plowman that are
currently exercisable or will become exercisable within 60 days of
October 31, 2001. Mr. Plowman jointly holds with his wife the voting and
dispositive power of 5,000 shares of common stock.
(16) Includes 1,000 shares subject to options held by Mr. Theobald that are
currently exercisable or will become exercisable within 60 days of
October 31, 2001. Mr. Theobald jointly holds with his wife the voting and
dispositive power of 10 shares of common stock.
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(17) Includes 80,500 shares subject to options held by Mr. Larkin that are
currently exercisable or will become exercisable within 60 days of
October 31, 2001.
(18) Includes 4,000 shares subject to options held by Mr. Smith that are
currently exercisable or will become exercisable within 60 days of
October 31, 2001.
(19) Includes 51,500 shares subject to options held by Mr. Mace that are
currently exercisable or will become exercisable within 60 days of
October 31, 2001.
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LEGAL MATTERS
Certain legal matters with respect to the validity of the new preferred
securities have been passed upon for us and the new trusts by Morris, Nichols,
Arsht & Tunnell, special Delaware counsel to us and each of the new trusts.
Certain legal matters with respect to the validity of the new preferred
securities guarantee, the cash offer preferred securities guarantee and our
common stock issuable upon conversion of the new preferred securities and
certain United States federal income taxation matters have been passed upon for
us and each of the new trusts by Gibson, Dunn & Crutcher LLP, Orange County,
California, special counsel to us and each of the new trusts. Certain legal
matters will be passed upon for the dealer manager and placement agent by Davis
Polk & Wardwell, New York, New York.
EXPERTS
The consolidated financial statements and schedule included in our annual
report on Form 10-K, as amended, for the fiscal year ended April 29, 2001 and
incorporated by reference in this prospectus and elsewhere in the registration
statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We file reports, proxy statements and other information with the SEC, in
accordance with the Exchange Act. You may read and copy the registration
statement, the documents that we incorporate by reference into the prospectus,
the Tender Offer Statement on Schedule TO-I, as well as our other reports, proxy
statements and other information filed by us at the public reference facilities
maintained by the SEC at Room 1024, 45 Fifth Street, N.W., Washington, D.C.
20549 and at the SEC's regional offices located at 233 Broadway, 16th Floor,
Woolworth Building, New York, New York 10279-1803 and 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. You may obtain copies from the public
reference room by calling the SEC at 1-800-SEC-0330. In addition, we are
required to file electronic copies of these materials with the SEC through the
SEC's EDGAR system. You may access the information we file with the SEC over the
Internet at the SEC's web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we filed
with them, which means that we can disclose important information by referring
you to those documents. The information incorporated by reference is considered
to be a part of this prospectus, and information that we file later with the SEC
will automatically update and supersede this information. We incorporate by
reference the documents listed below and any future filings made by us with the
SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act until our
offering is complete:
- Current Report on Form 8-K, filed on December 6, 2001;
- Current Report on Form 8-K, filed on November 8, 2001;
- Current Report on Form 8-K, filed on October 26, 2001;
- Quarterly Report on Form 10-Q for the fiscal quarter ended July 29, 2001;
- Current Report on Form 8-K, filed on May 30, 2001;
- Annual Report on Form 10-K, as amended, for the fiscal year ended
April 29, 2001;
- Registration Statement on Form 8-A, filed on October 28, 1998; and
- The description of our common stock contained in our Registration
Statement on Form S-4/A, filed on June 25, 1998.
You may request a copy of these filings, at no cost to you, by writing or
telephoning us at the following address:
Investor Relations Department, Fleetwood Enterprises, Inc., 3125 Myers
Street, Riverside, California 92503, (909) 351-3500.
The forward-looking statements made in connection with the exchange offer
pursuant to the registration statement or the Tender Offer Statement on
Schedule TO-I are not and have not been protected under the Securities
Litigation Reform Act. Futhermore, any references to the safe harbor for
forward-looking statements made in reports that are incorporated by reference
into this prospectus and filed pursuant to the Securities Exchange Act of 1934
are specifically not incorporated into this registration statement with respect
to the exchange offer.
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The Exchange Agent:
THE BANK OF NEW YORK
By Hand or Mail:
The Bank of New York
15 Broad Street, 16th Floor
New York, New York 10286
Attn: Carolle Montriul
By Facsimile Transmission
(For Eligible Institutions Only):
(212) 235-2261
For Information or Confirmation by Telephone:
(212) 235-2354
The Information Agent:
D.F. KING & CO., INC.
77 Water Street, 20th Floor
New York, New York 10005
Banks and Brokers Call Collect: (212) 269-5550
All Others Call Toll Free: (800) 290-6428
Any questions or requests for assistance or additional copies of this prospectus
and the letter of transmittal may be directed to the information agent at its
telephone number and location set forth above. You may also contact your broker,
dealer, commercial bank or trust company or other nominee for assistance
concerning the exchange offer.
The dealer manager for the exchange offer:
BANC OF AMERICA SECURITIES LLC
9 West 57th Street
New York, New York 10019
(212) 583-8000
Call Toll Free: (888) 583-8900