SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994 Commission File Number 1-9751
CHAMPION ENTERPRISES, INC.
(Exact name of Registrant as specified in its charter)
Michigan 38-2743168
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2701 University Drive, Suite 320, Auburn Hills, Michigan 48326
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (810) 340-9090
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
Common Stock, $1 par value American Stock Exchange
Chicago Stock Exchange
Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the
Registrant has been required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-
K or any amendment to this Form 10-K. /X/
The aggregate market value of the Common Stock held by non-affiliates of
the Registrant as of March 9, 1995, based on the last sale price of $35.00
per share for the Common Stock on the American Stock Exchange on such date,
was approximately $213,937,815.
As of March 9, 1995, the Registrant had 7,570,124 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part of Form 10-K Report
Document into which it is incorporated
Proxy Statement for Annual Shareholders' Meeting
to be held May 1, 1995 ....................... III
PART I
ITEM 1. BUSINESS.
Established in 1953, Champion Enterprises, Inc. and its subsidiaries
(collectively, the Registrant or the Company) operate in the manufactured
housing and commercial vehicle industries. In 1994 the Registrant operated 17
manufactured housing production facilities throughout the United States, one
facility in British Columbia, Canada and nine retail locations in the
Northwest United States. These manufacturing facilities shipped 20,986 homes
in 1994 and accounted for 93% of the Registrant's revenues. On February 3,
1995 the Registrant purchased the assets and assumed certain liabilities of
Chandeleur Homes, Inc. (Chandeleur) and Crest Ridge Homes, Inc. (Crest Ridge)
for approximately $47 million. Chandeleur produces manufactured housing in
two Alabama plants and shipped more than 3,600 units in 1994. Crest Ridge
shipped more than 1,800 homes from its Texas facility in 1994. For further
discussion of the transactions, see Note 3 of Notes to the Consolidated
Financial Statements on page F-9 of this Form 10-K. The Registrant operates
one commercial vehicle manufacturing facility which accounted for 7% of the
Registrant's 1994 revenues. The Registrant sold its recreational vehicle
division in 1992. Certain financial information with respect to the
Registrant's industry segments is contained on page F-15 of this Form 10-K.
The Registrant's goals over the next three years are to achieve a
minimum compound annual growth rate of 20% in fully-taxed earnings per share
and a minimum 30% return on equity. These goals are based on the growth in
the manufactured housing industry to date, the Registrant's increased
manufacturing capacity, its increased number of independent dealer locations,
continued market share improvement, and its acquisitions. These goals are
also based on a number of assumptions, many of which are beyond the
Registrant's control, including continued growth in both the manufactured
housing industry and the overall general economy, only modest changes in
interest rates and continued availability of municipal funding for commercial
vehicles. There can be no assurance that these assumptions will prove
accurate and actual results may differ substantially from these estimates.
See Outlook and Risk Factors on pages 11 and 12 of this Form 10-K for further
discussion.
At December 31, 1994 the Registrant and recently-acquired Chandeleur and
Crest Ridge employed approximately 3,900 and 600 persons, respectively.
HOUSING
Products
Manufactured housing is constructed to building standards in accordance
with the National Manufactured Home Construction and Safety Standards
promulgated by the U.S. Department of Housing and Urban Development. The
homes are manufactured in one or more sections then transported to the home
site on a permanently-affixed steel support chassis. The Registrant's homes
range in size from 650 to over 2,000 square feet, typically include two or
three bedrooms, a living room, dining room, kitchen, family room, and two
full bathrooms, and have retail sales prices without land from $12,000 to
$75,000.
The chief components and products used in manufactured housing are
generally the same kind and quality as those used by other housing builders,
including conventional site-builders. These components include lumber,
plywood, chipboard, drywall, steel, vinyl floor coverings, insulation,
exterior siding (wood, vinyl and metal), windows, shingles, home appliances
such as refrigerators and ranges, furnaces, plumbing and electrical fixtures
and hardware. These components are presently available from several sources
and the Registrant is not dependent upon any particular supplier. In 1992
and 1993, prices of lumber fluctuated significantly due to increased demand
and reductions in supply caused by environmental regulations in Canada and
the U.S. These fluctuations abated in 1994 as demand and supply reached an
equilibrium at prices 50% higher than in 1992. The industry and the
Registrant generally were able to pass these higher lumber costs on to the
consumer in the form of surcharges and increased base prices. It is not
certain, however, that any future price increases can be passed on to the
consumer without affecting demand.
The Registrant distributes its homes in most continental U.S. markets
and in western Canada in a variety of floor plans. More than 40 different
trade names are available, with the trade name "Dutch Home" accounting for
approximately 29% of the Registrant's housing segment's sales in 1994.
Production
The Registrant's homes are constructed in indoor facilities using an
assembly-line process employing approximately 150 production employees at
each facility. Manufactured homes are constructed in one or more sections
permanently affixed to a steel support chassis. The completed homes are
delivered to dealers' locations, then transported by the dealers to the sites
where they are placed and readied for occupancy. The product is assembled in
stages beginning with the construction of the undercarriage and ending with a
final quality control inspection. The efficiency of the assembly-line
process, protection from the elements of weather and quantity discounts
resulting from the Registrant's purchasing power enable the Registrant to
produce homes in one to two days at substantially less cost than conventional
site-built housing.
The Registrant's production schedule is based upon wholesale buyer orders
which fluctuate from week to week, are subject to cancellation at any time
without penalty and are not necessarily an indication of future business.
Once such orders become firm, they are filled within 45 days. As of February
1995, unfilled orders for housing, although not firm, totaled an estimated
$33 million. This amount was 31% lower than last February's estimated level
and represented about two week's production. The Registrant believes the
decline is the result of substantially increased production levels and
capacity, and is encouraged that the level of incoming orders is outpacing
last year's level by at least 30%.
The Registrant produces homes to fill existing wholesale and retail orders
and does not carry a large stock of finished goods. Typically less than one
month's supply of raw materials is maintained. The Registrant's requirements
for working capital may increase during winter months due to the seasonal
nature of industry sales and in April due to payment of volume discounts to
retailers.
Transportation charges are an important factor in the cost of a manufactured
home. As a result, most of the independent retail outlets for a manu-
facturer's products are located within a 250 to 500-mile radius of the
manufacturing plant. Regional population and employment trends can
significantly affect demand for products of manufacturers whose plants are
located in the region; consequently, the Registrant considers current levels
of, and expected changes in, such demand when deciding whether to continue
operation of various production facilities or whether to open additional
facilities.
Market
Manufactured housing competes for consumers' shelter dollars in suburban and
rural areas with other forms of new low-cost housing such as site-built
housing, prefabricated and modular homes, condominiums, and with existing
housing such as pre-owned homes and apartments. According to statistics
published by the Manufactured Housing Institute, manufactured housing
accounted for an estimated 31% of new single-family homes sold in 1994, up
from 28% in 1993. Industry shipments of manufactured housing increased 20%
in 1994 to 303,932 homes.
The market for manufactured housing is affected by a number of different
factors, including consumer confidence, job creation, general economic
growth and the overall affordability of manufactured housing versus other
forms of housing. In addition, demographic trends such as changes in
population growth and competition affect the demand for housing products.
The affordability of manufactured housing is influenced by interest rates and
the availability of financing. Although the Registrant does not believe
there is a direct correlation between manufactured housing shipments and
interest rate changes, there can be no assurance that a rise in overall
interest rates would not have an adverse impact on the general economy and,
therefore, the market for manufactured housing. Generally, manufactured
housing is less sensitive to interest rate changes than other housing. When
rates decrease manufactured housing becomes more affordable for those who
finance their purchases and when rates increase site-built housing becomes
even less affordable by comparison.
The Registrant believes the segment of the housing market in which
manufactured housing is most competitive includes consumers with household
incomes under $40,000. This segment has a high representation of young
singles and married couples, as well as elderly or retired persons. These
consumers are attracted by the comparatively low cost of fully or partially
furnished housing, together with the low down payment requirements and the
relative ease of financing. Persons in rural areas, where fewer housing
alternatives exist, and those who presently live in manufactured homes make
up a significant portion of the demand for new manufactured housing. The
Registrant believes that a much larger market may exist, including apartment
dwellers and persons who have traditionally purchased low-priced site-built
homes. In the past a number of factors have restricted demand for
manufactured housing, including less-favorable financing terms for
manufactured housing compared to site-built housing, the effects of
restrictive zoning on the availability of certain locations for home
placement and, in some cases, an unfavorable public image. These negative
factors have lessened considerably in recent years with increased financing
availability and less restrictions.
Competition
The manufactured housing industry is highly competitive. The Registrant
believes that as of December 1994 there were approximately 98 producers of
manufactured homes in the U.S. that were operating an estimated 269
production facilities. This total compares to 244 facilities a year ago, for
a 10% increase. Capital requirements for entry into manufacturing are
relatively small and product differentiation and consumer brand recognition
is slight. As a result, the principal method of competition is price, with
product quality and features also important factors. The Registrant's
margins have improved this year due primarily to higher sales volume per
facility, a higher mix of multi-sectional homes, production efficiencies and
a reduction in price competition as a result of increased overall market
demand.
Based on annual dollar sales, in 1994 the Registrant was the second largest
producer of manufactured housing in the U.S., excluding Chandeleur and Crest
Ridge. The Registrant's U.S. shipments totaled 20,247 homes, which resulted
in an increase in market share to 6.7%, up from 4.7% in 1993, according to
industry trade statistics and primarily as a result of the Dutch acquisition.
The Registrant's mix of multi-sectional homes was 59% in 1994, compared to
52% in 1993. The industry's 1994 multi-sectional mix was 49%. A multi-
sectional home, including a double-section home, is counted as one home or
"unit". Chandeleur and Crest Ridge shipped over 5,400 units in 1994, of
which approximately 25% were multi-sectional.
Distribution
The Registrant's products are distributed in the U.S. and Canada through
over 1,500 retail outlets operated by independent dealers (including
approximately 274 for Chandeleur and Crest Ridge), some of which are operated
by single firms having multiple outlets, as well as through nine Registrant-
owned retail centers. As is common in the industry, the majority of the
Registrant's dealers are independent and sell manufactured homes produced by
other manufacturers in addition to those produced by the Registrant. In 1994,
no single independent dealer or distributor accounted for more than 10% of
the Registrant's sales and less than 10% of the Registrant's manufactured
housing production was shipped to retail sales centers it owned. The majority
of dealer purchases are financed on a floor plan basis secured by a lien on
such units. In accordance with trade practice, the Registrant enters into
various repurchase agreements with the lending institutions providing such
financing, as is more fully described in Note 9 of Notes to Consolidated
Financial Statements on page F-12 and F-13 of this Form 10-K.
During 1994 the Registrant expanded its independent dealer distribution
network by 30% to approximately 1,270 retail locations. This increase
includes Dutch's approximately 267 dealers but excludes Chandeleur's and
Crest Ridge's approximately 274 dealers. The Registrant is continuing its
expansion efforts and expects continued sales growth in 1995 primarily from
its existing dealer base and from Chandeleur's and Crest Ridge's dealers.
COMMERCIAL VEHICLES
Products
The Registrant manufactures mid-size buses ranging in length from 20 to 33
feet with seating capacity for 10 to 37 passengers. Buses are offered with a
choice of interior or exterior storage areas, wheel-chair lifts, diesel,
gasoline and alternate fuel engines and various seat types, arrangements and
coverings. The Registrant's mid-size buses are marketed under the trade names
Centurion, Challenger, CTS, Crusader, Commander, Commodore, Contender and
Handi-Van.
Production
The Registrant purchases chassis for its buses from motor vehicle
manufacturers and produces the final product using assembly-line production
techniques. A steel-cage frame consisting of steel tubes is attached to the
chassis and an adhesive/bonding insulation technique is used to fasten the
smooth exterior walls to the frame. This construction provides superior
passenger comfort and safety. The chief components and products used by the
Registrant in its vehicle manufacturing operations, with the exception of the
chassis, are presently available from several sources and the Registrant is
not dependent upon any particular supplier. In early 1994 the industry
experienced a chassis shortage due to product change over at one of the
chassis manufacturers. The Registrant's production was not affected by this
shortage and it believes that chassis can be obtained in spite of potential
shortages in 1995.
Orders for buses are subject to adjustment or cancellation until final
approval of specifications is received from customers. Once such orders
become firm, they are filled within 90 days. As of February 1995, the level
of firm, unfilled orders for buses totaled approximately $10 million, which
was 17% greater than February 1994's level.
Market
The demand for mid-size buses is affected by factors such as government
regulations and spending programs, the need for short distance shuttle
services, overall economic conditions and the general availability of
financing. The market for mid-size buses is expected to increase as demand
grows for mass transportation and specialty transport vehicles such as buses
for the physically challenged and the elderly. Lower operating costs, greater
flexibility, and reduced capital investment is believed to make the
Registrant's vehicles a practical alternative to larger mass-transit buses
and smaller vans. Demand for mid-size buses is not seasonal in nature. The
Registrant sells its buses to municipalities, public agencies and private
businesses, which include shuttle fleets, nursing homes, churches, hotels,
airports and universities.
Competition
According to data prepared by the newly-formed Mid-Size Bus Manufacturers
Association, the Registrant believes it has approximately a 15% share of the
mid-size bus industry, up from approximately 12% in 1993.
Distribution
The Registrant distributes its buses through a network of independent
distributors and directly to municipalities and national accounts on a bid
basis. There are approximately 75 independent distributors of mid-size buses
in the U.S. and Canada.
____________________________
ITEM 2. PROPERTIES.
All of the Registrant's manufacturing facilities are one story with
concrete floors and wood and steel superstructures. The Registrant owns all
of its manufacturing facilities except for two housing facilities which are
leased, and owns substantially all of the machinery and equipment used in
each of its facilities. The following table sets forth certain information
with respect to the manufactured housing and commercial vehicle manufacturing
facilities (all of which are assembly-line operations) operated by the
Registrant.
Products Approximate
Location Manufactured Square Feet
Alabama: Guin Manufactured homes 110,000
Boaz(2)<F1> Manufactured homes 161,000
California: Lindsay Manufactured homes 156,000
Colorado: Berthoud Manufactured homes 103,000
Idaho: Weiser Manufactured homes 130,000
Indiana: LaGrange(2)<F2> Manufactured homes 145,000
Ridgeville Manufactured homes 105,000
Michigan: Imlay City Mid-size buses 172,000
White Pigeon(3) Manufactured homes 190,000
Nebraska: Central City Manufactured homes 130,000
York Manufactured homes 126,000
New York: Sangerfield Manufactured homes 114,000
North Carolina: Lillington Manufactured homes 110,000
Lillington Manufactured homes 110,000
Pennsylvania: Claysburg Manufactured homes 122,000
Tennessee: Henry Manufactured homes 98,000
Texas: Breckenridge<F3> Manufactured homes 82,000
Washington: Chehalis<F4> Manufactured homes 103,000
British Columbia: Penticton Manufactured homes 74,000
<F1>Purchased on February 3, 1995 from Chandeleur under a capital lease.
<F2>Includes one newly constructed Dutch facility which began production in
March, 1995.
<F3>Purchased on February 3, 1995 from Crest Ridge.
<F4>Lease, expiring March 31, 1996, can be renewed for up to 3 additional
years.
It is difficult to determine unit production capacity of the
Registrant's production facilities due to the ever-changing product mix. To
a significant extent, production levels are determined by the size of the
factory workforce (rather than the inherent capacity limitations of the
facility), due to the largely manual nature of the production and assembly
process. During 1994, $10.6 million was used for capital investments,
including the expansion of facilities located in Alabama, California, Idaho,
Indiana, North Carolina and Tennessee. The Registrant plans to spend at least
$8 million on capital improvements in 1995 including expansions in Alabama,
Nebraska and North Carolina and the addition of a new facility in Indiana.
The Registrant believes its plant facilities are generally well maintained
and, with completed and planned expansions, provide ample capacity to meet
expected demand.
The Registrant's executive offices are located in a leased office
building complex in Auburn Hills, Michigan. During fiscal 1994, the
Registrant sold its former recreational vehicle manufacturing facilities,
which had been leased to the purchaser with an option to buy. Other
miscellaneous properties are also owned and leased, including nine locations
used in the retail sale of manufactured housing.<PAGE>
ITEM 3. LEGAL PROCEEDINGS.
At any point in time, the Registrant is ordinarily involved in routine
litigation incidental to its business. This litigation arises principally
from the sale of its products and in various governmental agency proceedings
arising from occupational safety and health, wage and hour, and similar
employment and workplace regulations. In the opinion of the Registrant's
management, none of such matters presently pending are material to the
Registrant's overall financial position or operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of the Registrant's security
holders during the fourth quarter of 1994.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS.
(a) The Registrant's common stock is listed on the American, Chicago and
Pacific Stock Exchanges as ChampEnt and has a Ticket Symbol of CHB.
Quarterly stock prices and volumes were as follows:
(In thousands)
APPROXIMATE
HIGH LOW VOLUMES
1994
4th Quarter 40 5/8 26 3/4 1,527
3rd Quarter 39 5/8 26 5/8 2,109
2nd Quarter 34 7/8 22 3/4 2,829
1st Quarter 28 1/8 17 1/2 2,883
1993
4th Quarter 19 3/4 15 7/8 2,721
3rd Quarter 18 7/8 13 3,350
2nd Quarter 19 1/8 13 7/8 2,185
1st Quarter 18 7/8 9 1/8 4,704
(b) There were approximately 6,800 shareholders of record and 10,000
beneficial holders on March 9, 1995.
(c) The Registrant has not paid cash dividends during the past two
fiscal years. The loan agreement with Comerica Bank, among other things,
precludes payment of cash dividends on common stock.
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
FIVE-YEAR HIGHLIGHTS
(In thousands, except per share amounts and unit shipments)
<CAPTION>
(UNAUDITED)
CALENDAR 44 WEEKS
YEAR END ENDED FISCAL YEAR ENDED
FISCAL IN DECEMBER Jan. 1, IN FEBRUARY
1994 1993 1992 1991 1993 1992 1991 1990
OPERATIONS:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $615,668 $341,940 $270,554 $245,336 $235,233 $244,938 $256,365 $264,026
Total segment income
(loss) 41,753 16,611 9,633 3,065 8,932 4,968 5,694 (6,021)
Environmental reserve 2,700 - - - - - - -
Corporate expenses 5,113 4,932 3,986 3,934 3,549 3,837 3,647 4,235
Net interest income 150 904 505 319 568 423 574 649
Pretax income (loss)
continuing operations 34,090 12,583 6,152 (550) 5,951 1,554 2,621 (9,607)
Income (loss) -
continuing operations 25,190 11,183 5,462 (1,950) 4,821 804 1,591 (10,417)
Income (loss) -
discontinued operations 1,908 - (2,593) (1,488) (2,010) (1,419) (3,372) (3,974)
Net income (loss) 27,098 11,183 2,869 (3,438) 2,811 ( 615) (1,781) (14,391)
Per share amounts:<F1>
Income (loss) -
continuing operations 3.26 1.54 0.77 (0.29) 0.68 0.12 0.23 (1.48)
Income (loss) -
discontinued operations 0.24 - (0.37) (0.22) ( 0.28) (0.21) (0.49) (0.56)
Net income (loss) $3.50 $1.54 $0.40 $(0.51) $ 0.40 $(0.09) $(0.26) $(2.04)
Weighted average shares
outstanding 7,733 7,277 7,094 6,779 7,044 6,954 6,794 7,041
Depreciation and
amortization $3,895 $2,233 $1,948 $1,840 $1,637 $1,900 $2,026 $2,398
Capital expenditures $10,619 $6,639 $3,379 $2,068 $2,820 $2,189 $1,461 $5,065
<CAPTION>
FINANCIAL POSITION:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Working capital $18,753 $31,969 $21,945 $16,472 $21,945 $17,504 $15,456 $16,514
Property and equipment-net 30,059 19,635 15,554 16,652 15,554 15,791 16,757 18,807
Total assets 171,230 94,912 76,146 81,884 76,146 81,293 84,878 93,128
Long-term liabilities 12,857 6,880 5,868 11,261 5,868 10,740 12,447 14,776
Shareholders' equity 79,294 45,922 34,037 31,157 34,037 31,355 31,964 33,268
Per share $10.50 $6.37 $4.87 $4.61 $4.87 $4.62 $4.72 $5.05
Percentage return
(loss) on equity<F2> 43% 28% 9% (11)% 4% (2)% (5)% (35)%
<CAPTION>
OTHER STATISTICAL INFORMATION:
<S> <S> <C> <C> <C> <C> <C> <C> <C>
Manufactured home unit
shipments 20,986 12,488 11,011 10,455 9,526 10,241 10,864 11,708
<F1>Based on weighted average number of shares outstanding during each year.
<F2>Percentage return is based on average equity for each year.
In October 1992, the Company changed its fiscal year end from the end of February to the end of December.
Fiscal 1994 includes the results of Dutch Housing, Inc. from the effective date of the acquisition, which was January 28, 1994.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Champion Enterprises, Inc., achieved record sales and profits in 1994 due to
management's aggressive capital expansion, the growing manufactured housing
and mid-size bus industries and the acquisition of Dutch Housing, Inc. The
Company's housing segment, which comprised 93% of total revenues, increased
sales by 85% over last year's strong sales, and increased income by 149% over
1993. The mid-size bus segment posted a revenue increase of 36% over 1993 and
a 214% increase in profits. Cash flow from operations was $27.2 million, up
from $16.2 million in 1993. Overall, the Company exceeded its 1994 goals as
follows:
Actual Goals
Sales increase 80% 65%
EPS continuing
operations increase 112% 100%
Return on equity 43% 35%
Champion is committed to earnings growth through capital investment in its
current facilities, and accretive acquisitions in its current industries, or
diversified industries, consistent with capital limitations and prudent risk.
In February 1995, Champion completed the acquisitions of two manufactured
housing companies located in the Southeast and the Southwest for
approximately $47 million.
RESULTS OF OPERATIONS 1994 VS. 1993
CONSOLIDATED FINANCIAL SUMMARY
(In thousands, except per share amounts)
1994 1993 $ Change % Change
Net sales:
Housing $571,660 $309,697 $261,963 85%
Commercial vehicles 44,008 32,243 11,765 36%
$615,668 $341,940 $273,728 80%
Segment income:
Housing $39,935 $16,032 $23,903 149%
Commercial vehicles 1,818 579 1,239 214%
$41,753 $16,611 $25,142 151%
Income
continuing operations $25,190 $11,183 $14,007 125%
Net income 27,098 11,183 15,915 142%
Income per share
continuing operations 3.26 1.54 1.72 112%
Net income per share $3.50 $1.54 $1.96 127%
Income from continuing operations more than doubled to $25.2 million ($3.26
per share) in 1994 from $11.2 million ($1.54 per share) in 1993 on an 80%
increase in revenues. The acquisition of Dutch Housing, Inc., in January 1994
accounted for 48 percentage points of the sales increase, while sales at
existing operations increased 32%. Total segment income reached 6.8% of sales
in 1994 compared to 4.9% in 1993. Return on average shareholders' equity
reached 43% versus 28% in 1993. The effective income tax rate for 1994's
continuing operations was 26%, up from 1993's 11%. These rates differ from
the statutory federal rate of 35% due to utilization of substantially all
remaining tax loss carryforwards. On a fully-taxed basis, net income would
have been $22.3 million ($2.88 per share) in 1994 and $7.6 million ($1.04 per
share) in 1993.
Champion maintained a strong balance sheet throughout 1994, investing $47
million in capital expenditures and the Dutch acquisition. The year was
completed with a debt-free balance sheet and a cash position of $23 million,
down just $11.4 million from the year ended 1993.
Manufactured Housing
The Company's manufactured housing sales increased 85% in 1994 to $571.7
million from $309.7 million in 1993, significantly better than the 60% stated
goal. Housing revenues, excluding the Dutch acquisition, increased 31% in
1994. Total U.S. shipments for the Company were 20,247 units, up 71%.
Industry shipments in the U.S. rose 20% to 303,932 homes in 1994, the third
consecutive year of shipment gains. Champion's unit market share improved to
6.7% in 1994 from 4.7% in 1993. The multi-section mix increased to 59% from
52%, surpassing the Company's goal of 57% for 1994. Floor section market
share increased to 7.2% in 1994 from 4.8% in 1993.
The housing group recorded profits of $39.9 million, up $23.9 million or 149%
from $16 million last year. Operating margins as a percent of sales improved
to 7% from 5.2% in 1993, surpassing the Company's 1994 stated goal of 6%. The
margin improvement resulted from higher volume per facility, a greater mix of
multi-section homes, and to a lesser extent, reduced material costs as a
percent of sales. The volatility of lumber costs experienced in 1992 and 1993
abated in 1994, allowing the Company, and the industry in general, to
eliminate additional lumber surcharges. The average selling price of the
Company's homes increased 10% to $27,240 from $24,800 because of a higher mix
of multi-section homes and price increases.
Champion continued the capacity expansion program it had begun in mid-1992 to
meet the increasing demand for its housing products. Champion expanded four
housing facilities in 1993. In 1994, the Company expanded six facilities,
opened a new facility in Indiana, and has begun construction of another plant
at the same Indiana site, which is expected to be completed in the spring of
1995. In 1995, Champion will complete expansions at three facilities and may
expand additional facilities. Capital expenditures totaled $10.1 million in
1994, up from $6.2 million in 1993 and are expected to total at least $7.5
million in 1995.
Commercial Vehicles
Sales of mid-size buses totaled $44 million in 1994, up 36% from $32.2
million in 1993 and exceeding its 1994 goal of a 20% increase in sales
dollars as unit shipments increased 33%. Fleet sales accounted for 19% of
1994's revenues, up from 10% a year ago. The Company improved its market
share to an estimated 15% in 1994, from an estimated 12% in 1993, according
to data prepared by the newly formed Mid-Size Bus Manufacturers Association.
Champion's average unit price increased 3% in 1994.
The commercial vehicle division recorded profits of $1.8 million in 1994, up
$1.2 million or 214% over 1993. The operating margin rose to 4.1% of sales in
1994, exceeding its goal of 3% and 1993's operating margin of 1.8%. The
operating margin increased because of improved product mix and pricing, along
with increased labor efficiency and product quality.
Corporate and Other Expenses
General corporate expenses increased only 4% in 1994. The Company has been
cited for alleged environmental violations for the period 1955-1972. In the
fourth quarter of 1994, the Company recorded $2.7 million for settlement of
such claims. The recorded liability does not include any amounts for
potential insurance recoveries. In February 1994, the Company settled certain
litigation relating to discontinued operations resulting in a $3 million
($1.9 million after-tax) gain.
RESULTS OF FOURTH QUARTER 1994 VS. FOURTH QUARTER 1993
Net sales increased 83% to $164.8 million from $90.3 million in 1993.
Excluding a $2.7 million provision for environmental expenses in 1994, income
from continuing operations before taxes increased $5.8 million to $8.5
million in 1994, an increase of 217% from $2.7 million in 1993. Earnings per
share increased 72% to $.55 in 1994 from $.32 in 1993.
Manufactured housing revenues increased 89% over the fourth quarter of 1993
to $153 million in 1994. Housing revenues, excluding the Dutch acquisition,
increased 27% over last year's fourth quarter. Housing segment profits
increased 158% to $8.9 million in 1994 from $3.4 million in 1993. Dutch added
$2.9 million to segment profits. Commercial vehicle sales increased 25% to
$11.8 million in 1994, while segment income increased 133% to $621,000 in
1994 from $267,000 in 1993.
OUTLOOK AND RISK FACTORS
The Company continues to strive to improve shareholder value through
investment in sound operational businesses. Management will continue to
improve existing operations through a focus on quality and productivity and
to seek further growth opportunities through additional acquisitions of
related businesses and, if prudent, in diversified businesses. An important
step in this strategy was the acquisition of Chandeleur Homes, Inc., and
Crest Ridge Homes, Inc., in February 1995. Refer to Note 3 of Notes to
Consolidated Financial Statements for further discussion.
Manufactured Housing
Industry wholesale unit shipments of manufactured homes increased 20% in
1994, 21% in 1993 and 23% in 1992 according to the Manufactured Housing
Institute (MHI), an industry trade association. Management estimates a 7-10%
increase in industry shipments in 1995, which is consistent with forecasts
published by the MHI.
To the extent increased interest rates reduce the growth of jobs and the U.S.
economy, or cause a loss in consumer confidence, demand for manufactured
housing may be adversely affected. Management's estimates assume that the
recent increases in interest rates will not significantly slow the growth of
the U.S. economy. The Company is encouraged by the increased inflow of
financing into the wholesale, retail, and community development programs in
the manufactured housing industry. This inflow of funds has helped to dampen
the effect of the increase in consumer interest rates in 1994.
Although dealers' orders can be cancelled at any time without penalty, and
unfilled orders are not necessarily an indication of future business, the
Company's unfilled orders for housing in early February 1995 totaled
approximately $33 million, which was 31% lower than last year's level. The
Company believes this decline is the result of its increased production
levels and capacity, and is encouraged that the current level of incoming
orders is outpacing last year's level by at least 30%.
The Department of Housing and Urban Development (HUD), which regulates the
manufactured housing industry, enacted regional energy and wind standards in
1994 which increased the wholesale base price of manufactured homes from
5-10% in certain regions of the U.S. The Company has passed on these cost
increases to its customers. While there is no guarantee that future policy
and standard changes made by HUD will not adversely affect product demand,
management believes the cost of any new standards will not significantly
reduce demand.
The Company normally purchases materials from several different sources and
has not experienced serious shortages in the past. In 1992, 1993 and early
1994, however, prices of lumber fluctuated significantly due to reductions in
supply resulting from environmental regulations in Canada and the U.S. and in
part due to rising demand. These fluctuations abated in the spring of 1994 at
prices approximately 50% higher than 1992 levels. The Company believes that a
sufficient supply of lumber will be available to the home building industry
in the future. The manufactured housing industry and Champion have generally
been able to pass higher lumber costs on to the consumer in the form of
surcharges and base price increases; however, the Company is not certain that
any future cost increases can be passed on to consumers without affecting
demand.
The Company sponsors or takes part in several dealer inventory financing
programs for which it is contingently liable to the participating financial
institutions for certain repurchase and recourse obligations in the event of
dealer default. The Company provides for losses under these programs, which
in prior years have not been significant. See Note 9 of Notes to Consolidated
Financial Statements for more information concerning these inventory
financing programs.
In the long term, industry growth will be affected by, among other things,
the availability and cost of financing, the relative cost of manufactured
housing versus other forms of housing, including rental housing, general
economic trends and changes in demographics including new household
formations and the number of Americans on fixed incomes. The Company believes
that long-term demand for affordable manufactured housing will continue to
grow due to favorable demographic trends and financing factors. Changes in
regional markets and the U.S. economy as a whole will continue to affect
overall housing industry cycles.
Management believes that its strategy of appealing to the standardized and
customized markets, decentralized organizations, improving product quality,
broadened geographic coverage and selective acquisitions will enable the
Company to perform well in either up or down economic cycles.
Commercial Vehicles
In the past year approximately one-half of the Company's bus sales were to
municipalities. Sales to municipalities, largely dependent on government
funding, may be adversely affected by a reduction in federal spending
programs. The bus division had unfilled orders of approximately $10 million
in early February 1995, 17% greater than last year. In anticipation of
continued strong acceptance of Champion's mid-size buses, and continued
industry growth due to the increased use of alternative fuels and
requirements of the Americans with Disabilities Act, an idle facility on the
same production site as the current facility is being renovated to begin
production of two new bus products in 1995. Including the renovation, the
Company expects to spend $600,000 in 1995 on capital expenditures.
RESULTS OF OPERATIONS 1993 VS. 1992
In October 1992, the Company changed its fiscal year end from the end of
February to the end of December. The following comparisons are on a calendar
year basis.
CONSOLIDATED FINANCIAL SUMMARY
(In thousands, except per share amounts)
(Unaudited)
1993 1992 $ Change % Change
Net sales:
Housing $309,697 $246,247 $63,450 26%
Commercial vehicles 32,243 24,307 7,936 33%
$341,940 $270,554 $71,386 26%
Segment income (loss):
Housing $16,032 $10,576 $5,456 52%
Commercial vehicles 579 (943) 1,522
$16,611 $9,633 $6,978 72%
Income
continuing operations $11,183 $5,462 $5,721 105%
Net income 11,183 2,869 8,314 290%
Income per share
continuing operations 1.54 0.77 0.77 100%
Net income per share $1.54 $0.40 $1.14 285%
For 1993, the Company reported net income of $11.2 million ($1.54 per share)
on sales of $341.9 million, compared to net income of $2.9 million ($.40 per
share) on sales of $270.6 million in 1992. Income from continuing operations
totaled $5.5 million ($.77 per share) in 1992, as the Company sold its
unprofitable RV operation to Firan Motor Coach, Inc., recording a $2.6
million ($.37 per share) loss from discontinued operations.
Manufactured Housing
Sales for the manufactured housing group increased $63.5 million or 26% to
$309.7 million in 1993 from $246.2 million in 1992 on a 13% increase in North
American unit shipments. Industry shipments in the U.S. totaled 254,276
homes, an increase of 21% over 1992. The Company's U.S. shipments increased
16% to 11,859 units and market share totaled 4.7% in 1993, down from 4.9% in
1992.
Operating profit for the housing group totaled $16 million, up 52% from $10.6
million in 1992. The improvement resulted from, among other things, increased
productivity, a larger mix of multi-section homes, and higher volume. The
Company's average selling price of its homes was $24,800 in 1993, an increase
of 11% compared to $22,364 in 1992. Higher prices for lumber, which were
passed on to the consumer by the industry, and by Champion, in the form of
lumber surcharges, and a shift in multi-section mix to 52% from 47% a year
earlier, contributed to the increase in average selling price. The housing
segment invested $6.2 million in capital expenditures in 1993, completing
plant expansions at four of its facilities.
Commercial Vehicles
Commercial vehicle sales totaled $32.2 million in 1993, up 33% from $24.3
million in 1992. The sales increase was due in part to a delay in 1992 of
orders from the State of Michigan which were built in 1993, and to increased
penetration in the national fleet sales market.
The commercial vehicle division recorded profits of $579,000 in 1993 compared
to a loss of $943,000 in 1992. Higher sales combined with improved labor,
manufacturing and warranty costs produced the $1.5 million profit
improvement. Losses in 1992 included restructuring expenses related to the
consolidation of manufacturing operations to one facility.
Corporate and Other Expenses
General corporate expenses increased 24% in 1993 compared to 1992, mainly due
to legal and professional fees related to the Company's acquisition
activities and efforts to recover damage claims through litigation.
LIQUIDITY AND CAPITAL RESOURCES
Cash balances totaled $23 million at the end of 1994, down $11.4 million from
$34.4 million on January 1, 1994. In 1994, cash of $27.2 million was
generated from operations, $36.5 million was used to acquire Dutch and $10.6
million was used for capital investments. Additions to property, plant and
equipment amounted to $6.6 million in 1993. The Company's current ratio was
1.2 to 1 at December 31, 1994, compared to 1.8 to 1 at January 1, 1994, as
the Company put some of its excess cash to use in operations. The Company had
no debt at the end of 1994 or 1993.
In February of 1995, the Company purchased two manufactured housing
companies, Chandeleur Homes, Inc., and Crest Ridge Homes, Inc., for $47
million. The purchase was funded with available cash of $18 million and $20
million from its amended $60 million credit line. The remainder of the
purchase price is payable when certain conditions are met. The line of
credit, which expires in two years, includes $10 million of availability to
cover letters of credit. The Company currently has $7.6 million of letters of
credit outstanding, generally to support insurance obligations and licensing
and service bonding required by various states. See Note 4 of Notes to
Consolidated Financial Statements for additional information concerning the
credit facility. The Company plans to spend at least $8 million in 1995 on
capital improvements. Consistent with the Company's plan to improve
shareholder value through investment in sound operational businesses, it does
not plan to pay cash dividends in the near term.
The Company believes that existing cash balances, cash flow from operations
and additional availability under its line of credit are adequate to meet its
anticipated financing needs, operating requirements and capital expenditures
on both a short-term and long-term basis. However, the Company continually
explores other opportunities to raise capital to finance growth through
internal expansion and/or acquisitions.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements and schedules filed herewith are set forth on
the Index to Financial Statements and Financial Statement Schedules on page
F-1 of the separate financial section which follows page 18 of this Report
and are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information set forth in the first part of the section entitled
"Election of Directors" in the Registrant's 1994 Proxy Statement to
Shareholders (the "1994 Proxy Statement"), and under the caption "Certain
Information Regarding Nominees" in such section of the 1994 Proxy Statement
is incorporated herein by reference.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Registrant, their ages, and the position or
office held by each, are as follows:
Position or Office Name Age
Chairman of the Board of
Directors, President and
Chief Executive Officer Walter R. Young, Jr. 50
Vice President James M. Gurch 56
Group Vice President-
Transportation Thomas J. Ensch 56
Executive Vice President-Treasurer
and Chief Financial Officer A. Jacqueline Dout 40
Vice President-Secretary
and General Counsel Louis M. Balius 58
Assistant Treasurer and
Controller J. Craig Wiles 51
The executive officers of the Registrant serve at the pleasure of the
Registrant's Board of Directors except for Mr. Walter R. Young, Jr., who is
currently serving a three year term ending April 30, 1998, unless terminated
earlier in accordance with the terms of a certain Letter Agreement between
the Registrant and Mr. Young, dated April 27, 1990.
Mr. Young joined the Registrant in April 1990 as President and Chief
Executive Officer and was elected Chairman of the Board in April 1992. From
1987 to 1990, Mr. Young held various senior management positions with The
Henley Group, responsible for five wholly-owned companies and ten
international joint ventures, including President of The Wheelabrator
Corporation, a division of Wheelabrator Technologies, Inc., Atlanta, Georgia,
a provider of industrial surface treatment equipment, parts and services and
President of Johnson Filtration Systems, St. Paul, Minnesota, a provider and
servicer of well and water treatment products.
Mr. Gurch joined the Registrant in July 1992. Previously for the past
five years, he served as Senior Vice President-Operations for Schult Homes
Corporation, a leading manufactured housing producer.
Mr. Ensch joined the Registrant in April 1992. From 1989 to 1992, Mr.
Ensch served as President of Atlas Alloys Division of Rio Algom Ltd.,
Toronto, Ontario, a distributor of specialty metals, and from 1986 to 1989,
as Senior Vice President-Sales and Marketing of Uniroyal Goodrich Canada,
Kitchener, Ontario.
Prior to joining the Registrant in April 1994, Ms. Dout served as Vice
President and Treasurer of Mallinkrodt Group, Inc. (formerly IMCERA Group,
Inc.), where she was employed for six years.
Mr. Balius has served in various capacities since joining the
Registrant in 1972. Starting in 1980, he served as Secretary until becoming
Vice President-Legal and Governmental Affairs in 1982. Since that time, he
has served in various capacities as legal counsel and was elected as Vice
President-Secretary and General Counsel in 1988.
Mr. Wiles has served in various financial and accounting positions
including Controller since 1971 and as Assistant Treasurer and Controller
since 1990.
There are no family relationships among any of the Registrant's
executive officers.
The information set forth under the caption "Compliance with Section
16(a) of The Exchange Act" in the section entitled "Additional Information"
in the Registrant's 1994 Proxy Statement is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information set forth under the section entitled "Executive
Compensation" in the Registrant's 1994 Proxy Statement is incorporated herein
by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information set forth under the captions "Principal Shareholders"
and "Security Ownership of Management" in the section entitled "Additional
Information" in the Registrant's 1994 Proxy Statement is incorporated herein
by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Not applicable.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The financial statements, supplementary financial information, and
financial statement schedules filed herewith are set forth on the Index to
Financial Statements and Financial Statement Schedules on page F-1 of the
separate financial section which follows page 18 of this Report, which is
incorporated herein by reference.
The following exhibits are filed as part of this Report. Those exhibits
with an asterisk(*) designate the Registrant's management contracts or
compensation plans or arrangements for its executive officers.
Exhibit No. Description
3.1 Restated Articles of Incorporation of the Registrant - filed as
Schedule I to Exhibit A to the Proxy Statement for the
Predecessor's 1987 Annual Meeting of Shareholders (Filed
pursuant to Regulation 14A) and incorporated herein by
reference.
3.2 Bylaws of the Registrant.
4.1 Second Amended and Restated Loan Agreement dated March 2, 1994
between the Registrant and Comerica Bank, filed as Exhibit 4.1
to the Registrant's Annual Report on Form 10-K for the fiscal
year ended January 1, 1994 and incorporated herein by
reference.
4.2 First Amendment to Second Amended and Restated Loan Agreement
dated January 31, 1995 between the Registrant and Comerica
Bank.
4.3 Article III of the Registrant's Restated Articles of
Incorporation (defining the rights of the holders of shares of
the authorized classes of the Registrant's capital stock) -
included in the copy of the Registrant's Restated Articles of
Incorporation filed as Exhibit 3.1 hereto.
4.4 The Registrant has issued certain receivable-backed notes (the
"Notes") pursuant to a Trust Indenture dated as of August 1,
1987 between CAC Funding Corporation, as issuer, and First of
America Bank - Detroit, N.A., as trustee. The Notes do not
exceed 10 percent of the total assets of the Registrant and the
Registrant agrees to furnish a copy of the Trust Indenture to
the Commission upon request.
10.1 *Letter Agreement dated April 27, 1990 between the Registrant
and Walter R. Young, Jr., filed as Exhibit 10.3 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended March 2, 1990 and incorporated herein by reference.
10.2 *Non-Qualified Stock Option Agreement dated April 27, 1990
between the Registrant and Walter R. Young, Jr., filed as
Exhibit 10.4 to the Registrant's Annual Report on Form 10-K for
the fiscal year ended March 2, 1990 and incorporated herein by
reference.
10.3 *Letter Agreement dated March 10, 1992 between the Registrant
and Thomas J. Ensch, filed as Exhibit 10.4 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended January 1,
1993 and incorporated herein by reference.
10.4 *Letter Agreement dated May 28, 1992 between the Registrant and
James M. Gurch, filed as Exhibit 10.7 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended January 1,
1993 and incorporated herein by reference.
10.5 *Champion Enterprises, Inc. 1987 Stock Option Plan, as amended,
filed as Exhibit 10.9 to the Registrant's Annual Report on Form
10-K for the fiscal year ended February 28, 1992 and
incorporated herein by reference.
10.6 *Champion Enterprises, Inc. Stock Plan for Directors, as
amended, filed as Exhibit 10.9 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended January 1, 1994
and incorporated herein by reference.
10.7 *Champion Enterprises, Inc. 1990 Non-Qualified Stock Option
Program, filed as Exhibit 10.11 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended February 28, 1992
and incorporated herein by reference.
10.8 Lease Agreement dated November 21, 1991 between the Registrant
and University Development Company relating to the premises
located at 2701 University Drive, Auburn Hills, Michigan, filed
as Exhibit 10.12 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended February 28, 1992 and incorporated
herein by reference.
10.9 *Non-Qualified Stock Option Agreement dated July 6, 1992
between the Registrant and James M. Gurch, filed as Exhibit
10.13 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended January 1, 1993 and incorporated herein by
reference.
10.10 *Change in Control Severance Agreement dated as of April 12,
1991 between the Registrant and Louis M. Balius, filed as
Exhibit 10.15 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended January 1, 1993 and incorporated
herein by reference.
10.11 *Champion Enterprises, Inc. 1993 Middle Management Stock Option
Plan, filed as Exhibit 10.14 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended January 1, 1994 and
incorporated herein by reference.
10.12 *Letter Agreement dated March 15, 1994 between the Registrant
and A. Jacqueline Dout.
10.13 *Non-Qualified Stock Option Agreements dated April 18, 1994
between the Registrant and A. Jacqueline Dout.
10.14 Asset purchase agreement dated January 5, 1995 by and among the
Registrant, Chandeleur Homes, Inc., and the shareholders of
Chandeleur Homes, Inc., filed as Exhibit 2.1 to the
Registrant's Current Report on Form 8-K dated February 3, 1995
and incorporated herein by reference.
10.15 Asset purchase agreement dated January 5, 1995 by and among the
Registrant, Crest Ridge Homes, Inc., and the shareholders of
Crest Ridge Homes, Inc., filed as Exhibit 2.2 to the
Registrant's Current Report on Form 8-K dated February 3, 1995
and incorporated herein by reference.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Price Waterhouse.
27.1 Financial Data Schedules.
99.1 Proxy Statement for the Registrant's 1995 Annual Meeting of
Shareholders - filed by the Registrant pursuant to Regulation
14A and incorporated herein by reference.
(b) No reports on Form 8-K were filed during the last quarter of the
fiscal year ended December 31, 1994.<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized.
CHAMPION ENTERPRISES, INC.
By: /s/A. JACQUELINE DOUT
A. Jacqueline Dout
Dated: March 29, 1995 Executive Vice President - Treasurer
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/WALTER R. YOUNG, JR. Chairman of the Board of Directors, March 29, 1995
Walter R. Young, Jr. President and Chief Executive Officer
(Principal Executive Officer)
/s/A. JACQUELINE DOUT Executive Vice President - Treasurer March 29, 1995
A. Jacqueline Dout and Chief Financial Officer
(Principal Financial Officer)
/s/J. CRAIG WILES Assistant Treasurer and Controller March 29, 1995
J. Craig Wiles (Principal Accounting Officer)
/s/ROBERT W. ANESTIS Director March 29, 1995
Robert W. Anestis
/s/STANLEY R. DAY Director March 29, 1995
Stanley R. Day
/s/SELWYN ISAKOW Director March 29, 1995
Selwyn Isakow
/s/GEORGE R. MRKONIC Director March 29, 1995
George R. Mrkonic
/s/JOHNSON S. SAVARY Director March 29, 1995
Johnson S. Savary
/s/JAMES W. WHIMS Director March 29, 1995
James W. Whims
/s/CARL L. VALIDSERRI Director March 29, 1995
Carl L. Valdiserri
CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
AND
FINANCIAL STATEMENT SCHEDULES
Description Page
Report of Independent Accountants F-2
Consolidated Balance Sheets as of December 31, 1994
and January 1, 1994 F-3
Consolidated Statements of Operations for the Periods
Ended December 31, 1994, January 1, 1994 and
January 1, 1993 F-4
Consolidated Statements of Shareholders' Equity for the
Periods Ended December 31, 1994, January 1, 1994
and January 1, 1993 F-5
Consolidated Statements of Cash Flows for the Periods
Ended December 31, 1994, January 1, 1994 and
January 1, 1993 F-6
Notes to Consolidated Financial Statements F-7
Consolidated Financial Statement Schedules
Valuation and Qualifying Accounts and Reserves
(Schedule VIII) F-17
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
February 7, 1995
To the Board of Directors
and Shareholders of
Champion Enterprises, Inc.
In our opinion, the financial statements listed in the index appearing under
Item 14 (a) on page F-1 present fairly, in all material respects, the
financial position of Champion Enterprises, Inc. and its subsidiaries at
December 31, 1994 and January 1, 1994, and the results of their operations
and their cash flows for the years ended December 31, 1994 and January 1,
1994, and the ten months ended January 1, 1993, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted
our audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
200 Renaissance Center
Detroit, Michigan
<PAGE>
CHAMPION ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS
DEC. 31, JAN. 1,
(In thousands, except per share amounts) 1994 1994
ASSETS
Current Assets:
Cash, cash equivalents and short-term investments $23,027 $34,441
Accounts receivable, trade 24,277 11,708
Inventories 39,644 25,590
Deferred taxes and other 10,884 2,340
Total current assets 97,832 74,079
Property and Equipment:
Land and improvements 4,298 2,903
Buildings and improvements 24,549 18,438
Machinery and equipment 18,798 14,166
47,645 35,507
Less-accumulated depreciation 17,586 15,872
30,059 19,635
Goodwill 37,076 -
Other assets 6,263 1,198
$171,230 $94,912
LIABILITIES
Current Liabilities:
Accounts payable $29,098 $15,205
Accrued dealer discounts 16,151 9,679
Accrued compensation and payroll taxes 11,285 5,776
Accrued warranty obligations 8,432 5,332
Accrued insurance 3,804 2,438
Other liabilities 10,309 3,680
Total current liabilities 79,079 42,110
Long-term liabilities 12,857 6,880
Shareholders' Equity:
Common stock, $1 par value, 15,000 shares
authorized, 7,553 and 7,208 shares issued
and outstanding, respectively 7,553 7,208
Capital in excess of par value 36,981 30,859
Retained earnings 35,829 8,731
Foreign currency translation adjustments (1,069) (876)
79,294 45,922
$171,230 $94,912
See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
44 WEEKS
YEAR ENDED ENDED
DEC. 31 JAN. 1 JAN. 1
1994 1994 1993
Net sales $615,668 $341,940 $235,233
Cost of products sold 531,696 297,626 204,166
Selling, general and administrative expenses 47,271 32,625 25,525
578,967 330,251 229,691
Operating income 36,701 11,689 5,542
Other income (expense):
Interest income 966 1,391 1,306
Interest expense (816) (486) (738)
Environmental reserve (2,700) - -
Other income (expense), net (61) (11) (159)
Income from continuing operations before
income taxes 34,090 12,583 5,951
Income taxes 8,900 1,400 1,130
Income from continuing operations 25,190 11,183 4,821
Income (loss) from discontinued operations,
net of income taxes of $1,105 in 1994 1,908 - (2,010)
Net income $ 27,098 $ 11,183 $ 2,811
Per share amounts:
Income from continuing operations $3.26 $1.54 $ 0.68
Income (loss) from discontinued operations 0.24 - (0.28)
Net income $3.50 $1.54 $ 0.40
Weighted average shares outstanding 7,733 7,277 7,044
See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands)
FOREIGN
CURRENCY
TRANSLA-
CAPITAL IN RETAINED TION
COMMON STOCK EXCESS OF EARNINGS ADJUST-
SHARES AMOUNT PAR VALUE (DEFICIT) MENTS TOTAL
Balance February 28, 1992 6,792 $6,792 $29,992 $(5,263) $(166)$31,355
Net income - - - 2,811 - 2,811
Purchase of common stock (80) (80) (262) - - (342)
Stock option and
benefit plans 283 283 334 - - 617
Translation adjustments - - - - (404) (404)
Balance January 1, 1993 6,995 6,995 30,064 (2,452) (570) 34,037
Net income - - - 11,183 - 11,183
Stock option and
benefit plans 213 213 795 - - 1,008
Translation adjustments - - - - (306) (306)
Balance January 1, 1994 7,208 7,208 30,859 8,731 (876) 45,922
Net income - - - 27,098 - 27,098
Stock option and
benefit plans 345 345 3,250 - - 3,595
Tax benefit of stock options - - 2,872 - - 2,872
Translation adjustments - - - - (193) (193)
Balance December 31, 1994 7,553 $7,553 $36,981 $35,829 $(1,069)$79,294
See accompanying Notes to Consolidated Financial Statements.
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
YEAR ENDED 44 WEEKS ENDED
(In thousands) DEC. 31, 1994 JAN. 1, 1994 JAN. 1, 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Income from continuing operations $25,190 $11,183 $4,821
Adjustments to reconcile income
from continuing operations
to net cash provided by
operating activities:
Depreciation and amortization 3,895 2,233 1,637
Deferred income taxes (8,255) - -
Increase/decrease, net of acquisition:
Accounts receivable (11,661) (623) 3,287
Inventories (10,439) (3,034) (4,391)
Environmental reserve 2,700 - -
Accounts payable 10,193 2,330 2,658
Accrued liabilities 12,051 5,159 1,042
Other, net 3,574 (999) 831
Total adjustments 2,058 5,066 5,064
Net cash provided by continuing
operating activities 27,248 16,249 9,885
<CAPTION>
CASH FLOWS FROM DISCONTINUED OPERATIONS:
<S> <C> <C> <C>
Income (loss) from discontinued
operations 1,908 - (2,010)
Decrease in net assets of
discontinued operations 696 429 2,299
Net cash provided by
discontinued operations 2,604 429 289
<CAPTION>
CASH FLOWS FROM INVESTING ACTIVITIES:
<S> <C> <C> <C>
Additions to property and equipment (10,619) (6,639) (2,820)
Proceeds on disposal of property
and equipment 406 1,320 2,436
Dutch acquisition (36,481) - -
Net cash used for investing activities (46,694) (5,319) (384)
<CAPTION>
CASH FLOWS FROM FINANCING ACTIVITIES:
<S> <C> <C> <C>
Decrease in current notes payable - - (4,209)
(Increase) decrease in restricted cash - 1,376 (21)
Tax benefit of stock options exercised 2,872 - -
Common stock issued, net 2,556 976 77
Net cash provided by (used for)
financing activities 5,428 2,352 (4,153)
Net increase (decrease) in
cash and short-term investments (11,414) 13,711 5,637
Cash and short-term investments
at beginning of period 34,441 20,730 15,093
Cash and short-term investments
at end of period $23,027 $34,441 $20,730
<CAPTION>
ADDITIONAL CASH FLOW INFORMATION:
<S> <C> <C> <C>
Cash paid for:
Interest $677 $493 $776
Income taxes, net of refunds 14,854 1,434 121
<CAPTION>
CASH FLOWS FROM DUTCH ACQUISITION:
<S> <C>
Purchase price $ 40,000
Less: Deferred portion of
purchase price (2,600)
Cash acquired (1,591)
Plus: Acquisition costs
and payoff of mortgage 672
$ 36,481
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The Consolidated Financial Statements include the accounts of Champion
Enterprises, Inc. and its subsidiaries (the Company). All significant
intercompany transactions have been eliminated.
Change in Fiscal Year End
In October 1992, the Company changed its fiscal year end from the Friday
nearest the end of February to the Friday nearest the end of December. The
period February 29, 1992 through January 1, 1993 (fiscal 1992-B) consists of
44 weeks of operations. In fiscal 1993, the year end was changed to the
Saturday nearest the end of December.
Cash, Cash Equivalents and Short-Term Investments
Cash and cash equivalents include investments which have original maturities
within 90 days at the time of their purchase. Investments are carried at cost
which approximates market value because of their short maturities. Included
in this caption at January 1, 1994 were $1.4 million of short-term
investments with maturities in excess of 90 days.
Inventories
Inventories are stated at the lower of cost or market, with cost being
determined under the first-in, first-out method.
Property and Equipment
Property and equipment, including significant improvements thereto, are
stated at cost. Upon retirement or other disposal, the asset cost and related
accumulated depreciation are removed from the accounts and the net amount,
less any proceeds, is charged or credited to income. Maintenance and repairs
are charged to expense as incurred.
Depreciation
The Company provides depreciation on the straight-line method for property
and equipment other than trucks and autos, which are depreciated on the
declining balance method.
Property and equipment are depreciated over the following estimated useful
lives:
Years
Land improvements 3-15
Buildings and improvements 8-33
Machinery and equipment 3-15
Goodwill
The excess of cost over fair value of net assets of businesses acquired is
amortized on a straight-line basis over the expected periods to be benefited,
which is 40 years. Amortization recorded in 1994 was $864,000. The Company
assesses the recoverability of this intangible asset on a regular basis by
determining whether the amortization of the goodwill balance over its
remaining life can be recovered through projected undiscounted future cash
flows.
Warranty Obligations
The Company provides the retail consumer with a 12-month warranty from the
date of retail purchase. Estimated warranty obligations are provided at the
time of sale of the Company's products.
Income Taxes
Deferred tax assets and liabilities are determined based on the differences
between the financial carrying amounts and tax bases of assets and
liabilities using enacted tax rates in effect in the years in which the
differences are expected to reverse.
Revenue Recognition
Revenue is recognized from sales when wholesale floor plan financing or
dealer credit approval is received and the product is shipped to independent
dealers or, for Company-owned sales locations, upon transfer of title.
Earnings Per Share
In calculating earnings per share, the weighted average shares outstanding
includes common stock equivalents.
Reclassifications
Certain amounts in the prior years' financial statements have been
reclassified to conform to the current year presentation.
NOTE 2-INVENTORIES
A summary of inventories by component at December 31, 1994 and January 1,
1994 follows:
(In thousands) 1994 1993
Raw materials $25,449 $14,563
Work-in-process 4,432 3,188
Finished goods 9,763 7,839
$39,644 $25,590
NOTE 3-ACQUISITIONS
DUTCH HOUSING, INC.
During the first quarter of 1994, the Company purchased the assets and
assumed the liabilities of Dutch Housing, Inc. (Dutch), a privately-held
corporation with manufactured housing operations in Michigan and Indiana. The
cash purchase price of approximately $40 million was financed from existing
cash and new bank debt. Under the terms of the agreement, the Company paid
$37.4 million of the purchase price at the date of acquisition. The remaining
$2.6 million will be paid to the previous Dutch shareholders under conditions
pursuant to agreements related to employment of certain shareholders and
will be paid in early 1995. The acquisition was accounted for using the
purchase method and resulted in $38 million of financial statement goodwill,
which is being amortized over 40 years. Dutch's results of operations are
included with those of the Company from the effective date of the
acquisition, which was January 28, 1994.
Summarized below are the unaudited pro forma combined results of operations
for the years ended December 31, 1994 and January 1, 1994, assuming the
acquisition had taken place on January 2, 1994 and January 2, 1993,
respectively. The pro forma results are not necessarily indicative of future
earnings or earnings that would have been reported had the acquisition been
completed when assumed.
(In thousands, except per share amounts)
1994 1993
Net sales $619,668 $433,651
Income from continuing
operations before income
taxes $34,097 $20,010
Income taxes 8,900 1,400
Income from continuing operations $25,197 $18,610
Per share $3.26 $2.54
Income Taxes
The pro forma provision for income taxes has been calculated on a
consolidated basis as if the transaction had been completed at the beginning
of the respective periods. The difference between taxes provided for
financial reporting purposes and expected charges at the statutory rate is
principally due to net operating loss carryforwards partially offset by state
taxes and foreign tax charges at profitable operations.
Earnings Per Share
Pro forma earnings per share are based on the average number of shares
outstanding during the respective periods including 40,000 shares issued to
Dutch executives under stock option agreements entered into upon acquisition.
CHANDELEUR HOMES, INC. AND CREST RIDGE HOMES, INC.
On February 3, 1995, the Company completed the purchase of all the assets and
assumption of certain liabilities of Chandeleur Homes, Inc., and Crest Ridge
Homes, Inc., privately-held corporations with manufactured housing operations
in Alabama and Texas. The purchase price of approximately $47 million was
financed from available cash of $18 million and $20 million from the
Company's recently amended $60 million credit facility. Based on preliminary
unaudited financial results for 1994, the combined companies generated
revenues of approximately $98 million and earnings before interest and taxes
of approximately $9.8 million. The acquisition will be accounted for using
the purchase method. Accordingly, the results of operations of the acquired
companies will be included with those of the Company for periods subsequent
to February 3, 1995.
NOTE 4-DEBT
On January 31, 1995, the Company amended and expanded its credit agreement
with Comerica Bank, including a portion Participated to the First National
Bank of Chicago. The line of credit totals $60 million including $10 million
of availability to cover letters of credit. At the Company's option,
borrowings are subject to interest at either the bank's prime rate or the
bank's eurodollar rate plus 0.8%. In addition, the Company pays a commitment
fee of 3/16% on the unused portion of the facility. The line, which expires
on March 1, 1997, is secured by certain assets of the Company and, among
other things, precludes payment of cash dividends, limits additional
indebtedness and requires the Company to maintain certain financial
covenants, including minimum net worth and working capital amounts.
There were no borrowings outstanding at December 31, 1994. The maximum amount
of aggregate secured and unsecured short-term borrowings outstanding at any
month end was $9 million and $4.8 million for 1994 and 1992-B, respectively.
For 1994 and 1992-B aggregate short-term borrowings averaged $6.5 million and
$4.4 million with average interest rates of 6.1% and 8.4%, respectively. No
borrowings were outstanding during 1993.
Operating lease
In 1992, the Company entered into a noncancelable operating lease for its
corporate headquarters through April 30, 2002. Lease costs are being accrued
ratably over the term of the lease. Lease expense was $306,000 in both 1994
and 1993 and $229,000 in 1992-B. At December 31, 1994, future minimum lease
commitments are as follows: 1995 - $300,000; 1996 - $302,000; 1997 -
$310,000; 1998 - $326,000; 1999 - $326,000; thereafter through April 30, 2002
- $754,000.
NOTE 5-SHAREHOLDERS' EQUITY
There are 5 million shares of preferred stock without par value authorized,
which are subject to approval of issuance by the Board of Directors. The
Board of Directors also has authority to fix the number, rights, preferences
and limitations of the shares of each series, subject to applicable laws and
the provisions of the Articles of Incorporation. As of December 31, 1994, no
preferred stock had been issued.
NOTE 6- SAVINGS PLAN
Company contributions to the Savings Plan (the Plan) are a matching
contribution, in shares of Company stock or cash, equalling 35% of the first
4% of compensation contributed by participating employees. Participating
employees may make qualified cash or deferred arrangement contributions
ranging from 1% to 18% of compensation. The Company has no other retirement
or pension program.
Generally, all eligible full-time employees of the Company may participate in
the Plan after completing one year of service. Contributions to the Plan are
100% vested. Charges to expense in connection with the Plan were $508,000 in
1994, $285,000 in 1993 and $318,000 in 1992-B.
NOTE 7-INCOME TAXES
Pretax income from continuing operations for the years ended December 31,
1994 and January 1, 1994 and the 44-week period ended January 1, 1993 was
taxed under the following jurisdictions:
(In thousands) 1994 1993 1992-B
Domestic $31,962 $10,586 $3,344
Foreign 2,128 1,997 2,607
Total $34,090 $12,583 $5,951
The provision for income taxes was as follows:
(In thousands)
Continuing Operations
1994 1993 1992-B
Current tax expense:
Federal $13,749 $ 250 $ -
Foreign 1,700 900 1,130
State 1,706 250 -
Total current 17,155 1,400 1,130
Deferred tax expense:
Federal (7,213) - -
Foreign 620 - -
State (1,662) - -
Total deferred (8,255) - -
Total provision $8,900 $1,400 $1,130
Discontinued Operations
1994 1993 1992-B
Current tax expense:
Federal $1,055 $ - $ -
State 50 - -
Total provision $1,105 $ - $ -
Deferred tax assets and liabilities are comprised of the following as of
December 31, 1994 and January 1, 1994:
(In thousands) 1994 1993
Assets:
Warranty reserve $4,488 $2,944
Insurance accruals 3,440 2,406
Environmental 1,410 80
Dealer discounts 1,026 1,077
Other 2,022 965
Loss carryforwards 584 1,966
Gross deferred tax assets 12,970 9,438
Liabilities:
Inventory 391 814
Depreciation 724 1,053
Other 1,881 989
Gross deferred
tax liabilities 2,996 2,856
Deferred tax assets
valuation allowance - 6,582
Net assets $9,974 $ -
The provision for income taxes differs from the amount of income tax
determined by applying the applicable U.S. statutory federal income tax rate
to pretax income as a result of the following differences:
(Dollars in thousands)
Continuing Operations 1994 1993 1992-B
Statutory U.S. tax rates $11,932 $4,404 $2,023
Increase (decrease)
in rates resulting from:
Higher rates on earnings
of foreign operations 1,575 201 244
Recognize net
operating loss (5,609) (3,705) (1,137)
Other 1,002 500 -
Total provision $8,900 $1,400 $1,130
Effective tax rates 26% 11% 19%
Discontinued Operations 1994 1993 1992-B
Statutory U.S. tax rates $1,055 $ - $ -
Increase in rate
resulting from:
Other 50 - -
Total provision $1,105 $ - $ -
Effective tax rates 37% - -
NOTE 8-DISCONTINUED OPERATIONS
On October 6, 1992, the Company sold certain assets and liabilities of its
recreational vehicle (RV) segment to Firan Motor Coach, Inc. (Firan) for a
$621,000 note receivable, which was collected with interest during 1994. Also
in 1994 the Company sold the RV manufacturing facilities to Firan for two
notes totaling $2.3 million, which are secured by the property. One-fourth of
these notes is due on each anniversary thereof with applicable interest due
each quarter. All other remaining assets and liabilities of the RV segment
are immaterial. During 1994, certain litigation was settled, which resulted
in an after-tax gain of $1.9 million.
NOTE 9-CONTINGENT LIABILITIES
It is customary practice for companies in the manufactured housing industry
to enter into repurchase agreements with lending institutions which provide
wholesale floor plan financing to dealers. A majority of the Company's
wholesale sales are made pursuant to these agreements, which generally
provide for repurchase of the Company's products from the lending
institutions for the balance due them in the event of repossession upon a
dealer's default. The contingent liability is spread over many dealers and
financial institutions and is reduced by the resale value of the products
which are required to be repurchased. Expenses incurred in connection with
these agreements have been immaterial. The maximum potential repurchase
commitments at December 31, 1994 and January 1, 1994 were approximately $89
million and $34 million, respectively. The increase primarily resulted from
the Dutch acquisition.
In addition, the Company has guaranteed, on a limited basis, obligations of
certain dealers to Transamerica Commercial Finance Corp. (Transamerica) in
connection with a Company-sponsored inventory finance program. Amounts
outstanding as of December 31, 1994 totaled $41 million, compared to $46
million at January 1, 1994. This contingency is reduced by the resale value
of products repossessed from defaulting dealers. The Company provides
currently for estimated future expenses under this program.
Transamerica holds approximately 32% of the aggregate balance of such dealer
inventory financing. Any failure of Transamerica or other lending institution
would not directly impact the Company because payment is received for its
homes from the dealer (or its lending institution) at or near the time the
home is shipped. The Company believes there are many other finance companies
available to its dealers from which to obtain inventory financing.
Under the Company's insurance programs, coverage is obtained for catastrophic
exposures as well as those risks required to be insured by law. The Company
retains a significant portion of risk of certain losses related primarily to
medical benefits, workers' compensation and general, product and auto
liability. Provisions for losses expected under these programs, which
historically have averaged approximately 3% of sales, are recorded based on
the Company's estimates of the aggregate liability for claims incurred.
The Company is subject to various legal proceedings and claims which arise in
the ordinary course of its business. In addition, the Company has been cited
for alleged environmental violations for the years 1955 to 1972. In the
fourth quarter of 1994, the Company recorded $2.7 million for settlement of
such claims. The recorded liability does not include any amounts for
potential insurance recoveries. The Company has established reserves for
matters that are in its view probable and reasonably estimable. Based on
information presently available, management believes that existing reserves
are sufficient to satisfy any known liabilities. Further, any additional
liability that may ultimately result from the resolution of these matters is
not expected to have a material effect on the Company's financial position or
operations.
NOTE 10-STOCK OPTION AND INCENTIVE PLANS
Under the 1987 Stock Option Plan, 600,000 shares of common stock may be
issued to officers and key employees. During 1994, options for 58,000 shares
of common stock were granted. As of the current year end, options exercisable
and available for future grants were 114,280 and 746, respectively.
A total of 300,000 shares of the Company's common stock is available under
the 1990 Nonqualified Stock Option Program. Options granted during 1994
totaled 13,000. At December 31, 1994, options exercisable totaled 18,450 and
shares available for future grants were 18,500.
Under the 1993 Middle Management Stock Option Plan, options may be granted
for a total of 250,000 shares of common stock. Grants for 31,000 shares were
made during 1994. A total of 17,080 and 85,000 options were exercisable and
available for future grants, respectively, as of December 31, 1994.
Nonqualified stock option agreements were entered into with executive
officers of the Company and 940,000 shares were made available for grants
under these agreements. Options granted during 1994 were 305,000, which
includes 200,000 issued to Dutch executives upon the acquisition, and no
options were exercisable at year end.
The Stock Plan for Directors provides for issuing a total of 150,000 shares
of the Company's common stock to non-employee directors. Grants for 8,000
shares were made during 1994 and there were 36,000 options exercisable and
62,000 available for future grants as of December 31, 1994.
Amounts charged to expense in connection with the options granted under these
plans and agreements totaled $633,000 in 1994, $111,000 in 1993 and $284,000
in 1992-B.
Options granted under these plans and agreements may be issued below, at, or
above fair market value and generally expire ten years from the grant date.
Some options became exercisable immediately and others over a period of up to
five years. The following sets forth information with respect to these plans
and agreements:
Number Option
of shares price range
Outstanding at
February 28, 1992 815,746 1 - 7 1/2
Granted 357,500 1 - 10 1/2
Canceled (135,786) 2 - 7 1/2
Exercised (369,400) 1 - 7 1/2
Outstanding at
January 1, 1993 668,060 2 - 10 1/2
Granted 234,000 4 1/4 - 21 7/8
Canceled (31,540) 2 5/8 - 7 1/2
Exercised (221,540) 2 - 10 1/2
Outstanding at
January 1, 1994 648,980 2 - 21 7/8
Granted 415,000 8 1/2 - 47 3/4
Canceled (17,000) 2 5/8 - 7 5/8
Exercised (342,610) 2 - 21 7/8
Outstanding at
December 31, 1994 704,370 2 - 47 3/4
NOTE 11-BUSINESS SEGMENT INFORMATION
44 Weeks
Year Ended (Unaudited) Ended
Dec. 31, Jan. 1, Calendar Jan. 1,
(In thousands) 1994 1994 1992 1993
Net sales:
Housing $571,660 $309,697 $246,247 $216,258
Commercial vehicles 44,008 32,243 24,307 18,975
$615,668 $341,940 $270,554 $235,233
Pretax income (loss)
from continuing
operations:
Housing $ 39,935 $ 16,032 $ 10,576 $ 9,586
Commercial vehicles 1,818 579 (943) (654)
Segment income (loss) 41,753 16,611 9,633 8,932
Environmental reserve (2,700) - - -
Corporate expenses,
adjustments and other (4,963) (4,028) (3,481) (2,981)
$ 34,090 $ 12,583 $ 6,152 $ 5,951
Identifiable assets:
Housing $115,595 $ 45,678 $ 41,418 $ 41,418
Commercial vehicles 18,157 10,488 8,629 8,629
Corporate and other 37,478 38,746 26,099 26,099
$171,230 $ 94,912 $ 76,146 $ 76,146
Capital expenditures:
Housing $ 10,059 $ 6,217 $ 2,817 $ 2,246
Commercial vehicles 519 380 472 484
Corporate 41 42 90 90
$ 10,619 $ 6,639 $ 3,379 $ 2,820
Depreciation
and amortization:
Housing $ 3,518 $ 1,884 $ 1,490 $ 1,268
Commercial vehicles 341 328 325 236
Corporate 36 21 133 133
$ 3,895 $ 2,233 $ 1,948 $ 1,637
The housing segment income for calendar 1992 included a $500,000 gain from a
property sale.
In computing segment income (loss) from continuing operations, none of the
following items have been added or deducted: general corporate expenses,
interest income, interest expense, income taxes and environmental reserve.
Identifiable assets are those assets used in the Company's operations in each
industry segment. Corporate and other assets are principally cash and cash
equivalents, deferred taxes and other assets not specifically used in the
operations of any industry segment. Corporate and other identifiable assets
includes assets from discontinued operations of $2.5 million, $3.1 million
and $3.3 million in fiscal 1994, 1993 and 1992-B, respectively.
NOTE 12-QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
(Dollars in thousands, except per share amounts)
FIRST SECOND THIRD FOURTH TOTAL
QUARTER QUARTER QUARTER QUARTER FOR YEAR
1994
Net sales $124,988 $157,091 $168,786 $164,803 $615,668
Income from continuing
operations
before income taxes 6,486 10,727 11,052 5,825 34,090
Income from continuing
operations 4,786 7,927 8,152 4,325 25,190
Income from discontinued
operations 1,908 - - - 1,908
Net income 6,694 7,927 8,152 4,325 27,098
Per share amounts:
Income from continuing
operations 0.65 1.02 1.04 0.55 3.26
Income from discontinued
operations 0.26 - - - 0.24
Net income $ 0.91 $ 1.02 $ 1.04 $ 0.55 $ 3.50
Manufactured home unit
shipments 4,405 5,400 5,735 5,446 20,986
1993
Net sales $74,980 $84,711 $91,990 $90,259 $341,940
Income before income
taxes 2,167 3,412 4,314 2,690 12,583
Net income 1,917 3,032 3,854 2,380 11,183
Net income per share $ 0.27 $ 0.42 $ 0.53 $ 0.32 $ 1.54
Manufactured home unit
shipments 2,926 3,166 3,270 3,126 12,488
First quarter 1994 income from discontinued operations includes a one-time
after-tax gain of $1.9 million from the settlement of certain litigation.
Fourth quarter 1994 includes a pretax $2.7 million provision for
environmental reserves.
Per share amounts are based on the weighted average shares outstanding for
each period. Quarterly amounts may not add to annual amounts due to changes
in shares outstanding.
<PAGE>
CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE PERIODS ENDED DECEMBER 31, 1994, JANUARY 1, 1994 AND JANUARY 1, 1993
(In thousands)
Balance at Charges to Other Balance
Description beginning costs and Deductions additions/ at end
of period expenses <F1> (reductions) of period
Valuation and Qualifying Accounts:
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1994
Allowance for doubtful accounts
Deducted from accounts
receivable, trade $ 156 $ 23 $ (11) $ - $ 168
Deducted from other assets $ 99 $ - $ ( 35) $ - $ 64
Year Ended January 1, 1994
Allowance for doubtful accounts
Deducted from accounts
receivable, trade $ 265 $ 40 $ (149) $ - $ 156
Deducted from other assets $ 188 $ - $ (89) $ - $ 99
44 Weeks Ended January 1, 1993
Allowance for doubtful accounts
Deducted from accounts
receivable, trade $ 353 $ 5 $ (78) $ (15)<F2> $ 265
Deducted from other assets $ 226 $ - $ (38) $ - $ 188
<F1> Write-off of bad debts less recoveries.
<F2> Represents transfers to other liabilities.
</TABLE>
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description
3.1 Restated Articles of Incorporation of the Registrant - filed as
Schedule I to Exhibit A to the Proxy Statement for the
Predecessor's 1987 Annual Meeting of Shareholders (Filed
pursuant to Regulation 14A) and incorporated herein by
reference.
3.2 Bylaws of the Registrant.
4.1 Second Amended and Restated Loan Agreement dated March 2, 1994
between the Registrant and Comerica Bank, filed as Exhibit 4.1
to the Registrant's Annual Report on Form 10-K for the fiscal
year ended January 1, 1994 and incorporated herein by
reference.
4.2 First Amendment to Second Amended and Restated Loan Agreement
dated January 31, 1995 between the Registrant and Comerica
Bank.
4.3 Article III of the Registrant's Restated Articles of
Incorporation (defining the rights of the holders of shares of
the authorized classes of the Registrant's capital stock) -
included in the copy of the Registrant's Restated Articles of
Incorporation filed as Exhibit 3.1 hereto.
4.4 The Registrant has issued certain receivable-backed notes (the
"Notes") pursuant to a Trust Indenture dated as of August 1,
1987 between CAC Funding Corporation, as issuer, and First of
America Bank - Detroit, N.A., as trustee. The Notes do not
exceed 10 percent of the total assets of the Registrant and the
Registrant agrees to furnish a copy of the Trust Indenture to
the Commission upon request.
10.1 *Letter Agreement dated April 27, 1990 between the Registrant
and Walter R. Young, Jr., filed as Exhibit 10.3 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended March 2, 1990 and incorporated herein by reference.
10.2 *Non-Qualified Stock Option Agreement dated April 27, 1990
between the Registrant and Walter R. Young, Jr., filed as
Exhibit 10.4 to the Registrant's Annual Report on Form 10-K for
the fiscal year ended March 2, 1990 and incorporated herein by
reference.
10.3 *Letter Agreement dated March 10, 1992 between the Registrant
and Thomas J. Ensch, filed as Exhibit 10.4 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended January 1,
1993 and incorporated herein by reference.
10.4 *Letter Agreement dated May 28, 1992 between the Registrant and
James M. Gurch, filed as Exhibit 10.7 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended January 1,
1993 and incorporated herein by reference.
10.5 *Champion Enterprises, Inc. 1987 Stock Option Plan, as amended,
filed as Exhibit 10.9 to the Registrant's Annual Report on Form
10-K for the fiscal year ended February 28, 1992 and
incorporated herein by reference.
10.6 *Champion Enterprises, Inc. Stock Plan for Directors, as
amended, filed as Exhibit 10.9 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended January 1, 1994
and incorporated herein by reference.
10.7 *Champion Enterprises, Inc. 1990 Non-Qualified Stock Option
Program, filed as Exhibit 10.11 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended February 28, 1992
and incorporated herein by reference.
10.8 Lease Agreement dated November 21, 1991 between the Registrant
and University Development Company relating to the premises
located at 2701 University Drive, Auburn Hills, Michigan, filed
as Exhibit 10.12 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended February 28, 1992 and incorporated
herein by reference.
10.9 *Non-Qualified Stock Option Agreement dated July 6, 1992
between the Registrant and James M. Gurch, filed as Exhibit
10.13 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended January 1, 1993 and incorporated herein by
reference.
10.10 *Change in Control Severance Agreement dated as of April 12,
1991 between the Registrant and Louis M. Balius, filed as
Exhibit 10.15 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended January 1, 1993 and incorporated
herein by reference.
10.11 *Champion Enterprises, Inc. 1993 Middle Management Stock Option
Plan, filed as Exhibit 10.14 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended January 1, 1994 and
incorporated herein by reference.
10.12 *Letter Agreement dated March 15, 1994 between the Registrant
and A. Jacqueline Dout.
10.13 *Non-Qualified Stock Option Agreements dated April 18, 1994
between the Registrant and A. Jacqueline Dout.
10.14 Asset purchase agreement dated January 5, 1995 by and among the
Registrant, Chandeleur Homes, Inc., and the shareholders of
Chandeleur Homes, Inc., filed as Exhibit 2.1 to the
Registrant's Current Report on Form 8-K dated February 3, 1995
and incorporated herein by reference.
10.15 Asset purchase agreement dated January 5, 1995 by and among the
Registrant, Crest Ridge Homes, Inc., and the shareholders of
Crest Ridge Homes, Inc., filed as Exhibit 2.2 to the
Registrant's Current Report on Form 8-K dated February 3, 1995
and incorporated herein by reference.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Price Waterhouse.
27.1 Financial Data Schedules.
99.1 Proxy Statement for the Registrant's 1995 Annual Meeting of
Shareholders - filed by the Registrant pursuant to Regulation
14A and incorporated herein by reference.
Champion Enterprises, Inc. will, for a nominal charge, provide a copy of any
of the above Exhibits to any shareholder upon written request addressed to
the Public Relations Department, Champion Enterprises, Inc., 2701 University
Drive, Suite 320, Auburn Hills, Michigan 48326.
BYLAWS
OF
CHAMPION ENTERPRISES, INC.
(As amended through November 29, 1994)
ARTICLE I
Offices
1.01 Principal Office. The principal office of the Corporation shall
be at such place within the State of Michigan as the Board of Directors shall
determine from time to time.
1.02 Other Offices. The Corporation may also have offices at such
other places as the Board of Directors from time to time determines or the
business of the Corporation requires.
ARTICLE II
Seal
2.01 Seal. The Corporation shall have a seal in such form as the
Board of Directors may from time to time determine. The seal may be used by
causing it or a facsimile to be impressed, affixed, reproduced or otherwise.
ARTICLE III
Capital Stock
3.01 Issuance of Shares. The shares of capital stock of the
Corporation shall be issued in such amounts, at such times, for such
consideration and on such terms and conditions as the Board shall deem
advisable, subject to the provisions of the Articles of Incorporation of the
Corporation and the further provisions of these Bylaws, and subject also to
any requirements or restrictions imposed by the laws of the State of
Michigan.
3.02 Certificates for Shares. The shares of the Corporation shall be
represented by certificates signed by the Chairman of the Board, President or
a Vice President and by the Treasurer, Assistant Treasurer, Secretary or
Assistant Secretary of the Corporation, and may be sealed with the seal of
the Corporation or a facsimile thereof. The signatures of the officers may
be facsimiles if the certificate is countersigned by a transfer agent or
registered by a registrar other than the Corporation itself or its employee.
In case an officer who has signed or whose facsimile signature has been
placed upon a certificate ceases to be such officer before the certificate is
issued, it may be issued by the Corporation with the same effect as if he
were such officer at the date of issuance. A certificate representing shares
shall state upon its face that the Corporation is formed under the laws of
the State of Michigan; the name of the person to whom it is issued; the
number and class of shares, and the designation of the series, if any, which
the certificate represents; the par value of each share represented by the
certificate, or a statement that the shares are without par value; and such
other provisions as may be required by the laws of the State of Michigan.
3.03 Transfer of Shares. The shares of the capital stock of the
Corporation are transferable only on the books of the Corporation upon
surrender of the certificate therefor, properly endorsed for transfer, and
the presentation of such evidences of ownership and validity of the
assignment as the Corporation may require.
3.04 Registered Shareholders. The Corporation shall be entitled to
treat the person in whose name any share of stock is registered as the owner
thereof for purposes of dividends and other distributions in the course of
business, or in the course of recapitalization, consolidation, merger,
reorganization, sale of assets, liquidation or otherwise and for the purpose
of votes, approvals and consents by shareholders, and for the purpose of
notices to shareholders, and for all other purposes whatever, and shall not
be bound to recognize any equitable or other claim to or interest in such
shares on the part of any other person, whether or not the Corporation shall
have notice thereof, save as expressly required by the laws of the State of
Michigan.
3.05 Lost or Destroyed Certificates. Upon the presentation to the
Corporation of a proper affidavit attesting the loss, destruction or
mutilation of any certificate or certificates for shares of stock of the
Corporation, the Board of Directors shall direct the issuance of a new
certificate or certificates to replace the certificates so alleged to be
lost, destroyed or mutilated. The Board of directors may require as a
condition precedent to the issuance of new certificates any or all of the
following:
(a) Presentation of additional evidence or proof of the loss,
destruction or mutilation claimed;
(b) Advertisement of loss in such manner as the Board of Directors may
direct or approve;
(c) A bond or agreement of indemnity, in such form and amount and with
such sureties, or without sureties, as the Board of Directors may direct or
approve;
(d) Payment of any expenses incurred by the Corporation in processing
the claim of loss, or in lieu thereof payment of a lost certificate
processing fee in such amount as the Board of Directors may authorize or
approve;
(e) The order or approval of a court or judge.
ARTICLE IV
Shareholders and Meetings of Shareholders
4.01 Place of Meetings. All meetings of shareholders shall be held at
the principal office of the Corporation or at such other place as shall be
determined by the Board of Directors and stated in the notice of meeting.
4.02 Annual Meeting. The Annual Meeting of Shareholders of the
Corporation shall be held on such business day in the months of April or May
of each year, at such time, as the Board of Directors may fix. Directors
shall be elected at each Annual Meeting and such other business transacted as
may properly come before the meeting in accordance with these Bylaws. The
Board of Directors acting by resolution may postpone and reschedule any
previously scheduled Annual Meeting of Shareholders. Any Annual Meeting of
Shareholders may be adjourned by the Chairman of the meeting or pursuant to a
resolution of the Board of Directors.
4.03 Special Meetings. Special meetings of the shareholders may be
called by the Chairman of the Board, or by the President, or pursuant to
resolution of the Board of Directors. Business transacted at a special
meeting of shareholders shall be confined to the purpose or purposes of the
meeting as stated in the notice of the meeting. The Board of Directors
acting by resolution may postpone and reschedule any previously scheduled
special meeting of shareholders. Any special meeting of shareholders may be
adjourned by the Chairman of the meeting or pursuant to resolution of the
Board of Directors.
4.04 Notice of Meetings. Except as otherwise provided by statute,
written notice of the time, place and purposes of a meeting of shareholders
shall be given not less than 10 nor more than 60 days before the date of the
meeting to each shareholder of record entitled to vote at the meeting, either
personally or by mailing such notice to his last address as it appears on the
books of the Corporation. No notice need be given of an adjourned meeting of
the shareholders provided the time and place to which such meeting is
adjourned is announced at the meeting at which the adjournment is taken and
at the adjourned meeting only such business is transacted as might have been
transacted at the original meeting. However, if after the adjournment, a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each shareholder of record on the new record date
entitled to notice as provided in this Bylaw.
4.05 Record Dates. The Board of Directors, the Chairman of the Board
(if such office is filled) or the President may fix in advance a date as the
record date for the purpose of determining shareholders entitled to notice of
and to vote at a meeting of shareholders or an adjournment thereof, or to
express consent or to dissent from a proposal without a meeting, or for the
purpose of determining shareholders entitled to receive payment of a dividend
or allotment of a right, or for the purpose of any other action. The date
fixed shall not be more than 60 nor less than 10 days before the date of the
meeting, nor more than 60 days before any other action. In such case only
such shareholders as shall be shareholders of record on the date so fixed
shall be entitled to notice of and to vote at such meeting or adjournment
thereof, or to express consent or to dissent from such proposal, or to
receive payment of such dividend or to receive such allotment of rights, or
to participate in any other action, as the case may be, notwithstanding any
transfer of any stock on the books of the Corporation , or otherwise, after
any such record date. Nothing in this Bylaw shall affect the rights of a
shareholder and his transferee or transferor as between themselves.
4.06 List of Shareholders. The Secretary of the Corporation or the
agent of the Corporation having charge of the stock transfer records for
shares of the Corporation shall make and certify a complete list of the
shareholders entitled to vote at a shareholders' meeting or any adjournment
thereof. The list shall be arranged alphabetically within each class and
series, with the address of, and the number of shares held by, each
shareholder; be produced at the time and place of the meeting; be subject to
inspection by any shareholder during the whole time of the meeting; and be
prima facie evidence as to who are the shareholders entitled to examine the
list or vote at the meeting.
4.07 Quorum. Unless a greater or lesser quorum is required in the
Articles of Incorporation or by the laws of the State of Michigan, the
shareholders present at a meeting in person or by proxy who, as of the record
date for such meeting, were holders of a majority of the outstanding shares
of the Corporation entitled to vote at the meeting shall constitute a quorum
at the meeting. Whether or not a quorum is present, a meeting of shareholders
may be adjourned by a vote of the shares present in person or by proxy. When
the holders of a class or series of shares are entitled to vote separately on
an item of business, this Bylaw applies in determining the presence of a
quorum of such class or series for transaction of such item of business.
4.08 Proxies. A shareholder entitled to vote at a meeting of
shareholders or to express consent or dissent without a meeting may authorize
other persons to act for him by proxy. A proxy shall be signed by the
shareholder or his authorized agent or representative and shall not be valid
after the expiration of three years from its date unless otherwise provided
in the proxy. A proxy is revocable at the pleasure of the shareholder
executing it except as otherwise provided by the laws of the State of
Michigan.
4.09 Inspectors of Election. The Board of Directors, in advance of a
shareholders' meeting, may appoint one or more inspectors to act at the
meeting or any adjournment thereof. If inspectors are not so appointed, the
person presiding at the shareholders' meeting may, and on request of a
shareholder entitled to vote thereat shall, appoint one or more inspectors.
In case a person appointed fails to appear or act, the vacancy may be filled
by appointment made by the Board of Directors in advance of the meeting or at
the meeting by the person presiding thereat. If appointed, the inspectors
shall determine the number of shares outstanding and the voting power of
each, the shares represented at the meeting, the existence of a quorum and
the validity and effect of proxies, and shall receive votes, ballots or
consents, hear and determine challenges and questions arising in connection
with the right to vote, count and tabulate votes, ballots or consents,
determine the result, and do such acts as are proper to conduct the election
or vote with fairness to all shareholders. On request of the person presiding
at the meeting or a shareholder entitled to vote thereat, the inspectors
shall make and execute a written report to the person presiding at the
meeting of any of the facts found by them and matters determined by them.
The report shall be prima facie evidence of the facts stated and of the vote
as certified by the inspectors.
4.10 Voting. Each outstanding share is entitled to one vote on each
matter submitted to a vote, unless otherwise provided in the Articles of
Incorporation. Votes may be cast orally or in writing as the Chairman of the
meeting may determine, except that upon the written request of a shareholder
served on the President or Secretary not less than forty-eight (48) hours
prior to the time fixed for the meeting, votes shall be cast in writing.
Votes taken orally shall be cast by, and votes cast in writing shall be
signed by, the shareholder or his proxy. When an action, other than the
election of directors, is to be taken by a vote of the shareholders, it shall
be authorized by a majority of the votes cast by the holders of shares
entitled to vote thereon, unless a greater plurality is required by the
Articles of Incorporation or by the laws of the State of Michigan. Except as
otherwise provided by the Articles of Incorporation, directors shall be
elected by a plurality of the votes cast at any election.
4.11 Nomination and Shareholder Business Proposal.
(A) Annual Meetings of Shareholders.
(1) Nominations of persons for election to the Board of Directors of
the Corporation and the proposal of business to be considered by the
shareholders may be made at an annual meeting of shareholders (a) pursuant to
the Corporation's notice of meeting, (b) by or at the direction of the Board
of Directors of (c) by any shareholder of the Corporation who was a
shareholder of record at the time of giving of notice provided for in this
Bylaw, who is entitled to vote at the meeting and who complied with the
notice procedures set forth in this Bylaw.
(2) For nominations or other business to be properly brought before
an annual meeting by a shareholder pursuant to clause (c) of paragraph (A)(1)
of this Bylaw, the shareholder must have given timely notice thereof in
writing to the Secretary of the Corporation. To be timely, a shareholders's
notice shall be delivered to the Secretary at the principal executive offices
of the Corporation not less than 60 days nor more than 90 days prior to the
first anniversary of the preceding year's annual meeting; provided, however,
that in the event that the date of the annual meeting is advanced by more
than 30 days or delayed by more than 60 days from such anniversary date,
notice by the shareholder to be timely must be so delivered not earlier than
the 90th day prior to such annual meeting and not later than the close of
business on the later of the 60th day prior to such annual meeting or the
10th day following the day on which public announcement of the date of such
meeting is first made. Such shareholder's notice shall set forth (a) as to
each person whom the shareholder proposes to nominate for election or
reelection as a director, all information relating to such person that is
required to be disclosed in solicitations of proxies for election of
directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (the "Exchange Act")
(including such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected); (b) as to
any other business that the shareholder proposes to bring before the meeting,
a brief description of the business desired to be brought before the meeting,
the reasons for conducting such business at the meeting and any material
interest in such business of such shareholder and the beneficial owner, if
any, on whose behalf the proposal is made; (c) as to the shareholder giving
the notice and the beneficial owner, if any, on whose behalf the nomination
or proposal is made (i) the name and address of such shareholder, as they
appear on the Corporation's books, and of such beneficial owner and (ii) the
class and number of shares of the Corporation which are owned beneficially
and of record by such shareholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of paragraph
(A)(2) of this Bylaw to the contrary, in the event that the number of
directors to be elected to the Board of Directors of the Corporation is
increased and there is no public announcement naming all of the nominees for
director or specifying the size of the increased Board of Directors made by
the Corporation at least 70 days prior to the first anniversary of the
preceding year's annual meeting, a shareholders's notice required by this
Bylaw shall also be considered timely, but only with respect to nominees for
any new positions created by such increase, if it shall be delivered to the
Secretary at the principal executive offices of the Corporation not later
than the close of business on the 10th day following the day on which such
public announcement is firs made by the Corporation.
(B) Special Meetings of Shareholders.
Only such business shall be conducted at a special meeting of
shareholders as shall have brought before the meeting pursuant to the
Corporation's notice of meeting. Nominations of persons for election to the
Board of Directors may be made at a special meeting of shareholders at which
directors are to be elected pursuant to the Corporation's notice of meeting
(a) by or at the direction of the Board of Directors or (b) by any
shareholder of the Corporation who is a shareholder of record at the time of
giving of notice provided hereunder, who shall be entitled to vote at the
meeting and who complies with the notice procedures set forth in this Bylaw.
Nominations by shareholders of persons for election to the Board of Directors
may be made at such a special meeting of shareholders if the shareholder's
notice required by paragraph (A)(2) of this Bylaw shall be delivered to the
Secretary at the principal executive offices of the Corporation not earlier
than the 90th day prior to such special meeting and not later than the close
of business on the later of the 60th day prior to such special meeting or the
10th day following the day on which public announcement is first made of the
date of the special meeting and of the nominees proposed by the Board of
Directors to be elected at such meeting.
(C) General.
(1) Only such persons who are nominated in accordance with the
procedures set forth in this Bylaw shall be eligible to serve as directors
and only such business shall be conducted at a meeting of shareholders as
shall have been brought before the meeting in accordance with the procedures
set forth in this Bylaw. The Chairman of the meeting shall have the power
and duty to determine whether a nomination or any business proposed to be
brought before the meeting was made in accordance with the procedures set
forth in this Bylaw and, if any proposed nomination or business is not in
compliance with this Bylaw, to declare that such defective proposal shall be
disregarded.
(2) For purposes of this Bylaw, "public announcement" shall mean
disclosures in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document
publicly filed by the Corporation with the Securities and Exchange Commission
pursuant to Sections 13, 14, or 15(d) of the Exchange Act.
ARTICLE V
Directors
5.01 Number; Qualifications. The business and affairs of the
Corporation shall be managed by a Board of not less than three nor more than
nine directors as shall be fixed from time to time by the Board of Directors.
Directors need not be residents of Michigan or shareholders of the
Corporation. No person who has reached age 70 shall be eligible for election
to the Board of Directors (but an incumbent director who reaches age 70
during his term of office shall continue to serve until the next Annual
Meeting of Shareholders and until his successor is elected and shall have
qualified).
5.02 Election, Resignation and Removal. Directors shall be elected at
each annual meeting of the shareholders, each to hold office until the next
annual meeting of shareholders and until his successor is elected and
qualified, or until his resignation or removal. A director may resign by
written notice to the Corporation. The resignation is effective upon its
receipt by the Corporation or a subsequent time as set forth in the notice of
resignation. A director or the entire Board of Directors may be removed,
with or without cause, by vote of the holders of a majority of the shares
entitled to vote at an election of directors.
5.03 Vacancies. Vacancies in the Board of Directors occurring by
reason of death, resignation, removal, increase in the number of directors or
otherwise shall be filled by the affirmative vote of a majority of the
remaining directors though less than a quorum of the Board of Directors,
unless filled by proper action of the shareholders of the Corporation. Each
person so elected shall be a director for a term of office continuing only
until the next election of directors by the shareholders.
5.04 Annual Meeting. The Board of Directors shall meet each year
immediately after the Annual Meeting of the Shareholders, or within three
days of such time excluding Sundays and legal holidays if such later time is
deemed advisable, at the place where such meeting of the shareholders has
been held or such other place as the Board may determine, for the purpose of
election of officers and consideration of such business that may properly be
brought before the meeting; provided, that if less than a majority of the
directors appear for an annual meeting of the Board of Directors the holding
of such annual meeting shall not be required and the matters which might have
been taken up therein may be taken up at any later special or annual meeting,
or by consent resolution.
5.05 Regular and Special Meetings. Regular meetings of the Board of
Directors may be held at such times and places as the majority of the
directors may from time to time determine at a prior meeting or as shall be
directed or approved by the vote or written consent of all the directors.
Special meetings of the Board may be called by the Chairman of the Board (if
such office is filled) or the President and shall be called by the President
or Secretary upon the written request of any two directors.
5.06 Notices. No notice shall be required for annual or regular
meetings of the Board or for adjourned meetings, whether regular or special.
Three days written notice shall be given for special meetings of the Board,
and such notice shall state the time, place and purpose or purposes of the
meeting.
5.07 Quorum. When the Board of Directors or any committee thereof
consists of seven or less persons, a majority of the Board of Directors then
in office, or of the members of a committee thereof, constitutes a quorum for
the transaction of business. When the Board of Directors or any committee
thereof consists of eight or more persons, less than a majority but in no
event less than one-third of the members may constitute a quorum. The vote of
a majority of the directors present at any meeting at which there is a quorum
shall be the acts of the Board or of the committee, except as a larger vote
may be required by the laws of the State of Michigan. A member of the Board
or of a committee designated by the Board may participate in a meeting by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other.
Participation in a meeting in this manner constitutes presence in person at
the meeting.
5.08 Executive and Other Committees. The Board of Directors may, by
resolution passed by a majority of the whole Board, appoint two or more
members of the Board as an executive committee to exercise all powers and
authorities of the Board in management of the business and affairs of the
Corporation; provided, however, that such committee shall not have power or
authority to:
(a) amend the Articles of Incorporation;
(b) adopt an agreement of merger or consolidation;
(c) recommend to shareholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets;
(d) recommend to shareholders a dissolution of the Corporation or
revocation of dissolution;
(e) amend these Bylaws;
(f) fill vacancies in the Board;
(g) fix the compensation of the directors for serving on the Board or
on a committee; or
(h) unless expressly authorized by the Board, declare a dividend or
authorize the issuance of stock.
The Board of Directors from time to time may, by like resolution,
appoint such other committees of one or more directors to have such
authority as shall be specified by the Board in the resolution making such
appointments. The Board of Directors may designate one or more directors as
alternate members of any committee who may replace an absent or disqualified
member at any meeting thereof.
5.09 Dissents. A director who is present at a meeting of the Board
of Directors, or a committee thereof of which he is a member, at which action
on a corporate matter is taken is presumed to have concurred in that action
unless his dissent is entered in the minutes of the meeting or unless he
files his written dissent to the action with the person acting as secretary
of the meeting before the adjournment thereof or shall forward such dissent
by registered mail to the Secretary of the Corporation promptly after the
adjournment of the meeting. Such right to dissent does not apply to a
director who voted in favor of such action. A director who is absent from a
meeting of the Board, or a committee thereof of which he is a member, at
which any such action is taken is presumed to have concurred in the action
unless he files his written dissent with the Secretary of the Corporation
within a reasonable time after he has knowledge of the action.
5.10 Compensation. The Board of Directors, by affirmative vote of a
majority of directors in office and irrespective of any personal interest of
any of them, may establish reasonable compensation of directors for services
to the Corporation as directors or officers.
5.11 Employment of Others; Director-Emeritus. To assist in the
performance of its duties, the Board of Directors or any committee thereof
may employ any other corporation or any association, syndicate, trust, firm
or individual, or any group or combination thereof, to serve, assist, advise
or inform it, and may confer thereon such powers and authorities as it may
deem advisable, and make or contract to make such payments, fees or other
remuneration for services rendered as the Board may deem desirable. The
Board of Directors may, by resolution, adopted by a majority of the whole
Board, appoint a director or former director, who in either case, has served
as a director for ten years, or more, as a Director-Emeritus. Such
appointment shall be for a term expiring with the next Annual Meeting of
Shareholders, but shall be subject to renewal, by the same vote, at the
organizational meeting of the Board of Directors following such Annual
Meeting. A Director-Emeritus shall not be considered a member of the Board
of Directors, but shall be a consultant to the Board and, in such capacity,
shall be invited to attend all meetings of the Board and such meetings of
committees of the Board as the Chairman of the Board shall determine to be
appropriate. For his services, a Director-Emeritus shall be entitled to
receive the same compensation for meetings actually attended as members of
the Board of Directors, but shall not be entitled to receive any annual or
other periodic fee or retainer paid to members of the Board.
ARTICLE VI
Notices, Waivers of Notice and Manner of Acting
6.01 Notices. All notices of meetings required to be given to
shareholders, directors or any committee of directors may be given by mail,
telegram or cablegram to any shareholder, director or committee member at his
or her last address as it appears on the books of the Corporation. Notice to
directors may also be given by telex, facsimile transmission or similar
device.
6.02 Waiver of Notice. Notice of the time, place and purpose of any
meeting of shareholders, directors or committee of directors may be waived by
telegram, facsimile transmission, cablegram or other writing, either before
or after the meeting, or in such other manner as may be permitted by the laws
of the State of Michigan. Attendance of a person at any meeting of directors
or a committee of directors, constitutes a waiver of notice of the meeting
except when the person attends the meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called and convened.
6.03 Action Without a Meeting. Any action required or permitted at
any meeting of shareholders or directors or committee of directors may be
taken without a meeting, without prior notice and without a vote, if all of
the shareholders or directors or committee members entitled to vote thereon
consent thereto in writing.
ARTICLE VII
Officers
7.01 Number. The Board of Directors shall elect or appoint a
President, a Secretary and a Treasurer, and may elect a Chairman of the
Board, and one or more Vice Presidents, Assistant Secretaries and/or
Assistant Treasurers and such other officers as it shall deem advisable. The
President and Chairman of the Board, if any, shall be members of the Board of
Directors. Any two or more of the above offices may be held by the same
person, but no officer shall execute, acknowledge or verify an instrument in
more than one capacity.
7.02 Term of Office, Resignation and Removal. An officer shall hold
office for the term for which he is elected or appointed and until his
successor is elected or appointed and qualified, or until his resignation or
removal. An officer may resign by written notice to the Corporation. The
resignation is effective upon its receipt by the Corporation or at a
subsequent time specified in the notice of resignation. An officer may be
removed by the Board with or without cause. The removal of an officer shall
be without prejudice to his contract rights, if any. The election or
appointment of an officer does not of itself create contract rights.
7.03 Vacancies. The Board of Directors may fill any vacancies in
any office occurring for whatever reason.
7.04 Authority. All officers, employees and agents of the
Corporation shall have such authority and perform such duties in the conduct
and management of the business and affairs of the Corporation as may be
designated by the Board of Directors and these Bylaws.
ARTICLE VIII
Duties of Officers
8.01 Chairman of the Board. The Chairman of the Board, if such
office is filled, shall preside at all meetings of the shareholders and of
the Board of Directors at which he is present. He shall consult with and
advise the President concerning the management and policies of the
Corporation and, in conjunction with the President, shall direct the policies
of the Corporation. He shall provide to the President whatever assistance is
needed by the President in performing his duties and responsibilities as
such. The Chairman of the Board shall also perform such other duties and
execute such other duties and execute such other powers as the Board of
Directors may from time to time by resolution prescribe.
8.02 President. The President shall be the chief executive officer
of the Corporation. He shall see that all orders and resolutions of the
Board are carried into effect, and he shall have the general powers of
supervision and management usually vested in the chief executive officer of a
corporation, including the authority to vote all securities of other
corporations and business organizations which are held by the Corporation.
The President shall consult with the Chairman of the Board concerning the
management and policies of the Corporation and shall, in conjunction with the
Chairman of the Board, direct the policies of the Corporation. In the
absence or disability of the Chairman of the Board, or if that office has not
been filled, the President shall also preside at all meetings of the
shareholders and of the Board of Directors at which he is present, and
perform such other duties and execute such other powers as the Board of
Directors may from time to time prescribe.
8.03 Vice Presidents. The Vice Presidents, in order of their
seniority, shall, in the absence or disability of the President, perform is
duties and exercise his powers and shall perform such other duties as the
Board of Directors or the President may from time to time prescribe.
8.04 Secretary. The Secretary shall attend all meetings of the
Board of Directors and of shareholders and shall record all votes and minutes
of all proceedings in a book to be kept for that purpose. He shall give or
cause to be given notice of all meetings of the shareholders and of the Board
of Directors. He shall keep in safe custody the seal of the Corporation,
and, when authorized by the Board, affix the same to any instrument requiring
it, and when so affixed it shall be attested by his signature, or by the
signature of the Treasurer or an Assistant Secretary. The Secretary may
delegate any of his duties, powers and authorities to one or more Assistant
Secretaries, unless such delegation is disapproved by the Board.
8.05 Treasurer. The Treasurer shall have the custody of the
corporate funds and securities; shall keep full and accurate accounts of
receipts and disbursements in books of the Corporation; and shall deposit all
moneys and other valuable affects in the name and to the credit of the
Corporation in such depositories as may be designated by the Board of
Directors. He shall render to the President and directors, whenever they may
require it, an account of his transactions as Treasurer and of the financial
condition of the Corporation. The Treasurer may delegate any of his duties,
powers and authorities to one or more Assistant Treasurers unless such
delegation be disapproved by the Board of Directors.
8.06 Assistant Secretaries and Treasurers. The Assistant
Secretaries, in order of their seniority, shall perform the duties and
exercise the powers and authorities of the Secretary in case of his absence
or disability. The Assistant Treasurers, in the order of their seniority,
shall perform the duties and exercise the powers and authorities of the
Treasurer in case of his absence or disability. The Assistant Secretaries
and Assistant Treasurers shall also perform such duties as may be delegated
to them by the Secretary and Treasurer, respectively, and also such duties as
the Board of Directors may prescribe.
8.07 Bonds. The Board of Directors may require any officer, agent
or employee of the Corporation to give bond for the faithful discharge of his
duty and for the protection of the Corporation, in such sum and with such
surety or sureties as the Board may deem advisable.
ARTICLE IX
Special Corporate Acts
9.01 Orders for Payment of Money. All checks, drafts, notes, bonds,
bills of exchange and orders for payment of money of the Corporation shall be
signed by such officer of officers or such other person or persons as the
Board of Directors may from time to time designate.
9.02 Contracts and Conveyances. The Board of Directors of the
Corporation may in any instance designate the officer and/or agent who shall
have authority to execute any contract, conveyance, mortgage or other
instrument on behalf of the Corporation, or may ratify or confirm any
execution. When the execution of any instrument has been authorized without
specification of the executing officers or agents, the Chairman of the Board,
the President or any Vice President, and the Secretary or Assistant Secretary
or Treasurer or Assistant Treasurer, may execute the same in the name and on
behalf of this Corporation and may affix the corporate seal thereto.
ARTICLE X
Books and Records
10.01 Maintenance of Books and Records. The proper officers and agents
of the Corporation shall keep and maintain such books, records, and accounts of
the Corporation's business and affairs, minutes of the proceedings of its
shareholders, Board and committees, if any, and such stock ledgers and lists of
shareholders, as the Board of Directors shall deem advisable, and as shall be
required by the laws of the State of Michigan and others states or jurisdictions
empowered to impose such requirements. Books, records and minutes may be kept
within or without the State of Michigan in a place which the Board shall
determine.
10.02 Reliance on Information, Opinions, Reports. In discharging his or
her duties, a director or officer is entitled to rely on information, opinions,
reports, or statements, including financial statements and other financial data,
if prepared or presented by any of the following:
(a) one or more directors, officers, or employees of the
Corporation, or of a business organization under joint or common
control, whom the director or officer reasonably believes to be
reliable and competent in the matters presented;
(b) legal counsel, public accountants, engineers, or other
persons as to matters the director or officer reasonably believes
are within the person's professional or expert competence; and
(c) a committee of the Board of which he or she is not a member
if the director or officer reasonably believes the committee merits
confidence.
A director or officer is not entitled to rely on the information set forth in
this Section 10.02 if he or she has knowledge concerning the matter in question
that makes reliance otherwise permitted by this Section 10.02 unwarranted.
10.03 Fiscal Year. The fiscal year of the Corporation shall be on a "52-
53 week" basis. This fiscal year shall end with the Saturday which is closest
to the last day of December of each year and the next fiscal year shall begin
with the Sunday immediately following the Saturday on which the preceding fiscal
year ended.
ARTICLE XI
Indemnification
11.01 Right to Indemnification. Each person who was or is made a party
or is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
("proceeding"), by reason of the fact that he or she, or a person of whom he or
she is the legal representative, is or was a director or officer of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is alleged action
in an official capacity as a director, officer, employee or agent or in any
other capacity while serving as a director, officer, employee or agent, shall
be indemnified and held harmless by the Corporation to the fullest extent
authorized by the Michigan Business Corporation Act, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than said Act permitted the Corporation to provide prior to such
amendment) against all expenses, liability and loss (including attorney's fees,
judgments, fines, ERISA excise taxes or penalties, and amounts paid or to be
paid in settlement) reasonably incurred or suffered by such person in connection
therewith; provided, however, that the Corporation shall indemnify any such
person seeking indemnity in connection with an action, suit or proceeding (or
part thereof) initiated by such person only if such action, suit or proceeding
(or part thereof) was authorized by the Board of Directors of the Corporation.
Such right shall be a contract right and shall include the right to be paid by
the Corporation expenses incurred in defending any such proceeding in advance
of its final disposition; provided, however, that the payment of such expenses
incurred by a director or officer in his or her capacity as a director or
officer (and not in any other capacity in which service was or is rendered by
such person while a director or officer, including, without limitation, service
to an employee benefit plan) in advance of the final disposition of such
proceeding shall be made only upon delivery to the Corporation of an
undertaking, by or on behalf of such director or officer, to repay all amounts
so advanced if it should be determined ultimately that such director or officer
is not entitled to be indemnified under this Section or otherwise.
11.02 Right of Claimant to Bring Suit. If a claim under Section 11.01
is not paid in full by the Corporation within ninety days after a written claim
has been received by the Corporation, the claimant may at any time thereafter
bring suit against the Corporation to recover the unpaid amount of the claim
and, if successful in whole or in part, the claimant shall be entitled to be
paid also the expense of prosecuting such claim. It shall be a defense to any
such action (other than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final disposition where
the required undertaking has been tendered to the Corporation) that the claimant
has not met the standards of conduct which make it permissible under the
Michigan Business Corporation Act for the Corporation to indemnify the claimant
for the amount claimed, but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel, or its shareholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Michigan Business Corporation
Act, nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel, or it shareholders) that the claimant had
not met such applicable standard of conduct, shall be a defense to the action
or create a presumption that the claimant had not met the applicable standard
of conduct.
11.03 Non-Exclusivity of Rights. The right conferred on any person by
Sections 11.01 and 11.02 shall not be exclusive or any other rights which such
person may have or hereafter acquire under any statute, provision of the
Articles of Incorporation, bylaw, agreement, vote of shareholders or
disinterested directors or otherwise.
11.04 Insurance. The Corporation may maintain insurance, at its expense,
to protect itself or any such director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise, or both, against any such expense, liability or loss, whether or not
the Corporation would have the power to indemnify such person against such
expense, liability or loss under the Michigan Business Corporation Act.
ARTICLE XII
Amendments
12.01 Amendments. The Bylaws of the Corporation may be amended, altered
or repealed, in whole or in part, by the shareholders or by the Board of
Directors at any meeting duly held in accordance with these Bylaws, provided
that notice of the meeting includes notice of the proposed amendment, alteration
or repeal.
ARTICLE XIII
Control Shares and
Control Share Acquisitions
13.01 Control Share Acquisitions. The Corporation is subject to Chapter
7B, "Control Share Acquisitions," of the Michigan Business Corporation Act. The
Corporation became subject to Chapter 7B effective as of May 31, 1988, pursuant
to the adoption of a resolution by the Board of Directors that was filed with
the Michigan Department of Commerce. Under Chapter 7B, shares of capital stock
of the Corporation constituting "control shares" acquired in "control share
acquisitions" (as defined in Chapter 7B) have the same voting rights as were
accorded the shares before the "control share acquisition" only to the extent
granted by resolution approved by the shareholders of the Corporation in
accordance with Chapter 7B.
FIRST AMENDMENT TO SECOND
AMENDED AND RESTATED LOAN AGREEMENT
FIRST AMENDMENT TO SECOND AMENDED AND RESTATED LOAN AGREEMENT, dated as
of January 31, 1995 (this "First Amendment"), to the Second Amended and
Restated Loan Agreement dated as of March 2, 1994 (the "Loan Agreement")
among Champion Enterprises, Inc., Champion Home Builders Co., Moduline
International Inc., Lamplighter Homes, Inc., Champion Motor Coach, Inc., and
Dutch Housing, Inc., of Auburn Hills, Michigan (the "Companies"), and
Comerica Bank, of Detroit, Michigan (the "Bank").
W I T N E S S E T H :
WHEREAS, the Companies and the Bank are parties to the Loan Agreement;
and
WHEREAS, Champion, through two 100% Subsidiaries, CHI Acquisition Corp.
("CHI") and CRHI Acquisition Corp. ("CRHI"), has signed purchase agreements
to purchase substantially all of the assets of Chandeleur Homes, Inc. and
Crest Ridge Homes, Inc.; and
WHEREAS, the Bank and the Companies wish to amend the Loan Agreement to
provide, among other things, for the addition to the Loan Agreement of CHI
and CRHI as Companies, an increase in the Maximum Commitment, and a revision
of certain financial covenants;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, it is hereby agreed as follows:
ARTICLE I -- DEFINITIONS AND AMENDMENTS
1.1 Defined Terms. Capitalized terms used herein which are defined
in the Loan Agreement are used herein with such defined meanings.
1.2 Amendments to Section 1. (a) Substitution of Certain
Definitions. Section 1 of the Loan Agreement is hereby amended by deleting
the definitions set forth below in their entirety, and substituting therefor
the corresponding new definitions set forth below:
"Applicable Margin" shall mean, as of the date of determination
thereof, the following margins:
If Consolidated
Funded Debt
Ratio ("x")
is: The Applicable Margin is:
Prime-based Rate Eurodollar-based Rate
x > 1.25 .00 1.25%
1.00 < x < 1.25 .00 1.00%
.60 < x < 1.00 .00 .80%
x < .60 .00 .60%
"Consolidated Current Liabilities" shall mean, as of any date, the
amount that would be classified on a balance sheet as the current liabilities
at such time of Champion and its Consolidated Subsidiaries as determined in
accordance with GAAP, but excluding therefrom all indebtedness under the
Revolving Credit Note and all holdbacks under the Purchase Agreement and the
1995 Purchase Agreements.
"Consolidated Fixed Charge Coverage Ratio" shall mean as of the last
day of each fiscal quarter, a ratio, the numerator of which shall be
Consolidated EBITDA for the four fiscal quarters then ended, and the
denominator of which shall be the sum of Consolidated Interest Expense for
such period, plus Consolidated Capital Expenditures for such period, plus the
total of all principal payments paid or payable under loan obligations and
Capitalized Leases of Champion and its Consolidated Subsidiaries during such
period.
"Consolidated Tangible Net Worth" shall mean as of any date,
Consolidated Net Worth less Consolidated intangible assets, all as determined
in accordance with GAAP.
<PAGE>
"Letter of Credit Fee" shall mean a per annum fee on the aggregate face
amount of all Letters of Credit, determined as follows:
If Consolidated Funded Debt The Letter of Credit
Ratio (x) is: Fee is:
x greater than or equal to 1.25 1.25%
x is greater than or equal to 1.00 but
less than 1.25 1.00%
x is greater than or equal to .60 but
less than 1.00 .80%
x is less than .60 .60%
"Maximum Commitment" shall mean, as of any applicable date of
determination, $60,000,000 less the aggregate undrawn portion of all
outstanding Letters of Credit.
"Revolving Credit Commitment Fee" shall mean a per annum fee on the
unused portion of the revolving credit provided by Bank under this Agreement
(determined as provided in Section 2.8), as follows:
If Consolidated Funded Debt The Revolving Credit
Ratio (x) is: Commitment fee is:
x is greater than or equal to 1.25 .35%
x is greater than or equal to 1.00 but
less than 1.25 .25%
x is greater than or equal to .60 but
less than 1.00 .1875%
x is less than .60 .15%
(b) Addition of Certain Definitions. Section 1 of the Loan
Agreement is hereby amended by adding thereto the following definitions in
appropriate alphabetical order:
"Chandeleur" shall mean Chandeleur Homes, Inc., an Alabama corporation.
"CHI" shall mean CHI Acquisition Corp., a Michigan corporation and 100%
Subsidiary.
"CRHI" shall mean CRHI Acquisition Corp., a Michigan corporation and
100% Subsidiary.
"Consolidated EBITDA" shall mean as of the last day of each fiscal
quarter, the sum of Consolidated Net Income for the four fiscal quarters then
ended, plus Consolidated Interest Expense, Consolidated Income Taxes and
Consolidated depreciation and amortization for such four fiscal quarters (to
the extent such depreciation and amortization were included in computing
Consolidated Net Income).
"Consolidated Funded Debt" shall mean as of any applicable date of
determination, all indebtedness and liabilities of Champion and its
Consolidated Subsidiaries for borrowed money or which has been incurred in
connection with the acquisition of assets (other than notes payable to Dutch
and obligations to Chandeleur or Crest Ridge) in each case having a final
maturity of one year or longer from the date of origin thereof, including all
payments in respect thereof that are required within one year from the date
of any determination of Consolidated Funded Debt.
"Consolidated Funded Debt Ratio" shall mean as of the last day of each
fiscal quarter, a ratio, the numerator of which shall be Consolidated Funded
Debt and the denominator of which shall be Consolidated EBITDA.
"Crest Ridge" shall mean Crest Ridge Homes, Inc., a Texas corporation.
"First Amendment" shall mean the First Amendment to Second Amended and
Restated Loan Agreement dated January 31, 1995 between the Companies and the
Bank.
"First Amendment Effective Date" shall mean the first date upon which
each of the conditions precedent to the effectiveness of the First Amendment
shall have been satisfied.
"1995 Purchase Agreements" shall mean the Asset Purchase Agreement
dated January 5, 1995 among Chandeleur, certain shareholders of Chandeleur,
CHI and Champion, and the Asset Purchase Agreement dated January 5, 1995
among Crest Ridge, certain shareholders of Crest Ridge, CRHI and Champion.
"1995 Acquisitions" shall mean the acquisition by CHI and CRHI of
certain of the assets of Chandeleur and Crest Ridge pursuant to and in
compliance with the 1995 Purchase Agreements.
(c) Deletion of Certain Definitions. Section 1 of the Loan
Agreement is hereby amended by deleting the definitions of "Borrowing Base",
"Consolidated Tangible Assets", "Consolidated Leverage Ratio", and
"Consolidated Total Liabilities".
1.3 Amendment to Section 2.2. Section 2.2 is amended (a) by
deleting the third sentence thereof and inserting in lieu thereof the
following, "Effective on the First Amendment Effective Date, the Applicable
Margins shall be .80% for Eurodollar-based Advances and .00% for Prime-Based
Advances.", and (b) by deleting the term "Consolidated Leverage Ratio" where
it appears in said Section and inserting in its place the term "Consolidated
Funded Debt Ratio."
1.4 Amendment to Section 2.5(b). Section 2.5(b) is amended by
deleting the reference to "10:00 a.m." in the last line thereof and inserting
in its place "11:00 a.m.".
1.5 Amendment to Section 2.5(c). Section 2.5(c) is amended (a) by
deleting the reference to "$25,000" in the fifth line thereof and inserting
in its place the words "$100,000 or any larger amount thereof in $25,000
increments", and (b) by deleting the reference to "$500,000" in the sixth
line thereof and inserting in its place the number "$1,000,000."
1.6 Amendment to Section 2.7(c). Section 2.7(c) is amended (a) by
deleting the reference to "$25,000" in the sixth line thereof and inserting
in its place the words "100,000 or any larger amount thereof in $25,000
increments", and (b) by deleting the reference to "$500,000" in the seventh
line thereof and inserting in its place the number "$1,000,000."
1.7 Amendment to Section 2.8. Section 2.8 is amended (a) by deleting
the parenthetical in the fourth line thereof, (b) by deleting the fifth
sentence and inserting in lieu thereof the sentence "Effective on the First
Amendment Effective Date, the Revolving Credit Commitment Fee shall be .1875%
per annum.", and (c) by deleting the number ".375%" in the last sentence
thereof and inserting in its place the number ".35%"
1.8 Addition of Section 3.9. Section 3.9 is added to the Loan
Agreement, to read in its entirety as follows:
"3.9 Companies agree that, effective from and after the First
Amendment Effective Date, The First National Bank of Chicago
("First Chicago"), as the purchaser of a participating interest
in the Bank's Commitment, Advances and Letters of Credit made or
issued by Bank hereunder, shall have the same rights as Bank
under Section 3.1 through 3.6 hereof, as if First Chicago were a
direct creditor of Companies hereunder."
1.9 Amendment to Section 4.7. Section 4.7 is amended (a) by adding
the words "or issue any Letter of Credit" following the words "Revolving
Credit Note" in the second line, and (b) by deleting Subsections (a) and (b)
and inserting in their place the following:
(a) No event of default (as defined in Section 9.1 or 9.2) or
event which, with the giving of notice or the passage of
time, or both, would constitute such an event of default,
shall exist; and
(b) All of the representations and warranties set forth in
Section 5 shall be true and correct on and as of the date
of such Advance or issuance of a Letter of Credit, except
to the extent that such representations and warranties
relate solely to an earlier date in which case each of
such representations and warranties shall be true and
correct as of such earlier date, provided that references
to this Agreement therein shall be deemed to be
references to this Agreement as amended and in effect
from time to time."
1.10 Amendment to Section 5. The preamble to Section 5 is amended
(a) by inserting the words "and the 1995 Acquisitions" after the word
"Acquisition" in the fifth line thereof, and (b) by inserting the words "and
the 1995 Purchase Agreements" after the word "Agreement" in the fifth line
thereof.
1.11 Amendment to Section 5.12. Section 5.12 is amended by deleting
the second paragraph and inserting in lieu thereof the following:
"In August, 1990, Home Builders received a Section 104 "general
notification" letter from the United States Environmental Protection
Agency ("EPA") notifying Home Builders that it is a potentially
responsible party ("PRP") for remediation of the Metamora Landfill
in Metamora, Michigan (the "Site"). In August, 1994, Home Builders
received a Section 107 demand for restitution of past response costs
incurred by the EPA. Home Builders conducted a thorough
investigation of its waste generation practices at the Site and, as
a result of that investigation, believes that its liability as a PRP
is de minimus. However, to avoid the uncertainty of the result of
protracted and significantly expensive litigation, Home Builders has
offered $2.6 million to the EPA in an effort to settle the EPA's
claims for all past and future costs. Included in such settlement
would be provisions for contribution protection from all PRP's. Such
offer has not been accepted. Even if such offer is not accepted,
however, the management of Home Builders does not believe that the
EPA's claim, if adversely decided, would have a material and adverse
effect on the finances or operations of Home Builders.
On January 4, 1995, Home Builders received a demand from
the Michigan Department of Natural Resources ("MDNR") for
payment of past costs incurred pursuant to Section 104 and
future costs incurred by the State of Michigan for
responding to the release or threatened release of
hazardous substances at the Site. The demand letter
alleges that Home Builders is jointly and severally
responsible with other PRP's for payment of $3.4 million in
costs. It is believed by management that Home Builders'
additional liability, if any, will not be material. Home
Builders will be meeting with the MDNR in January, 1995 to
resolve this matter.
Home Builders is voluntarily remediating a leaking underground
storage tank site at its former Dryden manufacturing home production
facility. Soil remediation was completed in February, 1994. Ground
water remediation is expected to begin in the summer of 1995. The
remaining remediation costs are not considered by management to be
material."
1.12 Amendment to Section 5.13 and 5.14. Sections 5.13 and 5.14 are
amended by adding the words "Except as described in Section 5.12," at the
beginning of each such Section.
1.13 Addition of Sections 5.19 and 5.20. Sections 5.19 and 5.20 are
added to the Loan Agreement, to read in their entirety as follows:
"5.19 To the best of the Companies' knowledge, after due
inquiry, the audited financial statements of Chandeleur as at
December 31, 1993, and the unaudited financial statements as at
December 31, 1994, previously furnished to the Bank, are complete
and correct and fairly present the financial condition of
Chandeleur as of the dates of said financial statements, and
since December 31, 1994 there has been no material adverse change
in the financial condition of Chandeleur.
5.20 To the best of the Companies' knowledge, after due inquiry,
the audited financial statements of Crest Ridge as at December
31, 1994, and the unaudited financial statements as at December
31, 1994, previously furnished to the Bank, are complete and
correct and fairly present the financial condition of Crest Ridge
as of the dates of said financial statements, and since December
31, 1994 there has been no material adverse change in the
financial condition of Crest Ridge."
1.14 Amendment to Section 6.1(c). Section 6.1(c) is amended by
deleting the number "30" in the first line thereof and inserting in its place
the number "45", and (b) by deleting the number "6.15" in the eighth line and
inserting in its place the number "6.18".
1.15 Deletion of Section 6.12. Section 6.12 is hereby deleted, and
the words "[Intentionally Omitted]" are inserted in lieu of the language in
said Section.
1.16 Amendment to Section 6.13. Section 6.13 is amended by deleting
said Section in its entirety and inserting in lieu thereof the following:
"6.13 Maintain a Consolidated Current Ratio of not less
than 1 to 1 as of the last day of the first three fiscal
quarters of each fiscal year, and a Consolidated Current
Ratio of not less than .8 to 1 as of the last day of each
fiscal year."
1.17 Amendment to Section 6.15. Section 6.15 is amended by deleting
said Section in its entirety and by inserting in its place the following:
"6.15 Maintain, as of the last day of each fiscal quarter,
Consolidated Tangible Net Worth of not less than a deficit
of ($5,000,000) plus 50% of Champion's cumulative
Consolidated Net Income (not reduced by losses) for the
period (taken as one accounting period) beginning on
January 1, 1995 and ending on the date of determination."
1.18 Addition of Sections 6.17 and 6.18. Sections 6.17 and 6.18 are
added to the Loan Agreement, to read in their entirety as follows:
"6.17 Maintain, as of the last day of each fiscal quarter,
a Consolidated Funded Debt Ratio of not greater than 1.5 to
1.0.
6.18 Maintain, as of the last day of each fiscal quarter, a
ratio of Consolidated Funded Debt to Consolidated Net Worth of
not greater than 1 to 1."
1.19 Deletion of Sections 6.1(d) and 6.8. Sections 6.1(d) and 6.8
are hereby deleted and the words "[Intentionally Omitted]" are inserted in
lieu of the language of each of said Sections.
1.20 Amendment to Section 7.1. Section 7.1 is amended by deleting
all of said Section after the word "hereunder" in the fourth line thereof,
and inserting in lieu thereof the words, "Champion may redeem its stock for
amounts not to exceed $10,000,000 in the aggregate within any two year
period."
1.21 Amendment to Section 7.4(d). Section 7.4(d) is amended by
deleting the reference to "$500,000" and inserting in its place "$1,500,000".
1.22 Amendment to Section 7.5. Section 7.5 is amended by deleting
the period at the end thereof and inserting in lieu thereof the words, "and
except for the 1995 Acquisitions on terms not materially different from those
contained in the 1995 Purchase Agreements".
1.23 Amendment to Section 9.1. Section 9.1 is amended by (a)
deleting the word "or" following the word "principal" in the first line and
adding a comma in its place, (b) adding a comma after the word "interest" in
the first line, and (c) adding the words "fees or other amounts" following
such added comma.
1.24 Amendment to Section 10.8. Section 10.8 is amended to read in
its entirety as follows:
"10.8 All liabilities of Companies hereunder and under the
Revolving Credit Note and any Letter of Credit Agreements
shall be joint and several; provided, however, that in any
action or proceeding involving any state corporate law, or
any state or federal bankruptcy, insolvency, reorganization
or other law affecting the rights of creditors generally,
if the obligations of any Company under this Agreement
would otherwise be held or determined to be avoidable,
invalid or unenforceable on account of the amount of such
Company's liability under this joint and several liability
provision, then, notwithstanding any other provision of
this Agreement to the contrary, the amount of such
Company's liability under this joint and several liability
provision shall, without any further action by any Company
or the Bank be automatically limited and reduced to the
highest amount which is valid and enforceable as determined
in such action or proceeding."
1.25 Amendment to Revolving Credit Note. The Revolving Credit Note
is hereby amended by increasing the principal amount thereof to $60,000,000
in lieu of $40,000,000.
1.26 Amendment to Exhibits D and G . Exhibits D and G to the Loan
Agreement are amended by deleting such exhibits in their entirety, and
substituting therefor Exhibits D and G attached to this First Amendment.
ARTICLE II -- REPRESENTATIONS AND WARRANTIES;
CONDITIONS PRECEDENT; JOINDER OF CHI and CRHI
2.1 Representations; No Default. (a) On and as of the First Amendment
Effective Date and after giving effect to this First Amendment and to the
transactions contemplated hereby, each of the Companies hereby (i) confirms,
reaffirms and restates the representations and warranties set forth in
Section 5 of the Loan Agreement, except to the extent that such
representations and warranties relate solely to an earlier date in which case
each of the Companies hereby confirms, reaffirms and restates such
representations and warranties on and as of such earlier date, provided that
the references to the Loan Agreement therein shall be deemed to be references
to the Loan Agreement as amended by this First Amendment, and (ii) represents
and warrants that no default or event or omission which, with the giving of
notice or the passage of time, or both, has occurred and is continuing.
2.2 Effective Date. This First Amendment shall become effective on
the first date upon which each of the following conditions precedent shall
have been satisfied:
(a) The Bank shall have received counterparts of this First
Amendment executed by each of the Companies, CHI and CRHI, and
acknowledged and consented to by each of the Guarantors;
(b) The Bank shall have received (a) certified copies of the
articles of incorporation and bylaws of CHI and CRHI and
certificates of good standing from their respective states of
incorporation and each state in which they are required to
qualify to do business, and (b) certified copies of resolutions
of the Board of Directors of CHI and CRHI evidencing approval of
the execution and delivery of this First Amendment and the
borrowing pursuant to the Loan Agreement;
(c) CHI and CRHI shall have executed and delivered to the Bank
security agreements granting to the Bank a first lien security
interest, subject only to Permitted Liens, in all of their present and
future accounts receivable, contract rights, chattel paper, inventory,
general intangibles and instruments, machinery and equipment, motor
vehicles, furniture and fixtures and other tangible and intangible
personal property whether now owned or hereafter acquired, and
financing statements and motor vehicle lien registration applications
required or requested by the Bank to perfect the security interests to
be conferred on the Bank under this Agreement and to accord to the Bank
a perfected first priority security interest under the Uniform
Commercial Code, subject only to Permitted Liens;
(d) The Bank shall have received a legal opinion dated the First
Amendment Effective Date covering such matters incident to the
transactions contemplated hereby as the Bank reasonably requires,
from legal counsel to the Companies; and
(e) The Bank and The First National Bank of Chicago ("First
Chicago") shall have executed and delivered a participation
agreement pursuant to which First Chicago purchased a
participating interest in at least 33.33% of the Advances, the
Maximum Commitment and the Letters of Credit.
2.3 Joinder of CHI and CRHI. The Companies, the Bank, CHI and CRHI
hereby acknowledge and agree that upon the First Amendment Effective Date,
(a) each of CHI and CRHI shall become a "Company" party to the Loan
Agreement, and (b) the definition of "Company" and "Companies" shall be
amended to include each of CHI and CRHI.
ARTICLE III -- MISCELLANEOUS
3.1 Limited Effect. Except as expressly amended hereby, all of the
provisions, covenants, terms and conditions of the Loan Agreement shall
continue to be, and shall remain, in full force and effect in accordance with
its terms.
3.2 Expenses. The Companies shall be obligated to reimburse the Bank
for all its reasonable costs and expenses including, without limitation,
legal expenses incurred in connection with the preparation, execution and
delivery of this First Amendment.
3.3 Governing Law. This First Amendment shall be governed by, and
construed and interpreted in accordance with, the law of the State of
Michigan.
3.4 Counterparts. This First Amendment may be executed by one or more
parties hereto on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment
to be executed and delivered by their proper and duly authorized officers as
of the date first above written.
CHAMPION ENTERPRISES, INC.,
By:___________________________
Its:__________________________
CHAMPION HOME BUILDERS CO.
By:___________________________
Its:__________________________
MODULINE INTERNATIONAL, INC.
By:___________________________
Its:__________________________
LAMPLIGHTER HOMES, INC.
By:___________________________
Its:__________________________
CHAMPION MOTOR COACH, INC.
By:___________________________
Its:__________________________
DUTCH HOUSING, INC.
By:___________________________
Its:__________________________
CHI ACQUISITION CORP.
By:___________________________
Its:__________________________
CRHI ACQUISITION CORP.
By:___________________________
Its:__________________________
COMERICA BANK
By:___________________________
Its:__________________________
<PAGE>
CONSENT OF GUARANTORS
We consent to the foregoing amendments as of the date thereof and
ratify and reaffirm all of our obligations to the Bank pursuant to the
Guaranty and the Guarantor's Security Agreements.
BUILDERS CREDIT CORPORATION
By:___________________________
Its:__________________________
CHAMPION FINANCIAL CORPORATION
By:___________________________
Its:__________________________
March 15, 1994
Ms. Jacqueline Dout
33 Fox Trail
Lincolnshire, Illinois 60069
Dear Jackie:
This letter is to confirm my offer to join Champion and the major terms
of employment.
1) The position is Executive Vice President and Chief Executive Officer of
Champion Enterprises, Inc. based in Auburn Hills, Michigan. As such,
you will be elected by the Board as an Officer of Champion Enterprises,
Inc. You will report directly to me as President and CEO of Champion
Enterprises, Inc.
2) The beginning base salary is $200,000 annually, paid monthly.
3) The annual incentive plan for the fiscally year 1994 ending December
31, 1994, as approved by the Board is enclosed. Based upon the two
criteria, your incentive potential is between 50% and 100% of your base
compensation. Further, even though you will be with us for less than
the full fiscal year, you will qualify for a minimum annual incentive
of $75,000.
4) The equity program will be defined as separate agreements effect on
your date of employment to cover 105,000 shares of Champion Enterprises
stock over five years based on the following:
A. 15,000 shares at 40% of market price on the date of acceptance to be
purchased within 60 days of employment. You will have tax
consequences for the difference between purchase and market price.
Once you exercise this portion, you will be eligible for the
following:
B. 15,000 shares at 40% of market price on the date of acceptance
(whichever is lower) exercisable either during the first 60 days or
after 12 months up to ten years.
C. 75,000 shares at market value on the date of acceptance to be vested
and exercisable in equal pro rata proportions (15,000) over five
years at the 1st, 2nd, 3rd, 4th and 5th anniversary date.
As part of the option agreements referred to in B or C, there will
be a "change of control" provision that immediately vests the
outstanding unvested options.
5. You will be eligible for the company's normal medical (contributing),
life insurance (twice annual base salary) and long-term disability (60%
of monthly base) benefits. There is no defined benefits retirement
program, but we do have a 401(k) profit sharing and saving program.
These benefits and the offer are contingent upon you passing the
standard pre-employment physical and drug test.
6. You will be eligible for a country club initiation and dues after six
months of employment. You may be personally liable for the tax
consequences of the initial fee, depending upon business usage. You
are immediately eligible for annual physicals and legal and financial
assistance. We do not provide company cars.
7. You will be entitled to four weeks vacation (20 days) for each 12 month
period. We do not pay cash in lieu of vacations.
8. In order to expedite and assist your family's move from Illinois to
Michigan within 120 days of employment, the company will:
A. Employ a relocation management firm to market and sell your Illinois
home. If required, they will purchase your home if not sold in 90
days. In either case, normal real estate fees for selling your
Illinois home will be paid.
B. Pay for normal closing costs for purchasing your home in Michigan.
C. Pay for the physical moving of all household goods from Illinois to
Michigan.
D. Pay for temporary housing and transportation expenses during the
"converting" period up to four months.
9. During the first two years of employment, the following will apply:
A. If the company separates you for any reason (other than gross
malfeasance or legal reasons), the company will provide up to 18
months base salary and benefits. This will be reduced from 18
months, if less than 18 months remain of the 24 month period.
B. If you resign from the company within the first 12 months, you will
compensate the company $100,000 for expenses incurred.
10. The company will provide a contract providing 18 months base salary and
prorated bonus at "par" as severance if both: there is a change of
control or CEO; and if either the new company or CEO terminate your
services.
This offer is effective until march 21, 1994 and assures you will join
the company no later than April 18, 1994. IN addition, this offer is
contingent upon proper reference checks, which we have withheld, to this
point, at your request. If these terms are acceptable, please sign below and
return one copy to me.
I look forward to you joining Champion, for I am sure you will find it
personally and professionally rewarding while facing the exciting challenges
and opportunities.
Sincerely,
/S/ WALTER R. YOUNG, JR.
Walter R. Young, Jr.
\bj
By:
/S/ A. JACQUELINE DOUT
A. Jacqueline Dout
March 15, 1994
Date
Executive Vice President and Chief Financial Officer,
Champion Enterprises, Inc.
1994 Fiscal Year Incentive Plan
Eligibility
Must hold position at fiscal year end 1994 (Dec. 31 1994)
The Plan
The CFO will be paid annually based upon the attainment of the following two
categories:
Measure
Net Income Attainment Level Incentive (% of Base Pay)
Minimum $13,500,000 35%
Par 16,800,000 53%
Maximum 19,800,000+ 70%
Other Individual Objectives
Good 15%
Better 22%
Best 30%
Each of the two categories are mutually exclusive in incentive
attainment. Within each of the two categories, the incentive payout will
increase between the attainment levels listed, but not as much as the next
attainment level incentive. The maximum incentive level is 100% of base
salary.
Definition and Rules
-Payment will be made after audited year-end results are finalized.
-Payments from this plan are not eligible for benefit calculations.
-This Plan supersedes all other previous plans.
Definitions:
Base Pay: Annualized base pay as of December 31, 1994.
Net Income: Annual, audited and publicly reported. Net income adjusted only
for excluding extraordinary gains or losses incurred on the sale of assets.
All attainment measures are based on current operations as of December, 1993.
Any acquisition or divestitures during the year may require appropriate
modifications to these attainment measures.
NONQUALIFIED STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT made this 18th day of
April, 1994, by and between Champion Enterprises, Inc., a
Michigan corporation (the "Company") and A. Jacqueline Dout (the
"Optionee").
WITNESSETH:
WHEREAS, the Optionee and the Company have agreed that
the Optionee is to be employed as Executive Vice President and
Chief Financial Officer of the Company and, as an inducement for
the Optionee to enter into employment and because the Company
desires to (i) encourage stock ownership in the Company by the
Optionee, (ii) provide additional incentive to the Optionee as a
key employee of the Company, and (iii) encourage the Optionee to
remain in the employment of the Company, or any parent or
subsidiary of the Company, the Company has determined to grant a
nonqualified stock option to the Optionee, conditioned on her
commencement of employment with the Company and acceptance of
the terms set forth below.
NOW, THEREFORE, it is agreed between the parties as
follows:
1. Grant and Right to Exercise Option. Subject to
the terms and conditions hereof, including the Optionee's
commencement of employment with the Company, the Company hereby
grants to the Optionee the right and option to purchase from the
Company up to, but not exceeding in the aggregate, 15,000 shares
of the Company's Common Stock, par value $1.00, at a price of
$10.10 per share; provided, however, that the grant of such
option is subject to the purchase by Optionee from the Company
of an initial 15,000 shares of such Common Stock at a price of
$10.10 per share (the "Initial Purchase") and to full payment of
such purchase price not later than June 17, 1994. This option
is not intended to meet the requirements of an "incentive stock
option" under Section 422 of the Internal Revenue Code (the
"Code").
2. Right to Exercise Option. In the event the
Initial Purchase has been completed, the Optionee may purchase
all, but not part, of the 15,000 shares covered by this option,
on or before June 17, 1994. If the option is not exercised in
full on or before June 17, 1994, the Optionee's right to
exercise the option, subject to the Optionee's termination by
the Company for any reason except death, disability (as defined
in Section 22(e) of the Code), or in connection with a "sale or
merger" as described in Section 3, shall lapse until April 18,
1995, at which time the option again shall become exercisable in
full. After the Initial Purchase, any remaining portion of the
option that is outstanding and not fully exercisable immediately
shall become exercisable in full in the event of a "sale or
merger" as described in Section 3. Any provision of this
Agreement notwithstanding, no portion of this option shall be
exercisable on or after the tenth anniversary of the date of
grant.
3. Termination of Employment. If the Optionee's
employment with the Company, parent of subsidiary of the Company
shall be terminated for any reason other than death or
disability (as defined in Section 22(e) of the Code), the
Optionee shall have the right, within 30 days after such
termination of employment, to exercise this option to the extent
that it shall have been exercisable and unexercised on the date
of such termination of employment, subject to any other
limitation on the exercise of such option in effect at the date
of exercise.
If the Optionee shall die or become disabled, (as
defined in Section 22(e) of the Code), the Optionee or the
executor or administrator of the estate of the Optionee (as the
case may be) or the person or persons to whom the option shall
have been transferred by will or by the laws of descent and
distribution, shall have the right, within one year from the
date of the Optionee's death or disability to exercise this
option to the extent that it was exercisable and unexercised on
the date of the Optionee's death or disability, subject to any
other limitation on exercise in effect at the date of exercise.
As used in this Agreement, the term "parent" of the
Company means any "parent corporation" as defined in Section
424(e) of the Code, the term "subsidiary" of the Company means
any "subsidiary corporation" as defined in Section 424(b) of the
Code, the term "employment" means employment with the Company or
any parent or subsidiary of the Company, and the term "sale or
merger" means the occurrence of any of the following events:
(i) the acquisition of ownership by a person, firm or
corporation, or a group acting in concert, of fifty-one (51%)
percent, or more, of the outstanding common stock of the Company
in a single transaction or a series of related transactions
within a one-year period; (ii) a sale of all or substantially
all of the assets of the Company to any person, firm or
corporation; or (iii) a merger, consolidation or similar
transaction between the Company and another entity if
shareholders of the Company do not own a majority of the voting
stock of the corporation surviving the transaction and a
majority in value of the total outstanding stock of such
surviving corporation after the transaction.
The transfer of the Optionee from one corporation to
another among the Company, its parent and any of its
subsidiaries, or a leave of absence with the written consent of
the Company, shall not be a termination of employment for
purposes of this option.
4. Exercise of Option. The Optionee, from time to
time during the period when the option hereby granted may by its
terms be exercised, may exercise the option in whole or in part
as at the time permitted, by delivery to the Company of: (a) a
written notice signed by the Optionee (i) stating the number of
shares that the Optionee has elected to purchase at that time
from the Company, (ii) representing that the Optionee is
acquiring the shares being purchased for investment and not for
resale and the Optionee agrees to comply with the requirements
of Rule 144 of the Securities Exchange Act of 1934, as amended;
and (b) cash, personal check, bank draft, or money order for an
amount equal to the purchase price of the shares then to be
purchased. After receipt of the foregoing and subject to
Sections 5 and 6 below, the Company shall issue the shares in
the name of the Optionee and deliver the certificates therefore
to the Optionee.
5. Compliance With Securities Laws. Anything to the
contrary herein notwithstanding, the Company's obligation to
sell and deliver stock under this option is subject to such
compliance with federal and state laws, rules and regulations
applying to the authorization, issuance or sale of securities,
and applicable stock exchange requirements, as the Company deems
necessary or advisable. The Company shall not be required to
sell and deliver stock pursuant hereto unless and until it
receives satisfactory proof that the issuance or transfer of
such shares shall not violate any of the provisions of the
Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, or the rules and regulations of the
Securities Exchange Commission promulgated thereunder, or the
rules and regulations of any stock exchange on which the
Company's securities are traded, or state law governing the sale
of securities, or that there has been compliance with the
provisions of such acts, rules, regulations and state laws. If
the Optionee fails to accept delivery and pay for all or any
part of the number of shares specified by such notice upon
tender of delivery thereof the Optionee's right to exercise this
option with respect to such undelivered shares may be terminated
by the Company.
6. Restrictive Legend. The stock certificate(s) to
be issued upon the Optionee's exercise of this option shall
include the following legend: The securities represented by
this document have been acquired for investment and not with a
view to, or in connection with, the sale or distribution
thereof. No such sale or disposition of these securities may be
effected without an effective registration statement related
thereto, an opinion of counsel satisfactory to the Company that
such registration is not required under the Securities Act of
1933 and applicable state securities law, or a written advice
from the Securities and Exchange Commission and applicable state
securities agencies, or a member of the staff thereof, that
"no-action" would be recommended if the proposed transfer were
to be made without the filing of a registration statement (or
any combination of the foregoing).
7. Non-Assignability. The option hereby granted
shall not be transferable by the Optionee other than by will or
the laws of descent and distribution, and the option may be
exercised during the Optionee's lifetime only by the Optionee.
Any transferee of the option shall take the same subject to the
terms and conditions of this Agreement. No such transfer of the
option shall be effective to bind the Company unless the Company
shall have been furnished with written notice thereof and a copy
of the will and/or such other evidence as the Company may deem
necessary to establish the validity of the transfer and the
acceptance by the transferee or transferees of the terms and
conditions of this Agreement. No assignment or transfer of this
option, or of the rights represented thereby, whether voluntary
or involuntary, by operation of law or otherwise, except a
transfer by the Optionee by will or by the laws of descent and
distribution, shall vest in the purported assignee or transferee
any interest or right herein whatsoever.
8. Withholding. The Optionee hereby authorizes the
Company to withhold from her compensation or agrees to tender
the applicable amount to the Company to satisfy any requirements
for withholding of income and employment taxes in connection
with the exercise of the option granted hereby.
9. Disputes. As a condition to the granting of the
option granted hereby, the Optionee and the Optionee's
successors and assigns agree that any dispute or disagreement
which shall arise under or as a result of this Agreement shall
be determined by the Board in its sole discretion and judgment
and that any such determination and any interpretation by the
Board of the terms of this Agreement shall be final and shall be
binding and conclusive for all purposes.
10. Adjustments. In the event of any stock dividend,
stock split, reclassification or similar transaction affecting
the shares covered by this option, the rights of the Optionee
shall be appropriately adjusted by the Board.
11. Rights as Shareholder. The Optionee shall have no
rights as a shareholder of the Company with respect to any of
the shares covered by this option until the issuance of a stock
certificate or certificates upon the exercise of the option in
full or in part, and then only with respect to the shares
represented by such certificate or certificates.
12. Notices. Every notice relating to this Agreement
shall be in writing and if given by mail shall be given by
registered or certified mail with return receipt requested. All
notices to the Company shall be delivered to the Secretary of
the Company at the Company's headquarters in Auburn Hills,
Michigan, or addressed to the Secretary of the Company at 2701
University Drive,, Suite 320, Auburn Hills, Michigan 48326. All
notices by the Company to the Optionee shall be delivered to the
Optionee personally or addressed to the Optionee at the
Optionee's last residence address as then contained in the
records of the Company or such other address as the Optionee may
designate. Either party by notice to the other may designate a
different address to which notices shall be addressed. Any
notice given by the Company to the Optionee at the Optionee's
last designated address shall be effective to bind any other
person who shall acquire rights hereunder.
13. "Optionee" to Include Certain Transferees.
Whenever the word "Optionee" is used in any provision of this
Agreement under circumstances where the provision should
logically apply to any other person or persons to whom the
option, in accordance with the provisions of Section 7 hereof,
may be transferred, the word "Optionee" shall be deemed to
include such person or persons.
14. Governing Law. This Agreement has been made in
and shall be construed in accordance with the laws of the State
of Michigan.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the day and year first above written.
CHAMPION ENTERPRISES, INC.
By:
Chairman of the Board
A. Jacqueline Dout, Optionee
MAH4551
<PAGE>
NOTICE OF PURCHASE OF COMMON STOCK
Secretary
Champion Enterprises, Inc.
2701 University Drive
Suite 320
Auburn Hills, MI 48326
Dear Sir:
Pursuant to a Nonqualified Stock Option Agreement with
the Company dated April 18, 1994, I am entitled to purchase
15,000 shares of Champion Enterprises, Inc. Common Stock, par
value $1.00 per share, at a price of $10.10 per share, such
purchase of all 15,000 shares to be made on or before June 17,
1994.
I hereby elect to purchase all 15,000 shares at $10.10
per share. A personal check [or cash, bank draft or money order]
for the purchase price is enclosed herewith.
I authorize the Company to withhold from my
compensation or agree to tender the applicable amount to the
Company to satisfy any requirements for withholding of income
and employment taxes in connection with this purchase.
I represent that the shares of Common Stock that I am
purchasing are being purchased for investment purposes and not
with a view to resale. I further represent that I shall comply
with the requirements of Rule 144 of the Securities Exchange Act
of 1934, as amended.
A. Jacqueline Dout
Dated: , 1994
NOTICE OF EXERCISE OF NONQUALIFIED STOCK OPTION
Secretary
Champion Enterprises, Inc.
2701 University Drive
Suite 320
Auburn Hills, MI 48326
Dear Sir:
Pursuant to a Nonqualified Stock Option Agreement with
the Company dated April 18, 1994, I purchased 15,000 shares of
Champion Enterprises, Inc. Common Stock, par value $1.00 per
share, at a price of $10.10 per share on or before June 17,
1994. I now am entitled to exercise the remaining portion of
the nonqualified stock option to purchase 15,000 shares at
$10.10 per share.
I hereby elect to purchase shares at $10.10
per share. A personal check [or cash, bank draft or money order]
for the purchase price is enclosed herewith.
I authorize the Company to withhold from my
compensation or agree to tender the applicable amount to the
Company to satisfy any requirements for withholding of income
and employment taxes in connection with this purchase.
I represent that the shares of Common Stock that I am
purchasing are being purchased for investment purposes and not
with a view to resale. I further represent that I shall comply
with the requirements of Rule 144 of the Securities Exchange Act
of 1934, as amended.
A. Jacqueline Dout
Dated: , 19
NONQUALIFIED STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT made this 18th day of
April, 1994, by and between Champion Enterprises, Inc., a
Michigan corporation (the "Company") and A. Jacqueline Dout (the
"Optionee").
WITNESSETH:
WHEREAS, the Optionee and the Company have agreed that
the Optionee is to be employed as Executive Vice President and
Chief Financial Officer of the Company and because the Company
desires to (i) encourage stock ownership in the Company by the
Optionee, (ii) provide additional incentive to the Optionee as a
key employee of the Company, and (iii) encourage the Optionee to
remain in the employment of the Company, or any parent or
subsidiary of the Company, the Company has determined to grant a
nonqualified stock option to the Optionee, conditioned on her
commencement of employment with the Company and acceptance of
the terms set forth below.
NOW, THEREFORE, it is agreed between the parties as
follows:
1. Grant of Option. Subject to the terms and
conditions hereof, including the Optionee's commencement of
employment with the Company, the Company hereby grants to the
Optionee the right and option to purchase from the Company up
to, but not exceeding in the aggregate, 75,000 shares of the
Company's Common Stock, par value $1.00, at a price of $25.25
per share (equal to the closing price of the Company's Common
Stock on the American Stock Exchange on the date of the
Optionee's acceptance of employment, as reported in The Wall
Street Journal). This option is not intended to meet the
requirements of an "incentive stock option" under Section 422 of
the Internal Revenue Code (the "Code").
2. Right to Exercise Option. The Optionee may
purchase from the Company on and after the first anniversary of
the date of grant, 20% of the shares covered by this option, and
on each succeeding one year anniversary thereof may exercise an
additional 20% of the shares covered by the option, so that on
the fifth anniversary of the date of grant this option shall be
fully exercisable. To the extent not exercised, installments
shall accumulate and the Optionee may exercise them in whole or
in part in any subsequent period. Any portion of the option
that is outstanding and not fully exercisable immediately shall
become exercisable in full in the event of a "sale or merger" as
defined in Section 3. Any provision of this Agreement
notwithstanding, no portion of this option shall be exercisable
on or after the tenth anniversary of the date of grant.
3. Termination of Employment. If the Optionee's
employment with the Company, parent of subsidiary of the Company
shall be terminated for any reason other than death or
disability (as defined in Section 22(e) of the Code), the
Optionee shall have the right, within 30 days after such
termination of employment, to exercise this option to the extent
that it shall have been exercisable and unexercised on the date
of such termination of employment, subject to any other
limitation on the exercise of such option in effect at the date
of exercise.
If the Optionee shall die or become disabled, (as
defined in Section 22(e) of the Code), the Optionee or the
executor or administrator of the estate of the Optionee (as the
case may be) or the person or persons to whom the option shall
have been transferred by will or by the laws of descent and
distribution, shall have the right, within one year from the
date of the Optionee's death or disability to exercise this
option to the extent that it was exercisable and unexercised on
the date of the Optionee's death or disability, subject to any
other limitation on exercise in effect at the date of exercise.
As used in this Agreement, the term "parent" of the
Company means any "parent corporation" as defined in Section
424(e) of the Code, the term "subsidiary" of the Company means
any "subsidiary corporation" as defined in Section 424(b) of the
Code, the term "employment" means employment with the Company or
any parent or subsidiary of the Company, and the term "sale or
merger" means the occurrence of any of the following events:
(i) the acquisition of ownership by a person, firm or
corporation, or a group acting in concert, of fifty-one (51%)
percent, or more, of the outstanding common stock of the Company
in a single transaction or a series of related transactions
within a one-year period; (ii) a sale of all or substantially
all of the assets of the Company to any person, firm or
corporation; or (iii) a merger, consolidation or similar
transaction between the Company and another entity if
shareholders of the Company do not own a majority of the voting
stock of the corporation surviving the transaction and a
majority in value of the total outstanding stock of such
surviving corporation after the transaction.
The transfer of the Optionee from one corporation to
another among the Company, its parent and any of its
subsidiaries, or a leave of absence with the written consent of
the Company, shall not be a termination of employment for
purposes of this option.
4. Exercise of Option. The Optionee, from time to
time during the period when the option hereby granted may by its
terms be exercised, may exercise the option in whole or in part
as at the time permitted, by delivery to the Company of: (a) a
written notice signed by the Optionee (i) stating the number of
shares that the Optionee has elected to purchase at that time
from the Company, (ii) representing that the Optionee is
acquiring the shares being purchased for investment and not for
resale and the Optionee agrees to comply with Rule 144 of the
Securities Exchange Act of 1934, as amended; and (b) cash,
personal check, bank draft, or money order for an amount equal
to the purchase price of the shares then to be purchased. After
receipt of the foregoing and subject to Sections 5 and 6 below,
the Company shall issue the shares in the name of the Optionee
and deliver the certificates therefore to the Optionee.
5. Compliance With Securities Laws. Anything to the
contrary herein notwithstanding, the Company's obligation to
sell and deliver stock under this option is subject to such
compliance with federal and state laws, rules and regulations
applying to the authorization, issuance or sale of securities,
and applicable stock exchange requirements, as the Company deems
necessary or advisable. The Company shall not be required to
sell and deliver stock pursuant hereto unless and until it
receives satisfactory proof that the issuance or transfer of
such shares shall not violate any of the provisions of the
Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, or the rules and regulations of the
Securities Exchange Commission promulgated thereunder, or the
rules and regulations of any stock exchange on which the
Company's securities are traded, or state law governing the sale
of securities, or that there has been compliance with the
provisions of such acts, rules, regulations and state laws. If
the Optionee fails to accept delivery and pay for all or any
part of the number of shares specified by such notice upon
tender of delivery thereof the Optionee's right to exercise this
option with respect to such undelivered shares may be terminated
by the Company.
6. Restrictive Legend. The stock certificate(s)
issued upon the Optionee's exercise of this option shall include
the following legend: The securities represented by this
document have been acquired for investment and not with a view
to, or in connection with, the sale or distribution thereof. No
such sale or disposition of these securities may be effected
without an effective registration statement related thereto, an
opinion of counsel satisfactory to the Company that such
registration is not required under the Securities Act of 1933
and applicable state securities law, or a written advice from
the Securities and Exchange Commission and applicable state
securities agencies, or a member of the staff thereof, that
"no-action" would be recommended if the proposed transfer were
to be made without the filing of a registration statement (or
any combination of the foregoing).
7. Non-Assignability. The option hereby granted
shall not be transferable by the Optionee other than by will or
the laws of descent and distribution, and the option may be
exercised during the Optionee's lifetime only by the Optionee.
Any transferee of the option shall take the same subject to the
terms and conditions of this Agreement. No such transfer of the
option shall be effective to bind the Company unless the Company
shall have been furnished with written notice thereof and a copy
of the will and/or such other evidence as the Company may deem
necessary to establish the validity of the transfer and the
acceptance by the transferee or transferees of the terms and
conditions of this Agreement. No assignment or transfer of this
option, or of the rights represented thereby, whether voluntary
or involuntary, by operation of law or otherwise, except a
transfer by the Optionee by will or by the laws of descent and
distribution, shall vest in the purported assignee or transferee
any interest or right herein whatsoever.
8. Withholding. The Optionee hereby authorizes the
Company to withhold from her compensation or agrees to tender
the applicable amount to the Company to satisfy any requirements
for withholding of income and employment taxes in connection
with the exercise of the option granted hereby.
9. Disputes. As a condition to the granting of the
option granted hereby, the Optionee and the Optionee's
successors and assigns agree that any dispute or disagreement
which shall arise under or as a result of this Agreement shall
be determined by the Board in its sole discretion and judgment
and that any such determination and any interpretation by the
Board of the terms of this Agreement shall be final and shall be
binding and conclusive for all purposes.
10. Adjustments. In the event of any stock dividend,
stock split, reclassification or similar transaction affecting
the shares covered by this option, the rights of the Optionee
shall be appropriately adjusted by the Board.
11. Rights as Shareholder. The Optionee shall have no
rights as a shareholder of the Company with respect to any of
the shares covered by this option until the issuance of a stock
certificate or certificates upon the exercise of the option in
full or in part, and then only with respect to the shares
represented by such certificate or certificates.
12. Notices. Every notice relating to this Agreement
shall be in writing and if given by mail shall be given by
registered or certified mail with return receipt requested. All
notices to the Company shall be delivered to the Secretary of
the Company at the Company's headquarters in Auburn Hills,
Michigan, or addressed to the Secretary of the Company at 2701
University Drive,, Suite 320, Auburn Hills, Michigan 48326. All
notices by the Company to the Optionee shall be delivered to the
Optionee personally or addressed to the Optionee at the
Optionee's last residence address as then contained in the
records of the Company or such other address as the Optionee may
designate. Either party by notice to the other may designate a
different address to which notices shall be addressed. Any
notice given by the Company to the Optionee at the Optionee's
last designated address shall be effective to bind any other
person who shall acquire rights hereunder.
13. "Optionee" to Include Certain Transferees.
Whenever the word "Optionee" is used in any provision of this
Agreement under circumstances where the provision should
logically apply to any other person or persons to whom the
option, in accordance with the provisions of Section 7 hereof,
may be transferred, the word "Optionee" shall be deemed to
include such person or persons.
14. Governing Law. This Agreement has been made in
and shall be construed in accordance with the laws of the State
of Michigan.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the day and year first above written.
CHAMPION ENTERPRISES, INC.
By:
Chairman of the Board
A. Jacqueline Dout, Optionee
MAH4552
NOTICE OF EXERCISE OF NONQUALIFIED STOCK OPTION
Secretary
Champion Enterprises, Inc.
2701 University Drive
Suite 320
Auburn Hills, MI 48326
Dear Sir:
Pursuant to a Nonqualified Stock Option Agreement with
the Company dated April 18, 1994, a nonqualified stock option
was granted to me to purchase 75,000 shares of Champion
Enterprises, Inc. Common Stock, par value $1.00 per share, at a
price of $25.25 per share.
I hereby elect to exercise my nonqualified stock option
with respect to shares. A personal check [or cash,
bank draft or money order] for the purchase price is enclosed
herewith.
I authorize the Company to withhold from my
compensation or agree to tender the applicable amount to the
Company to satisfy any requirements for withholding of income
and employment taxes in connection with my exercise of this
option.
I represent that the shares of Common Stock that I am
purchasing are being purchased for investment purposes and not
with a view to resale. I further represent that I shall comply
with the requirements of Rule 144 of the Securities Exchange Act
of 1934, as amended.
A. Jacqueline Dout
Dated: , 19
SUBSIDIARIES OF THE REGISTRANT
Name of Subsidiary<F1> Names under which
[state of incorporation or organization] business done <F2>
Champion Home Builders Co. [Michigan] -
Champion Home Communities, Inc. [Michigan] -
Champion Motor Coach, Inc. [Michigan] -
Moduline International, Inc. [Washington] -
Lamplighter Homes, Inc. [Washington] -
Dutch Housing, Inc. [Michigan] -
Chandeleur Homes, Inc. [Michigan] -
Crest Ridge Homes, Inc. [Michigan] -
________________________________________
<F1> Each subsidiary is wholly-owned by the Registrant, or
by the subsidiary of the Registrant which is its
immediate parent and under which it is listed in the above
table.
<F2> In addition to its own name.
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the
Prospectus constituting part of the Registration Statement on
Form S-8 (Nos. 2-93052, 2-93052-99, 33-36511, 33-38470, 33-
41957, 33-41959 and 33-75244) and S-3 (Nos. 33-54192 and 33-
82544) of Champion Enterprises, Inc. of our report dated
February 7, 1995 appearing on page F-2 of this Form 10-K.
Price Waterhouse LLP
Detroit, Michigan
March 28, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE COMPANY'S AUDITED FINANCIAL STATEMENTS
AS OF AND FOR THE PERIOD ENDING DECEMBER 31, 1994 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS
<MULTIPLIER> 1,000
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<PERIOD-TYPE> YEAR
<CASH> 23,027
<SECURITIES> 0
<RECEIVABLES> 24,445
<ALLOWANCES> 168
<INVENTORY> 39,644
<CURRENT-ASSETS> 97,832
<PP&E> 47,645
<DEPRECIATION> 17,586
<TOTAL-ASSETS> 171,230
<CURRENT-LIABILITIES> 79,079
<BONDS> 0
0
0
<COMMON> 7,553
<OTHER-SE> 71,741
<TOTAL-LIABILITY-AND-EQUITY> 171,230
<SALES> 615,668
<TOTAL-REVENUES> 615,668
<CGS> 531,696
<TOTAL-COSTS> 531,696
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 23
<INTEREST-EXPENSE> 816
<INCOME-PRETAX> 34,090
<INCOME-TAX> 8,900
<INCOME-CONTINUING> 25,190
<DISCONTINUED> 1,908
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,098
<EPS-PRIMARY> 3.50
<EPS-DILUTED> 3.50
</TABLE>
