SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 24, 1996
Champion Enterprises, Inc.
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
Michigan
----------------------------------------------
(State or other jurisdiction of incorporation)
1-9751 38-2743168
------------------------ -----------------------
(Commission File Number) (IRS Employer Identification No.)
2701 University Drive, Suite 320, Auburn Hills, MI 48326
---------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (810)340-9090
------------
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On October 24, 1996, RHI Acquisition Corp. ("RHI
Acquisition"), a wholly owned subsidiary of Champion Enterprises,
Inc. (the "Company"), merged with and into Redman Industries,
Inc. ("Redman"), and Redman became a wholly owned subsidiary of
the Company. Prior to the merger of RHI Acquisition with and
into Redman (the "Merger"), shares of Redman's common stock, par
value $.01 per share (the "Redman Shares") were traded on The
Nasdaq National Market under the symbol "RDMN." Redman will
continue to conduct business as a wholly owned subsidiary of the
Company. The Merger was completed pursuant to the Agreement and
Plan of Merger, dated as of August 19, 1996, by and among Redman,
the Company and RHI Acquisition (the "Merger Agreement"). The
Merger Agreement was filed as Exhibit 2 to the Company's
Registration Statement on Form S-4, filed September 20, 1996,
Registration No. 333-12351, and is incorporated herein by
reference as Exhibit 2 to this Report.
In the Merger, each Redman Share issued and outstanding
immediately prior to the effective time of the Merger was
converted into the right to receive 1.24 shares of the common
stock, par value $1.00 per share, of the Company (the "Champion
Shares"). Approximately 16.5 million Champion Shares were issued
pursuant to the merger. The last reported sale prices on October
23, 1996, the day before the Merger was consummated, were $21.75
per Champion Share as reported on the NYSE Composite Transactions
Tape and $26.75 per Redman Share as reported on Nasdaq.
The acquired assets were used by Redman to manufacture and
assemble manufactured housing. The Company expects to continue
to operate the acquired business and use the acquired assets as
they had been prior to the Merger.
Prior to the execution of the Merger Agreement, there was no
material relationship between the Company and Redman or between
any officers or directors of the Company and the officers,
directors or shareholders of Redman.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired
(1) The Redman Industries, Inc. audited financial
statements were included in its Annual Report on
Form 10-K for the fiscal year ended March 29, 1996
and are incorporated herein by reference.
(2) The Redman Industries, Inc. Consolidated
Statements of Income for the fiscal six months
ended September 27, 1996 and September 29, 1995
and Consolidated Balance Sheet as of September 27,
1996 were included in its Form 10-Q for the
quarter ended September 27, 1996 and are
incorporated herein by reference.
(b) Pro Forma Financial Information
Filed with this report are the following unaudited pro forma
financial statements of the registrant:
(1) Pro Forma Combined Condensed Statements of Income
for the fiscal years ended December 30, 1995,
December 31, 1994 and January 1, 1994.
(2) Pro Forma Combined Condensed Statements of Income
for the fiscal nine months ended September 28,
1996 and September 30, 1995.
(3) Pro Forma Combined Condensed Balance Sheet as of
September 28, 1996.
(c) Exhibits
Exhibit No. Description
- ----------- -----------
2 Agreement and Plan of Merger, dated as of August
19, 1996, by and among Redman Industries, Inc.,
Champion Enterprises, Inc. and RHI Acquisition
Corp., filed as Exhibit 2 to the Company's
Registration Statement of Form S-4, filed
September 20, 1996, Registration No. 333-12351,
and incorporated herein by reference.
99.1 Press Release issued October 24, 1996.<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
CHAMPION ENTERPRISES, INC.
/S/ A. JACQUELINE DOUT
------------------------------
A. Jacqueline Dout
Executive Vice President
and Chief Financial Officer
November 6, 1996<PAGE>
CHAMPION ENTERPRISES, INC.
PRO FORMA FINANCIAL INFORMATION
Unaudited Pro Forma Combined Condensed
Statements of Income and Notes Thereto
Set forth below are the respective historical consolidated
statements of income of Champion Enterprises, Inc. (Champion) and
Redman Industries, Inc. (Redman) and the unaudited pro forma
combined condensed statements of income for the years ended
December 30, 1995, December 31, 1994 and January 1, 1994 and the
nine months ended September 28, 1996 and September 30, 1995
assuming the merger had been consummated at the beginning of the
respective periods. The presentation reflects (i) the accounting
for the merger as a pooling of interests and (ii) the issuance of
approximately 16.5 million shares of Champion common stock to
effect the merger. Prior to the merger Redman used a fiscal year
ending on the Friday nearest the end of March. Accordingly, the
pro forma financial statements combine Champion's years ended
December 30, 1995, December 31, 1994 and January 1, 1994 with
Redman's years ended March 29, 1996, March 31, 1995 and April 1,
1994, respectively. The interim pro forma financial statements
combine Champion's nine months ended September 28, 1996 and
September 30, 1995 with Redman's nine months ended September 27,
1996 and December 29, 1995, respectively. The unaudited pro forma
combined condensed statements of income give effect only to the
reclassifications and adjustments set forth in the financial
statements and accompanying notes and do not reflect any cost
savings or any other benefits anticipated by Champion's
management as a result of the merger.
Due to the different fiscal year ends of Champion and Redman,
Redman's results for the three months ended March 29, 1996 are
included in the unaudited pro forma combined condensed statements
of income for the year ended December 30, 1995 and the nine
months ended September 28, 1996. For the three months ended
March 29, 1996 Redman had net sales of $150 million and net
income of $6 million.
The unaudited pro forma combined condensed statements of income
for the year ended December 30, 1995 and the nine months ended
September 28, 1996 and September 30, 1995 include the pro forma
effects of Champion's acquisitions during 1996 assuming the
acquisitions had taken place at the beginning of the respective
periods. Champion acquired Homes of Legend, Inc. effective April
26, 1996 and Grand Manor, Inc. effective March 29, 1996, which
were recorded using the purchase method.
The unaudited pro forma combined condensed statements of income
should be read in conjunction with the historical financial
statements of Champion and Redman and the unaudited pro forma
combined condensed balance sheet included with this Form 8-K.
The unaudited pro forma combined condensed statements of income
are not necessarily indicative of future earnings or earnings
that would have been reported for the respective periods had the
merger been completed at the beginning of each such period.
CHAMPION ENTERPRISES, INC.
SUMMARY OF EARNINGS PER SHARE
Summarized below are the earnings per share amounts from the
Unaudited Pro Forma Combined Condensed Statements of Income which
are presented on the following pages:
Pro Forma
Champion/ Including
Redman Champion's
Champion Pro Forma 1996
Fiscal Year Ended Historical Combined Acquisitions*
- ----------------- ---------- --------- ------------
December 30, 1995 $1.01 $1.14 $1.17
December 31, 1994 $0.82 $0.92
January 1, 1994 $0.38 $0.44
Nine Months Ended
- -----------------
September 28, 1996 $0.99 $1.06 $1.08
September 30, 1995 $0.76 $0.86 $0.88
*Homes of Legend, Inc. was acquired effective April 26, 1996, and
Grand Manor, Inc. was acquired effective March 29, 1996.
CHAMPION ENTERPRISES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
YEAR ENDED DECEMBER 30, 1995
(In thousands, except per share amounts)
<TABLE>
<S> <C> <C> <C> <C>
Champion Redman
Historical Historical Reclassification Champion/
Year ended Year ended and Redman
Dec. 30, March 29, Pro Forma Pro Forma
1995 1996 Adjustment Combined
---------- ---------- ---------------- ----------
Net sales $797,871 $613,855 $ - $1,411,726
Cost of sales 679,732 485,550 32,796 (A) 1,198,078
Selling, general and
administrative
expenses 63,186 88,569 (32,796)(A) 118,959
-------- -------- -------- ----------
742,918 574,119 - 1,317,037
-------- -------- -------- ----------
Operating income 54,953 39,736 - 94,689
Other income (expense):
Interest income 810 2,156 2,966
Interest expense (2,313) (495) (2,808)
-------- -------- -------- ----------
Income before income
taxes 53,450 41,397 - 94,847
Income taxes 21,200 17,362 38,562
-------- -------- -------- ----------
Net income $ 32,250 $ 24,035 $ - $ 56,285
======== ======== ======== ==========
Income per share $ 1.01 $ 1.14
======== ==========
Weighted average shares
outstanding 31,926 17,589 49,515(B)
======== ======== ==========
</TABLE>
See accompanying Note to Unaudited Pro Forma Combined Condensed
Statements of Income.
CHAMPION ENTERPRISES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
YEAR ENDED DECEMBER 30, 1995 (continued)
(In thousands, except per share amounts)
<TABLE>
<S> <C> <C> <C> <C> <C>
Homes of Grand
Legend Manor
Champion/ Historical Historical
Redman Year ended Year ended
Pro Forma Dec. 29, Dec. 30, Pro Forma Pro Forma
Combined 1995 1995 Adjustments Combined
---------- ---------- ---------- ----------- ----------
Net sales $1,411,726 $69,678 $22,123 $ - $1,503,527
Cost of sales 1,198,078 60,169 19,087 120(C) 1,277,454
Selling, general and
administrative
expenses 118,959 5,767 914 925(D) 126,565
---------- ------- ------- ------- ----------
1,317,037 65,936 20,001 1,045 1,404,019
---------- ------- ------- ------- ----------
Operating income 94,689 3,742 2,122 (1,045) 99,508
Other income (expense):
Interest income 2,966 95 (190)(E) 2,871
Interest expense (2,808) (162) (28) (1,700)(F) (4,698)
---------- ------- ------- ------- ----------
Income before income
taxes 94,847 3,675 2,094 (2,935) 97,681
Income taxes 38,562 1,250 0 (150)(G) 39,662
---------- ------- ------- ------- ----------
Net income $ 56,285 $ 2,425 $ 2,094 $(2,785) $ 58,019
========== ======= ======= ======= ==========
Income per share $ 1.14 $ 1.17
========== ==========
Weighted average
shares outstanding 49,515 15 49,530
========== ======= ==========
</TABLE>
See accompanying Notes to Unaudited Combined Condensed Statements
of Income.
CHAMPION ENTERPRISES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1994
(In thousands, except per share amounts)
<TABLE>
<S> <C> <C> <C> <C>
Champion Redman
Historical Historical Reclassification
Year ended Year ended and
Dec. 31, March 31, Pro Forma Pro Forma
1994 1995 Adjustment Combined
---------- ---------- ---------------- ----------
Net sales $585,574 $557,973 $ - $1,143,547
Cost of sales 501,602 449,921 26,790 (A) 978,313
Selling, general and
administrative
expenses 47,332 73,949 (26,790)(A) 94,491
-------- -------- --------- ----------
548,934 523,870 - 1,072,804
-------- -------- --------- ----------
Operating income 36,640 34,103 - 70,743
Other income (expense):
Environmental
reserve (2,700) (2,700)
Interest income 966 1,012 1,978
Interest expense (816) (573) (1,389)
-------- -------- --------- ----------
Income from continuing
operations before
income taxes 34,090 34,542 - 68,632
Income taxes 8,900 14,602 23,502
-------- -------- --------- ----------
Income from
continuing
operations $ 25,190 $ 19,940 $ - $ 45,130
======== ======== ========= ==========
Per share income
from continuing
operations $ 0.82 $ 0.92
======== ==========
Weighted average
shares outstanding 30,932 17,968 48,900(B)
======== ========= ==========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed
Statements of Income.
CHAMPION ENTERPRISES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
YEAR ENDED JANUARY 1, 1994
(In thousands, except per share amounts)
<TABLE>
<S> <C> <C> <C> <C>
Champion Redman
Historical Historical Reclassification
Year ended Year ended and
Jan. 1, April 1, Pro Forma Pro Forma
1994 1994 Adjustment Combined
---------- ---------- ---------------- ----------
Net sales $328,326 $443,056 $ - $ 771,382
Cost of sales 284,012 358,654 21,076 (A) 663,742
Selling, general and
administrative
expenses 32,636 61,570 (21,076)(A) 73,130
-------- -------- --------- ----------
316,648 420,224 - 736,872
-------- -------- --------- ----------
Operating income 11,678 22,832 - 34,510
Other income (expense):
Special charge for
stock options (5,225) (5,225)
Decreased equity in
subsidiary (572) (572)
Interest income 1,391 1,391
Interest expense (486) (2,741) (3,227)
-------- -------- --------- ----------
Income from continuing
operations before
income taxes and
extraordinary item 12,583 14,294 - 26,877
Income taxes 1,400 6,526 7,926
-------- -------- --------- ----------
Income from continuing
operations before
extraordinary
item $ 11,183 $ 7,768 $ - $ 18,951
======== ======== ========= ==========
Per share income
from continuing
operations before
extraordinary item $ 0.38 $ 0.44
======== ==========
Weighted average
shares outstanding 29,108 13,846 42,954(B)
======== ========= ==========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed
Statements of Income.
CHAMPION ENTERPRISES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 28, 1996
(In thousands, except per share amounts)
<TABLE>
<S> <C> <C> <C> <C>
Champion Redman
Historical Historical Reclassification Champion/
Nine months Nine months and Redman
Sept. 28, Sept. 27, Pro Forma Pro Forma
1996 1996 Adjustment Combined
---------- ---------- ---------------- ----------
Net sales $723,374 $495,127 $ - $1,218,501
Cost of sales 610,524 390,351 27,632 (A) 1,028,507
Selling, general and
administrative
expenses 58,340 71,220 (27,632)(A) 101,928
-------- -------- --------- ----------
668,864 461,571 - 1,130,435
-------- -------- --------- ----------
Operating income 54,510 33,556 - 88,066
Other income (expense):
Interest income 466 1,579 2,045
Interest expense (1,637) (331) (1,968)
-------- -------- --------- ----------
Income before income
taxes 53,339 34,804 - 88,143
Income taxes 20,500 14,281 34,781
-------- -------- --------- ----------
Net income $ 32,839 $ 20,523 $ - $ 53,362
======== ======== ========= ==========
Income per share $ 0.99 $ 1.06
======== ==========
Weighted average
shares outstanding 33,246 16,971 50,217(B)
======== ========= ==========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed
Statements of Income.
CHAMPION ENTERPRISES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 28, 1996 (continued)
(In thousands, except per share amounts)
<TABLE>
<S> <C> <C> <C> <C> <C>
Homes of Grand
Legend Manor
Historical Historical
Champion/ Four months Three months
Redman ended ended
Pro Forma April 26, March 30, Pro Forma Pro Forma
Combined 1996 1996 Adjustments Combined
---------- ---------- ---------- ----------- ----------
Net sales $1,218,501 $27,277 $ 6,334 $ - $1,252,112
Cost of sales 1,028,507 23,278 5,329 60(C) 1,057,174
Selling, general and
administrative
expenses 101,928 2,214 246 462(D) 104,850
---------- ------- ------- ------- ----------
1,130,435 25,492 5,575 522 1,162,024
---------- ------- ------- ------- ----------
Operating income 88,066 1,785 759 (522) 90,088
Other income (expense):
Interest income 2,045 56 (60)(E) 2,041
Interest expense (1,968) (56) (6) (620)(F) (2,650)
---------- ------- ------- ------- ----------
Income before income
taxes 88,143 1,785 753 (1,202) 89,479
Income taxes 34,781 650 (150)(G) 35,281
---------- ------- ------- ------- ----------
Net income $ 53,362 $ 1,135 $ 753 $(1,052) $ 54,198
========== ======= ======= ======= ==========
Income per share $ 1.06 $ 1.08
========== ==========
Weighted average
shares outstanding 50,217 15 50,232
========== ======= ==========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed
Statements of Income.
CHAMPION ENTERPRISES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1995
(In thousands, except per share amounts)
<TABLE>
<S> <C> <C> <C> <C>
Champion Redman
Historical Historical
Nine months Nine months Reclassification Champion/
ended ended and Redman
Sept. 30, Dec. 29, Pro Forma Pro Forma
1995 1995 Adjustment Combined
---------- ---------- ---------------- ----------
Net sales $592,058 $464,073 $ - $1,056,131
Cost of sales 504,642 367,812 23,939 (A) 896,393
Selling, general and
administrative
expenses 45,976 66,495 (23,939)(A) 88,532
-------- -------- --------- ----------
550,618 434,307 - 984,925
-------- -------- --------- ----------
Operating income 41,440 29,766 - 71,206
Other income (expense):
Interest income 570 1,629 2,199
Interest expense (1,885) (373) (2,258)
-------- -------- --------- ----------
Income before income
taxes 40,125 31,022 - 71,147
Income taxes 16,000 12,974 28,974
-------- -------- --------- ----------
Net income $ 24,125 $ 18,048 $ - $ 42,173
======== ======== ========= ==========
Income per share $ 0.76 $ 0.86
======== ==========
Weighted average
shares outstanding 31,588 17,713 49,301(B)
======== ========= ==========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed
Statements of Income.
CHAMPION ENTERPRISES, INC.
UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1995 (continued)
(In thousands, except per share amounts)
<TABLE>
<S> <C> <C> <C> <C> <C>
Homes of Grand
Legend Manor
Historical Historical
Champion/ Nine months Nine months
Redman ended ended
Pro Forma Sept. 29, Sept. 30, Pro Forma Pro Forma
Combined 1995 1995 Adjustments Combined
---------- ---------- ---------- ----------- ----------
Net sales $1,056,131 $50,246 $16,194 $ - $1,122,571
Cost of sales 896,393 43,276 14,061 90 (C) 953,820
Selling, general and
administrative
expenses 88,532 4,257 664 694 (D) 94,147
---------- ------- ------- ------- ----------
984,925 47,533 14,725 784 1,047,967
---------- ------- ------- ------- ----------
Operating income 71,206 2,713 1,469 (784) 74,604
Other income (expense):
Interest income 2,199 (115)(E) 2,084
Interest expense (2,258) (64) (21) (1,305)(F) (3,648)
---------- ------- ------- ------- ----------
Income before income
taxes 71,147 2,649 1,448 (2,204) 73,040
Income taxes 28,974 1,073 (373)(G) 29,674
---------- ------- ------- ------- ----------
Net income $ 42,173 $ 1,576 $ 1,448 $(1,831) $ 43,366
========== ======= ======= ======= ==========
Income per share $ 0.86 $ 0.88
========== ==========
Weighted average
shares outstanding 49,301 15 49,316
========== ======= ==========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed
Statements of Income.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF
INCOME
Note A
In connection with the merger Redman's accounting policies will
be conformed to those of Champion. However, the effects of
conforming the companies' accounting policies are immaterial and
therefore are not reflected in the Unaudited Pro Forma Combined
Condensed Statements of Income. The reclassification is to
classify Redman service costs consistent with Champion's
classification.
Note B
In connection with the merger Champion issued 1.24 shares of
Champion common stock for each issued and outstanding share of
Redman common stock. The total number of Champion shares issued
was approximately 16.5 million. The total number of additional
Champion shares included in the computation of weighted average
shares outstanding is based on the total number of Redman
weighted average common and common equivalent shares outstanding
during the respective periods times the exchange factor of 1.24.
Champion's weighted average shares outstanding and per share
amounts have been adjusted to reflect the two-for-one stock
splits effected May 31, 1996 and May 30, 1995.
The following pro forma adjustments are required in connection
with Champion's acquisitions of Homes of Legend and Grand Manor.
Note C
Depreciation of additional cost assigned to buildings.
Note D
Amortization of goodwill over 40 years and non-compete agreements
over 42 months.
Note E
Adjust interest income to reflect use of cash to fund the
acquisitions.
Note F
Adjust interest expense for borrowings used to fund the
acquisitions.
Note G
Accrue income taxes on income of acquired S corporations and
reflect the tax benefit of the pro forma adjustments.
Note H
In connection with the merger of Champion and Redman, Champion
will record charges to operations of approximately $25 million in
the fourth quarter ending December 28, 1996, the quarter in which
the merger was consummated. These charges are non-recurring,
direct costs of the merger, of which approximately 40% are
investment banking, legal and accounting fees, approximately 25%
are reserves against costs triggered by change in control
provisions contained in employment agreements with certain
executives of Redman, and the remainder are other costs
associated with combining and realigning the operations of the
two companies. These costs are not reflected as pro forma
adjustments because they are non-recurring costs directly
associated with the merger. These estimated non-recurring
charges are preliminary estimates only and therefore are subject
to change. Champion believes that it is necessary to reserve
against severance costs because the change in control provisions
contained in the employment agreements of certain Redman
executives allow such persons to voluntarily terminate their
employment and receive severance payments.
CHAMPION ENTERPRISES, INC.
PRO FORMA FINANCIAL INFORMATION
Unaudited Pro Forma Combined Condensed
Balance Sheet and Notes Thereto
Set forth below are the respective historical consolidated
balance sheets of Champion Enterprises, Inc. (Champion) and
Redman Industries, Inc. (Redman) and the unaudited pro forma
combined condensed balance sheet at September 28, 1996 assuming
the merger had taken place on the balance sheet date. The
presentation reflects (i) the accounting for the merger as a
pooling of interests, (ii) the issuance of approximately 16.5
million shares of Champion common stock to effect the merger and
(iii) the accrual of $25 million of non-recurring charges
directly associated with the merger. The unaudited pro forma
combined condensed balance sheet should be read in conjunction
with the historical financial statements of Champion and Redman
and the unaudited pro forma combined condensed statements of
income included with this Form 8-K. The pro forma information
set forth below is not necessarily indicative of the future
financial position or the financial position that would have been
reported had the transaction been completed on September 28,
1996.
CHAMPION ENTERPRISES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
SEPTEMBER 28, 1996
(In thousands)
<TABLE>
<S> <C> <C> <C> <C> <C>
Champion Redman
Enterprises, Industries,
Inc. Inc. Champion/
Historical Historical Redman
Sept. 28, Sept. 27, Pro Forma Adjustments Pro Forma
1996 1996 Increase/(decrease) Combined
---------- ---------- ---------------------- ----------
ASSETS
CURRENT ASSETS:
Cash, cash equivalents
and short-term
investments $ 8,214 $ 30,087 $ - $ - $ 38,301
Accounts receivable,
trade 63,943 45,343 109,286
Inventories 57,573 23,143 80,716
Deferred taxes and
other 15,463 11,828 6,400(B) 33,691
---------- -------- ------- ------- ----------
Total current assets 145,193 110,401 6,400 - 261,994
---------- -------- ------- ------- ----------
PROPERTY AND EQUIPMENT,
NET 68,134 47,496 115,630
GOODWILL, NET 105,669 20,770 126,439
OTHER ASSETS 7,034 2,699 9,733
---------- -------- ------- ------- ----------
$ 326,030 $181,366 $ 6,400 $ - $ 513,796
========== ======== ======= ======= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable to bank $ 11,000 $ - $ - $ - $ 11,000
Accounts payable 58,711 22,846 81,557
Other accrued
liabilities 75,437 63,238 25,000(B) 163,675
---------- -------- ------- ------- ----------
Total current
liabilities 145,148 86,084 - 25,000 256,232
---------- -------- ------- ------- ----------
LONG-TERM LIABILITIES 32,780 18,809 51,589
SHAREHOLDERS' EQUITY:
Common stock 31,016 145 (145)(A) 16,500 (A) 47,516
Capital in excess of
par value 17,136 50,149 (34,505)(A) 32,780
Retained earnings 100,918 44,329 (18,600)(B) 126,647
Treasury stock (18,150) 18,150 (A) -
Foreign currency
translation
adjustments (968) (968)
---------- -------- ------- ------- ----------
148,102 76,473 (53,250) 34,650 205,975
---------- -------- ------- ------- ----------
$ 326,030 $181,366 $(53,250) $59,650 $ 513,796
========== ======== ======= ======= ==========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed
Balance Sheet.
Notes to Unaudited Pro Forma Combined Condensed Balance Sheet
Note A
The Unaudited Pro Forma Combined Condensed Balance Sheet reflects
the issuance of 1.24 shares of Champion Enterprises, Inc. common
stock ($1 par value) for each share of issued and outstanding
common stock of Redman Industries, Inc. to effect the merger.
The total number of Champion Enterprises, Inc. common stock
issued in connection with the merger was approximately 16.5
million shares. The Unaudited Pro Forma Combined Condensed
Balance Sheet reflects the elimination of Redman's common stock
and treasury stock.
Note B
In connection with the merger of Champion and Redman, Champion
expects to record charges to operations, currently estimated to
be approximately $25 million, in the fourth quarter ending
December 28, 1996, the quarter in which the merger was
consummated. These charges are non-recurring, direct costs of
the merger, of which approximately 40% are investment banking,
legal and accounting fees, approximately 25% are reserves against
costs triggered by change in control provisions contained in
employment agreements with certain executives of Redman, and the
remainder are other costs associated with combining and
realigning the operations of the two companies. An estimated
pretax charge of $25 million, $18.6 million on an after tax
basis, is reflected in the Unaudited Pro Forma Combined Condensed
Balance Sheet, together with the related $6.4 million deferred
tax benefit. This estimated non-recurring charge is a
preliminary estimate only and therefore is subject to change.
Champion believes that it is necessary to reserve against
severance costs because the change in control provisions
contained in the employment agreements of certain Redman
executives allow such persons to voluntarily terminate their
employment and receive severance payments.
Note C
In connection with the merger Redman's accounting policies will
be conformed to those of Champion. However the effects of
conforming the accounting policies are immaterial and therefore
are not reflected in the Unaudited Pro Forma Combined Condensed
Balance Sheet.
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description
- ----------- -----------
2 Agreement and Plan of Merger, dated as of August
19, 1996, by and among Redman Industries, Inc.,
Champion Enterprises, Inc. and RHI Acquisition
Corp., filed as Exhibit 2 to the Company's
Registration Statement of Form S-4, filed
September 20, 1996, Registration No. 333-12351,
and incorporated herein by reference.
99.1 Press Release issued October 24, 1996.
CHAMPION ENTERPRISES, INC. AND REDMAN INDUSTRIES, INC. COMPLETE MERGER
Auburn Hills, MI, October 24, 1996 -- Walter R. Young, Jr.,
chairman, president and chief executive officer of Champion
Enterprises, Inc. (NYSE: CHB) announced today that the merger
with Redman Industries, Inc. (NASDAQ: RDMN) was completed.
Earlier in the day, shareholders at both companies approved
proposals related to the merger at special shareholder meetings.
More than 99 percent of Redman stockholders voting approved the
merger and more than 99 percent of Champion shareholders voting
approved the additional 17.3 million shares to be issued.
"Today is a momentous day for us," said Young. "Just five years
ago, Champion had sales of less than $250 million annually. With
the merger, our 1995 pro forma sales were $1.4 billion, and 1996
sales will be even higher. Our market capitalization has gone
from less than $50 million in 1991, to more than $1 billion
currently. More important than historic performance are the
growth opportunities the merger with Redman will provide.
"We now have over 3,200 independent retail locations selling our
products nationwide. On a combined basis we sold approximately
54,000 homes in 1995 and currently have 49 manufactured housing
production facilities. We intend to continue to break new ground
in creating homes that the customers desire.
"We are optimistic about the continued long-term growth of the
industry as the market expands with new buyers who seek cost-effective,
quality homes. Our decentralized organization is
quick to recognize what regional customers want. The continued
strength in multi-section sales is a good indicator that our
homes are beginning to compete effectively with site-built homes.
We are well-positioned to continue capitalizing on that segment
of the market, as evidenced by our current combined 55 percent
multi-section mix," he explained.
"Longer term, we have increased potential for improvements in
manufacturing with the sharing of production technology,
materials purchasing, and inventory control," said Young.
"Profitability and return on investment are our most important
measures. Combined, our 1995 return on equity was in excess of
36 percent. By the end of 1996, we anticipate that Champion will
have virtually no debt. Based on our current combined balance
sheet, our investment capacity is at least $300 million, ample to
continue to grow the organization at better than a 20 percent
compound annual growth rate."
Champion will issue 1.24 shares of Champion Enterprises common
stock for each outstanding share of Redman common stock. Redman
shareholders will receive instructions in the mail shortly,
advising them on how to exchange their Redman shares for Champion
shares. Redman common stock will stop public trading at the
close of business today.
The merger will be accounted for as a pooling of interests.
On that basis, pro forma combined sales for 1995 were $1.4
billion, with net income of $56.3 million, or $1.14 per share, as
compared to the $1.01 Champion reported previously. For the nine
months ended September 28, 1996, pro forma combined sales were
$1.2 billion with net income of $53.4 million. Earnings per
share on a pro forma basis for the nine month period were $1.06
compared with $0.99 for Champion alone.
Champion Enterprises, Inc., headquartered in Auburn Hills,
Michigan, is one of the fastest growing companies in the
manufactured housing industry and is number two in U.S. market
share. The company now operates 49 manufactured housing
facilities and is represented by over 3,200 independent retail
dealer locations. Champion was cited by Forbes as having the
highest five-year average return on equity in the construction
industry and by Fortune as one of the "100 Fastest Growing
Companies in America."
FACT SHEET
<TABLE>
<S> <C> <C> <C>
PRE MERGER POST MERGER
Champion Redman Pro forma
Enterprises, Inc.* Industries, Inc. Combined
Stock Symbol NYSE:CHB NASDAQ:RDMN NYSE: CHB
Financial Data
Year Ended 12/30/95 3/29/96 Combination
Net Sales $798 million* $614 million $1,412 million
Net Income $ 32 million $ 24 million $ 56 million
EPS $1.01 $1.69 $1.14
Return on Equity 34% 41% 36%
Share Information
Weighted Average
Shares
Outstanding 33.5 million 13.6 million 50 million**
Recent Share
Price $21 3/4 $26 3/4 TBD
Operating Data
Principal markets Midwest & Central West & Southeast U.S.
Market coverage 90% of U.S. and 40 states U.S. and western
western Canada Canada
Homes sold (1995) 29,398 24,557 53,955
% Multi-section
(1995) 56% 53% 54%
Number of manu-
factured
housing plants 31 18 49
Retail dealer
locations 2,000 1,400 3,200***
Employees 6,000 4,000 10,000
Headquarters Auburn Hills, MI Dallas, TX Auburn Hills, MI
</TABLE>
* Includes commercial vehicle net sales of $57 million.
** One Redman common share was exchanged for 1.24 shares of
Champion common shares.
*** Total combined eliminates estimated overlapping dealers.
CHAMPION ENTERPRISES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
13 WEEKS ENDED 39 WEEKS ENDED
SEPT 28, SEPT 30, % SEPT. 28 SEPT 30, %
1996 1995 CHG. 1996 1995 CHG.
Net Sales $447,111 $368,545 21% $1,218,501 $1,041,981 17%
Cost of Sales 377,673 312,117 21% 1,028,507 885,049 16%
Selling, general
and administrative
expenses 35,778 30,342 18% 101,928 87,033 17%
413,451 342,459 21% 1,130,435 972,082 16%
Operating Income 33,660 26,086 29% 88,066 69,899 26%
Net interest income
(expense) 6 (1) 77 (417)
Income before
income taxes 33,666 26,085 29% 88,143 69,482 27%
Income taxes 13,192 10,518 25% 34,781 28,322 23%
Net income $ 20,474 $ 15,567 32% $ 53,362 $ 41,160 30%
Income Per Share $0.41 $0.31 32% $1.06 $0.83 28%
Weighted average
shares
outstanding 50,333 49,439 50,216 49,393
Homes sold 16,824 14,064 20% 46,087 40,296 14%
</TABLE>
NOTE TO FINANCIAL INFORMATION
Effective March 29, 1996 Champion acquired Grand Manor, Inc.
Effective April 26, 1996 Champion acquired Homes of Legend, Inc.
For the quarter ended September 28, 1996, these acquisitions had
net sales of $28.1 million and segment income of $2.6 million.
Champion's results for the nine months ended September 28, 1996
include net sales of $50.1 million and segment income of $4.5
million from these acquisitions.
