<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
Commission File Number 0-24210
AMERICAN HOMESTAR CORPORATION
(Exact name of registrant as specified in its charter)
TEXAS 76-0070846
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
2450 SOUTH SHORE BOULEVARD, SUITE 300, LEAGUE CITY, TEXAS 77573
(Address of principal executive offices, including zip code)
(281) 334-9700
(Registrant's telephone number, including area code)
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 for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Number of shares outstanding of each of the issuer's classes of common stock,
as of November 1, 1999.
Common Stock, Par Value $.05 Per Share 18,423,707
<PAGE> 2
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets - May 31, 1999 and September 30, 1999...................... 2
Consolidated Statements of Operations - three months ended
August 31, 1998 and September 30, 1999 and the one month ended June 30, 1999 ..... 3
Consolidated Statements of Cash Flows - three months ended
August 31, 1998 and September 30, 1999 and the one month ended June 30, 1999...... 4
Notes to Consolidated Financial Statements............................................. 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................................. 9
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K....................................................... 15
</TABLE>
1
<PAGE> 3
PART I -- FINANCIAL INFORMATION
AMERICAN HOMESTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MAY 31, SEPTEMBER 30,
1999 1999
------------ -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash ................................................................... $ 6,865,000 $ 11,874,000
Cash in transit from financial institutions ............................ 44,414,000 29,301,000
------------ ------------
Total cash and cash equivalents .................................. 51,279,000 41,175,000
Inventories, net ....................................................... 118,681,000 110,504,000
Accounts receivable .................................................... 48,965,000 37,289,000
Manufacturer incentives receivable ..................................... 543,000 273,000
Deferred tax assets .................................................... 4,488,000 5,248,000
Prepaid expenses and other current assets .............................. 12,925,000 15,783,000
------------ ------------
Total current assets ............................................. 236,881,000 210,272,000
Property, plant and equipment, net ........................................ 94,826,000 94,541,000
Goodwill (net of accumulated amortization of $11,403,000 and
$12,054,000 , respectively) ............................................. 87,324,000 93,723,000
Investment in affiliates .................................................. 8,610,000 9,558,000
Other assets .............................................................. 11,675,000 10,111,000
------------ ------------
$439,316,000 $418,205,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of notes payable and capital lease ................ $ 3,086,000 $ 3,302,000
Floor plan payable, net of participations .............................. 86,671,000 70,989,000
Accounts payable ....................................................... 36,391,000 26,827,000
Accrued expenses ....................................................... 41,406,000 43,417,000
Accrued warranty costs ................................................. 8,368,000 7,821,000
------------ ------------
Total current liabilities ........................................ 175,922,000 152,356,000
Notes payable and capital lease, less current installments ................ 126,728,000 127,268,000
Deferred tax liabilities .................................................. 362,000 --
Minority interest in consolidated subsidiary .............................. 839,000 916,000
Shareholders' equity:
Preferred stock, no par value, authorized 5,000,000
shares; 375,000 shares issued and outstanding ........................ -- 4,500,000
Common stock, $0.05 par value; authorized 50,000,000
shares; issued and outstanding 18,412,900 and 18,423,707
shares at May 31, 1999 and September 30, 1999,
respectively ......................................................... 921,000 921,000
Additional paid-in capital ............................................. 62,472,000 62,519,000
Retained earnings ...................................................... 72,072,000 69,725,000
------------ ------------
Total shareholders' equity ....................................... 135,465,000 137,665,000
------------ ------------
$439,316,000 $418,205,000
============ ============
</TABLE>
2
<PAGE> 4
AMERICAN HOMESTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED ONE MONTH ENDED
-------------------------------- ---------------
AUGUST 31, SEPTEMBER 30, JUNE 30,
1998 1999 1999
------------- ------------- -------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Revenues:
Net sales ..................................... $ 137,880,000 $ 155,340,000 $ 49,272,000
Other revenues ................................ 9,651,000 10,439,000 3,493,000
------------- ------------- -------------
Total revenues .......................... 147,531,000 165,779,000 52,765,000
------------- ------------- -------------
Costs and expenses:
Cost of sales ................................. 106,260,000 126,889,000 40,214,000
Selling, general and administrative ........... 29,811,000 35,221,000 12,487,000
Restructuring charge .......................... -- 2,323,000 --
------------- ------------- -------------
Total costs and expenses ................ 136,071,000 164,433,000 52,701,000
------------- ------------- -------------
Operating income ........................ 11,460,000 1,346,000 64,000
Interest expense ................................. (2,444,000) (4,032,000) (1,487,000)
Other income (expense) ........................... -- (183,000) 19,000
------------- ------------- -------------
Income (loss) before items shown below .. 9,016,000 (2,869,000) (1,404,000)
Income tax expense (benefit) ..................... 3,703,000 (1,234,000) (462,000)
------------- ------------- -------------
Income (loss) before items shown below .. 5,313,000 (1,635,000) (942,000)
Earnings in affiliate ............................ 536,000 256,000 49,000
Minority interests ............................... (65,000) (56,000) (20,000)
------------- ------------- -------------
Net income (loss) ....................... $ 5,784,000 $ (1,435,000) $ (913,000)
============= ============= =============
Earnings (loss) per share - basic:
Net income per share .................... $ 0.33 $ (0.08) $ (0.05)
============= ============= =============
Earnings (loss) per share - diluted:
Net income per share .................... $ 0.31 $ (0.08) $ (0.05)
============= ============= =============
</TABLE>
3
<PAGE> 5
AMERICAN HOMESTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
ONE MONTH
THREE MONTHS ENDED ENDED
------------------------------- ------------
AUGUST 31, SEPTEMBER 30, JUNE 30,
1998 1999 1999
------------ ------------- ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) ............................................ $ 5,784,000 $ (1,435,000) $ (913,000)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization .............................. 1,491,000 3,733,000 1,171,000
Minority interests in income of consolidated subsidiaries... 65,000 56,000 20,000
Earnings in affiliates ..................................... (536,000) (256,000) (49,000)
Restructuring charge........................................ -- 2,231,000 --
Deferred taxes ............................................. 46,000 (1,095,000) (29,000)
Change in assets and liabilities, net of acquisitions
Decrease (increase) in receivables ....................... (2,724,000) 15,362,000 (3,686,000)
Decrease (increase) in inventories ....................... (5,737,000) 12,527,000 (4,350,000)
Decrease (increase) in prepaid expenses and other
current assets.......................................... (946,000) (3,923,000) 1,065,000
Decrease (increase) in other assets ...................... 876,000 1,868,000 (304,000)
Decrease in accounts payable ............................. (649,000) (989,000) (8,575,000)
Increase (decrease) in accrued expenses .................. 1,418,000 (6,342,000) 6,207,000
------------ ------------ ------------
Net cash provided by (used in) operating activities... (912,000) 21,737,000 (9,443,000)
------------ ------------ ------------
Cash flows from investing activities:
Payment for purchase of acquisitions, net of cash acquired ... (4,483,000) -- --
Purchases of property, plant and equipment ................... (4,945,000) (3,649,000) (1,608,000)
------------ ------------ ------------
Net cash used in investing activities ................ (9,428,000) (3,649,000) (1,608,000)
------------ ------------ ------------
Cash flows from financing activities:
Participation in floor plan payable .......................... 11,408,000 (5,276,000) 12,417,000
Borrowings under floor plan payable .......................... 52,221,000 33,943,000 17,870,000
Repayments of floor plan payable ............................. (45,072,000) (53,616,000) (21,020,000)
Proceeds from long-term debt borrowings ...................... 498,000 -- --
Principal payments of long-term debt ......................... (1,083,000) (876,000) (630,000)
Exercise of stock options .................................... 2,000 35,000 12,000
------------ ------------ ------------
Net cash provided by (used in) financing activities .. 17,974,000 (25,790,000) 8,649,000
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents ............ 7,634,000 (7,702,000) (2,402,000)
Cash and cash equivalents, beginning of period .................. 56,141,000 48,877,000 51,279,000
------------ ------------ ------------
Cash and cash equivalents, end of period ........................ $ 63,775,000 $ 41,175,000 $ 48,877,000
============ ============ ============
Supplemental disclosures of cash flow information:
Cash paid for interest ....................................... $ 248,000 $ 2,659,000 $ 778,000
Cash paid for income taxes ................................... 171,000 700,000 249,000
============ ============ ============
</TABLE>
4
<PAGE> 6
AMERICAN HOMESTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
American Homestar Corporation and subsidiaries (the "Company") have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, they do not include all the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Because of the seasonal nature of the Company's business, operating
results for the one and three months ended June 30, 1999 and September 30, 1999,
respectively, are not necessarily indicative of the results that may be expected
for the fiscal year ending June 30, 2000. These condensed consolidated financial
statements should be read in conjunction with the financial statements and the
notes thereto included in the Company's latest annual report on Form 10-K.
In May 1999, the Board of Directors voted to change the Company's fiscal
year end from May 31 to June 30 to be effective for the year beginning July 1,
1999. Such change was subject to IRS approval which was received on August 31,
1999. Accordingly, the Company is including the financial information for the
one month ended June 30, 1999 (the transition period) in this quarterly report
on Form 10-Q for the quarterly period ended September 30, 1999. This new fiscal
year will allow the Company to conform its quarterly reporting periods to those
predominantly used in its industry.
RECLASSIFICATIONS
Certain prior years' amounts have been reclassified to conform to
classifications used in the current period.
NON-CASH TRANSACTIONS
In connection with the Company's December 29, 1998 acquisition of R-Anell Custom
Homes, Inc. and its related manufacturing companies, Gold Medal Homes, Inc. and
Gold Medal Homes of North Carolina, Inc. (collectively "R-Anell"), and pursuant
to certain earn out provisions of the stock purchase agreement, a third
amendment to the stock purchase agreement dated September 30, 1999 was entered
into by the Company and R-Anell. The purchase price was increased by $7.5
million and paid as follows; $4.5 million (375,000 shares) of Series A
Convertible Preferred Stock (the "Series A Stock") of American Homestar
Corporation, a $1.5 million note payable and a $1.5 million payable which was
paid in cash October 15, 1999. Each share of Series A Stock is nonvoting,
cumulative and, in connection with a qualifying transfer, convertible into one
share of Common Stock from April 1, 2001 to October 1, 2001. After October 1,
2001, each share of Series A Stock is convertible into shares of Common Stock
equal to the greater of: (1) one share of Common Stock; or (2) the number of
shares of Common Stock equal to the quotient obtained by dividing $12.00 by the
average closing price. The purchase price adjustment had the effect of
increasing goodwill by $7.5 million.
REPURCHASE AGREEMENTS
The Company has entered into agreements with various financial institutions
and other credit sources under which the Company has agreed to repurchase
manufactured homes sold to independent dealers in the event of default by a
dealer in its obligation to such credit sources. Under the terms of such
agreements, the Company agrees to repurchase manufactured homes at declining
prices over the periods of the agreements (which generally range from 12 to 15
months). At September 30, 1999, the Company's contingent repurchase liability
was approximately $107.7 million.
5
<PAGE> 7
AMERICAN HOMESTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
INVENTORIES
A summary of inventories follows:
<TABLE>
<CAPTION>
MAY 31, SEPTEMBER 30,
1999 1999
-------------- --------------
<S> <C> <C>
Manufactured homes:
New .................................. $ 82,564,000 $ 77,855,000
Used ................................. 9,179,000 7,531,000
Furniture and supplies ................. 10,176,000 11,566,000
Raw materials and work-in-process ...... 16,762,000 13,552,000
-------------- --------------
$ 118,681,000 $ 110,504,000
============== ==============
</TABLE>
INVESTMENT IN AFFILIATE
Summary financial information for the Company's 50% owned subsidiary, 21st
Century Mortgage Corporation, for the three months ended August 31, 1998 and
September 30, 1999 and the one month ended June 30, 1999 follows:
<TABLE>
<CAPTION>
ONE MONTH
THREE MONTHS ENDED ENDED
----------------------------- -----------
AUGUST 31, SEPTEMBER 30, JUNE 30,
1998 1999 1999
------------ ------------- -----------
<S> <C> <C> <C>
Total revenues...................... $ 4,274,000 $ 4,195,000 $ 1,044,000
Net income.......................... $ 1,072,000 $ 513,000 $ 97,000
============ ============= ===========
</TABLE>
RESTRUCTURING CHARGE
The Company incurred a restructuring charge during the three months ended
September 30, 1999 of $2.3 million due to the closing of one manufacturing
facility. Certain assets used in the affected operation were written down to
their net realizable value. The Company also incurred severance and other
benefit-related costs in connection with the restructuring of operations. The
restructuring charge is shown as a separate component of operating expenses. In
addition to the restructuring charge, the Company also took an inventory
write-down of approximately $0.7 million to allow for reduced selling prices and
selling concessions on the discontinued models of the closed manufacturing
facility at Company-owned retail sales centers and franchise locations. The
additional inventory charge is included in cost of sales for the three months
ended September 30, 1999.
6
<PAGE> 8
AMERICAN HOMESTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
EARNINGS PER SHARE
The following data show the amounts used in computing earnings per share and
the weighted average number of shares of dilutive potential common stock for the
periods indicated:
<TABLE>
<CAPTION>
ONE MONTH
THREE MONTHS ENDED ENDED
----------------------------- ------------
AUGUST 31, SEPTEMBER 30, JUNE 30,
1998 1999 1999
------------ ------------ ------------
<S> <C> <C> <C>
Net income (loss) ........................... $ 5,784,000 $ (1,435,000) $ (913,000)
============ ============ ============
Weighted average common shares outstanding .. 17,406,487 18,421,475 18,415,875
Dilutive effect of stock options ............ 1,077,245 -- --
------------ ------------ ------------
Common shares denominator ................... 18,483,732 18,421,475 18,415,875
============ ============ ============
</TABLE>
At September 30, 1999 and June 30, 1999, potentially dilutive outstanding stock
options were 115,100 and 170,416 shares, respectively. These potentially
dilutive options were not included in the loss per share calculation for the
three months ended September 30, 1999 and the one month ended June 30, 1999 as
their effect would be anti-dilutive due to the net loss incurred in the
respective periods.
LONG-TERM DEBT
On September 30, 1998, the Company completed the private placement of $46
million of 7.25% Series A Senior Unsecured Notes and $5 million of 7.14% Series
B Senior Unsecured Notes with an average life of eight years and a final
maturity in September 2008. Such notes require quarterly interest payments and
equal annual principal reductions beginning in 2004. Proceeds from the notes
were used to fund acquisitions and expansions with the remainder used for
general corporate purposes.
The Company's amended loan agreements related to the 8.32% Senior Unsecured
Notes issued in July 1997 and the 7.25% Series A and 7.14% Series B Senior
Unsecured Notes described above contain certain requirements as to net working
capital, consolidated net worth, fixed charge coverage and restrictions as to
disposition of assets, additional long-term debt, redemption of common stock,
payment of dividends and prepayment of subordinated debt. At September 30, 1999,
the Company was in compliance with all such requirements and restrictions, as
amended.
7
<PAGE> 9
AMERICAN HOMESTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
BUSINESS SEGMENTS
The Company operates primarily in three business segments, retail sales,
manufacturing of manufactured housing and financial services. The following
table summarizes, for the periods indicated, information about these segments:
<TABLE>
<CAPTION>
(IN THOUSANDS)
ADJUSTMENTS/
RETAIL MANUFACTURING OTHER ELIMINATIONS TOTAL
------------ ------------- ------------ --------------- ------------
<S> <C> <C> <C> <C> <C>
Three Months Ended
August 31, 1998
Revenues from external
customers ......................... $ 89,726 $ 53,810 $ 3,995 $ -- $ 147,531
Intersegment revenues ............. 889 43,277 1,612 (45,778) --
Interest expense .................. 2,044 749 1,285 (1,634) 2,444
Depreciation and amortization ..... 645 747 99 -- 1,491
Segment profit (loss) before
income taxes ...................... 1,751 8,991 (232) (1,494) 9,016
Segment assets .................... 160,767 133,088 184,518 (165,920) 312,453
Expenditures for segment
assets ............................ 3,407 1,121 417 -- 4,945
THREE MONTHS ENDED SEPTEMBER
30, 1999
Revenues from external
customers ......................... $ 98,350 $ 63,207 $ 4,222 $ -- $ 165,779
Intersegment revenues ............. 54 46,041 2,672 (48,811) --
Interest expense .................. 3,045 1,363 2,333 (2,709) (4,032)
Depreciation and amortization ..... 2,483 1,053 197 -- 3,733
Segment profit (loss) before
income taxes ...................... (3,396) 973 (527) 81 (2,869)
Segment assets .................... 232,973 156,002 339,080 (309,850) 418,205
Expenditures for segment
assets ............................ 1,563 1,378 708 -- 3,649
ONE MONTH ENDED JUNE 30, 1999
Revenues from external
customers ......................... $ 30,848 $ 20,493 $ 1,424 $ -- $ 52,765
Intersegment revenues ............. 558 14,285 772 (15,615) --
Interest expense .................. 1,188 345 789 (835) 1,487
Depreciation and amortization ..... 777 330 64 -- 1,171
Segment profit (loss) before
income taxes ...................... (1,841) 1,047 (519) (91) (1,404)
Expenditures for segment
assets ............................ 760 423 425 -- 1,608
</TABLE>
Intersegment revenues are primarily sales by the manufacturing segment to
the retail segment and are transferred at market price. Earnings in affiliates
in the consolidated statements of operations relates to the financial services
segment. The adjustment to intersegment revenue is made to eliminate
intercompany sales between the manufacturing and retail segments. The interest
expense adjustment is made to eliminate intersegment interest between the
corporate and manufacturing and retail segments and to net the interest expense
on the floor plan credit facility against the interest earned. The segment
assets adjustment is primarily made up of an adjustment to eliminate
subsidiary's equity at the corporate level, a reclass of the floor plan
participation balance and the elimination of intercompany receivables.
8
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Form 10-Q contains certain forward-looking statements and information
relating to the Company that are based on the beliefs of the Company's
management as well as assumptions made by and information currently available to
the Company's management. When used in this document, the words "anticipate,"
"believe," "estimate," "should," and "expect" and similar expressions as they
relate to the Company or management of the Company are intended to identify
forward-looking statements. Such statements reflect the current views of the
Company with respect to future events and are subject to certain risks,
uncertainties and assumptions, including the risk factors described in the
Company's most recently filed registration statement. Should one or more of
these risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those described herein as
anticipated, believed, estimated or expected. The Company does not intend to
update these forward-looking statements.
GENERAL
American Homestar Corporation is one of the leading vertically integrated
manufactured housing companies in the United States with operations in
manufacturing, retailing, financing and insurance.
The Company, which started as a retailer in 1971, embarked on its vertical
integration strategy in fiscal 1993 by entering into a joint venture with Oak
Creek Homes, Inc. ("Oak Creek"), a manufacturer and long time supplier, to start
up and operate two manufacturing facilities in its core southwest market region.
In August 1993 (early fiscal 1994), the Company acquired Oak Creek, thereby
added manufacturing to its growing retail base. In September 1995, the Company
formed 21st Century Mortgage Corporation ("21st Century") to originate, finance,
sell and service manufactured housing retail installment contracts. The Company
owns 50% of 21st Century and has an option to purchase the remaining 50% in
September 2000, and uses the equity method of accounting for its investment in
21st Century.
In September 1996, the Company exercised its option to acquire Guerdon
Holdings, Inc. ("Guerdon") after managing Guerdon's operations under a
management agreement since March 1996. Guerdon produces manufactured homes in
four facilities located in Oregon, Idaho, Nebraska and Mississippi, and sells
its homes to over 150 independent retailers located in 17 states in the Pacific
Northwest Rocky Mountain and South Central regions of the United States.
In September 1996, the Company acquired Heartland Homes, Inc. ("Heartland"),
a single plant manufacturer of low-to-medium-priced homes in North Carolina.
Concurrent with the Heartland acquisition, the Company also purchased the assets
of Manu-Fac Homes Inc. ("Manu-Fac"), a contractually affiliated group of 15
independent retailers, which have since become franchisees of the Company.
In June 1997, the Company acquired Brilliant Holding Corporation
("Brilliant"), which operated three manufacturing plants in Northern Alabama.
Also in June 1997, the Company acquired N.C. Homes, Inc., which operated twelve
retail sales centers in North Carolina and one in Virginia.
In January 1998, the Company acquired Davis Homes, which operated three
retail sales centers in Alabama. In July 1998, the Company acquired First Value,
which operated two retail sales centers in North Carolina. In September 1998,
the Company acquired DWP, which operated six retail sales centers in Washington,
Oregon and New Mexico.
In December 1998, the Company acquired R-Anell, which produces manufactured
and modular homes in three facilities located in North Carolina and sells its
homes through approximately 100 independent and Company-owned retail sales
centers located primarily in North Carolina, South Carolina and Virginia.
In March 1999, the Company acquired 25% of the outstanding common stock of
HomeMax from Zaring in exchange for a $4.4 million note, and the Company loaned
HomeMax $4 million in exchange for a subordinated note
9
<PAGE> 11
convertible into an additional 25% of HomeMax's common stock. The Company also
received an option to acquire all of the remaining HomeMax common stock after
three years at a predefined price. Zaring may require, or the Company may elect,
earlier exercise of this option if HomeMax meets certain performance goals
within the three-year period. In connection with this transaction, the Company
entered into a Management and Consulting Agreement with Zaring and HomeMax
pursuant to which the Company will manage the HomeMax operations. In addition,
the Company, Zaring and HomeMax entered into a Securityholders Agreement
providing for the joint control of HomeMax by the Company and Zaring and certain
restrictions on the capital stock of HomeMax. HomeMax currently operates twelve
retail sales centers in North Carolina, South Carolina and Kentucky.
VERTICAL INTEGRATION AND INTERNALIZATION
The Company's growth strategy is based on an increasing degree of vertical
integration over time. Vertical integration allows the Company to increase its
profit margins on the manufacture and sale of its products, and provides the
ability to realize additional sources of income from financing the sales and
insuring the Company's products.
10
<PAGE> 12
RESULTS OF OPERATIONS
The following table summarizes certain key sales statistics for the three
months ended August 31, 1998 and September 30, 1999 and the one month ended June
30, 1999:
<TABLE>
<CAPTION>
THREE MONTHS ENDED ONE MONTH ENDED
------------------------------------- ------------------
AUGUST 31, SEPTEMBER 30, JUNE 30,
1998 1999 1999
------------------ ----------------- ------------------
<S> <C> <C> <C>
Company-manufactured new homes sold at retail ......... 1,249 1,430 432
Total new homes sold at retail ........................ 1,459 1,612 514
Internalization rate (1) .............................. 86% 89% 84%
Previously-owned homes sold at retail ................. 510 572 138
Average retail selling price--new homes (HUD code) .... $ 52,245 $ 55,097 $ 54,430
Average retail selling price--new homes (modular) ..... -- $ 114,561 $ 96,627
Number of retail sales centers at end of period ....... 93 124 125
Total manufacturing shipments ......................... 2,966 3,077 1,007
Manufacturing shipments to independent retail sales
centers, including franchisees ........................ 1,568 1,804 582
</TABLE>
(1) The internalization rate is the proportion of new homes sold by
Company-owned retail sales centers that are manufactured by the Company.
The following table summarizes the Company's operating results, expressed
as a percentage of revenues, for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTH ENDED ONE MONTH ENDED
------------------------------------- ------------------
AUGUST 31, SEPTEMBER 30, JUNE 30,
1998 1999 1999
------------------ ----------------- ------------------
<S> <C> <C> <C>
Total revenues ......................... 100.0% 100.0% 100.0%
Gross profit ........................... 28.0% 23.5% 23.8%
Selling, general and administrative .... 20.2% 21.2% 23.7%
Restructuring charge ................... -- 1.4% --
Operating income ....................... 7.8% 0.8% 0.1%
Net income ............................. 3.9% (0.9%) (1.7%)
</TABLE>
One month ended June 30, 1999 compared to one month ended June 30, 1998
Net Sales. Net sales of manufactured homes were $49.3 million for the one
month ended June 30, 1999, compared to $41.9 million for one month ended June
30, 1998. The increase was primarily the result of a 6% increase in the number
of new and previously-owned homes sold at retail. The Company opened one new
retail sales center during the month ended June 30, 1999.
Other Revenues. Transportation revenues for the one month ended June 30,
1999 were $1.1 million, compared to $1.0 million for the one month ended June
30, 1998. Transportation is not a key growth operation of the Company and has
over time represented a declining proportion of total revenues and net income.
Other non-transportation revenues were $2.4 million for the one month ended June
30, 1999, consistent with the one month ended June 30,
11
<PAGE> 13
1998. Revenues from insurance operations were $1.4 million for the one month
ended June 30, 1999, consistent with the one month ended June 30, 1998.
Cost of Sales. Cost of manufactured homes sold were $40.2 million (81.6% of
net sales) for the one month ended June 30, 1999 compared to $32.3 million
(77.1% of net sales) for the one month ended June 30, 1998. Cost of sales
attributable to transportation operations for the one month ended June 30, 1999
were $0.8 million (80.3% of transportation revenues) compared $0.8 million
(82.4% of transportation revenue) for the one month ended June 30, 1998.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the one month ended June 30, 1999, were $12.5
million (23.7% of total revenues) compared to $9.8 million (22.0% of total
revenue) for the one month ended June 30, 1998.
Interest Expense. Interest expense was $1.5 million for the one month ended
June 30, 1999 compared to $0.8 million for the one month ended June 30, 1998.
Income Taxes. The income tax benefit, expressed as a percentage of loss
before income taxes, minority interest and earnings in affiliate, was 32.9% for
the one month ended June 30, 1999 compared to income tax expense, expressed as a
percentage of income before income taxes, minority interest and earnings in
affiliate, of 41.1% for the one month ended June 30, 1998. The lower percentage
benefit was the result of the Company's loss position for the month and the
relationship of nondeductible goodwill amortization expense to the loss.
Three months ended September 30, 1999 compared to three months ended August 31,
1998
Net Sales. Net sales of manufactured homes were $155.3 million for the
three months ended September 30, 1999, compared to $137.9 million for the three
months ended August 31, 1998. The increase was primarily the result of an 11%
increase in the number of new and previously-owned homes sold at retail as well
as a 5% increase in the average selling price of new HUD code homes. The
weighted average number of new homes sold per retail sales center in the core
Nationwide Housing Corporation ("Nationwide") operations decreased from 16 in
the first three months of fiscal 1999 to 12 in the first three months of fiscal
2000. The Company closed one retail sales center during the first quarter of
fiscal 2000.
Other Revenues. Transportation revenues for the three months ended
September 30, 1999 were $2.7 million, a decrease of 7% from $2.9 million for the
three months ended August 31, 1998. Transportation is not a key growth operation
of the Company and has over time represented a declining proportion of total
revenues and net income. Other non-transportation revenues increased to $7.7
million for the three months ended September 30, 1999, compared to $6.8 million
for the three months ended August 31, 1998. Revenues from insurance operations
increased to $4.2 million for the three months ended September 30, 1999,
compared to $4.0 million for the three months ended August 31, 1998.
Cost of Sales. Cost of manufactured homes sold were $126.9 million (81.7%
of net sales) for the three months ended September 30, 1999, as compared to
$106.6 million (77.1% of net sales) for the three months ended August 31, 1998.
The increase in cost of sales was primarily due to higher sales volume. The
increase in cost of sales, expressed as a percentage of sales, was primarily the
result of lower gross margins in the Company's manufacturing operations due to
decreased efficiency in connection with lower operating levels. Cost of sales
attributable to transportation operations for the three months ended September
30, 1999 were $2.2 million (83.0% of transportation revenues), a decrease of 6%
from $2.4 million (81.7% of transportation revenues) for the three months ended
August 31, 1998.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the three months ended September 30, 1999, were
$35.2 million (21.2% of total revenues), as compared to $29.8 million (20.2% of
total revenues) for the three months ended August 31, 1998. The increase in
selling, general and
12
<PAGE> 14
administrative expenses was attributable to increased sales, manufacturing and
insurance activities as well as an increase in fixed costs and expenses
associated primarily with new retail sales centers and expanded manufacturing
capacity.
Restructuring Charge, The Company incurred a restructuring charge during
the three months ended September 30, 1999 of $2.3 million due to the closing of
one manufacturing facility. Certain assets used in the affected operation were
written down to their net realizable value. The Company also incurred severance
and other benefit-related costs in connection with the restructuring of
operations. The restructuring charge is shown as a separate component of
operating expenses. In addition to the restructuring charge, the Company also
took an inventory write-down of approximately $0.7 million to allow for reduced
selling prices and selling concessions on the discontinued models of the closed
manufacturing facility at Company-owned retail sales centers and franchise
locations. The additional inventory charge is included in cost of sales for the
three months ended September 30, 1999.
Interest Expense. Interest expense increased 65% to $4.0 million for the
three months ended September 30, 1999, from $2.4 million for the three months
ended August 31, 1998. This increase was primarily attributable to increased
borrowings associated with the Company's private placement of 7.25% Series A and
7.14% Series B Senior Unsecured Notes totaling $51 million in September 1998.
Income Taxes. The income tax (benefit) provision, expressed as a percentage
of income (loss) before income taxes, minority interest and earnings in
affiliate, was 43.0% and 41.1% for the three months ended September 30, 1999 and
August 31, 1998, respectively.
LIQUIDITY AND CAPITAL RESOURCES.
Cash provided by operations was $21.7 million for the three months ended
September 30, 1999. Substantial decreases in receivables and inventory accounted
for a significant portion of the cash provided in the period.
The Company had capital expenditures of $3.6 million for the three months
ended September 30, 1999. These expenditures were used primarily to expand
manufacturing capacity.
At September 30, 1999, the Company had a $125 million floor plan credit
facility with Associates Housing Finance, LLC ("the Associates"). The facility,
similar to a revolving credit facility, bears interest at a rate of prime less
0.05% and is used to finance the purchase of inventory of new homes at
Company-owned retail sales centers. The Company is able to purchase
participations in the floor plan credit facility, effectively reducing its net
borrowings under the facility. These participations earn interest at a rate of
prime less 0.75% (with such interest income reported as a reduction of total
interest expense) and are immediately available to the Company in cash as the
Company redeems them. At September 30, 1999, the Company had net borrowings of
$71.0 million (gross borrowings of $118.1 million less participations of $47.1
million).
On September 30, 1998, the Company completed the private placement of $46
million of 7.25% Series A Senior Unsecured Notes and $5 million of 7.14% Series
B Senior Unsecured Notes with an average life of eight years and a final
maturity in September 2008. Such notes require quarterly interest payments and
equal annual principal reductions beginning in 2004. Proceeds from the notes
were used to fund acquisitions and expansion with the remainder used for general
corporate purposes.
Management believes that current cash resources, additional borrowing
capacity and future cash provided from operations will be sufficient to satisfy
internal working capital and capital expenditure requirements for the
foreseeable future. Management's current focus is on improving performance and
profitability in existing operations rather than substantial near term growth.
Management has also undertaken a series of initiatives designed to reduce net
debt levels and to enhance overall liquidity over the next three quarters.
13
<PAGE> 15
IMPACT OF YEAR 2000
Beginning in calendar year 1998, the Company commenced replacement of its
then current information technology system with a new system. The replacement,
which is expected to be substantially completed in calendar year 1999, is
required to meet current and future needs of the Company's business as well as
to make various administrative and operating functions more efficient. Because
the Company did not undertake this replacement for reasons of Year 2000
compliance, the costs of this conversion have not been identified as Year 2000
compliance costs. The costs of upgrading the Company's software programs,
operating hardware and network systems is estimated to be approximately $3.3
million, with approximately $2.7 million having been spent to date, and the
Company believes that these new programs and systems will not be subject to the
Year 2000 problem. Costs incurred to date for external consultants for Year 2000
compliance specific costs are approximately $87,000, and management estimates an
additional $10,000 will be required.
The Company relies upon various vendors, utility companies,
telecommunications service companies, delivery service companies and other
service providers, which are outside of the Company's control. There is no
assurance that such parties will not suffer a Year 2000 business disruption,
which could have a material adverse effect on the Company's financial condition
and results of operations.
The Company has implemented a detailed Year 2000 Project plan to assess the
Company's internal business-critical systems upon which the Company depends.
This includes information technology systems and applications ("IT"), as well as
non-IT systems and equipment with embedded technology, such as fax machines and
telephone systems. The main internal IT systems include accounting systems such
as general ledgers. Detailed testing of the Company's internal IT systems was
completed by May 31, 1999 (the end of its fiscal year) and management expects
all corrective action and verification to be complete by November 15, 1999. Any
problems actually encountered by the Company in addressing its Year 2000 issue
that are beyond the Company's control could have adverse effects on the
Company's future operations, results of operations or financial condition. The
Company is developing a Year 2000 contingency plan to mitigate the effects of
business disruption stemming from either internal system failures or an
interruption in critical services or supplies from external sources over which
the Company has no control. The contingency plan is expected to be complete by
November 30, 1999.
The Company believes that the worst case scenario relative to Year 2000
issues would be a significant disruption of production due to wide-spread
failures of vendors and suppliers to provide critical materials and services,
including utilities. Because of the broad geographical disbursement of the
Company's manufacturing facilities and the diversification of vendors for most
materials, the Company believes that such disruptions, if any, will be temporary
and isolated. Where the Company is dependent on a few suppliers to supply a
crucial supply or component, measures have been taken, where possible, to
identify alternative vendors who can supply the required materials. Because of
seasonal factors, any possible short-term disruption of manufacturing activities
should have a relatively nominal impact on the Company's operations and
therefore has been deemed an acceptable risk by management.
14
<PAGE> 16
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT INDEX
<TABLE>
<CAPTION>
<S> <C> <C>
EXHIBIT REPORT WITH WHICH
DESCRIPTION NO. EXHIBIT WAS FILED
- ------------ ---------- ------------------------------
Restated Articles of Incorporation of American Homestar Corporation. 3.1 S-1 Registration Statement
No. 33-78630
Amended and Restated Bylaws of American Homestar Corporation. 3.2 S-1 Registration Statement
No. 33-78630
Specimen Common Stock Certificate. 4.1 S-1 Registration Statement
No. 33-78630
Third Amendment to the Stock Purchase and Plan of Reorganization, 10.1 Filed herewith
dated September 30, 1999, among American Homestar Corporation,
R-Anell Custom Homes, Inc., Gold Medal Homes, Inc., Gold Medal
Homes of North Carolina, Inc. and certain security holders of
R-Anell Custom Homes, Inc., Gold Medal Homes, Inc., and Gold
Medal Homes of North Carolina, Inc.
None 11
None 15
None 18
None 19
None 22
None 24
Financial Data Schedules 27 Filed herewith
None 99
(b) REPORTS ON FORM 8-K - The Company filed a current report on Form 8-K on
September 20, 1999, regarding the change in the Company's fiscal year end
from May 31 to June 30 effective with the year beginning July 1, 1999.
</TABLE>
15
<PAGE> 17
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 thereunto duly authorized.
AMERICAN HOMESTAR CORPORATION
Date: November 15, 1999 By: /s/ Craig A. Reynolds
-----------------------------------------
Craig A. Reynolds
Executive Vice President, Chief Financial
Officer and Secretary (Principal
Financial and Accounting Officer)
16
<PAGE> 18
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT REPORT WITH WHICH
NO. DESCRIPTION EXHIBIT WAS FILED
- ---------- ------------ --------------------------
<S> <C> <C>
3.1 Restated Articles of Incorporation of American Homestar Corporation. S-1 Registration Statement
No. 33-78630
3.2 Amended and Restated Bylaws of American Homestar Corporation. S-1 Registration Statement
No. 33-78630
4.1 Specimen Common Stock Certificate. S-1 Registration Statement
No. 33-78630
10.1 Third Amendment to the Stock Purchase and Plan of Reorganization, Filed herewith
dated September 30, 1999, among American Homestar Corporation,
R-Anell Custom Homes, Inc., Gold Medal Homes, Inc., Gold Medal
Homes of North Carolina, Inc. and certain security holders of
R-Anell Custom Homes, Inc., Gold Medal Homes, Inc., and Gold
Medal Homes of North Carolina, Inc.
11 None
15 None
18 None
19 None
22 None
24 None
27 Financial Data Schedules Filed herewith
99 None
</TABLE>
<PAGE> 1
EXHIBIT 10.1
THIRD AMENDMENT TO
STOCK PURCHASE AGREEMENT
AND
PLAN OF REORGANIZATION
This Third Amendment to Stock Purchase Agreement and Plan of
Reorganization (the "Third Amendment"), dated as of September 30, 1999, is
entered into by and among R-Anell Custom Homes, Inc., a North Carolina
corporation ("R-Anell"), Gold Medal Homes, Inc., a North Carolina corporation
("GMHI"), Gold Medal Homes of North Carolina, Inc., a North Carolina corporation
("GMHNC") (R-Anell, GMHI and GMHNC are sometimes each referred to herein as a
"Company" and collectively, as the "Companies"), the holders of all of the
outstanding capital stock of the Companies (collectively, the "Shareholders")
(the Companies and the Shareholders are sometimes referred to collectively as
the "Sellers"), and American Homestar Corporation, a Texas corporation
("Purchaser" or "AHC"). Except as otherwise defined herein, capitalized terms
used in this Amendment shall have the meanings assigned to them in the Purchase
Agreement (as defined below).
W I T N E S S E T H :
WHEREAS, the parties hereto are parties to that certain Stock Purchase
Agreement and Plan of Reorganization, dated as of May 26, 1998, as amended (the
"Purchase Agreement"); and
WHEREAS, the parties hereto have had disputes concerning the Net Debt
Calculation and the Stock Purchase Price Adjustment, and desire to settle such
disputes by amending the Purchase Agreement to the extent provided below;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
A. AMENDMENTS TO AGREEMENT. The Agreement is hereby amended as
follows:
1. For purposes of Section 1.2(b) of the Agreement, the
adjustment to the Stock Purchase Price as a result of the Net Debt
Calculation shall be $111,518 in favor of the Shareholders, which
amount shall be payable by AHC to the Shareholders of R-Anell and GMHNC
in immediately available funds on October 4, 1999, according to an
allocation to be delivered to AHC on or prior to October 3, 1999.
2. Section 1.3 (a) of the Agreement is hereby amended to read
in its entirety as follows:
1
<PAGE> 2
(a) The R-Anell Stock Purchase Price shall be
adjusted (a "Stock Purchase Price Adjustment") as follows:
(i) The R-Anell Stock Purchase Price shall
be increased by $7.5 million, which amount shall be
apportioned among the Shareholders of R-Anell in the
percentages provided in Exhibit C to the Agreement,
and paid to the Shareholders of R-Anell as follows
(with each Shareholder to receive its proportionate
share of the cash, First Note and AHC Preferred Stock
provided below):
(1) $1.5 million in immediately
available funds on or prior to
October 15, 1999;
(2) $1.5 million in a promissory note,
the form of which is attached hereto
as Exhibit 2 (the "First Note"),
which First Note shall be executed
and delivered by AHC to the
Shareholders of R-Anell on the date
hereof; and
(3) 375,000 shares (the "Preferred
Shares") of Series A Convertible
Preferred Stock, no par value per
share, of AHC (the "AHC Preferred
Stock"), the Certificate of the
Designations, Number, Voting Powers,
Preferences and Rights of which are
set forth in Exhibit 3 attached
hereto (the "Certificate of
Designations"), and the certificates
for which shall be delivered to the
Shareholders of R-Anell on the date
hereof.
(ii) For each $1.00 of EBIT in excess of
$4.75 million of EBIT earned during the Second Period
(subject to a maximum of $3 million), AHC shall pay
to the Shareholders of R-Anell an additional $1.00,
which amount shall be payable as follows (with each
Shareholder to receive its proportionate share of the
cash, Second Note and AHC Preferred Stock provided
below):
(1) twenty percent (20%) of which shall
be payable in immediately available
funds within thirty (30) days
following the final and binding
determination of EBIT for the Second
Period as provided for in Section
1.3(d) of the Agreement;
2
<PAGE> 3
(2) twenty percent (20%) of which shall
be payable pursuant to a promissory
note, the form of which is attached
hereto as Exhibit 2 (the "Second
Note"), which Second Note shall be
executed and delivered by AHC to the
Shareholders of R-Anell on the date
of delivery of the funds as provided
in subpart (1) above (the "Delivery
Date"); and
(3) sixty percent (60%) of which shall
be deliverable in shares of AHC
Preferred Stock, the certificates
for which shall be delivered to the
Shareholders of R-Anell on the
Delivery Date.
For purposes of the calculating EBIT for the Second
Period, the parties hereto agree that EBIT for the
First Period shall be $4 million.
3. Section 1.3(b) of the Agreement is hereby amended to read
in its entirety as follows:
(b) For purposes of this Agreement, "EBIT" shall mean
earnings of all three of the Companies, before interest and
taxes. EBIT for the period of July 1, 1999 to December 31,
1999 shall be calculated in accordance with the rules and
regulations set forth in Exhibit 3 attached hereto and in
accordance with Section 1.3 (c) of the Agreement.
4. Section 1.3 (f) of the Agreement is hereby terminated in
its entirety.
5. The parties hereto agree that AHC agrees that the
Shareholders, in their sole discretion and determination, may, upon
written notice to AHC, determine the method for calculating earnings
for purposes of the Employee Pool to allow employees to obtain an equal
or greater percentage of the total available Employee Pool as compared
to the Shareholders; provided, however that the size of the Employee
Pool shall not be changed.
6. The parties hereto agree that, at any time during the
period of October 1, 2000, through April 1, 2001, AHC shall have the
right to redeem all or any portion of the shares of AHC Preferred Stock
issued to the Shareholders of R-Anell pursuant to Section 2 above at a
redemption price of $12.00 per share, payable in cash. In order to make
any such redemption, AHC shall give written notice of such redemption
to the Shareholders of R-Anell at least fourteen (14) days prior to the
date of such redemption, and each Shareholder shall have the right,
prior to such stated redemption date, to convert each of its shares of
AHC Preferred Stock into one share of Common Stock of AHC (subject to
adjustment as provided in the Certificate of Designations).
3
<PAGE> 4
B. MISCELLANEOUS.
1. AHC hereby represents and warrants to the Shareholders as
follows:
(a) The Series A Stock to be issued hereunder will,
when issued, be duly authorized, validly issued, fully paid
and nonassessable.
(b) Since May 31, 1995, AHC has filed all forms,
documents and reports with the SEC required to be filed by it
pursuant to federal securities laws and the SEC rules and
regulations thereunder (the "SEC Reports"), all of which
complied in all material respects with all applicable
requirements of the Securities Act and the Exchange Act. The
SEC Reports do not contain any untrue statement of a material
fact or omit to state a material fact required to be stated
therein to make statements contained therein not misleading.
AHC will take all steps necessary by AHC to enable the
Shareholders to be eligible to sell shares of Common Stock of
AHC underlying the Series A Stock under Rule 144 of the
Securities Act on and after October 1, 2000.
(c) The execution, delivery and performance of this
Third Amendment have been approved and authorized by AHC, and
this Third Amendment is enforceable against AHC in accordance
with its term, except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors'
rights generally or the availability of equitable remedies.
(d) As of May 31, 1999, AHC had authorized (i)
50,000,000 shares of Common Stock, 18,412,900 shares of which
were issued and outstanding; and (ii) 5,000,000 shares of
Preferred Stock, none of which share were issued and
outstanding. Between May 31, 1999 and September 29, 1999, the
Company has not increased its authorized shares of Common
Stock or Preferred Stock, has not issued a material amount of
Common Stock, has not issued any shares of Preferred Stock,
and has authorized the issuance of up to 1,000,000 shares of
Series A Stock.
2. The Shareholders acknowledge and agree that between
December 28, 1998, and the date hereof, the Companies have been
operated in a manner consistent with the terms and provisions of
Section 1.3 (c) of the Agreement.
3. Except as specifically provided herein, the Agreement shall
remain in full force and effect.
4. This Third Amendment may be executed in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have executed this Third
Amendment as of the date first above written.
AMERICAN HOMESTAR CORPORATION
By: /s/ Laurance A. Dawson, Jr.
-------------------------------
Title: President
R-ANELL CUSTOM HOMES, INC.
By: /s/ Dennis L. Jones
-------------------------------
Title: President
GOLD MEDAL HOMES, INC.
By: /s/ Dennis L. Jones
-------------------------------
Title: President
GOLD MEDAL HOMES OF NORTH
CAROLINA, INC.
By: /s/ Dennis L. Jones
-------------------------------
Title: President
/s/ Rollan L. Jones
----------------------------------
Rollan L. Jones
/s/ Dennis L. Jones
----------------------------------
Dennis L. Jones
/s/ Stephen M. Purdy
----------------------------------
Stephen M. Purdy
/s/ Randy K. Cosby
----------------------------------
Randy K. Cosby
5
<PAGE> 6
ROLLAN L. JONES RETAINED ANNUITY
TRUST NUMBER ONE
By: /s/ Terry Leigh Barber
-------------------------------
Terry Leigh Barber, Trustee
By: /s/ Dennis L. Jones
-------------------------------
Dennis L. Jones, Trustee
ROLLAN L. JONES RETAINED ANNUITY
TRUST NUMBER TWO
By: /s/ Terry Leigh Barber
-------------------------------
Terry Leigh Barber, Trustee
By: /s/ Dennis L. Jones
-------------------------------
Dennis L. Jones, Trustee
6
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> JUN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 4,175,000
<SECURITIES> 0
<RECEIVABLES> 37,289,000
<ALLOWANCES> 0
<INVENTORY> 110,504,000
<CURRENT-ASSETS> 210,272,000
<PP&E> 94,541,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 418,205,000
<CURRENT-LIABILITIES> 152,356,000
<BONDS> 0
0
4,500,000
<COMMON> 921,000
<OTHER-SE> 132,244,000
<TOTAL-LIABILITY-AND-EQUITY> 418,205,000
<SALES> 155,340,000
<TOTAL-REVENUES> 167,779,000
<CGS> 126,889,000
<TOTAL-COSTS> 164,433,000
<OTHER-EXPENSES> (183,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,032,000
<INCOME-PRETAX> (2,869,000)
<INCOME-TAX> (1,234,000)
<INCOME-CONTINUING> (1,435,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,435,000)
<EPS-BASIC> (0.08)
<EPS-DILUTED> (0.08)
</TABLE>
