SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 8, 2002
Champion Enterprises, Inc.
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(Exact name of Registrant as Specified in Charter)
Michigan
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(State or Other Jurisdiction of Incorporation)
1-9751 38-2743168
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(Commission File Number) (IRS Employer Identification No.)
2701 Cambridge Court, Suite 300, Auburn Hills, Michigan 48326
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: 248/340-9090
INTRODUCTORY NOTE
On August 8, 2002, we issued a Management Report which was included in
Item 5 of our Current Report on Form 8-K dated August 8, 2002 in which we
announced the closing or consolidation of 64 retail sales centers and seven
homebuilding facilities as well as employee reductions estimated at 1,500. We
also announced in the August 8, 2002 Management Report that we expected to
record in our third quarter ended September 28, 2002 restructuring and asset
impairment charges that included a pretax retail goodwill impairment charge of
$97 million and the recording of a deferred tax valuation allowance of $110
million to $120 million. After further review and advice from our independent
accountants, we concluded that the retail goodwill impairment charges and
deferred tax asset valuation allowance will be recorded in our second quarter
ended June 29, 2002 rather than in the third quarter ending September 28, 2002
and this will be reflected in our Form 10-Q for the quarterly period ended June
29, 2002. Accordingly, we are filing this amendment to Form 8-K to reflect our
conclusion to record the pretax $97 million retail goodwill impairment charge
and a $120 million deferred tax valuation allowance in our second quarter ended
June 29, 2002.
ITEM 5. OTHER EVENTS.
Item 5 is amended and restated to read in its entirety as follows:
CHAMPION MANAGEMENT REPORT
This Management Report relates to the restructuring actions that we are taking
to size our operations at a reduced industry demand level and position ourselves
for future profitability.
Restructuring Actions
The industry, now entering the fourth year of this down cycle,
continues to be affected by tight consumer credit standards and high
repossession levels. We took quick actions in the second quarter to reduce our
retail lots and consolidate a factory, but with continued negative information
about the economy, financing availability for our industry, recent industry
shipments and our incoming order rates, we feel compelled to do more. In this
regard, we have made some tough decisions to help ensure our viability during
the remaining industry downturn and return Champion to the right side of
breakeven. As a result, we are closing or consolidating 64 retail sales centers
(35%) and seven homebuilding facilities (15%) across the country. Employee
reductions are estimated at 1,500 (15%).
In our third quarter ending September 28, 2002, we expect to record
restructuring charges totaling $44 million pretax for closing costs. These costs
include $31 million pretax for non-cash impairment charges. The resulting cash
charges in total are estimated at $13 million pretax. These closures and the
expected operating losses should result in a tax
refund of greater than $40 million next year. The restructuring charges we
expect to record in the third quarter are in addition to the $97 million pretax
retail goodwill impairment charge and the $120 million deferred tax valuation
allowance recorded in the second quarter ended June 29, 2002.
Retail. After the closures announced today, our retail operations, excluding
closing costs and closed lot operating expenses, are expected to be about
breakeven in the third quarter. Of the total closing-related costs, $15 million
results from retail location closures, including non-cash impairment charges of
$11 million and lease termination and other costs of $4 million. These closures
are estimated to result in annual cost savings of at least $25 million and
inventory reductions of $27 million. Retail closings announced today bring our
store count to 117 locations and the total closed since June 2000 to 196
locations, or 64%.
Manufacturing. We are closing/consolidating seven homebuilding facilities to
improve manufacturing profitability, align capacity with lower industry shipment
levels, and reduce our cost structure. Charges related to manufacturing
consolidations or closings total $29 million, which consist of non-cash
impairment charges of $20 million, additional warranty costs of $4 million, and
other closing costs of $5 million. We have now closed 29 facilities, or 43%,
since mid-1999. Following today's announced closings, 39 homebuilding facilities
remain operational, of which 31 are for our traditional distribution channel and
8 for our Genesis operations to builders and developers.
Corporate. While we have always had relatively low corporate overhead, we are
reducing these expenses by 15%. These reductions, which generate cost savings of
about $4 million annually, are the result of program changes as well as staffing
and pay reductions. Effective immediately, senior management has taken pay cuts
between 10% and 20%.
Summary
The closing and consolidating of the 64 retail stores, seven manufacturing
plants and our corporate reductions will improve our profitability, cash flow
and financial position. We will continue to search for additional actions that
will further improve our performance. In this regard, we are studying both
retail and manufacturing operations, as well as all aspects of our businesses,
for additional opportunities.
We are disappointed with market conditions and the resulting losses and
impairment charges. We believe that these closings and consolidations are
necessary to return the company to profitability and to keep capacity and
inventories aligned with expected demand.
Champion Enterprises, Inc., headquartered in Auburn Hills, Michigan, is the
industry's leading manufacturer and has produced nearly 1.6 million homes since
the company was founded. Following the closings and consolidations described
above, the company will operate 39 homebuilding facilities and 117 retail
locations. Independent retailers,
including 618 Champion Home Center locations, and approximately 400 builders and
developers also sell Champion-built homes. The company also provides financing
for retail buyers of its homes. Further information can be found at the
company's website, www.championhomes.net.
This Management Report contains certain statements, including statements
regarding industry forecasts and assessments, expected restructuring and asset
impairment charges, expected tax refund, profitability, cash flow and financial
position improvements, estimated cost savings and inventory reductions, which
could be construed to be forward looking statements within the meaning of the
Securities and Exchange Act of 1934. These statements reflect the company's
views with respect to future plans, events and financial performance. The
company does not undertake any obligation to update the information contained
herein, which speaks only as of the date of this Management Report. The company
has identified certain risk factors which could cause actual results and plans
to differ substantially from those included in the forward looking statements.
These factors are discussed in the company's most recently filed Form 10-K and
other SEC filings, and those discussions regarding risk factors are incorporated
herein by reference.
ITEM 7. EXHIBITS.
Item 7 is amended and restated to read in its entirety as follows:
None
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.
By: /s/ Anthony S. Cleberg
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Anthony S. Cleberg, Executive Vice
President and Chief Financial Officer
Date: August 16, 2002