(10) Discontinued Operations
On April 15, 2008, the folding trailer business was designated as held-for-sale and was subsequently sold on May 12, 2008. On March 30, 2005, Fleetwood announced plans to exit its manufactured housing retail and financial services businesses and completed the sale of the majority of the assets of these businesses by August 2005. The decision to exit these businesses was intended to stem losses and return to a traditional focus on core manufacturing operations.
Assets and liabilities expected to be sold or extinguished have been reclassified to current assets and liabilities from discontinued operations, respectively, and consist of the following:
| 2008 | 2007 | ||||||
|---|---|---|---|---|---|---|---|
| (Amounts in thousands) | |||||||
| Current assets from discontinued operations: Receivables |
$ | 6,175 | $ | 5,201 | |||
| Inventories | 8,904 | 11,966 | |||||
| Property, plant and equipment, net | 5,857 | 6,775 | |||||
| Goodwill | — | 6,316 | |||||
| Other assets | 1,085 | 1,150 | |||||
| 22,021 | 31,408 | ||||||
| Current liabilities from discontinued operations: Accounts payable |
2,931 | 2,601 | |||||
| Employee compensation | 2,387 | 3,748 | |||||
| Product warranty | 3,430 | 5,698 | |||||
| Other current liabilities | 12,289 | 17,439 | |||||
| $ | 21,037 | $ | 29,486 | ||||
Operating results of these businesses, including impairment charges, are classified as discontinued operations for all periods presented. Discontinued operations, net for fiscal years 2008, 2007 and 2006, consist of the following:
| 2008 | 2007 | 2006 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| (Amounts in thousands) | |||||||||||
| Sales | $ | 76,633 | $ | 88,593 | $ | 177,595 | |||||
| Net income (loss) before charges: Retail |
$ | (600 | ) | $ | (1,649 | ) | $ | (16,695 | ) | ||
| Financial services | (11 | ) | (19 | ) | (1,063 | ) | |||||
| Folding trailers | 3,829 | (9,637 | ) | (6,215 | ) | ||||||
| Gain on sale, impairment charges and termination costs: Gain on sale of insurance assets |
— | — | 2,417 | ||||||||
| Impairment of retail and finance services | — | (393 | ) | (2,520 | ) | ||||||
| Impairment of folding trailer operations | (7,150 | ) | — | — | |||||||
| Severance and termination costs | — | — | (4,511 | ) | |||||||
| Contract (lease) termination costs | — | (250 | ) | — | |||||||
| Discontinued operations, net | $ | (3,932 | ) | $ | (11,948 | ) | $ | (28,587 | ) | ||
As of year-end, a strong indication of market value of the folding trailer business was available based on advanced discussions with the buyer. These discussions culminated in the signing of a stock purchase agreement on April 28, 2008. An impairment of approximately $7.2 million was recorded to reduce the carrying value of the folding trailer business to its estimated market value. The impairment was primarily recorded against goodwill on the balance sheet and was included in the loss from discontinued operations.
Results include a deferred income tax provision of $2.5 million in fiscal 2008, a benefit of $2.5 million in fiscal 2007, and no tax provision in fiscal 2006.
Losses and other costs from discontinued operations in fiscal 2009 are not expected to be material.