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DIVIDENDS AND DISTRIBUTIONS
On October 30, 2001, the board of directors discontinued the payment of dividends on our common stock in conjunction with an election to defer distributions on our existing 6% convertible trust preferred securities. We have the right to elect to defer distributions for up to 20 consecutive quarters under the trust indenture governing the existing 6% convertible trust preferred securities. When we defer a distribution on the 6% convertible trust preferred securities, we are prevented from declaring or paying dividends on our common stock during the period of the deferral. In light of our business environment and recent operating results, we currently anticipate that we will find it necessary to defer distributions on the existing 6% convertible trust preferred securities for the foreseeable future, subject to the terms of the governing documents. At the end of fiscal 2004, we have deferred $35.3 million, including accrued interest at 6 percent on the deferred amounts.
OTHER
In the opinion of management, the combination of existing cash resources, expected future cash flows from operations, and available lines of credit will be sufficient to satisfy our foreseeable cash requirements for the next 12 months, including up to $45 million for capital expenditures, to be utilized primarily for enhancements to motor home manufacturing facilities.
-- CONTRACTS AND COMMITMENTS --
Below is a table showing payment obligations for long-term debt, capital leases, operating leases and purchase obligations for the next five years and beyond:
| |
Payments Due by Period |
| (AMOUNTS IN THOUSANDS) |
|
Less than |
|
More than |
| Contractual Obligations |
Total |
1 year |
1-3 years |
3-5 years |
5 years |
|
| Long-term debt(1) |
$ |
102,159 |
|
$ |
— |
|
$ |
462 |
|
$ |
335 |
|
$ |
101,362 |
|
| Capital lease obligations |
|
1,360 |
|
|
770 |
|
|
576 |
|
|
14 |
|
|
— |
|
| Operating leases(2) |
|
66,194 |
|
|
12,601 |
|
|
16,899 |
|
|
11,011 |
|
|
25,683 |
|
| Purchase obligations(3) |
|
6,115 |
|
|
6,115 |
|
|
— |
|
|
— |
|
|
— |
|
| Other long-term liabilities: |
| Deferred compensation and |
| non-qualified retirement plans |
|
49,473 |
|
|
8,082 |
|
|
11,718 |
|
|
9,182 |
|
|
20,491 |
|
| Insurance reserves |
|
32,916 |
|
|
32,916 |
|
|
— |
|
|
— |
|
|
— |
|
| Convertible subordinated |
| debentures(4) |
|
272,791 |
|
|
— |
|
|
— |
|
|
— |
|
|
272,791 |
|
|
| Total |
$ |
531,008 |
|
$ |
60,484 |
|
$ |
29,655 |
|
$ |
20,542 |
|
$ |
420,327 |
|
|
| (1) |
On December 22, 2003, we completed the sale of $100 million aggregate principal amount of 5% convertible senior subordinated debentures due in 2023. Interest on the debentures is payable semi-annually at the rate of 5.00%. The debentures are convertible, under certain circumstances, into the Company’s common stock at an initial conversion rate of 85.0340 shares per $1,000 principal amount of debentures, equivalent to an initial conversion price of $11.76 per share of common stock.
|
| (2) |
Most of the Company’s retail sales locations and certain of its other facilities are leased under terms that range from monthly to 18 years. Also included in the above amounts are equipment leases. Management expects that in the normal course of business, leases will be renewed or replaced by other leases to support continuing operations.
|
| (3) |
We have an operating agreement with a large dealer who manages 31 retail store locations for FRC. Either party may terminate the agreement by giving written notice 120 days in advance of the date of the termination. If termination notice is provided, Fleetwood is obligated to repurchase the outstanding inventory at that time for the amount of the dealer’s obligations to its flooring institutions. Similarly, an equivalent amount is included in the aggregate repurchase obligation described in Note 16 to the Company’s financial statements contained elsewhere in this Report. That repurchase obligation would become due and payable to the flooring institution only in the event the dealer defaults prior to its agreement with Fleetwood being terminated.
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| (4) |
The convertible subordinated debentures were issued in three separate transactions, and are currently reflected on the balance sheet as a long-term liability. In fiscal 1998, Fleetwood, through a wholly owned Delaware business trust, issued $287.5 million aggregate liquidation amount of 6% convertible trust preferred securities due in 2028. In fiscal 2002, Fleetwood, through another Delaware business trust, exchanged $86.25 million in liquidation amount of the existing 6% convertible trust preferred securities for $37.95 million in liquidation amount of new 9.5% convertible trust preferred securities due in 2013. Also in fiscal 2002, Fleetwood, again through a Delaware business trust, issued $150 million in aggregate liquidation amount of new 9.5% convertible trust preferred securities due in 2013. The obligations of the business trusts to holders of the convertible trust preferred securities are supported by convertible subordinated debentures issued by Fleetwood to the respective business trusts and a guarantee by Fleetwood of certain of the trusts’ obligations. The interest is payable quarterly. Currently, as permitted by the trust documents, payment of interest is being deferred on the outstanding 6% convertible trust preferred securities. Subsequent to the end of the fiscal year, all outstanding 9.5% convertible trust preferred securities were either converted into common stock or redeemed.
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-- OFF-BALANCE SHEET ARRANGEMENTS --
In March 2000, Fleetwood entered into a sale and leaseback agreement involving 22 manufactured housing retail stores. The minimum rental payments required under this agreement are included in the Contractual Obligations schedule above, under operating leases. The agreement includes a contingent rental reset provision which provides that, in the event that the Company’s credit rating falls below a certain level anytime prior to March 2005, the Company could be required, at the option of the lessor, to make an accelerated rent payment equal to the unamortized principal of the lessor’s underlying debt. Since entering into the agreement, the Company’s credit rating has fallen below the specified level, raising the possibility that the provision could be exercised in March 2005. The accelerated payment would be approximately $20 million.
A number of alternatives to the accelerated rent payment are currently available to the Company and are being considered. It is likely that sometime prior to March 2005, the Company will move to restructure the arrangement to mitigate the potential negative cash impact.
We describe our aggregate contingent repurchase obligation in Note 16 to the Company’s financial statements and under Critical Accounting Policies in this Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this Report.
Under the senior credit agreement, Fleetwood Enterprises, Inc. is a guarantor of the borrowings of Fleetwood Holdings, Inc. (FHI) and Fleetwood Retail Corp. (FRC). FHI includes most of the wholly owned manufacturing subsidiaries and FRC includes all the retail housing subsidiaries. Only the FRC parent company, however, and seven of the retail subsidiaries are borrowers under the loan and covered under the guarantee. In addition, Fleetwood Enterprises, Inc. guarantees FRC’s floorplan obligations to Textron and Bombardier Capital, Inc. pursuant to FRC’s wholesale financing agreements with the two flooring institutions. Subsequent to the end of fiscal year 2004, these guarantees were renewed to extend through the term of the amended and restated agreement to July 2007.
Under the warehouse line of credit, initiated in December 2003, between HomeOne Credit Corp., our captive finance subsidiary, and Greenwich Capital Financial Products, Inc., Fleetwood Enterprises, Inc. is a guarantor of the borrowings.
Early in fiscal 2004, Fleetwood Enterprises, Inc. entered into three limited guarantees aggregating $1,575,000, to certain obligations of certain retailers to floorplan lenders.
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