NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Earnings per share:
Basic earnings per share are computed by dividing income available to common shareholders by the weighted average number of common shares outstanding. The effect of convertible securities was anti-dilutive in fiscal 2006, 2005 and 2004, and was, therefore, not considered when determining diluted earnings (loss). The effect of stock options was anti-dilutive in fiscal 2006 and 2005 and dilutive in 2004.
The table below shows the calculation components of both basic and diluted earnings per share for each of the three fiscal years in the period ended April 30, 2006:
| 2006 | 2005 | 2004 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| (Amounts in thousands) | |||||||||||
| Income (loss) from continuing operations | $ | (6,065 | ) | $ | (72,577 | ) | $ | 17,358 | |||
| Loss from discontinued operations | (22,372 | ) | (88,882 | ) | (39,619 | ) | |||||
| Net loss | $ | (28,437 | ) | $ | (161,459 | ) | $ | (22,261 | ) | ||
| Weighted average shares outstanding used for basic earnings (loss) per share |
59,506 | 55,332 | 38,357 | ||||||||
| Effect of dilutive employee stock options | — | — | 985 | ||||||||
| Weighted average shares outstanding used for dilutive earnings (loss) per share |
59,506 | 55,332 | 39,342 | ||||||||
Anti-dilutive securities outstanding as of the fiscal years ended April 30, 2006, April 24, 2005 and April 25, 2004 are as follows:
| 2006 | 2005 | 2004 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| (Amounts in thousands) | |||||||||||
| Options and warrants | 4,546 | 5,753 | 5,963 | ||||||||
| Convertible subordinated debentures | 4,131 | 4,131 | 8,975 | ||||||||
| Convertible senior subordinated debentures | 8,503 | 8,503 | 8,503 | ||||||||
Common stock reserved for future issuance at April 30, 2006 was 17,180 shares.
Stock-based incentive compensation:
The Company accounts for stock-based incentive compensation plans, which are described more fully in Note 18, using the intrinsic method under which no compensation cost is recognized for stock option grants because the options are granted at fair market value at the date of grant. Had compensation costs for these plans been determined using the fair value method, under which a compensation cost is recognized straight-line over the vesting period of the stock option based on its fair value at the date of grant, the Company’s net loss and loss per share would have been affected as indicated by the following table:
| Years Ended April | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2006 | 2005 | 2004 | |||||||||
| (Amounts in thousands, except per share data) | |||||||||||
| Net loss, as reported | $ | (28,437 | ) | $ | (161,459 | ) | $ | (22,261 | ) | ||
| Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects |
(3,198 | ) | (4,020 | ) | (4,071 | ) | |||||
| Pro forma net loss | $ | (31,635 | ) | $ | (165,479 | ) | $ | (26,332 | ) | ||
| Basic loss per share, as reported | $ | (.48 | ) | $ | (2.92 | ) | $ | (.58 | ) | ||
| Basic loss per share, pro forma | $ | (.53 | ) | $ | (2.99 | ) | $ | (.69 | ) | ||
| Diluted loss per share, as reported | $ | (.48 | ) | $ | (2.92 | ) | $ | (.57 | ) | ||
| Diluted loss per share, pro forma | $ | (.53 | ) | $ | (2.99 | ) | $ | (.67 | ) | ||
The fair value of each option granted is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants in fiscal years 2006, 2005 and 2004, respectively: risk-free interest rates were 4.35 percent in 2006 and 4.0 percent in 2005 and 2004, expected dividend yields of 0.0 percent for all periods presented; expected lives of 4.22 years for 2006 and 4 years for 2005 and 2004, and an expected volatility of 44 percent for fiscal 2006 and 47 percent for fiscal 2005 and 79 percent for fiscal 2004.
Investment income:
Investment income for fiscal years 2006, 2005 and 2004 consisted of the following:
| 2006 | 2005 | 2004 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| (Amounts in thousands) | |||||||||||
| Interest income | $ | 5,461 | $ | 2,394 | $ | 2,632 | |||||
| Gross realized gains on investments | 28 | 34 | 35 | ||||||||
| Gross realized losses on investments | 2 | — | (1 | ) | |||||||
| Investment management fees | (54 | ) | (43 | ) | (40 | ) | |||||
| $ | 5,437 | $ | 2,385 | $ | 2,626 | ||||||
Inventories:
Inventories at April 30, 2006 and April 24, 2005, consisted of the following:
| 2006 | 2005 | ||||||
|---|---|---|---|---|---|---|---|
| (Amounts in thousands) | |||||||
| Manufacturing inventory Raw materials |
$ | 126,060 | $ | 139,520 | |||
| Work in process | 38,989 | 40,736 | |||||
| Finished goods | 12,783 | 53,335 | |||||
| $ | 177,832 | $ | 233,591 | ||||
Most recreational vehicle and manufactured home components are readily available from a variety of sources. However, a few components are produced by only a small group of quality suppliers that have the capacity to supply large quantities on a national basis. Primarily, this occurs in the case of motor home chassis, where Spartan and Freightliner supply diesel-powered chassis, and Workhorse Custom Chassis and Ford Motor Company are the dominant suppliers of Class A gas chassis and Ford Motor Company is the dominant supplier of Class C chassis. Shortages, production delays or work stoppages by the employees of such suppliers could have a material adverse effect on our sales. If we cannot obtain an adequate chassis supply, this could result in a decrease in our sales and earnings.