Exhibit 99.3
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
For the three months ended April 1, 2006
     The following unaudited pro forma combined financial statements of Champion Enterprises, Inc. (“Champion”) give effect to the acquisition of Calsafe Group (Holdings) Limited and its operating subsidiary Caledonian Building Systems Limited (collectively “Calsafe”) by a wholly-owed subsidiary of Champion Enterprises, Inc. On April 7, 2006, Champion acquired 100% of the capital stock of Calsafe for aggregate cash consideration of approximately $100 million plus potential contingent purchase price of up to approximately $6.4 million and additional potential contingent consideration of be paid over four years. The final purchase price will ultimately be determined based upon the achievement of certain financial benchmarks over the three years and three quarters ending December 2009. The transaction was financed through a combination of a pound Sterling denominated term loan and cash.
      Pro forma adjustments related to the pro forma combined balance sheet have been determined assuming the acquisition was consummated on April 1, 2006. The pro forma combined balance sheet combines Champion’s unaudited consolidated balance sheet as of April 1, 2006 with Calsafe’s audited consolidated balance sheet as of April 7, 2006. The pro forma combined income statement combines the companies’ respective income statements as if the combination had occurred at the beginning of the quarter ended April 1, 2006 and April 7, 2006, respectively. The unaudited pro forma combined financial statements are based on the assumptions and adjustments described in the accompanying notes. The pro forma combined income statement is not necessarily indicative of operating results that would have been achieved had the combination been consummated as of the beginning of the period presented and should not be construed as representative of future operations. You should read the unaudited pro forma combined financial statements in conjunction with the historical consolidated financial statements, including related notes, filed as part of our Annual Report on Form 10-K for the year ended December 30, 2006 and our Quarterly Report on Form 10-Q for the three months ended April 1, 2006.

 

 

CHAMPION ENTERPRISES, INC.
UNAUDITED PRO FORMA INCOME STATEMENT
FOR THE THREE MONTHS ENDED APRIL 1, 2006
(IN THOUSANDS, EXCEPT PER SHARE DATA)
                                 
                    Pro Forma        
    Champion     Calsafe     Adjustments     Pro Forma  
    (A)     (B)              
Net sales
   $ 346,529     $ 40,191     $ —     $ 386,720  
Cost of sales
     292,236       32,287       44 (1)     324,567  
 
                        
Gross margin
     54,293       7,904       (44 )     62,153  
 
                                
Selling, general, and administrative expenses
     37,231       2,567       61 (2)     39,859  
Amortization of intangibles
     92       468       423 (3)     983  
 
                        
Operating income (loss)
     16,970       4,869       (528 )     21,311  
 
                                
Interest expense, net
     2,070       1,650       (254) (4)     3,466  
 
                        
 
                                
Income (loss) from continuing operations before income taxes
     14,900       3,219       (274 )     17,845  
 
                                
Income tax expense (benefit)
     1,200       1,106       (96) (5)     2,210  
 
                        
Income (loss) from continuing operations
   $ 13,700     $ 2,113     $ (178 )   $ 15,635  
 
                        
 
                                
Basic income per share from continuing operations
   $ 0.18                     $ 0.21  
Weighted average shares outstanding - basic
     76,081                       76,081  
 
                                
Diluted income per share from continuing operations
   $ 0.18                     $ 0.20  
Weighted average shares outstanding - diluted
     77,300                       77,300  
See accompanying Notes to Pro Forma Financial Statements.

 

 

CHAMPION ENTERPRISES, INC.
UNAUDITED PRO FORMA BALANCE SHEET
AS OF APRIL 1, 2006
(IN THOUSANDS, EXCEPT PAR VALUE)
                                 
                    Pro Forma        
    Champion     Calsafe     Adjustments     Pro Forma  
    (C)     (D)                  
ASSETS
                                
Current assets
                                
Cash and cash equivalents
   $ 132,136     $ 24,253     $ (45,211 )(6),(7),(11)   $ 111,178  
Restricted cash
     325       —       —       325  
Accounts receivable, trade
     45,899       22,729       —       68,628  
Inventories
     106,747       1,830       —       108,577  
Current assets of discontinued operations
     1,262       —       —       1,262  
Other current assets
     6,922       967       —       7,889  
 
                        
Total current assets
     293,291       49,779       (45,211 )     297,859  
 
                        
 
                                
Property, plant, and equipment, net
     96,067       9,138       3,491 (8)     108,696  
 
                                
Goodwill
     171,670       32,847       58,416 (9),(10)     262,933  
Amortizable intangible assets, net
     3,836       —       30,220 (10)     34,056  
Non-current assets of discontinued operations
     1,720       —       —       1,720  
Other non-current assets
     17,327       112       267 (6),(7)     17,706  
 
                        
 
   $ 583,911     $ 91,876     $ 47,183     $ 722,970  
 
                        
 
                                
LIABILITIES AND SHAREHOLDERS’ EQUITY
                                
Current liabilities
                                
Accounts payable
   $ 40,896     $ 35,199     $ —     $ 76,095  
Accrued warranty obligations
     33,899       —       —       33,899  
Accrued volume rebates
     30,024       —       —       30,024  
Accrued compensation and payroll taxes
     17,883       2,249       —       20,132  
Accrued self-insurance
     32,277       —       —       32,277  
Current liabilities of discontinued operations
     2,893       —       —       2,893  
Other current liabilities
     30,106       34,874       (22,762 )(6),(7),(11)     42,218  
 
                        
Total current liabilities
     187,978       72,322       (22,762 )     237,538  
 
                        
 
                                
Long-term liabilities
                                
Long-term debt
     201,418       —       77,775 (6)     279,193  
Other long-term liabilities
     31,383       1,610       10,114 (12)     43,107  
 
                        
 
     232,801       1,610       87,889       322,300  
 
                        
Shareholders’ equity
                                
Common stock, $1 par value, 120,000 shares authorized, 76,142 shares issued and outstanding
     76,142       28       (28 )(13)     76,142  
Capital in excess of par value
     195,087       2,771       (2,771 )(13)     195,087  
Accumulated deficit
     (108,216 )     15,145       (15,145 )(13)     (108,216 )
Accumulated other comprehensive income
     119       —       —       119  
 
                        
Total shareholders’ equity
     163,132       17,944       (17,944 )     163,132  
 
                        
 
   $ 583,911     $ 91,876     $ 47,183     $ 722,970  
 
                        
See accompanying Notes to Pro Forma Financial Statements.

 

 

NOTES TO PRO FORMA FINANCIAL STATEMENTS
 
(A)   Champion’s unaudited consolidated results of continuing operation for the 13 week period ended April 1, 2006, under generally accepted accounting principles in the United States (“US GAAP”).
 
(B)   Calsafe’s unaudited consolidated results of continuing operations for the 14 week period January 1, 2006 to April 7, 2006, the date the transaction was completed, under generally accepted accounting principles in the United Kingdom (“UK GAAP”). Calsafe’s results for the period have been translated from pounds Sterling to U.S. dollars using the average exchange rate for the period of $1.751 to £1.0.
 
(C)   Champion’s unaudited consolidated balance sheet as of April 1, 2006, under generally accepted accounting principles in the United States (“US GAAP”).
 
(D)   Calsafe’s audited consolidated balance sheet as of April 7, 2006, under generally accepted accounting principles in the United Kingdom (“UK GAAP”). Calsafe’s balance sheet as of April 7, 2006, has been translated from pounds Sterling to U.S. dollars using the April 7, 2006 exchange rate of $1.746 to £1.0.
The principal difference between UK GAAP and US GAAP for the Calsafe results is that goodwill is amortizable under UK GAAP but not under US GAAP. This difference is adjusted in adjustment (3) as discussed below.
 
(1)   Adjustment to depreciation expense due to revaluation of property, plant, and equipment acquired in the transaction.
 
(2)   Adjustment to amortization expense for deferred financing costs associated with debt incurred to finance the acquisition.
 
(3)   Adjustment to eliminate goodwill amortization expense of $468,000 included in Calsafe’s operating results and to record estimated amortization expense of $891,000 for amortizable intangible assets acquired in the transaction.
 
(4)   Adjustment to eliminate interest expense of $1,650,000 included in Calsafe operating results for debt repaid during the period from proceeds from the sale of discontinued operations and debt repaid at acquisition and to record interest expense of $1,396,000 for debt incurred to finance the acquisition. Interest expense on the debt incurred to finance the acquisition was based on the UK LIBOR rate for the quarter plus 2.5%.
 
(5)   Adjustment to record tax effects of purchase accounting, pro forma adjustments and acquisition financing structure.
 
(6)   Adjustment to record debt incurred to finance the acquisition and payment or accrual of associated deferred financing costs.
 
(7)   Adjustment to record purchase of Calsafe and payment or accrual of associated costs of the acquisition.
 
(8)   Adjustment to reflect the fair value of Calsafe’s property, plant and equipment.
 
(9)   Adjustment to eliminate the goodwill included in Calsafe’s balance sheet.
 
(10)   Adjustment to record estimated amortizable intangible assets and goodwill acquired in the transaction, based on the following preliminary purchase price allocation, using the exchange rate at April 7, 2006:
                 
    Estimated Value     Useful Life  
    (in thousands)     (years)  
Trade names
   $ 7,856       15  
Employment contracts
     3,579       5  
Technology
     489       3  
Technology
     3,107       5  
Customer relationships
     15,189       10  
 
              
Total amortizable intangibles
     30,220          
Goodwill
     91,263          
 
              
Total goodwill and intangibles
   $ 121,483          
 
              

 

 

 
(11)   Adjustment to eliminate inter-company balances and transfers that arose on the acquisition date.
 
(12)   Record purchase accounting for deferred taxes.
 
(13)   Adjustment to eliminate the shareholders’ equity of Calsafe as of April 7, 2006.