Conference Call Today at 11:00 a.m. Eastern
Call-in Number 888-482-0024, #82796842
Replay Number 888-286-8010, #275485
AUBURN HILLS, Mich., Feb. 12 /PRNewswire-FirstCall/ --
Champion Enterprises, Inc. (NYSE: CHB), the nation's leading housing
manufacturer, today reported results for its fourth quarter and year ended
December 28, 2002. For the quarter, Champion had total revenues of $330
million and a net loss of $5.5 million ($0.12 per diluted share), compared to
revenues of $366 million and a net loss of $4.8 million ($0.10 per diluted
share) in the same quarter a year earlier. For the twelve months ended
December, the company had revenues of $1.4 billion and a net loss of $256
million ($5.22 per diluted share) in 2002, compared to revenues of $1.5
billion and a net loss of $28 million ($0.59 per diluted share) a year ago.
In 2001 Champion had after tax goodwill amortization expense for the three and
twelve months of $2.2 million ($0.05 per diluted share) and $8.8 million
($0.18 per diluted share), respectively.
Included in 2002 results were restructuring charges to close and
consolidate retail sales centers and manufacturing facilities. For the
quarter, these charges totaled $7.5 million pretax, consisting of losses on
inventory liquidation of $4.0 million, asset impairment charges of $1.4
million, lease termination costs of $0.9 million and other closing related
expenses of $1.2 million. Also included in quarterly results was a $2.3
million pretax gain from the sale of seven idle homebuilding facilities and a
$1.5 million gain from the settlement of debt related to development
operations. A $14.5 million tax benefit was also recognized for the quarter
resulting from operating losses for the three-month period and from the
completion of the sale or abandonment of certain acquired businesses and
assets.
In the year-to-date period of 2002, pretax closing related expenses were
$55.3 million, including non-cash asset impairment charges of $28.9 million.
In addition, pretax results included goodwill impairment charges of $97
million and gains from debt retirement of $7.4 million. The tax provision for
the twelve months ended 2002 included a deferred tax asset valuation allowance
of $102.3 million.
Chairman, President, and Chief Executive Officer, Walter R. Young,
commented, "Results in 2002 were hurt by tough market conditions, with
industry wholesale shipments dropping 24.6% for the quarter and 12.8% for the
year. Wholesale shipments were 168,491 homes in 2002, the lowest level since
1963. Substantial uncertainty exists as a result of the ongoing lack of
affordable consumer financing and high consumer repossession levels. While
our actions to manage through this cycle had a significant negative affect on
earnings, we substantially strengthened our liquidity position and operating
cash flows. We also considerably reduced our operating breakeven points and
improved earnings potential."
Operations
Manufacturing- For the three-month period, manufacturing revenues
decreased 17% to $268 million from $323 million one year earlier. Quarterly
manufacturing segment income was $6.5 million excluding the $2.3 million gain
on sale of fixed assets, compared to $19.3 million in the three months ended
December 2001. For the year-to-date period, the manufacturing segment had
revenues of $1.2 billion in 2002, down 11% from $1.3 billion in 2001.
Excluding restructuring charges of $26.3 million and the gain on sale of fixed
assets, the manufacturing segment reported income of $26.7 million for the
year, compared to $57.4 million in the year ago period (excluding $3.3 million
for impairment charges related to closed operations).
Champion had unfilled manufacturing orders of $26 million at 37 plants
this December, compared to $18 million at 49 plants a year earlier. Losses
related to independent retailer defaults in 2002 dropped to $1.3 million from
$3.9 million in 2001. Genesis sales to builders and developers increased 15%
from 2,700 homes a year ago to 3,100 homes in 2002, representing 10% of
Champion's manufacturing homes sold and an estimated 15% of manufacturing
revenues.
Retail- For the quarter, retail revenues were $95 million and the segment
had a loss of $7.1 million excluding $9.7 million of expenses to close 26
retail locations. In the fourth quarter of 2001, retail operations had
comparable revenues and a loss of $9.2 million excluding $1.2 million of
closing-related expenses. In the three months ended in 2002, closing-related
expenses consisted of $6.7 million for losses on inventory liquidation, $0.9
million for non-cash asset impairment charges, $0.9 million for lease
termination costs and $1.2 million for other closing expenses. Excluding
closing related expenses of $28.6 million in 2002 and $5.6 million in 2001,
the retail segment reported a loss of $29.6 million for the year, compared to
a loss of $27.6 million one year earlier.
In 2002 fourth quarter same store sales increased 10% from a year earlier.
For the quarter, the average number of new homes sold per sales location,
excluding the wholesale liquidation of inventory from closed sales centers,
increased 46% largely as a result of closing under performing retail locations
and the liquidation of related inventories. Retail locations reduced
inventories by 800 new homes during the quarter, or by 34%, to an average of
13.2 new homes per store from 16.3 at the end of September.
Finance- HomePride Finance Corp. originated $26.1 million of loans for the
quarter and $55.6 million for the year. The company received $35.6 million of
proceeds for $46.8 million of loans placed in its warehouse funding facility
in 2002. As expected, while HomePride is in its start-up phase of operations,
it reported a pretax loss of $3.3 million and $8.3 million, respectively, for
the three- and twelve-month periods.
Corporate Expenses- In 2002 general corporate expenses included
restructuring charges related to development investments of $0.5 million for
the quarter and $2.8 million for the year. Corporate expenses in the year-to-
date period also included $0.3 million of severance costs.
Capital Structure
Champion ended the year with $77.4 million in unrestricted cash and $52.3
million in restricted cash, primarily serving as collateral for outstanding
letters of credit. In addition, the company had $16.1 million in cash
deposits, which were classified as other current assets on the balance sheet.
During the three and twelve months ended December 2002, the company used $1.7
million and $1.5 million, respectively, of cash flow for operations.
In January 2003 Champion finalized a committed three-year, $75 million
revolving credit facility (subject to borrowing base availability) to be used
in support of letters of credit and for general corporate purposes. As of the
end of January 2003, $57.1 million of letters of credit were outstanding on
this line, which is collateralized by accounts receivable, inventories,
property, plant, and equipment and, to a lesser degree, cash and other assets.
Upon issuing these letters of credit, restricted cash and cash deposits, in
the aggregate, were reduced to $27.3 million and, over the next three months,
are expected to be reduced to approximately $15 million.
Champion had total debt outstanding at the end of December of $359.2
million, including floor plan payable and excluding warehouse line borrowings
in support of its finance operations. During the fourth quarter of 2002, $15
million of the company's Series B-1 convertible preferred stock was redeemed
for common stock at the floor redemption price of $5.66 per common share. A
total of 2.65 million common shares were issued in connection with these
redemptions.
Young said, "We will continue to manage our operations with a primary
focus on cash flow. In 2002 net working capital invested in operations
decreased by $50 million, a 33% improvement over 2001. Further, with the
addition of our new credit facility, we realized an immediate improvement in
our unrestricted cash position of $41 million and, over the next several
months, expect to free up an additional $10 million to $15 million of cash as
a result of this line. Finally, while uncertainty always exists with respect
to this process, the company expects to file its 2002 tax returns for an
estimated $60 million tax refund in the second quarter of this year."
Industry View
The company currently estimates 2003 industry wholesale HUD code shipments
of 165,000 homes, slightly below 2002 levels and substantially less than the
peak of 373,000 shipments in 1998. This estimate assumes that industry
repossessions could increase from an estimated 90,000 in 2002 to 115,000 homes
in 2003, an estimate which is dependent upon, among other things, the eventual
management of the Conseco Finance portfolio. Such a high level of
repossessions could represent up to 40% of total consumer demand as opposed to
approximately 10% in a more normal environment. While consumer home-only
financing remains tight, the company believes that cash and real estate loans
represent over 60% of the industry's new home funding, up from 20% during the
industry's peak sales levels.
Outlook
"Despite the progress we've made in reducing our operating breakeven
points and positioning the company for a return to profitability, we still
expect to report a loss in the seasonally slower first quarter. Industry
conditions remain uncertain, which makes forecasting any further out very
difficult. As we did in 2002, we will continue to carefully monitor each of
our location's results and take prompt actions, if and where necessary, to
maximize our cash and profitability as this difficult industry cycle
continues," Young concluded.
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. The company operates 37 homebuilding
facilities in 16 states and two Canadian provinces and 118 retail locations in
24 states. Independent retailers, including 657 Champion Home Center
locations, and approximately 600 builders and developers also sell Champion-
built homes. The company also provides financing for retail purchasers of its
homes. Further information can be found at the company's website,
http://www.championhomes.net .
This news release contains certain statements, including statements
regarding industry forecasts, estimates of wholesale shipments, repossessions,
consumer demand, finance availability and real estate loan activity and other
trends and the company's primary focus, projected cash flow, tax returns and
refunds, future plans, results, liquidity, earnings and prospects, 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 press release. 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.
CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL SUMMARY
(Dollars and weighted shares in thousands, except per share amounts)
Unaudited
Three Months Ended
Dec. 28, Dec. 29, %
2002 2001 Chg.
Revenues:
Manufacturing net sales $268,235 $322,601 (17%)
Retail net sales 94,544 95,468 (1%)
Financial services revenues 1,233 -
Less: intercompany (33,686) (52,000)
Total revenues 330,326 366,069 (10%)
Cost of sales (1) 285,151 299,746 (5%)
Gross margin 45,175 66,323 (32%)
Selling, general and
administrative expenses 53,630 66,610 (19%)
Financial services operating costs 4,391 -
Goodwill impairment charges (2) - -
Closing-related expenses (1)
Asset impairment charges 1,400 1,200
Other closing costs 2,100 -
Gain on fixed asset sales (1) (2,300) -
Gain on debt retirement (3) (1,515) -
Operating loss (4) (12,531) (1,487)
Interest expense, net 7,452 5,224
Loss before income taxes (5) (19,983) (6,711)
Income taxes (benefits) (6) (14,500) (1,900)
Net loss (5,483) (4,811)
Less: dividends on preferred stock 482 250
Loss available to common
shareholders $(5,965) $(5,061)
Basic and diluted loss per share $(0.12) $(0.10)
Weighted shares for basic and
diluted EPS 50,976 48,247
See accompanying Notes to Financial Information.
CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL SUMMARY
(Dollars and weighted shares in thousands, except per share amounts)
Twelve Months Ended
Dec. 28, Dec. 29, %
2002 2001 Chg.
Revenues:
Manufacturing net sales $1,150,638 $1,296,315 (11%)
Retail net sales 376,632 452,910 (17%)
Financial services revenues 1,728 -
Less: intercompany (156,704) (201,000)
Total revenues 1,372,294 1,548,225 (11%)
Cost of sales (1) 1,177,661 1,283,216 (8%)
Gross margin 194,633 265,009 (27%)
Selling, general and
administrative expenses 235,109 274,773 (14%)
Financial services operating costs 9,791 -
Goodwill impairment charges (2) 97,000 -
Closing-related expenses (1)
Asset impairment charges 28,900 7,700
Other closing costs 11,100 1,200
Gain on fixed asset sales (1) (2,300) -
Gain on debt retirement (3) (7,385) -
Operating loss (4) (177,582) (18,664)
Interest expense, net 26,573 22,624
Loss before income taxes (5) (204,155) (41,288)
Income taxes (benefits) (6) 51,400 (13,400)
Net loss (255,555) (27,888)
Less: dividends on preferred stock 1,857 500
Loss available to common shareholders $(257,412) $(28,388)
Basic and diluted loss per share $(5.22) $(0.59)
Weighted shares for basic and
diluted EPS 49,341 47,887
See accompanying Notes to Financial Information.
CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
OTHER STATISTICAL INFORMATION (UNAUDITED)
Three Months Ended Twelve Months Ended
Dec. 28, Dec. 29, % Dec. 28, Dec. 29, %
2002 2001 Chg. 2002 2001 Chg.
MANUFACTURING
Homes sold 7,180 9,482 (24%) 32,460 39,551 (18%)
Less: intercompany 908 1,530 (41%) 4,274 5,785 (26%)
Homes sold to
independent
retailers/builders 6,272 7,952 (21%) 28,186 33,766 (17%)
Total floors sold 13,566 17,471 (22%) 60,408 71,487 (15%)
Floors sold per
average plant 357 357 1,381 1,430 (3%)
Multi-section mix 85% 80% 82% 77%
Average home price $35,900 $32,600 10% $34,100 $31,400 9%
Manufacturing
facilities at
period end 37 49 (24%) 37 49 (24%)
RETAIL
Homes sold
New homes retailed 1,199 1,581 (24%) 5,340 7,578 (30%)
New homes
wholesaled 535 - 666 -
Pre-owned homes 277 394 (30%) 1,410 1,897 (26%)
Total homes sold 2,011 1,975 2% 7,416 9,475 (22%)
% Champion-produced
new homes sold 97% 93% 96% 88%
New multi-section mix 84% 74% 81% 72%
Average new home
price (excl.
wholesaled) $66,800 $56,800 18% $63,600 $56,200 13%
Average number of
new homes sold per
sales center per
quarter (excl.
wholesaled) (7) 9.2 6.3 46% 6.9 7.2 (4%)
Average number of
new homes in
inventory per sales
center at
period end (7) 13.2 12.6 5% 13.2 12.6 5%
Sales centers at
period end (7) 118 244 (52%) 118 244 (52%)
CONSOLIDATED (in thousands)
Contingent
repurchase
obligations $225,000 $300,000 (25%) $225,000 $300,000 (25%)
Champion-produced
field inventories $510,000 $625,000 (18%) $510,000 $625,000 (18%)
Shares issued and
outstanding 52,658 48,320 9% 52,658 48,320 9%
Depreciation expense $4,648 $5,897 (21%) $21,295 $24,425 (13%)
Cash provided by
(used for)
operations (8) ($1,725) $1,807 (195%) ($1,489) $67,034 (102%)
See accompanying Notes to Financial Information.
CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
Unaudited
Dec. 28, Sept. 28, Dec. 29,
ASSETS 2002 2002 2001
Cash and cash equivalents $77,381 $92,356 $69,456
Restricted cash 33,857 18,613 648
Accounts receivable, trade 28,631 48,172 27,507
Inventories 111,352 146,386 172,276
Refundable taxes, deferred taxes
and other current assets 89,547 61,891 75,737
Total current assets 340,768 367,418 345,624
Loans receivable, net 52,488 28,282 -
Property and equipment, net 127,644 135,910 177,430
Goodwill, net 165,437 165,940 258,967
Restricted cash 18,443 18,443 -
Deferred taxes and other assets 24,109 24,240 76,131
$728,889 $740,233 $858,152
LIABILITIES AND SHAREHOLDERS' EQUITY
Floor plan payable $17,147 $9,180 $70,919
Warehouse line borrowing 35,565 17,903 -
Accounts payable 37,615 58,589 47,559
Other accrued liabilities 173,615 192,834 174,036
Total current liabilities 263,942 278,506 292,514
Long-term debt 341,612 344,734 224,926
Other long-term liabilities 56,754 46,867 48,678
Mandatorily redeemable
convertible preferred stock 29,256 44,108 20,000
Shareholders' equity 37,325 26,018 272,034
$728,889 $740,233 $858,152
See accompanying Notes to Financial Information.
CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL INFORMATION (UNAUDITED)
(1) A reconciliation of pretax closing-related expenses and the number of
retail locations and manufacturing facilities closed or consolidated follows
(dollars in thousands):
Three Months Ended Twelve Months Ended
Dec. 28, Dec. 29, Dec. 28, Dec. 29,
2002 2001 2002 2001
Closing-related expenses:
Cost of sales $4,000 $- $15,300 $-
Selling, general and
administrative expenses 3,500 1,200 40,000 8,900
$7,500 $1,200 $55,300 $8,900
Operations closed or consolidated:
Retail sales centers 26 13 126 48
Manufacturing facilities 2 - 12 4
In the quarter ended December 2002, the company sold seven idle
homebuilding facilities, which resulted in a gain of $2.3 million.
(2) During the twelve months ended in 2002, the company recorded retail
goodwill impairment charges totaling $97 million.
(3) During the quarter ended December 2002, the company recorded a pretax
gain of $1.5 million from the settlement of debt related to its development
operations. The year-to-date period also included a $5.9 million pretax gain
resulting from the repurchase of $30 million of Senior Notes due 2009 for
$23.8 million.
(4) A reconciliation of operating loss follows (in thousands):
Three Months Ended Twelve Months Ended
Dec. 28, Dec. 29, Dec. 28, Dec. 29,
2002 2001 2002 2001
Operating income (loss) before
goodwill impairment charges and
amortization expense,
closing-related expenses and
gains on fixed asset sales
and debt retirement $(8,846) $2,653 $(34,967) $1,854
Goodwill impairment charges - - (97,000) -
Goodwill amortization expense - (2,940) - (11,618)
Closing-related expenses (7,500) (1,200) (55,300) (8,900)
Gain on fixed asset sales 2,300 - 2,300 -
Gain on debt retirement 1,515 - 7,385 -
Operating loss $(12,531) $(1,487) $(177,582) $(18,664)
(5) Manufacturing and retail EBITA consists of earnings (loss) before
interest, taxes and goodwill amortization, and includes the gain on fixed
asset sales and asset impairment charges and other costs related to closed or
consolidated operations. Financial services loss includes operating costs,
net interest income earned on finance loans receivable and interest expense
from the warehouse facility. A reconciliation of loss before income taxes
follows (dollars in thousands):
% of % of
Dec. 28, Related Dec. 29, Related
Three months ended: 2002 Sales 2001 Sales
Manufacturing EBITA $8,803 3.3% $19,319 6.0%
Retail EBITA (loss) (16,753) -17.7% (10,417) -10.9%
Financial services loss (3,320) -
Gain on debt retirement 1,515 -
General corporate expenses (7,068) (7,449)
Intercompany profit elimination 4,130 -
Goodwill amortization - (2,940)
Interest, net, excluding
financial services (7,290) (5,224)
Loss before income taxes $(19,983) -6.0% $(6,711) -1.8%
% of % of
Dec. 28, Related Dec. 29, Related
Twelve months ended: 2002 Sales 2001 Sales
Manufacturing EBITA $2,743 0.2% $54,131 4.2%
Retail EBITA (loss) (58,204) -15.5% (33,154) -7.3%
Financial services loss (8,283) -
Gain on debt retirement 7,385 -
General corporate expenses (30,903) (28,023)
Goodwill impairment charges (97,000) -
Intercompany profit elimination 6,460 -
Goodwill amortization - (11,618)
Interest, net, excluding
financial services (26,353) (22,624)
Loss before income taxes $(204,155) -14.9% $(41,288) -2.7%
(6) In 2002 the company provided a 100% valuation allowance for its
deferred tax assets and recorded tax benefits for tax losses which can be
carried back for refunds of taxes previously paid. The effective tax rate for
the three months ended December 2002 differs from the 35% federal statutory
rate due to changes in temporary differences, benefits of which were recorded
during the quarter. The effective tax rate for the twelve months ended
December 2002 differs from the federal statutory rate due primarily to changes
in temporary differences, non-deductible goodwill impairment charges and the
deferred tax asset valuation allowance. For the three and twelve months ended
December 2001, the difference between the federal statutory rate and the
effective tax rate is due to state income taxes and non-deductible items,
primarily goodwill amortization.
(7) The number of sales centers at period end has been revised to include
outlets specializing in sales to manufactured housing communities in addition
to full service retail locations. Per location averages have been revised
accordingly.
(8) A reconciliation of cash flows follows (in thousands):
Three Months Ended Twelve Months Ended
Dec. 28, Dec. 29, Dec. 28, Dec. 29,
2002 2001 2002 2001
Net loss $(5,483) $(4,811) $(255,555) $(27,888)
Adjustments:
Depreciation and amortization 4,648 8,837 21,295 36,043
Goodwill impairment charges - - 97,000 -
Asset impairment charges, net (900) 1,200 26,600 7,700
Refundable income taxes (26,500) 377 (41,900) 1,977
Deferred tax valuation
allowance - - 94,800 -
Changes in working capital 33,601 13,692 49,856 48,585
Other (7,091) (17,488) 6,415 617
Cash provided by (used for)
operations (1,725) 1,807 (1,489) 67,034
Increase in finance loans
receivable (24,700) - (53,559) -
Other 3,565 (2,494) (7,512) (24,490)
Cash used for investing (21,135) (2,494) (61,071) (24,490)
Proceeds from Senior Notes - - 145,821 -
Inc (dec) in floor plan payable,
net 7,967 2,835 (53,772) (43,279)
Increase in restricted cash (15,244) - (51,652) -
Proceeds from warehouse facility 17,662 - 35,565 -
Preferred stock issuance, net - - 23,810 18,464
Repurchase of Senior Notes - - (23,750) -
Other (2,500) 1,401 (5,537) 1,584
Cash provided by (used for)
financing 7,885 4,236 70,485 (23,231)
Increase (decrease) in cash (14,975) 3,549 7,925 19,313
Beginning cash and cash
equivalents 92,356 65,907 69,456 50,143
Ending cash and cash equivalents $77,381 $69,456 $77,381 $69,456
SOURCE Champion Enterprises, Inc.
 back to top
Related links:
http://www.championhomes.net
Company News On-Call:
http://www.prnewswire.com/gh/cnoc/comp/110861.html
CONTACT:
Investor and Media Contacts: Phyllis A.
Knight, Chief Financial Officer, +1-248-340-9090, or Colleen T.
Bauman, Investor Relations, +1-248-340-7731, both of Champion
Enterprises, Inc.
|
