Earn Out Accrual on Strong Performance of International Segment
Acquisition, Debt and Restructuring Charges Drive Net Loss of $0.08 Per
Diluted Share for the Quarter
TROY, Mich., Feb. 19 /PRNewswire-FirstCall/ -- Champion Enterprises,
Inc. (NYSE: CHB), a leader in factory-built construction, today announced
results for its fourth quarter and fiscal year ended Dec. 29, 2007.
Revenues for the quarter increased 8.2 percent to $325.6 million compared
to $300.9 million for the fourth quarter of 2006. The Company reported a
net loss for the quarter of $6.0 million, or $0.08 per diluted share,
compared to net income of $3.6 million, or $0.05 per diluted share, for the
same period of the prior year.
The loss before income taxes in the fourth quarter of 2007 included the
following items: $6.4 million of expense recorded in connection with the
earn out provisions of the 2006 acquisition of Calsafe Group (Holdings)
Ltd., loss on debt retirement of $4.5 million as a result of the Company's
previously announced changes to its debt structure, and charges totaling
$3.6 million related to the previously announced closure of a manufacturing
facility. Pre- tax income for the fourth quarter of 2006 was reduced by a
$0.4 million loss on debt retirement.
Revenues for the full year 2007 decreased 6.7 percent to $1.27 billion
compared to $1.36 billion reported for 2006. Net income for 2007 totaled
$7.2 million, or $0.09 per diluted share, compared to net income of $138.3
million, or $1.78 per diluted share, in 2006. Net income in 2006 included
$101.9 million of income from the reversal of the previously recorded
deferred tax valuation allowance and $4.7 million of pre-tax gains from
property sales.
"While our earnings continue to be pressured by deteriorating
conditions in the U.S. housing markets, our efforts to diversify and build
a strong international platform continue to mitigate these pressures,"
stated William Griffiths, chairman, president and chief executive officer
of Champion Enterprises, Inc. "Our non-U.S. revenues increased 135 percent
in 2007, contributing over 30 percent of our total revenues and strong cash
returns.
"Thanks to the focused work of our operations both in North America and
internationally, our free cash flow improved over 60 percent to $69 million
in 2007 despite a decline in reported earnings for the year. As a result,
our cash position continued to improve, ending 2007 at $135 million. This,
coupled with the successful refinancing we completed during the fourth
quarter, leaves Champion well positioned to continue to execute its growth
and diversification strategies."
North American Manufacturing Segment
-- Manufacturing segment net sales for the fourth quarter decreased 10.7
percent to $224.0 million compared to $250.8 million in the same
period of the prior year.
-- Revenues from the sale of modular homes in the quarter totaled $71
million, representing approximately 32 percent of manufacturing
segment sales, down from $86 million in the fourth quarter of 2006.
-- Manufacturing segment income for the fourth quarter decreased to $3.4
million compared to $15.0 million in the fourth quarter of 2006.
Segment income for the quarter ended Dec. 29, 2007 was reduced by $3.6
million of pretax restructuring charges related to the closure of the
Company's manufacturing facility in Alabama, including a pretax non-
cash fixed asset impairment charge of $1.8 million.
-- Manufacturing segment backlogs ended the year at $56 million,
inclusive of the previously announced acquisition of western Canada-
based SRI Homes (SRI), compared to $36 million at the end of 2006 and
$64 million at the end of the third quarter. Backlogs in the U.S.
increased 18 percent as compared to the end of 2006.
International Manufacturing Segment
-- International segment sales grew 182 percent to $92.1 million for the
quarter, up from $32.6 million in the same period of the prior year,
and increased 8 percent compared to $85.3 million last quarter. For
the year, international segment revenues totaled $280.8 million, a
substantial increase compared to sales of $90.7 million reported for
the approximately nine months in 2006.
-- Segment income for the fourth quarter of 2007, before expenses related
to earn out provisions, totaled $9.9 million compared to $2.5 million
in the fourth quarter of 2006 and $6.4 million in the third quarter.
Segment income for the fourth quarter of 2007 was reduced by $6.4
million as a result of earn out provisions, resulting in reported
segment income of $3.4 million for the quarter.
-- Segment margins before expenses related to earn out provisions for the
quarter were 10.7 percent compared to 7.6 percent in the same period
last year and 7.5 percent last quarter, and for the year were 8.5
percent compared to 6.2 percent last year.
-- International segment order backlogs remain strong, with firm
contracts and orders pending contracts under framework agreements
totaling approximately $250 million at the end of the year, compared
to approximately $225 million at the end of 2006 and approximately
$275 million at the end of the third quarter.
Retail Segment
-- The retail segment reported fourth quarter 2007 revenues of $15.7
million compared to $23.7 million for the same period last year, a
reflection of continuing tightness in California housing markets.
-- The retail segment reported a loss of $0.3 million for the quarter,
down from $1.3 million of segment income in the fourth quarter of
2006.
Other Highlights
-- As previously announced, during the fourth quarter of 2007 the
Company issued $180 million of 2.75 percent convertible senior notes
due 2037, repurchased $75.6 million of its 7 5/8 percent Senior Notes
due 2009 for cash totaling $79.7 million and repaid $14.5 million of
its term loan due 2012, resulting in a pretax loss on debt retirement
of $4.5 million.
-- Cash flow from operations totaled $44.3 million for the quarter ended
Dec. 29, 2007 compared to $0.5 million for the same period last year
and totaled $79.5 million for the full year compared to $59.9 million
in the prior year.
-- Cash and cash equivalents increased to $135.4 million as of Dec. 29,
2007 compared to $111.3 million at the end of the third quarter of
2007 and $70.2 million at the end of last year. During the quarter,
the Company increased its cash position by approximately $78 million
as a result of the aforementioned changes to its debt structure, and
used $95.4 million of cash to complete the SRI acquisition.
-- Available U.S. federal tax loss carry-forwards increased in 2007 and
now total approximately $233 million at Dec. 29, 2007.
In conclusion Griffiths stated, "We are upbeat about 2008. Even though
predictions for the U.S. housing market are negative, our non-U.S.
operations remain strong, and the addition of SRI will be accretive to our
results. Further, we continue to believe that conditions in the U.S. favor
an eventual turn in the traditional manufactured housing business. When
this market improves, our operations are well positioned to generate even
stronger cash returns as backlogs and capacity utilization increase."
Fourth Quarter 2007 Conference Call
Champion Enterprises will host a conference call on Wednesday, Feb. 20,
2008 at 11 a.m. EST to discuss these results and current business trends.
To listen to the call, please call (800) 591-6942 for domestic callers or
(617) 614-4909 for international callers. The passcode is 18460456. The
call may also be heard live at http://www.championhomes.com under the "Investors"
link.
A telephone replay of the call will be available approximately one hour
after the call's conclusion through Wednesday, March 5, 2008. To access the
telephone replay, please call (888) 286-8010 for domestic callers or (617)
801-6888 for international callers. The passcode is 78176789. The web- cast
replay will be available on the Company's web site for 90 days under the
"Investors" link.
About Champion
Troy, Michigan-based Champion Enterprises, Inc., a leader in
factory-built construction, operates 33 manufacturing facilities in North
America and the United Kingdom working with independent retailers, builders
and developers. The Champion family of builders produces manufactured and
modular homes, as well as modular buildings for government and commercial
applications. For more information, please visit http://www.championhomes.com .
Forward-Looking Statements
This news release contains certain statements, including statements
regarding backlogs and pending orders, future market conditions, areas of
management focus, the execution of Champion's growth and diversification
strategy, and cash flow projections, each of which could be construed to be
forward-looking statements within the meaning of the Securities 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 filings
with the Securities and Exchange Commission, in each case under the section
entitled "Forward-Looking Statements," and those discussions regarding risk
factors are incorporated herein by reference.
CHB/ 5
CHAMPION ENTERPRISES, INC.
CONSOLIDATED FINANCIAL SUMMARY
(Dollars and weighted shares in thousands, except per share amounts)
(UNAUDITED)
Three Months Ended
December 29, December 30, %
2007 2006 Change
Net sales:
Manufacturing segment $223,951 $250,823 (10.7%)
International segment 92,110 32,640 182.2%
Retail segment 15,749 23,685 (33.5%)
Less: intercompany (6,200) (6,200)
Total net sales 325,610 300,948 8.2%
Cost of sales 280,527 251,355 11.6%
Gross margin 45,083 49,593 (9.1%)
Selling, general and administrative
expenses 44,526 38,549 15.5%
Restructuring charges 2,659 -
Amortization of intangible assets 1,454 1,428 1.8%
Operating (loss) income (3,556) 9,616 (137.0%)
Loss on debt retirement 4,543 398 1041.5%
Interest expense, net 3,115 4,151 (25.0%)
(Loss) Income from operations
before income taxes (11,214) 5,067 (321.3%)
Income tax (benefit) expense (5,262) 1,503 (450.1%)
Net (loss) income $(5,952) $3,564 (267.0%)
Basic (loss) income per share $(0.08) $0.05 (260.0%)
Weighted shares for basic EPS 77,248 76,454
Diluted (loss) income per share $(0.08) $0.05 (260.0%)
Weighted shares for diluted EPS 77,248 77,708
See accompanying Notes to Consolidated Financial Information.
Twelve Months Ended
December 29, December 30, %
2007 2006 Change
Net sales:
Manufacturing segment $941,945 $1,195,834 (21.2%)
International segment 280,814 90,717 209.5%
Retail segment 73,406 117,397 (37.5%)
Less: intercompany (22,700) (39,300)
Total net sales 1,273,465 1,364,648 (6.7%)
Cost of sales 1,083,601 1,147,032 (5.5%)
Gross margin 189,864 217,616 (12.8%)
Selling, general and administrative
expenses 157,134 154,534 1.7%
Restructuring charges 3,780 1,200 215.0%
Amortization of intangible assets 5,727 3,941 45.3%
Operating (loss) income 23,223 57,941 (59.9%)
Loss on debt retirement 4,543 398 1041.5%
Interest expense, net 14,731 14,446 2.0%
(Loss) Income from operations
before income taxes 3,949 43,097 (90.8%)
Income tax (benefit) expense (3,243) (95,211) 96.6%
Net (loss) income $7,192 $138,308 (94.8%)
Basic (loss) income per share $0.09 $1.81 (95.0%)
Weighted shares for basic EPS 76,916 76,334
Diluted (loss) income per share $0.09 $1.78 (94.9%)
Weighted shares for diluted EPS 77,719 77,578
See accompanying Notes to Consolidated Financial Information.
(more)
CHB/ 6
CHAMPION ENTERPRISES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands) (UNAUDITED)
Dec. 29, Sept. 29, Dec. 30,
2007 2007 2006
Assets:
Cash and cash equivalents $135,408 $111,282 $70,208
Accounts receivable, trade 89,710 102,456 47,645
Inventories 90,782 81,961 102,350
Deferred tax assets 29,746 29,145 32,303
Other current assets 14,827 10,735 10,677
Total current assets 360,473 335,579 263,183
Property, plant and equipment, net 116,984 105,182 112,527
Goodwill and other intangible assets,
net 432,593 336,181 335,464
Deferred tax assets 87,983 80,586 71,600
Other non-current assets 23,697 15,967 17,841
Total assets $1,021,730 $873,495 $800,615
Liabilities and Shareholders' Equity:
Short-term debt $25,884 $2,125 $2,168
Accounts payable 119,628 110,380 54,607
Other accrued liabilities 172,321 140,258 146,428
Total current liabilities 317,833 252,763 203,203
Long-term debt 342,897 254,090 252,449
Deferred tax liabilities 7,065 9,621 10,600
Other long-term liabilities 34,089 32,581 32,601
Shareholders' equity 319,846 324,440 301,762
Total liabilities and shareholders'
equity $1,021,730 $873,495 $800,615
See accompanying Notes to Consolidated Financial Information.
CHB/ 7
CHAMPION ENTERPRISES, INC.
CONSOLIDATED CONDENSED CASH FLOW STATEMENTS
(In thousands)
(UNAUDITED)
Three Months Ended Twelve Months Ended
Dec. 29, Dec. 30, Dec. 29, Dec. 30,
2007 2006 2007 2006
Net (loss) income $(5,952) $3,564 $7,192 $138,308
Loss from discontinued operations - 27 - 16
Adjustments:
Depreciation and amortization 5,027 5,011 20,063 17,943
Stock-based compensation 740 846 2,975 4,563
Change in deferred taxes (13,217) (525) (17,637) (100,125)
Fixed asset impairment charges 2,000 - 2,000 1,200
Gain on disposal of fixed assets (566) (238) (1,199) (4,708)
Loss on debt retirement 4,543 398 4,543 398
Increase/decrease:
Accounts receivable 24,695 16,782 (28,412) 28,626
Inventories 3,045 9,860 24,024 13,129
Accounts payable 8,116 (20,675) 61,230 (16,405)
Accrued liabilities 14,781 (12,939) 5,734 (24,753)
Foreign exchange translation
gain (942) - (942) -
Other, net 2,060 (1,639) (102) 1,682
Cash provided by operating
activities 44,330 472 79,469 59,874
Additions to property, plant and
equipment (4,707) (3,303) (10,201) (17,582)
Acquisitions (95,371) (555) (95,371) (153,845)
Proceeds from disposal of fixed
assets 847 1,836 4,487 7,566
Distributions from unconsolidated
affiliates - - 884 -
Cash used for investing activities (99,231) (2,022) (100,201) (163,861)
Payments on long-term debt (14,752) (28,236) (16,329) (29,612)
Proceeds from term loan - - - 78,561
Proceeds from convertible debt 180,000 - 180,000 -
Redemption of senior notes (79,728) (6,901) (79,728) (6,901)
Increase in deferred financing
costs (5,939) - (5,939) (1,076)
Decrease in restricted cash - - 15 698
Common stock issued, net 1,507 19 3,801 1,974
Cash provided by (used for)
financing activities 81,088 (35,118) 81,820 43,644
Cash (used for) provided by
discontinued operations (223) 33 62 1,201
Effect of exchange rate changes on
cash and cash equivalents (1,838) 404 4,050 2,371
Increase (decrease) in cash and
cash equivalents 24,126 (36,231) 65,200 (56,771)
Cash and cash equivalents at
beginning of period 111,282 106,439 70,208 126,979
Cash and cash equivalents at end of
period $135,408 $70,208 $135,408 $70,208
See accompanying Notes to Consolidated Financial Information.
CHB/ 8
CHAMPION ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)
(1) On December 21, 2007, the Company acquired substantially all of the
assets and the business of SRI Homes, Inc., a producer of factory - built
homes in western Canada. The purchase price was $114 million (CAD) plus
the assumption of operating liabilities, and was funded through a
combination of cash and a $24 million (CAD) seller note. Due to the
timing of the acquisition, no results of SRI are included in the Company's
2007 results, but SRI is included in the Company's consolidated balance
sheet at December 29, 2007.
(2) The results of operations for businesses acquired in 2006 are
included in the Company's results from continuing operations subsequent to
the respective acquisition dates. Manufacturing segment acquisitions
consisted of Highland Manufacturing which was acquired on March 31, 2006,
and North American Housing which was acquired on July 31, 2006. The
Company's international segment consists of Caledonian Building Systems
Limited, which was acquired on April 7, 2006.
(3) The Company evaluates the performance of its manufacturing,
international and retail segments based on income before amortization of
intangible assets, interest, income taxes and general corporate expenses.
A reconciliation of (loss) income from operations before income taxes for
the three and twelve months ended are as follows (dollars in thousands):
Three months ended: Dec. 29, Related Dec. 30, Related
2007 Sales 2006 Sales
Manufacturing segment income $3,383 1.5% $15,042 6.0%
International segment income 3,449 3.7% 2,476 7.6%
Retail segment (loss) income (316) -2.0% 1,319 5.6%
General corporate expenses (8,249) (8,066)
Amortization of intangible assets (1,454) (1,428)
Loss on debt retirement (4,543) (398)
Intercompany eliminations (369) 300
Interest expense, net (3,115) (4,151)
(Loss) income from operations
before income taxes $(11,214) (3.4%) $5,094 1.7%
Twelve months ended: Dec. 29, Related Dec. 30, Related
2007 Sales 2006 Sales
Manufacturing segment income $40,924 4.3% $81,600 6.8%
International segment income 17,393 6.2% 5,634 6.2%
Retail segment income 1,911 2.6% 7,636 6.5%
General corporate expenses (31,609) (32,472)
Amortization of intangible assets (5,727) (3,941)
Loss on debt retirement (4,543) (398)
Intercompany eliminations 331 (500)
Interest expense, net (14,731) (14,446)
Income from operations
before income taxes $3,949 0.3% $43,113 3.2%
(4) In the second quarter of 2006 the Company reversed its deferred tax
asset valuation allowance totaling $101.9 million. The Company's earnings
subsequent to this reversal are fully taxed for financial reporting
purposes. Income tax benefit for 2007 is comprised primarily of deferred
tax benefits and cash tax expense for foreign operations.
(5) Gains on disposal of fixed assets resulted primarily from the sale of
two idle plants in 2007 and from the sale of an investment property in
Florida and five idle plants in 2006.
(6) During the fourth quarter and year ended December 29, 2007, charges
totaling $3.6 million and $4.9 million, respectively, were incurred in
connection with the closure of a manufacturing facility in Alabama in the
fourth quarter and a facility in Pennsylvania during the second quarter.
A portion of these charges, totaling $0.9 million in the fourth quarter
and $1.1 million for the year, were recorded in cost of sales, with the
balance reported as restructuring charges.
(7) As a result of contingent purchase price or "earn out" provisions
related to the Company's acquisition of Caledonian in 2006, an estimated
payment of $13.3 million was accrued during the fourth quarter of 2007 in
connection with Caledonian's 2007 results. Approximately $6.9 million of
the amount accrued was recorded as an increase to goodwill, while the
remaining $6.4 million was recorded as compensation expense in the
international segment.
CHB/ 9
CHAMPION ENTERPRISES, INC.
OTHER STATISTICAL INFORMATION (UNAUDITED)
Three months ended Twelve months ended
Dec. 29, Dec. 30, % Dec. 29, Dec. 30, %
2007 2006 Change 2007 2006 Change
MANUFACTURING SEGMENT
Units sold:
HUD-Code 2,251 2,804 (20%) 9,971 15,341 (35%)
Modular 921 1,119 (18%) 3,670 4,574 (20%)
Canadian 422 275 53% 1,637 1,132 45%
Other 17 21 (19%) 68 79 (14%)
Total units sold 3,611 4,219 (14%) 15,346 21,126 (27%)
Less: intercompany 92 91 1% 312 570 (45%)
Units sold to independent
retailers / builders 3,519 4,128 (15%) 15,034 20,556 (27%)
Floors sold 6,697 8,242 (19%) 29,233 40,521 (28%)
Multi-section mix 75% 82% 77% 80%
Average unit prices,
excluding delivery
Total $55,700 $54,600 2% $55,100 $51,800 6%
HUD-Code $45,000 $46,800 (4%) $45,000 $45,400 (1%)
Modular $73,000 $70,600 3% $76,500 $70,300 9%
SOURCE Champion Enterprises, Inc.
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Related links:
http://www.championhomes.com
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CONTACT:
Investors, Phyllis Knight, Executive Vice
President and CFO, of Champion Enterprises, Inc.,
+1-248-614-8200; or Media, Christine Fisher of pushtwentytwo,
+1-248-335-9500, ext. 30, cfisher@pushtwentytwo.com, for Champion
Enterprises, Inc.
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