Manufacturing Margins Improve to 7.8% for the Quarter and 8.2% for the Last
Twelve Months
AUBURN HILLS, Mich., April 17 /PRNewswire-FirstCall/ -- Champion
Enterprises, Inc. (NYSE: CHB), a leader in factory-built construction,
today announced results for its first quarter ended April 1, 2006. Revenues
for the quarter increased 42 percent to $346.5 million compared to $244.3
million for the first quarter of 2005. Net income for the quarter improved
to $13.6 million, or $0.18 per diluted share, compared to net income of
$2.7 million, or $0.03 per diluted share for the first quarter of 2005. Net
income in the year ago quarter included $3.8 million of income related to
the valuation of the then-outstanding common stock warrant and a $2.6
million loss from discontinued operations.
Operating Highlights
* Manufacturing net sales increased 39 percent to $331.7 million from
$238.7 million in the first quarter of 2005. Net sales were favorably
affected by the delivery of the last 627 homes, representing $23.0 million
of revenue, to the Federal Emergency Management Agency (FEMA). Excluding
these sales, manufacturing net sales improved 29 percent for the quarter.
* Manufacturing segment income for the quarter rose 131 percent to
$25.9 million from $11.2 million in the first quarter of 2005. Segment
income included gains totaling $3.9 million from the sale of properties,
compared to $1.5 million of gains in the first quarter of 2005.
* Manufacturing margins reached 7.8 percent compared to 4.7 percent in
the first quarter of 2005, representing the twelfth consecutive quarter of
year-over-year improving margins. Excluding property sale gains,
manufacturing margins increased to 6.6 percent for the quarter compared to
4.1 percent last year.
* Revenues from the sale of modular homes totaled $81 million, climbing
75 percent compared to last year's first quarter, and representing 24
percent of total manufacturing sales for the quarter.
* Backlogs ended the quarter at $71 million compared to $86 million at
the end of the first quarter of 2005. The current backlog is much more
evenly distributed throughout the country as compared to last year when
over 80 percent of the backlog was concentrated in Florida, California and
Arizona.
* Champion's average selling price increased 11 percent to $49,700 as
the Company continues to achieve a more favorable product mix and price for
higher raw material and transportation costs.
* The Company's California-based retail segment grew revenues 9 percent
to $27.3 million compared to $25.1 million for the first quarter of 2005.
* Retail segment income improved 19 percent to $1.5 million for the
quarter.
* Cash flow from continuing operations increased sharply to $27.0
million for the first quarter of 2006 compared to a use of $5.1 million
last year. Approximately $17 million of the $32.1 million increase was the
result of FEMA settlements in the quarter. Cash and cash equivalents stood
at approximately $132.1 million at quarter end.
Other Highlights
* On March 31, 2006, Champion acquired Minnesota-based Highland
Manufacturing Company, LLC, a leading regional manufacturer of manufactured
and modular homes with a significant presence in the north central United
States. The debt-free transaction was valued at $23 million in cash.
* Champion completed the purchase of United Kingdom-based Calsafe Group
(Holdings) Ltd. and its operating subsidiary Caledonian Building Systems, a
leading steel-framed modular manufacturer, for approximately $110 million
on April 7, 2006. The acquisition was partially debt financed via an
approximately $80 million addition to the Company's term credit facility.
* Both transactions are expected to be accretive to Champion's 2006
results.
"We took an important step forward with the acquisitions of Caledonian
and Highland. These additions expand our geographic reach, further
diversify our product offerings and customer base and increase our modular
market share," said William Griffiths, chairman, president and chief
executive officer of Champion Enterprises, Inc.
"Caledonian offers us new multi-story construction technology, new
distribution channels and several new markets to target. With the Highland
acquisition, we also expanded our domestic footprint in the north central
region of the U.S., a market previously underserved by Champion."
Griffiths concluded, "We remain focused on building Champion's
capabilities and increasingly penetrating the overall modular construction
industry. We will continue to pursue strategic acquisitions while at the
same time working to improve manufacturing efficiencies in support of our
goal to deliver record manufacturing margins and superior shareholder
returns."
First Quarter 2006 Conference Call
Champion Enterprises will host a conference call on April 18 at 11:00
a.m. EDT to discuss these results and current business trends. To listen to
the call, please call 888-482-0024 for domestic callers or 617-801-9702 for
international callers. The pass code is 98000944. You can also listen to
the call via the Company's website at http://www.championhomes.com under
the Investor Relations link.
A replay of the call will be available beginning approximately one hour
after its conclusion through Tuesday, April 25, 2006. To access the replay,
please call 888-286-8010 for domestic callers or 617-801-6888 for
international callers. The passcode is 61383413. The replay will also be
available under the Investor Relations link at the Company's website under
Audio Archives.
About Champion
Auburn Hills, Michigan-based Champion Enterprises, Inc. is a leader in
factory-built construction, operating 36 manufacturing facilities in North
America and the United Kingdom, and partnering with over 3,000 independent
retailers, builders and developers. The Company produces manufactured and
modular homes through its family of homebuilders, as well as modular
commercial buildings for military and commercial applications. For more
information, please visit http://www.championhomes.com .
Forward-Looking Statements
This news release contains certain statements, including statements
regarding accretion, sales, sales growth, margins, backlogs, and market
coverage, each of 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, in each case under the section entitled "Forward-Looking
Statements," and those discussions regarding risk factors are incorporated
herein by reference.
CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED) (1)
(Dollars and weighted shares in thousands, except per share amounts)
Three Months Ended
April 1, April 2, %
2006 2005 Change
(Restated)(6)
Net sales:
Manufacturing $331,651 $238,738 39%
Retail (1) 27,278 25,137 9%
Less: intercompany (12,400) (19,600)
Total net sales 346,529 244,275 42%
Cost of sales 292,236 207,011 41%
Gross margin 54,293 37,264 46%
Selling, general, and administrative
expenses 37,323 31,747 18%
Mark-to-market credit
for common stock warrant (2) - (3,800)
Loss on debt retirement - -
Restructuring charges - -
Operating income 16,970 9,317 82%
Interest expense, net 2,070 3,808 (46%)
Income from continuing operations
before income taxes (3) 14,900 5,509 170%
Income tax expense (4) 1,200 300
Income from continuing operations 13,700 5,209 163%
Loss from discontinued operations,
net of taxes (1) (53) (2,558)
Net income $13,647 $2,651 415%
Income from continuing operations $13,700 $5,209
Less: dividends on preferred stock - (259)
Less: amount allocated to
participating securities (5) - (337)
Income from continuing operations
available to common shareholders $13,700 $4,613 197%
Basic income per share (5):
Income from continuing operations $0.18 $0.06 200%
Loss from discontinued operations - (0.03)
Net income $0.18 $0.03 500%
Weighted shares for basic EPS 76,081 72,547
Diluted income per share (5):
Income from continuing operations $0.18 $0.06 200%
Loss from discontinued operations - (0.03)
Net income $0.18 $0.03 500%
Weighted shares for diluted EPS 77,300 73,345
See accompanying Notes to Financial Information.
CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (1)
(In thousands)
(UNAUDITED)
April 1, December 31,
2006 2005
Assets
Cash and cash equivalents $132,136 $126,979
Restricted cash 325 713
Accounts receivable, trade 45,899 49,146
Inventories 106,747 108,650
Current assets of discontinued
operations 1,262 1,836
Other current assets 6,922 10,832
Total current assets 293,291 298,156
Property, plant, and equipment, net 96,067 91,173
Goodwill and other intangible assets 175,506 158,101
Non-current assets of discontinued
operations 1,720 2,226
Other non-current assets 17,327 16,998
$583,911 $566,654
Liabilities and Shareholders' Equity
Accounts payable $40,896 $29,115
Current liabilities of discontinued
operations 2,893 3,279
Other accrued liabilities 144,189 153,697
Total current liabilities 187,978 186,091
Long-term debt 201,418 201,727
Other long-term liabilities 31,383 31,531
Shareholders' equity 163,132 147,305
$583,911 $566,654
See accompanying Notes to Financial Information.
CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED CASH FLOW STATEMENTS (UNAUDITED) (1)
(In thousands)
Three Months Ended
April 1, April 2,
2006 2005
(Restated)(6)(8)
Net income $13,647 $2,651
Loss from discontinued operations 53 2,558
Adjustments:
Depreciation and amortization 3,231 2,539
Stock-based compensation 1,817 964
Mark-to-market credit for common
stock warrant (2) - (3,800)
Gains on fixed assets (7) (3,986) (1,595)
Changes in working capital 18,986 (9,534)
Changes in accrued liabilities (10,491) (1,814)
Other 3,763 2,939
Cash provided by (used for)
continuing operating activities 27,020 (5,092)
Additions to property, plant and
equipment (4,511) (2,468)
Acquisition of Highland Manufacturing
Company (22,828) -
Proceeds on disposal of fixed assets 4,620 4,746
Other - (55)
Cash (used for) provided by investing
activities (22,719) 2,223
Decrease in long-term debt (301) (51)
Increase in deferred financing costs (15) -
Increase in restricted cash - (4,165)
Common stock issued, net 622 182
Dividends paid on preferred stock - (259)
Cash provided by (used for) financing
activities 306 (4,293)
Net cash used for operating
activities of discontinued
operations 550 (2,271)
Net cash provided by investing
activities of discontinued
operations - 19,568
Net cash used for financing
activities of discontinued
operations - (10,282)
Cash provided by discontinued
operations (1) 550 7,015
Increase (decrease) in cash and cash
equivalents 5,157 (147)
Cash and cash equivalents at
beginning of period 126,979 142,266
Cash and cash equivalents at end of
period $132,136 $142,119
See accompanying Notes to Financial Information.
CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL INFORMATION (UNAUDITED)
(1) The Company's discontinued operations consists of its traditional
retail business which was disposed of in 2005 and 2004 and its former
consumer finance business.
(2) During the first quarter of 2005, the Company recorded a credit
(income) of $3.8 million for the change in the estimated fair value of its
then outstanding common stock warrant for 2.2 million shares.
(3) The Company evaluates the performance of its manufacturing and retail
segments based on earnings before interest, income taxes, and general
corporate expenses. A reconciliation of income from continuing operations
before income taxes for the three months ended follows (dollars in
thousands):
Three months ended: As % of As % of
April 1, Related April 2, Related %
2006 Sales 2005 Sales Change
Manufacturing segment income $25,874 7.8% $11,194 4.7% 131%
Retail segment income 1,513 5.5% 1,267 5.0% 19%
General corporate expenses (9,617) (8,144) (18%)
Mark-to-market credit for
stock warrant - 3,800
Intercompany eliminations (800) 1,200
Interest expense, net (2,070) (3,808) 46%
Income from continuing
operations before income
taxes $14,900 4.3% $5,509 2.3% 170%
(4) The effective tax rates for the periods presented differ from the 35%
federal statutory rate because the Company has a 100% deferred tax asset
valuation allowance. In addition, the Company is in a federal tax loss
carryforward position and tax benefits can only be recorded to the extent
of current taxable income. Income tax expense consisted of state and
foreign income taxes.
(5) EPS for periods reported reflect the adoption of EITF 03-6, which
requires the use of the two-class method for enterprises with
participating securities. The company's participating securities during
the 2005 period consisted of its convertible preferred stock and common
stock warrant. As a result of the repurchase and cancellation of the
warrant and the conversion of all convertible preferred stock in April
2005, the Company's participating securities have been eliminated for the
current period.
(6) The Company early adopted SFAS No. 123(R), in the fourth quarter of
2005, effective January 2, 2005 using the modified prospective method of
transition. The cumulative effect of the accounting change at January 2,
2005 of $0.23 million (income) was included in selling, general, and
administrative expenses and was insignificant to income from continuing
operations, income before income taxes, net income, and cash flow from
operations. The effect of expensing stock options was insignificant in
the first quarter of 2006 and approximately $0.1 million in the first
quarter of 2005. The first quarter of 2005 has been restated to reflect
the adoption of SFAS No. 123(R) by $0.1 million. This adjustment has been
included in selling, general, and administrative expenses.
(7) $3.9 million gains on sales of fixed assets resulted from the sale of
an investment property in Florida and the sale of an idle plant.
(8) The 2005 statement of cash flows has been revised to separately
disclose the operating, investing, and financing portions of the cash
flows attributable to discontinued operations. These amounts were
previously reported on a combined basis.
(9) Because the acquisition was completed on March 31, 2006, no results
of operations for Highland are included in the Company's results from
continuing operations for the three months ended April 1, 2006. The
estimated assets and liabilities of Highland are included in the
consolidated balance sheet as of April 1, 2006 and total $25.7 million and
$2.9 million, respectively.
CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL INFORMATION (UNAUDITED)
CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
OTHER STATISTICAL INFORMATION (UNAUDITED)
Three months ended
April 1, April 2, %
2006 2005 Change
MANUFACTURING
Units sold
HUD Code 4,765 4,014 19%
Modular 1,012 780 30%
Canadian 302 196 54%
Total units sold 6,079 4,990 22%
Less: intercompany 181 339 (47%)
Units sold to independent
retailers/builders 5,898 4,651 27%
Floors sold 11,314 9,609 18%
Multi-section mix 75% 87%
Average unit prices, excluding
delivery
Total $49,700 $44,600 11%
HUD Code $43,600 $41,900 4%
Modular $77,000 $57,100 35%
SOURCE Champion Enterprises, Inc.
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Related links:
http://www.championhomes.com
http://www.prnewswire.com/comp/110861.html/
CONTACT:
Lisa D. Lettieri, Vice President of Investor
Relations, +1-248-340-9090, llettieri@championhomes.net , or
Phyllis Knight, Executive Vice President and CFO,
+1-248-340-9090, both of Champion Enterprises
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