AUBURN HILLS, Mich., April 19 /PRNewswire-FirstCall/ -- Champion
Enterprises, Inc. (NYSE: CHB), a leader in the factory-built housing industry,
today reported results for its first quarter ended April 2, 2005. The company
reported income from continuing operations of $5.3 million, or $0.06 per
diluted share, on revenues of $244 million. In the comparable quarter of
2004, the company had a loss from continuing operations of $14.2 million
($0.21 per diluted share) on revenues of $207 million. Results in 2005
benefited from a $3.8 million credit related to the valuation of a common
stock warrant, while the comparable quarter in 2004 included $8.3 million of
charges related to this valuation and debt retirement activities. Excluding
the effect of the warrant valuation changes and last year's debt retirement
loss, income from continuing operations improved $7.4 million.
During the quarter, the company reclassified its retail business, other
than Advantage Homes, to discontinued operations for all periods presented.
Including the company's discontinued retail business, first quarter net income
was $2.7 million, or $0.03 per diluted share, compared to a loss of $14.3
million ($0.21 per diluted share) in the prior year.
Highlights
* Core manufacturing operations reported $11.2 million of segment income,
an increase of 140% or $6.5 million over the prior year, and a 4.7% segment
margin in the seasonally slow first quarter. Included in this increase was
$1.5 million of gains from the sale of idle facilities;
* Modular home sales increased 12% and now represent 20% of manufacturing
revenues;
* Manufacturing backlogs at quarter end totaled $86 million, up 72% from
$50 million a year earlier;
* Cash flow from continuing operating activities improved by $27.4
million, and the company ended the quarter with $142 million in cash and cash
equivalents.
Management Comments and Outlook
William Griffiths, President and Chief Executive Officer, commented, "This
is our eighth consecutive quarter of year-over-year manufacturing margin
improvement and double-digit growth in segment income. This improvement was
achieved despite relatively flat manufacturing unit sales for the quarter.
"Advantage Homes, our only ongoing retail operation, continued its history
of profitability and saw growth in both income and net sales," Griffiths said.
"While overall results were negatively impacted by our discontinued retail
operations, we have substantially completed an orderly liquidation of this
business. Last week we sold an additional eight locations and within the next
several months we expect to complete the divesture of the remaining ten.
Total net cash proceeds from our 2005 divestitures are still expected to be in
the range of $20 to $25 million and no material impact on results is
anticipated."
Commenting on the industry, Griffiths said, "During the first two months
of 2005, year-over-year industry wholesale shipments of HUD code homes rose
13%. While we are pleased that conditions in certain regions continue to
improve, 80% of this increase came in California, Florida and Arizona. While
our shipments in those states also improved, and were up 22% compared to last
year, we are capacity constrained in these areas and increasing our
manufacturing capacity and throughput remains a priority for this year.
Offsetting those improvements were lower year-over-year shipments in the
Midwest, where industry wholesale shipments fell 16% in January and February."
Operating Results and Other Events
Manufacturing- In the first quarter of 2005, manufacturing net sales
increased to $239 million from $210 million in the comparable quarter last
year as a result of increases in sales of modular homes and the average
selling price per home, which rose 10%. Segment income increased 140% to
$11.2 million, or 4.7% of net sales, from $4.7 million, or 2.2% of net sales,
a year earlier. The company operated 29 manufacturing facilities during this
year's first quarter, compared to 30 plants a year ago.
Retail- Advantage Homes earned $1.3 million of segment income in the
quarter on net sales of $25 million, up from $0.8 million in income and $19
million in net sales during last year's first quarter. This operation
consists of 18 California locations specializing in sales to communities.
Discontinued operations- Champion's discontinued operations reported a
loss for the quarter of $2.6 million on revenues of $19 million, compared to
break even on revenues of $30 million a year earlier. During the quarter, $20
million of cash was generated from the divestiture of traditional retail
locations, of which $10 million was used to reduce floor plan payables to $1.6
million at quarter end.
Other- Earlier this week the company purchased and canceled its
outstanding 2.2 million share common stock warrant for $4.5 million in cash.
The preferred shareholder simultaneously converted all remaining preferred
shares to common stock. As a result, 3.1 million shares of common stock were
issued and no further dividend payments will be required. This transaction
will result in additional income of $0.5 million in this year's second
quarter. Had this conversion occurred prior to the end of this quarter, there
would have been no effect on diluted earnings per share. Additionally,
cancellation of the warrant eliminates future dilution risk.
Conference Call
Mr. Griffiths and Ms. Knight will review results in a conference call for
investors and analysts beginning at 11:00 a.m. eastern time tomorrow. To
participate in the conference call, please call the number below:
Dial-in #: (888) 481-7939
Pass code #: 68430777
A replay of the conference call will be available after 1:00 p.m. eastern
time tomorrow through midnight on Wednesday, April 27, 2005. The recording
may be heard by dialing the number below:
Dial-in #: (888) 286-8010
Pass code #: 61880346
The live call and the replay can also be accessed using the company's
website, http://www.championhomes.net .
About Champion
Champion Enterprises, Inc., headquartered in Auburn Hills, Michigan, is
one of the industry's leading manufacturers and has produced over 1.6 million
homes since the company was founded. The company operates 29 homebuilding
facilities in 14 states and two Canadian provinces and 18 retail locations in
California. Over 2,400 independent retailers, including approximately 840
Champion Home Center locations, and an estimated 500 builders and developers
also sell Champion-built homes. Further information can be found at the
company's website.
Forward Looking Statements
This news release contains certain statements, including statements
regarding the company's financial position, future margins, growth
opportunities, future divestitures and the company's ability to increase
manufacturing capacity and throughput, 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 2, April 3, %
2005 2004 Change
Net sales:
Manufacturing $238,738 $209,856 14%
Retail (1) 25,137 19,478 29%
Less: intercompany (19,600) (22,600)
Total net sales 244,275 206,734 18%
Cost of sales 207,011 179,277 15%
Gross margin 37,264 27,457 36%
Selling, general and administrative
expenses 31,669 28,243 12%
Mark-to-market (credit) charge for
common stock warrant (2) (3,800) 5,100
Loss on debt retirement (3) - 3,226
Operating income (loss) 9,395 (9,112) 203%
Interest expense, net 3,808 4,830 (21%)
Income (loss) from continuing
operations before income taxes (4) 5,587 (13,942) 140%
Income tax expense (5) 300 300
Income (loss) from continuing
operations 5,287 (14,242) 137%
Loss from discontinued
operations, net of taxes (1) (2,558) (81)
Net income (loss) $2,729 $(14,323) 119%
Income (loss) from continuing
operations $5,287 $(14,242)
Less: dividends on preferred stock (259) (160)
Less: amount allocated to
participating securities (6) (343) -
Income (loss) from continuing
operations available to
common shareholders $4,685 $(14,402) 133%
Basic income (loss) per share (6):
Income (loss) from continuing
operations $0.06 $(0.21) 129%
Loss from discontinued
operations (0.03) -
Net income (loss) $0.03 $(0.21) 114%
Weighted shares for basic EPS 72,547 68,103
Diluted income (loss) per share (6):
Income (loss) from continuing
operations $0.06 $(0.21) 129%
Loss from discontinued
operations (0.03) -
Net income (loss) $0.03 $(0.21) 114%
Weighted shares for diluted EPS 73,345 68,103
See accompanying Notes to Financial Information.
CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED) (1)
(In thousands)
April 2, January 1,
2005 2005
Assets
Cash and cash equivalents $142,119 $142,266
Restricted cash 4,694 529
Accounts receivable, trade 34,245 22,119
Inventories 83,869 71,616
Current assets of discontinued operations 14,751 35,463
Other current assets 13,003 13,535
Total current assets 292,681 285,528
Property, plant and equipment, net 77,999 80,957
Goodwill 126,583 126,591
Non-current assets of discontinued
operations 6,478 7,747
Other non-current assets 15,726 16,219
$519,467 $517,042
Liabilities, Redeemable Convertible
Preferred Stock and Shareholders' Equity
Accounts payable $28,664 $13,819
Current liabilities of discontinued
operations 9,051 21,411
Other accrued liabilities 137,052 141,128
Total current liabilities 174,767 176,358
Long-term debt 200,710 200,758
Long-term liabilities of discontinued
operations 417 432
Other long-term liabilities 40,492 41,444
Redeemable convertible preferred stock 20,750 20,750
Shareholders' equity 82,331 77,300
$519,467 $517,042
See accompanying Notes to Financial Information.
CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED CASH FLOW STATEMENTS (UNAUDITED) (1)
(In thousands)
Three Months Ended
April 2, April 3,
2005 2004
Income (loss) from continuing operations $5,287 $(14,242)
Adjustments:
Depreciation 2,539 2,670
Mark-to-market (credit) charge for
common stock warrant (2) (3,800) 5,100
Loss on debt retirement (3) - 3,226
(Gains) losses on fixed asset sales (1,595) 37
Changes in working capital (9,534) (25,055)
Changes in accrued liabilities (1,814) (5,018)
Other 3,825 778
Cash used for continuing operations (5,092) (32,504)
Loss from discontinued operations (2,558) (81)
Decrease (increase) in net assets of
discontinued operations 9,573 (3,355)
Cash provided by (used for)
discontinued operations (1) 7,015 (3,436)
Additions to property, plant and
equipment (2,468) (1,880)
Proceeds on disposal of fixed assets 4,746 223
Other (55) (58)
Cash provided by (used for) investing
activities 2,223 (1,715)
Decrease in floor plan payable, net - (29)
Repayment of industrial revenue bond
and other debt (51) (5,813)
(Increase) decrease in restricted cash (4,165) 1,710
Preferred stock issued, net (2) - 12,000
Common stock issued, net 182 1,611
Dividends paid on preferred stock (259) (112)
Cash (used for) provided by financing
activities (4,293) 9,367
Decrease in cash and cash equivalents (147) (28,288)
Cash and cash equivalents at
beginning of period 142,266 145,868
Cash and cash equivalents at end of
period $142,119 $117,580
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 excludes Advantage Homes, and its former consumer
finance business. Prior traditional retail amounts have been restated to
reflect this classification.
(2) As a result of the change in the company's common stock price, in the
quarter ended April 2, 2005 Champion recorded a $3.8 million credit for the
change in estimated fair value of an outstanding common stock warrant for 2.2
million shares issued in connection with the Series C preferred stock. This
warrant valuation resulted in a charge of $5.1 million in the comparable
quarter a year earlier. In addition, during the first quarter of 2004, the
preferred shareholder exercised its right to purchase $12 million of Series B-
2 preferred stock. As a result of the repurchase and cancellation of the
warrant in April 2005, this mark-to-market adjustment will be eliminated for
future periods.
(3) During the first quarter of 2004, the company issued 3.9 million
shares of its common stock in exchange for $27 million of its Senior Notes,
resulting in a pretax loss of $3.2 million.
(4) 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 (loss) from continuing operations before
income taxes for the three months ended follows (dollars in thousands):
April 2, Related April 3, Related %
2005 Sales 2004 Sales Change
Manufacturing segment income $11,190 4.7% $4,654 2.2% 140%
Retail segment income 1,267 5.0% 783 4.0% 62%
General corporate expenses (8,062) (6,023) (34%)
Mark-to-market credit
(charge) for stock warrant 3,800 (5,100)
Loss on debt retirement - (3,226)
Intercompany eliminations 1,200 (200)
Interest expense, net (3,808) (4,830) 21%
Income (loss) from
continuing operations
before income taxes $5,587 2.3% $(13,942) (6.7%) 140%
(5) 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.
(6) 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 at quarter end consisted
of its convertible preferred stock and common stock warrant, which may
participate in dividends paid on common stock pursuant to the terms of the
securities. The company has no plans to pay dividends on its common stock in
the near term. 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 future periods.
CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
OTHER STATISTICAL INFORMATION (UNAUDITED)
Three Months Ended
April 2, April 3, %
2005 2004 Change
MANUFACTURING
Homes sold
HUD Code 4,014 4,122 (3%)
Modular 780 694 12%
Canadian 196 189 4%
Total homes sold 4,990 5,005
Less: intercompany 339 446 (24%)
Homes sold to independent
retailers/builders 4,651 4,559 2%
Floors sold 9,609 9,724 (1%)
Multi-section mix 87% 87%
Average home prices
Total $44,600 $40,500 10%
HUD Code $41,900
Modular $57,100
SOURCE Champion Enterprises, Inc.
 back to top
Related links:
http://www.championhomes.net
Company News On-Call:
http://www.prnewswire.com/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.
|
