AUBURN HILLS, Mich., April 21 /PRNewswire-FirstCall/ -- Champion
Enterprises, Inc. (NYSE: CHB), one of the nation's leading housing
manufacturers, today reported results for its first quarter ended April 3,
2004. For the quarter, the company reported revenues of $237 million and a
loss from continuing operations of $15.5 million, or $0.23 per diluted share.
Included in the loss was a $5.1 million mark-to-market charge related to an
outstanding common stock warrant and a $3.2 million loss in connection with
debt retirement. Champion had a net loss for the quarter of $14.3 million, or
$0.21 per diluted share.
For the first quarter of 2003, the company had revenues of $243 million
and a loss from continuing operations of $14.1 million, or $0.33 per diluted
share, which included a $6.7 million gain from debt retirement and an income
tax benefit of $2.7 million. A year ago, Champion reported a net loss of
$21.4 million, or $0.46 per diluted share. The prior year loss per diluted
share included a charge of $0.06 per share related to the company accelerating
the reduction in the conversion price of its Series C preferred stock.
The company's focus on strengthening operations contributed to improved
performance for the quarter in both its manufacturing and retail segments
despite difficult market conditions. Year-over-year, as summarized below,
Champion's quarterly pretax internal operating results improved by $16.6
million although the loss from continuing operations increased by $1.4
million. The company believes that pretax internal operating results are
useful in evaluating its businesses as they exclude non-cash capital structure
related items and income taxes.
(Dollars in millions) April 3, March 29, Better/
2004 2003 (Worse)
Manufacturing EBIT $4.7 $(6.8) $11.5
Retail EBIT (0.3) (2.7) 2.4
General corporate expenses (6.1) (7.3) 1.2
Intercompany eliminations (0.2) 0.4 (0.6)
Interest expense, net (5.0) (7.1) 2.1
Pretax internal operating results (6.9) (23.5) 16.6
Mark-to-market charge for stock warrant (5.1) - (5.1)
Debt retirement (loss) gain (3.2) 6.7 (9.9)
Income tax (expense) benefit (0.3) 2.7 (3.0)
Loss-continuing operations $(15.5) $(14.1) $(1.4)
Chairman, President and Chief Executive Officer, Al Koch, commented,
"We're pleased with the improvements reported by both our manufacturing and
retail operations, which reflect our actions to size operations for
profitability. The manufacturing segment reported net sales growth for the
first time in two years and profits versus a loss in the prior year's first
quarter. Our 78 ongoing retail locations also showed progress with positive
segment earnings. Despite the expected seasonal use of cash for operations
this quarter, the company maintained a solid liquidity position with further
improvements anticipated as we move into our stronger seasonal periods."
Operations
Manufacturing- In the first quarter of 2004, manufacturing revenues
increased slightly to $210 million from $209 million in the year earlier
period, with the company operating 17% fewer plants and selling 12% fewer
homes. The company reported strong growth in its modular home sales, which
accounted for 14% of manufacturing segment homes sold and increased 55% year-
over-year. The manufacturing segment had earnings before interest, income
taxes and general corporate expenses (EBIT) of $4.7 million for the first
three months of the year, an improvement of $11.5 million from the loss of
$6.8 million in the comparable 2003 period. Champion's manufacturing incoming
order rate for March 2004 was up 8% compared to the same month a year ago and
the company had unfilled manufacturing orders totaling $50 million at 30
plants at April 3, 2004. A year earlier the company had unfilled orders of
$33 million at the 36 operating plants.
Retail- For the quarter ended March 2004, Champion's retail operations
reported same store revenues comparable to a year ago, but due to operating
34% fewer locations currently, overall retail revenues declined 18% to $50
million. Retail operations reported an EBIT loss of $253,000 for the three-
month period, consisting of income of $188,000 at the 78 ongoing locations and
a loss of $441,000 at locations that have been closed. This quarter's results
are significantly improved from the loss of $2.7 million in the first quarter
of 2003. The average new home retail sales price increased 29% to $93,500.
Other- Results in 2004 included a mark-to-market charge related to the
company's outstanding common stock warrants for 2.2 million shares as a result
of the increase in Champion's common stock value during the quarter.
Additionally, as previously announced, in the first quarter of this year the
company issued 3.9 million shares of common stock in exchange for $27 million
of Senior Notes, resulting in a pretax loss. Net interest expense dropped 30%
versus a year earlier as a result of debt reduction completed in 2003 and
early 2004. Income from discontinued operations during the quarter ended
April 3, 2004 resulted from the settlement of contractual obligations.
Financial Position
During the quarter the company continued to focus on improving its
financial position and reducing debt. Cash and cash equivalents totaled $118
million at the end of March 2004, up $47 million from a year ago but down from
the beginning of the year as a result of the typical seasonal use of cash
during the first quarter. During the quarter the company used $35 million in
cash flows for operations, driven primarily by a seasonal increase in working
capital. This amount compares to a use of $29 million in the comparable
quarter a year ago, or $38 million before the effect of a $9.6 million
decrease in cash deposits.
Long-term debt was $213 million at the end of March 2004, down from $245
million at the beginning of the year and from $313 million a year ago. Net
debt (total debt less cash) was $109 million, an improvement from $114 million
at the start of the year and a 64% reduction from $306 million a year ago.
During the quarter Champion used $5.7 million to repay industrial revenue bond
financing related to a closed manufacturing facility. In addition, the
company received $12 million for the issuance of redeemable convertible
preferred stock upon the exercise of the preferred shareholder's right.
Outlook
Koch continued, "HUD code homes represented 82% of our manufacturing homes
sold in the first quarter, compared to 88% in the comparable quarter of 2003.
Industry wholesale shipments of these homes through February of this year were
down 12.5%, an improving trend from the drop of 22% in 2003. However,
conditions remain difficult in many of our markets. While we remain
optimistic about the possibilities of increased consumer financing and the
potential for a downward trend in consumer repossessions this year, as of
today consumer financing remains tight and sales of consumer repossessions are
still at historically high levels.
"The improved operating results we reported today give us cause for
optimism, particularly as the spring selling season gets underway. Our
strategy of appealing to the broader housing market appears to be taking hold
as demonstrated by the growth of our modular business. In addition, our
financial position continues to improve and our stronger operations and
balance sheet should position us well for the future," concluded Koch.
Conference Call
Mr. Koch and other executive officers of the company will review results
in a conference call for investors and analysts beginning at 10:00 a.m.
eastern time today. To participate in the conference call, please call the
number below:
Dial-in #: (866) 800-8648
Pass code #: 97792623
A replay of the conference call will be available after 11:00 a.m. eastern
time today through midnight on Wednesday, April 28, 2004. The recording may
be heard by dialing the number below:
Dial-in #: (888) 286-8010
Pass code #: 61880346
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 30 homebuilding
facilities in 14 states and two Canadian provinces and 78 retail locations in
21 states. Independent retailers, including 760 Champion Home Center
locations, and approximately 500 builders and developers also sell Champion-
built 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 shipments, consumer financing, and repossessions, and
statements regarding the company's financial position, expected results,
improved operations, balance sheet strength, future cash flows, backlogs,
liquidity, and the sizing of operations that 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 those
discussions regarding risk factors are incorporated herein by reference.
CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
(Dollars and weighted shares in thousands, except per share amounts)
Three Months Ended
April 3, March 29, %
2004 2003 Change
Net sales:
Manufacturing $209,856 $209,197 0%
Retail 49,829 61,121 (18%)
Less: intercompany (22,600) (27,521)
Total net sales 237,085 242,797 (2%)
Cost of sales 202,484 210,456 (4%)
Gross margin 34,601 32,341 7%
Selling, general and administrative
expenses 36,423 48,663 (25%)
Mark-to-market charge for common
stock warrant (1) 5,100 -
Loss (gain) on debt retirement (2) 3,226 (6,703)
Operating loss (10,148) (9,619) (5%)
Interest expense, net 5,031 7,137 (30%)
Loss from continuing operations
before income taxes (3) (15,179) (16,756) 9%
Income tax expense (benefits) (4) 300 (2,700)
Loss from continuing operations (15,479) (14,056) (10%)
Income (loss) from discontinued
operations, net of taxes (5) 1,156 (7,369)
Net loss $(14,323) $(21,425) 33%
Loss from continuing operations $(15,479) $(14,056)
Less: dividends on preferred stock 160 286
Less: charge to retained earnings for
induced preferred stock conversion (1) - 3,488
Loss from continuing operations
available to common shareholders $(15,639) $(17,830) 12%
Basic and diluted loss per share:
Loss from continuing operations $(0.23) $(0.33) 30%
Income (loss) from discontinued
operations 0.02 (0.13)
Net loss $(0.21) $(0.46) 54%
Weighted shares for basic and diluted EPS 68,103 54,525
See accompanying Notes to Financial Information.
CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
Unaudited Unaudited
April 3, January 3, March 29,
Assets 2004 2004 2003
Cash and cash equivalents $117,580 $145,868 $70,439
Restricted cash 6,631 8,341 664
Accounts receivable, trade 32,153 13,773 38,199
Inventories 112,467 98,824 121,999
Current assets of discontinued
operations (5) - - 62,705
Refundable taxes and other current
assets 18,047 18,325 79,704
Total current assets 286,878 285,131 373,710
Property, plant and equipment, net 94,564 95,821 121,738
Goodwill 126,522 126,537 160,882
Non-current assets of discontinued
operations (5) 22 68 4,801
Other non-current assets 19,949 20,743 23,119
$527,935 $528,300 $684,250
Liabilities, Redeemable Convertible
Preferred Stock and Shareholders' Equity
Floor plan payable $13,597 $14,123 $17,177
Accounts payable 33,278 26,724 40,196
Current liabilities of discontinued
operations (5) 1,652 3,173 46,213
Other accrued liabilities 159,508 167,624 164,434
Total current liabilities 208,035 211,644 268,020
Long-term debt (2) 212,631 245,468 313,493
Other long-term liabilities 52,777 47,510 54,738
Redeemable convertible preferred
stock (1) 20,750 8,689 13,507
Shareholders' equity 33,742 14,989 34,492
$527,935 $528,300 $684,250
See accompanying Notes to Financial Information.
CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED CASH FLOW STATEMENTS (UNAUDITED)
(In thousands)
Three Months Ended
April 3, March 29,
2004 2003
Loss from continuing operations $(15,479) $(14,056)
Adjustments:
Depreciation and amortization 2,985 4,273
Mark-to-market charge for common
stock warrant (1) 5,100 -
Loss (gain) on debt retirement (2) 3,226 (6,703)
Gains on fixed asset sales (25) (990)
Changes in cash collateral deposits (6) - 9,600
Changes in working capital (25,469) (17,092)
Changes in accrued liabilities (7,413) (5,090)
Other 2,014 1,495
Cash used for continuing operations (35,061) (28,563)
Income (loss) from discontinued operations(5) 1,156 (7,369)
(Increase) decrease in net assets of
discontinued operations (5) (1,521) 1,456
Cash used for discontinued operations (365) (5,913)
Additions to property, plant and equipment (1,880) (1,200)
Acquisition related deferred purchase
price payments - (2,500)
Proceeds on disposal of fixed assets 223 3,842
Other - (202)
Cash used for investing activities (1,657) (60)
(Decrease ) increase in floor plan
payable, net (526) 30
Repayment of industrial revenue bond
and other debt (5,888) (146)
Purchase of Senior Notes (2) - (20,554)
Decrease in restricted cash (6) 1,710 50,229
Preferred stock issued, net 12,000 -
Common stock issued, net 1,611 300
Dividends paid on preferred stock (112) (482)
Deferred financing costs - (1,783)
Cash provided by financing activities 8,795 27,594
Decrease in cash and cash equivalents (28,288) (6,942)
Cash and cash equivalents at
beginning of period 145,868 77,381
Cash and cash equivalents at end of period $117,580 $70,439
See accompanying Notes to Financial Information.
CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL INFORMATION (UNAUDITED)
(1) As a result of the $4.04 per share increase in the company's common
stock price in the quarter ended April 3, 2004, Champion recorded a $5.1
million charge 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. In addition, during the first quarter of 2004, the preferred
shareholder exercised its right to purchase $12 million of Series B-2
preferred stock. During the first quarter of 2003, the company agreed to
accelerate the reduction in the conversion price for its Series C preferred
stock. This amendment to the preferred stock terms was accounted for as an
induced conversion, resulting in a charge directly to retained earnings of
$3.5 million and an increase in the loss per share of $0.06 per diluted share.
(2) 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 due
2007 and 2009, resulting in a pretax loss of $3.2 million. In the first
quarter of 2003, the company recorded pretax gains of $6.7 million resulting
from the purchase and retirement of $28 million of its Senior Notes for total
cash payments of $21 million. As of the dates below, long-term debt consisted
of the following (in thousands):
April 3, Jan. 3, March 29, Reduction
2004 2004 2003 3 Months 12 Months
Senior Notes due 2007 $97,510 $111,010 $135,010 $(13,500) $(37,500)
Senior Notes due 2009 100,215 113,715 157,100 (13,500) (56,885)
Industrial revenue bonds 12,430 18,145 18,145 (5,715) (5,715)
Other 2,476 2,598 3,238 (122) (762)
$212,631 $245,468 $313,493 $(32,837) $(100,862)
(3) The company evaluates the performance of its manufacturing and retail
segments based on earnings (loss) before interest, income taxes and general
corporate expenses (EBIT). A reconciliation of loss from continuing
operations before income taxes for the three months ended follows (dollars in
thousands):
April 3, Related March 29, Related %
2004 Sales 2003 Sales Change
Manufacturing EBIT $4,654 2.2% $(6,846) (3.3%) 168%
Retail EBIT (253) (0.5%) (2,683) (4.4%) 91%
General corporate
expenses (6,023) (7,272) 17%
Mark-to-market charge for
stock warrant (5,100) -
(Loss) gain on debt
retirement (3,226) 6,703
Intercompany eliminations (200) 479
Interest expense, net (5,031) (7,137) 30%
Loss from continuing
operations before
income taxes $(15,179) (6.4%) $(16,756) (6.9%) 9%
For the quarter ended April 3, 2004, manufacturing and retail EBIT
included $1.1 million and $441,000, respectively, for costs related to closed
locations.
(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 in 2004 consisted of state and
foreign income taxes. The income tax benefit for 2003 consisted of $3.0
million recorded to reduce the deferred tax asset valuation allowance
following the completion of the company's 2002 federal income tax return,
which resulted in a larger refund than previously estimated, partially offset
by provisions for foreign income taxes.
(5) In 2003 the company exited its consumer finance business, HomePride
Finance Corp. Related amounts are presented as discontinued operations.
During the quarter ended April 3, 2004, the company recorded income from
discontinued operations due to the settlement of contractual obligations.
(6) During the first quarter of 2003, the company finalized a $75 million
revolving credit facility, which was used to issue letters of credit to
replace cash collateral and resulted in the release of $49.8 million of
restricted cash and $9.6 million of cash deposits. At the end of March 2004,
the company had $61.0 million of letters of credit issued and no borrowings
outstanding under this facility.
CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
OTHER STATISTICAL INFORMATION (UNAUDITED)
Three Months Ended
April 3, March 29, %
2004 2003 Change
MANUFACTURING
Homes sold
HUD Code
Multi-section 3,611 4,310 (16%)
Single-section 511 703 (27%)
Total HUD Code 4,122 5,013 (18%)
Modular 694 449 55%
Canadian 189 209 (10%)
Total homes sold 5,005 5,671 (12%)
Less: intercompany 446 730 (39%)
Homes sold to independent
retailers/builders 4,559 4,941 (8%)
Total floors sold 9,724 10,718 (9%)
Floors sold per average plant 324 294 10%
Multi-section mix 87% 84%
Average home price $40,500 $35,500 14%
Manufacturing facilities at period end 30 36 (17%)
RETAIL
Homes sold
New homes 482 777 (38%)
Pre-owned homes 304 308 (1%)
Total homes sold 786 1,085 (28%)
% Champion-produced new homes sold 91% 97%
New multi-section mix 92% 83%
Average number of new homes in
inventory per sales center at period end 13.2 13.1
Average new home retail price $93,500 $72,400 29%
Average number of new homes
sold per sales center per month 2.1 2.2 (5%)
Average number of total homes
sold per sales center per month 3.4 3.1 10%
Sales centers at period end 78 118 (34%)
CONSOLIDATED AT PERIOD END (in thousands)
Contingent repurchase obligations (est.) $230,000 $260,000 (12%)
Champion-produced field inventories (est.) $510,000 $550,000 (7%)
Shares issued and outstanding 70,094 56,422 24%
SOURCE Champion Enterprises, Inc.
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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.
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