Manufacturing Segment Backlogs Increase 62 Percent Sequentially while
Segment Margin Improves to 6.7 Percent; Cash From Operations Totals $23.6
Million for the Quarter
AUBURN HILLS, Mich., July 17 /PRNewswire-FirstCall/ -- Champion
Enterprises, Inc. (NYSE: CHB), a leader in factory-built construction,
today announced results for its second quarter ended June 30, 2007.
Revenues for the quarter decreased 11 percent to $330.4 million compared to
$370.7 million for the second quarter of 2006. Income from continuing
operations before income taxes totaled $10.0 million compared to $11.5
million for the second quarter of 2006. Net income for the quarter totaled
$7.5 million, or $0.10 per diluted share, compared to net income of $112.1
million, or $1.44 per diluted share, for the same period of the prior year.
Net income for the second quarter of 2006 included $101.9 million of income
from the reversal of the previously recorded deferred tax asset valuation
allowance.
North American Manufacturing Segment
* Manufacturing segment net sales for the second quarter decreased 19
percent to $258.3 million compared to $319.9 million in the same period
of the prior year.
* Revenues from the sale of modular homes in the quarter totaled $80
million, representing 31 percent of manufacturing segment sales, down
from $88 million in the second quarter of 2006, while homes sold into
Canada grew 82 percent compared to the second quarter of last year and
increased 25 percent over last quarter.
* Manufacturing segment income for the second quarter totaled $17.2
million compared to $21.0 million in the second quarter of 2006.
Segment margins improved to 6.7 percent for the quarter compared to 6.6
percent in the same period last year, while the capacity utilization
rate decreased slightly to 60 percent compared to 62 percent in the
second quarter of 2006.
* Segment backlogs improved to $68 million at the end of the second
quarter compared to $52 million at the same time last year and $42
million at the end of the first quarter.
International Manufacturing Segment
* International segment sales climbed to $56.9 million for the second
quarter, up from $27.1 million in the same period of the prior year and
$46.5 million last quarter.
* Segment income increased to $4.5 million for the period from $1.2
million in the second quarter of 2006 and $3.1 million in the first
quarter, resulting in an improved margin of 7.8 percent compared to 4.4
percent in the same period last year and 6.7 percent last quarter.
* International segment order backlogs remained strong, with firm
contracts and orders pending contracts under framework agreements
totaling approximately $245 million, compared to approximately $120
million at the end of the second quarter of 2006 and approximately $250
million at the end of last quarter.
Retail Segment
* The retail segment reported second quarter 2007 revenues of $21.4
million compared to $35.0 million for the same period last year, a
reflection of the significant ongoing challenges in the California
housing markets.
* Retail segment income totaled $0.7 million for the quarter compared to
$2.4 million in the second quarter of 2006, and segment margins were
3.1 percent compared to 6.8 percent for the same period of the prior
year.
Other Highlights
* Cash and cash equivalents increased to $104.8 million at June 30, 2007
compared to $76.6 million at the end of the first quarter of 2007.
* Cash flow from continuing operating activities totaled $23.6 million
for the quarter ended June 30, 2007 compared to $12.6 million for the
same period last year, while free cash flow (cash flow from continuing
operating activities less capital expenditures) improved to $21.8
million from $8.0 million for the second quarter of 2006.
* The Company amended its credit facility during the quarter to adjust
both the allowed leverage and required interest coverage for the last
12 months ended June 30, 2007 and for the 12-month periods ending Sept.
29, 2007 and Dec. 29, 2007. The Company was in compliance with both
requirements, as amended, for the period ended June 30, 2007.
"Despite continuing difficulties in the U.S. housing markets, our
results this quarter demonstrate the substantial efforts we've made to
right size our organization and to improve efficiencies in our plants
regardless of market conditions," stated William Griffiths, chairman,
president and chief executive officer of Champion Enterprises, Inc. "While
our manufacturing segment sales declined 19 percent, our segment margin
improved to 6.7 percent for the quarter, up from 6.6 percent last year. In
addition, the manufacturing segment ended the quarter on a strong note with
backlogs improving over 30 percent year-over-year and over 60 percent since
last quarter.
"Further, the international segment reported its strongest quarter
since being acquired in April of 2006 by more than doubling both sales and
segment income as compared to the second quarter of 2006."
Griffiths concluded, "Finally, as a result of our strict focus on cash
and working capital management, we nearly tripled free cash flow as
compared to last year's second quarter, adding further to the resources
available for reinvestment in our longer-term growth and diversification
strategy."
Second Quarter 2007 Conference Call
Champion Enterprises will host a conference call on Wednesday, July 18,
2007 at 11 a.m. EDT to discuss these results and current business trends.
To listen to the call, please call (888) 481-7939 for domestic callers or
(617) 847-8707 for international callers. The passcode is 97414913. The
call may also be heard live at http://www.championhomes.com under the investor
relations link.
A telephone replay of the call will be available approximately one hour
after the call's conclusion through Wednesday, Aug. 1, 2007. To access the
telephone replay, please call (888) 286-8010 for domestic callers or (617)
801-6888 for international callers. The passcode is 80507364. The webcast
replay will be available on the Company's Web site under the investor
relations link for 90 days.
About Champion
Auburn Hills, Michigan-based Champion Enterprises, Inc., a leader in
factory-built construction, operates 32 manufacturing facilities in North
America and the United Kingdom and works with over 3,000 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 future market conditions, the reinvestment of resources in
Champion's growth and diversification strategy, and backlogs and pending
orders, 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.
- Tables Follow -
CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
(Dollars and weighted shares in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, July 1, % June 30, July 1, %
2007 2006 Change 2007 2006 Change
(Restated) (Restated)
Net sales:
Manufacturing
segment $258,319 $319,943 (19%) $457,615 $651,594 (30%)
International
segment 56,887 27,131 110% 103,418 27,131 281%
Retail segment 21,354 35,043 (39%) 39,424 62,321 (37%)
Less: intercompany (6,200) (11,400) (10,300) (23,800)
Total net sales 330,360 370,717 (11%) 590,157 717,246 (18%)
Cost of sales 278,488 313,878 (11%) 506,272 606,114 (16%)
Gross margin 51,872 56,839 (9%) 83,885 111,132 (25%)
Selling, general and
administrative
expenses 36,747 40,027 (8%) 73,647 77,258 (5%)
Amortization of
intangible assets 1,417 1,299 9% 2,819 1,391 103%
Operating income 13,708 15,513 (12%) 7,419 32,483 (77%)
Interest expense, net 3,723 4,011 (7%) 7,763 6,081 28%
Income (loss) from
continuing operations
before income taxes 9,985 11,502 (13%) (344) 26,402 (101%)
Income tax expense
(benefit) 2,527 (100,503) 103% (563) (99,303) 99%
Income from continuing
operations 7,458 112,005 (93%) 219 125,705 (100%)
Income from
discontinued operations,
net of taxes 7 77 (91%) - 24 (100%)
Net income $7,465 $112,082 (93%) $219 $125,729 (100%)
Basic income per share:
Income from continuing
operations $0.10 $1.47 (93%) $- $1.65 (100%)
Income from
discontinued
operations - - - -
Net income $0.10 $1.47 (93%) $- $1.65 (100%)
Weighted shares for
basic EPS 76,796 76,343 76,676 76,212
Diluted income per
share:
Income from
continuing
operations $0.10 $1.44 (93%) $- $1.62 (100%)
Income from
discontinued
operations - - - -
Net income $0.10 $1.44 (93%) $- $1.62 (100%)
Weighted shares for
diluted EPS 77,658 77,495 77,506 77,438
See accompanying Notes to Financial Information.
CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands) (UNAUDITED) (UNAUDITED)
June 30, March 31, December 30,
2007 2007 2006
Assets:
Cash and cash equivalents $104,755 $76,571 $70,208
Accounts receivable, trade 73,646 58,099 47,645
Inventories 83,004 93,046 102,350
Deferred tax asset 31,565 32,126 32,303
Other current assets 11,836 9,834 10,677
Total current assets 304,806 269,676 263,183
Property, plant and equipment, net 106,653 110,598 112,527
Goodwill and other intangible assets,
net 335,537 334,012 335,464
Deferred tax asset 76,880 76,235 71,600
Other non-current assets 17,012 17,245 17,841
Total assets $840,888 $807,766 $800,615
Liabilities and Shareholders' Equity:
Accounts payable $88,363 $72,784 $54,607
Other accrued liabilities 149,223 144,791 148,596
Total current liabilities 237,586 217,575 203,203
Long-term debt 253,288 251,956 252,449
Deferred tax liability 10,178 10,327 10,600
Other long-term liabilities 32,504 32,562 32,601
Shareholders' equity 307,332 295,346 301,762
Total liabilities and shareholders'
equity $840,888 $807,766 $800,615
See accompanying Notes to Financial Information.
CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED CASH FLOW STATEMENTS (UNAUDITED)
(In thousands)
Three Months Ended Six Months Ended
June 30, July 1, June 30, July 1,
2007 2006 2007 2006
(Restated) (Restated)
Net income $7,465 $112,082 $219 $125,729
Income from discontinued operations (7) (77) - (24)
Adjustments:
Depreciation and amortization 5,005 4,833 10,032 8,064
Stock-based compensation 737 1,531 1,556 3,348
Change in deferred taxes (257) (101,900) (4,492) (101,900)
Loss (gain) on disposal of fixed
assets 207 (542) (593) (4,528)
Increase/decrease:
Accounts receivable (14,732) 5,713 (25,159) 11,199
Inventories 10,361 2,317 19,705 5,952
Accounts payable 14,253 (10,131) 32,285 (266)
Accrued liabilities 3,550 97 (2,352) (10,394)
Other, net (3,026) (1,361) (743) 2,014
Cash provided by continuing
operating activities 23,556 12,562 30,458 39,194
Additions to property, plant and
equipment (1,769) (4,547) (3,647) (9,058)
Acquisitions - (100,364) - (123,192)
Proceeds on disposal of fixed assets 2,586 1,143 3,404 5,763
Distributions from unconsolidated
subsidiaries 884 - 884 -
Cash provided by (used for)
investing activities 1,701 (103,768) 641 (126,487)
Payments on long-term debt (543) (528) (1,036) (829)
Proceeds from term loan - 78,561 - 78,561
Increase in deferred financing costs - (980) - (995)
(Increase) decrease in restricted cash - (6) 15 382
Common stock issued, net 957 1,333 1,421 1,955
Cash provided by
financing activities 414 78,380 400 79,074
Cash (used for) provided by
discontinued operations (127) 504 92 1,054
Effect of exchange rate changes on
cash and cash equivalents 2,640 1,832 2,956 1,832
Increase (decrease) in cash and
cash equivalents 28,184 (10,490) 34,547 (5,333)
Cash and cash equivalents at
beginning of period 76,571 132,136 70,208 126,979
Cash and cash equivalents at end
of period $104,755 $121,646 $104,755 $121,646
See accompanying Notes to Financial Information.
CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL INFORMATION (UNAUDITED)
(1) 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
consist of Highland Manufacturing that was acquired on March 31, 2006,
and North American Housing that was acquired on July 31, 2006. The
Company's international segment consists of Caledonian Building
Systems Limited, which was acquired on April 7, 2006.
(2) 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 income (loss) from continuing
operations before income taxes for the three and six months ended are
as follows (dollars in thousands):
Three months ended: June 30, Related July 1, Related
2007 Sales 2006 Sales
Manufacturing segment income $17,217 6.7% $21,039 6.6%
International segment income 4,458 7.8% 1,199 4.4%
Retail segment income 666 3.1% 2,379 6.8%
General corporate expenses (7,416) (7,605)
Amortization of intangible assets (1,417) (1,299)
Intercompany eliminations 200 (200)
Interest expense, net (3,723) (4,011)
Income from continuing operations
before income taxes $9,985 3.0% $11,502 3.1%
Six months ended: June 30, Related July 1, Related
2007 Sales 2006 Sales
Manufacturing segment income $17,313 3.8% $47,005 7.2%
International segment income 7,582 7.3% 1,199 4.4%
Retail segment income 1,538 3.9% 3,892 6.2%
General corporate expenses (16,695) (17,222)
Amortization of intangible assets (2,819) (1,391)
Intercompany eliminations 500 (1,000)
Interest expense, net (7,763) (6,081)
(Loss) income from continuing
operations before income taxes $(344) (0.1%) $26,402 3.7%
(3) 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 the six months ended June
30, 2007 is primarily based on the Company's estimated effective
consolidated tax rate for the full year plus any tax adjustments.
(4) For the year-to-date period ended June 30, 2007, gains on disposal of
fixed assets resulted primarily from the sale of two idle plants,
while for the same period in 2006, gains on disposal of fixed assets
resulted primarily from the sale of an investment property in Florida
and three idle plants.
CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
OTHER STATISTICAL INFORMATION (UNAUDITED)
Three months ended Six months ended
June 30, July 1, % June 30, July 1, %
2007 2006 Change 2007 2006 Change
MANUFACTURING
Units sold:
HUD-Code 2,752 4,185 (34%) 4,912 8,950 (45%)
Modular 1,002 1,246 (20%) 1,769 2,240 (21%)
Canadian 430 236 82% 774 538 44%
Other 10 25 (60%) 22 43 (49%)
Total units sold 4,194 5,692 (26%) 7,477 11,771 (36%)
Less: intercompany 86 172 (50%) 150 353 (58%)
Units sold to independent
retailers / builders 4,108 5,520 (26%) 7,327 11,418 (36%)
Floors sold 8,098 11,048 (27%) 14,463 22,362 (35%)
Multi-section mix 79% 83% 79% 79%
Average unit prices,
excluding delivery
Total $55,100 $51,300 7% $55,000 $50,500 9%
HUD-Code $45,400 $46,000 (1%) $45,400 $44,700 2%
Modular $75,000 $66,500 13% $76,000 $71,200 7%
Contacts:
Laurie Van Raemdonck
Vice President, Investor Relations
(248) 340-7731
lvanraemdonck@championhomes.net
or
Phyllis Knight
Executive Vice President and CFO
(248) 340-9090
SOURCE Champion Enterprises, Inc.
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Related links:
http://www.championhomes.com/
http://www.prnewswire.com/comp/110861.html/
CONTACT:
Laurie Van Raemdonck, Vice President,
Investor Relations, +1-248-340-7731,
lvanraemdonck@championhomes.net, or Phyllis Knight, Executive
Vice President and CFO, +1-248-340-9090, both of Champion
Enterprises, Inc.
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