Diversification Drives Profitability and Positive Free Cash Flow Despite
Continued Deterioration in Champion's Core Domestic Housing Markets
TROY, 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 28, 2008. Revenues for the
quarter decreased 12.5 percent to $289.2 million compared to $330.4 million
for the second quarter of 2007. Net income for the quarter totaled $3.4
million, or $0.04 per diluted share, compared to net income of $7.5
million, or $0.10 per diluted share, for the same period of the prior year.
North American Manufacturing Segment
-- Manufacturing segment net sales for the second quarter decreased
18.2 percent to $211.3 million compared to $258.3 million in the same
period of the prior year.
-- Manufacturing segment income for the second quarter totaled $13.6
million compared to $17.2 million in the second quarter of 2007. The
segment margin stood at 6.4 percent for the quarter compared to 6.7 percent
in the same period last year.
-- Revenues from the sale of modular homes in the U.S. totaled $49
million for the quarter, down from $80 million in the second quarter of
2007.
-- Segment backlogs totaled $42 million at June 28, 2008, up from $25
million at the end of last quarter but down from $68 million at the end of
the second quarter of 2007.
International Manufacturing Segment
-- International segment net sales increased 24.0 percent to $70.5
million for the quarter from $56.9 million in the same period of the prior
year.
-- Segment income for the quarter was $3.9 million, down from $4.5
million in the second quarter of 2007.
-- The segment margin for the quarter was 5.5 percent, down from 7.8
percent in the same period last year. The margin was negatively impacted in
the quarter by both mix of business and the impact of additional
investments in selling, general and administrative expenses in anticipation
of an expansion of the business in 2009 and beyond.
-- For the first half of 2008, international segment revenues increased
75 percent to $180.9 million from $103.4 million for the same period of
2007. Segment income for the six-month period grew to $12.3 million from
$7.6 million last year, and the segment margin was 6.8 percent compared to
7.3 percent in the prior period.
-- International segment order backlogs remain strong, with firm
contracts and orders pending contracts under framework agreements totaling
approximately $205 million compared to $210 million at the end of last
quarter.
Retail Segment
-- Retail segment second quarter 2008 revenues totaled $9.4 million,
down from $21.4 million for the same period last year.
-- As a result of significantly reduced sales levels caused by
difficult California housing markets, the retail segment reported a loss of
$1.0 million for the quarter compared to segment income of $0.7 million in
the second quarter of 2007.
Other Items
-- During the quarter, the Company elected to repay the $24 million
note issued in connection with its December 2007 acquisition of SRI Homes
ahead of the scheduled maturity date of Jan. 5, 2009.
-- Cash, cash equivalents and short-term investments totaled $91.3
million as of June 28, 2008 compared to $105.4 million at the end of last
quarter and $104.8 million at the end of the second quarter of 2007.
-- Cash provided by operating activities totaled $14.1 million for the
quarter ended June 28, 2008, down from $23.6 million for the same period
last year primarily as a result of reduced earnings.
"Continuing difficult housing market conditions and mounting economic
concerns in the U.S. negatively impacted our domestic operations during the
quarter," stated William Griffiths, chairman, president and chief executive
officer of Champion Enterprises, Inc. "Our second quarter unit sales in the
U.S. were only 7 percent higher than the typically slower first quarter,
while last year's second quarter shipments increased 28 percent over the
first quarter.
"However, strong contributions from our Canadian operations helped to
mitigate weakness in the U.S. This, coupled with further plant
rationalizations completed last quarter, resulted in a manufacturing
segment margin of 6.4 percent which is down only slightly from last year's
6.7 percent and a significant improvement over the first quarter."
Griffiths concluded, "While the downturn in domestic single-family
housing persists, we are focused on increasing our multi-family, military
and commercial modular business in the U.S.; maximizing margins in stronger
housing markets in western Canada; building the infrastructure to further
grow our international segment and seeking opportunities in growing
residential markets abroad. Our continuing diversification efforts will
result in a stronger company poised to benefit from increased sales when
the nation's housing markets begin to stabilize."
Second Quarter 2008 Conference Call
Champion Enterprises will host a conference call on Thursday, July 17,
2008 at 11 a.m. EDT to discuss these results and current business trends.
To listen to the call, please call (888) 661-5138 for domestic callers or
(913) 312-0854 for international callers. The passcode is 4613006. 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 two
hours after the call's conclusion through Friday, July 25, 2008. To access
the telephone replay, please call (888) 203-1112 for domestic callers or
(719) 457-0820 for international callers. The passcode is 4613006. A
webcast replay will be available on the Company's web site under the
"Investors" link.
About Champion
Troy, Michigan-based Champion Enterprises, Inc., a leader in
factory-built construction, operates 31 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, international segment expansion and
growth, future market conditions, sales and margin projections and
Champion's growth and diversification strategy, 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.
CHAMPION ENTERPRISES, INC.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
(Dollars and weighted shares in thousands, except per share amounts)
Three Months Ended
----------------------------------
June 28, June 30, %
2008 2007 Change
---------- ---------- --------
Net sales:
Manufacturing segment $211,273 $258,319 (18.2%)
International segment 70,513 56,887 24.0%
Retail segment 9,398 21,354 (56.0%)
Less: intercompany (2,000) (6,200)
--------- ---------
Total net sales 289,184 330,360 (12.5%)
Cost of sales 246,722 278,488 (11.4%)
--------- ---------
Gross margin 42,462 51,872 (18.1%)
Selling, general and administrative
expenses 33,015 36,740 (10.1%)
Restructuring charges - -
Foreign currency transaction (gains)
losses (576) -
Amortization of intangible assets 2,382 1,417 68.1%
------- -------
Operating income (loss) 7,641 13,715 (44.3%)
Interest expense, net 4,089 3,723 9.8%
------- -------
Income (loss) before income taxes 3,552 9,992 (64.5%)
Income tax expense (benefit) 202 2,527 (92.0%)
------- -------
Net income (loss) $3,350 $7,465 (55.1%)
======== ========
Basic income (loss) per share: $0.04 $0.10 (60.0%)
======== ========
Weighted shares for basic EPS 77,738 76,796
======== ========
Diluted income (loss) per share: $0.04 $0.10 (60.0%)
======== ========
Weighted shares for diluted EPS 77,929 77,658
======== ========
See accompanying Notes to Consolidated Financial Information.
CHAMPION ENTERPRISES, INC.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
(Dollars and weighted shares in thousands, except per share amounts)
Six Months Ended
----------------------------------
June 28, June 30, %
2008 2007 Change
---------- ---------- --------
Net sales:
Manufacturing segment $392,758 $457,615 (14.2%)
International segment 180,879 103,418 74.9%
Retail segment 18,445 39,424 (53.2%)
Less: intercompany (6,200) (10,300)
--------- ---------
Total net sales 585,882 590,157 (0.7%)
Cost of sales 506,852 506,272 0.1%
--------- ---------
Gross margin 79,030 83,885 (5.8%)
Selling, general and administrative
expenses 72,318 72,526 (0.3%)
Restructuring charges 9,471 1,121 744.9%
Foreign currency transaction (gains)
losses 1,775 -
Amortization of intangible assets 4,851 2,819 72.1%
-------- --------
Operating income (loss) (9,385) 7,419 (226.5%)
Interest expense, net 7,962 7,763 2.6%
------- --------
Income (loss) before income taxes (17,347) (344) 4942.7%
Income tax expense (benefit) (213) (563) (62.2%)
------- --------
Net income (loss) $(17,134) $219 (7923.7%)
======== ========
Basic income (loss) per share: $(0.22) $ -
======== ========
Weighted shares for basic EPS 77,605 76,676
======== ========
Diluted income (loss) per share: $(0.22) $ -
======== ========
Weighted shares for diluted EPS 77,605 77,506
======== ========
See accompanying Notes to Consolidated Financial Information.
CHAMPION ENTERPRISES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
(UNAUDITED) (UNAUDITED)
June 28, March 29, December 29,
2008 2008 2007
---------- ---------- ------------
Assets:
Cash and cash equivalents $84,370 $95,405 $135,408
Short-term investments 6,950 9,975 -
Accounts receivable 95,365 125,833 89,646
Inventories 82,703 94,704 90,782
Deferred tax assets 28,369 28,760 29,746
Other current assets 9,334 9,000 14,827
---------- ---------- ----------
Total current assets 307,091 363,677 360,409
---------- ---------- ----------
Property, plant and equipment, net 105,353 104,834 116,984
Goodwill and other intangible assets,
net 433,667 431,459 433,151
Deferred tax assets 97,298 93,085 87,983
Other non-current assets 22,313 22,706 23,696
---------- ---------- ----------
Total assets $965,722 $1,015,761 $1,022,223
========== ========== ==========
Liabilities and Shareholders' Equity:
Short-term debt $3,997 $29,628 $25,884
Accounts payable 125,482 137,494 119,390
Other accrued liabilities 148,283 167,968 173,052
---------- ---------- ----------
Total current liabilities 277,762 335,090 318,326
---------- ---------- ----------
Long-term debt 342,186 342,671 342,897
Deferred tax liabilities 10,272 6,725 7,065
Other long-term liabilities 34,611 34,359 34,089
Shareholders' equity 300,891 296,916 319,846
---------- ---------- ----------
Total liabilities and shareholders'
equity $965,722 $1,015,761 $1,022,223
========== =========== ===========
See accompanying Notes to Consolidated Financial Information.
CHAMPION ENTERPRISES, INC.
CONSOLIDATED CONDENSED CASH FLOW STATEMENTS (UNAUDITED)
(In thousands)
Three Months Ended Six Months Ended
-------------------- ------------------
June 28, June 30, June 28, June 30,
2008 2007 2008 2007
----------------------------------------
Net income (loss) $3,350 $7,465 $(17,134) $219
Adjustments:
Depreciation and amortization 5,705 5,005 11,812 10,032
Stock-based compensation 297 737 857 1,556
Change in deferred taxes (4,828) (257) (8,608) (4,492)
Fixed asset impairment charges - - 7,000 -
Insurance proceeds - - 2,500 -
(Gain) loss on disposal of fixed
assets (41) 207 (139) (593)
Foreign currency transaction
(gains) losses (576) - 1,775 -
Increase/decrease:
Accounts receivable 30,310 (14,732) (1,325) (25,159)
Inventories 12,095 10,361 8,711 19,705
Accounts payable (9,921) 14,253 4,376 32,285
Accrued liabilities (22,050) 3,550 (21,587) (2,352)
Other, net (207) (3,033) (452) (743)
------------------ ------------------
Cash provided by (used for)
operating activities 14,134 23,556 (12,214) 30,458
------------------ ------------------
Proceeds on disposal of fixed assets 53 2,586 1,200 3,404
Redemption (purchase) of short-term
investments, net 3,025 - (6,950) -
Additions to property, plant and
equipment (3,441) (1,769) (5,716) (3,647)
Distributions from unconsolidated
affiliates - 884 - 884
Acquisitions (177) - (2,500) -
------------------ ------------------
Cash (used for) provided by
investing activities (540) 1,701 (13,966) 641
------------------ ------------------
Payments on debt (25,608) (543) (25,657) (1,036)
Decrease in restricted cash - - - 15
Common stock issued, net 372 957 437 1,421
------------------ ------------------
Cash (used for) provided by
financing activities (25,236) 414 (25,220) 400
------------------ ------------------
Cash (used for) provided by
discontinued operations (65) (127) (87) 92
Effect of exchange rate changes on
cash and cash equivalents 672 2,640 449 2,956
------------------ ------------------
(Decrease) increase in cash and
cash equivalents (11,035) 28,184 (51,038) 34,547
Cash and cash equivalents at
beginning of period 95,405 76,571 135,408 70,208
------------------ ------------------
Cash and cash equivalents at end of
period $84,370 $104,755 $84,370 $104,755
================== ==================
See accompanying Notes to Consolidated Financial Information.
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. ("SRI"), a producer of factory-
built homes in western Canada. The results of operations for SRI are
included in the Company's results and its manufacturing segment beginning
in the first quarter of 2008.
(2) The Company evaluates the performance of its manufacturing,
international and retail segments based on income before amortization of
intangible assets, interest, income taxes, foreign currency transaction
gains and losses on intercompany indebtedness and general corporate
expenses. A reconciliation of income (loss) before income taxes for the
three and six months ended is as follows (dollars in thousands):
Three months ended: June 28, Related June 30, Related
2008 Sales 2007 Sales
-------------------------------------
Manufacturing segment income $13,595 6.4% $17,217 6.7%
International segment income 3,889 5.5% 4,458 7.8%
Retail segment (loss) income (1,043) -11.1% 666 3.1%
General corporate expenses (7,094) (7,409)
Amortization of intangible assets (2,382) (1,417)
Intercompany eliminations 100 200
Foreign currency transaction gains 576 -
Interest expense, net (4,089) (3,723)
-------- --------
Income before income taxes $3,552 1.2% $9,992 3.0%
======== ========
Six months ended: June 28, Related June 30, Related
2008 Sales 2007 Sales
-------------------------------------
Manufacturing segment income $4,572 1.2% $17,313 3.8%
International segment income 12,278 6.8% 7,582 7.3%
Retail segment (loss) income (3,807) -20.6% 1,538 3.9%
General corporate expenses (15,702) (16,695)
Amortization of intangible assets (4,851) (2,819)
Intercompany eliminations (100) 500
Foreign currency transaction losses (1,775) -
Interest expense, net (7,962) (7,763)
---------- --------
Loss before income taxes $(17,347) (3.0%) $ (344) (0.1%)
========== ========
(3) For the year-to-date period ended June 28, 2008, $9.8 million of
restructuring charges were incurred in connection with the Company's
decision to close a manufacturing facility in Oregon, close the final of
four plants at an Indiana complex where the other three plants had been
previously idled, and reduce the number of North American regional offices
from four to two. Charges totaling $9.3 million were recorded in the
manufacturing segment with the remaining $0.5 million included in general
corporate expenses. During the same period in 2007, the Company recorded
restructuring charges of $1.3 million related to the closure of a plant in
Pennsylvania. A portion of these charges, totaling $0.3 million and $0.2
million in 2008 and 2007, respectively, was recorded in cost of sales,
with the balance reported as restructuring charges.
(4) During the quarter ended June 30, 2008, the Company repaid the
$24.0 million (CAD) note issued in connection with its acquisition of
SRI.
CHAMPION ENTERPRISES, INC.
OTHER STATISTICAL INFORMATION (UNAUDITED)
Three months ended Six Months Ended
--------------------- -------------------
June 28, June 30, % June 28, June 30, %
2008 2007 Change 2008 2007 Change
------------------------ -----------------------
MANUFACTURING SEGMENT
Units sold:
HUD-Code 1,697 2,752 (38%) 3,258 4,912 (34%)
Modular 652 1,002 (35%) 1,321 1,769 (25%)
Canadian 733 430 70% 1,297 774 68%
Other 72 10 620% 99 22 350%
---------------- ---------------
Total units sold 3,154 4,194 (25%) 5,975 7,477 (20%)
Less: intercompany 35 86 (59%) 98 150 (35%)
---------------- ----------------
Units sold to independent
retailers / builders 3,119 4,108 (24%) 5,877 7,327 (20%)
Floors sold 5,649 8,098 (30%) 10,637 14,463 (26%)
Multi-section mix 69% 79% 67% 79%
Average unit prices,
excluding delivery
Total $57,800 $55,100 5% $57,200 $55,000 4%
HUD-Code $45,400 $45,400 0% $45,400 $45,400 0%
Modular $70,800 $75,000 (6%) $70,000 $76,000 (8%)
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, +1-248-614-8267,
lvanraemdonck@championhomes.net, or Phyllis Knight, Executive
Vice President and CFO, +1-248-614-8200, both of Champion
Enterprises, Inc.
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