Highlighted by double-digit percentage increases in
revenues and operating income
AUBURN HILLS, Mich., July 19 /PRNewswire-FirstCall/ -- Champion
Enterprises, Inc. (NYSE: CHB), a leader in the factory-built housing industry,
announced today results for the second quarter ending July 2, 2005. Revenues
for the second quarter of 2005 climbed 17 percent to $317.1 million, compared
to $270.5 million for the second quarter of 2004. Second quarter 2005
operating income rose 16 percent to $18.5 million, compared to $16.0 million
for the comparable quarter of 2004. For the quarter, the Company posted net
income of $13.5 million, or $0.17 per diluted share, compared to $23.4
million, or $0.30 per diluted share for the same period last year.
The second quarter of 2004 was favorably impacted by a number of non-
operating items, including a $12.0 million tax benefit and $4.4 million of
income related to common stock warrant valuation and debt retirement gains.
As a result, provided below is a table summarizing Champion's pretax internal
operating results, which management regards as useful in evaluating its core
operations because non-cash capital structure related items and income taxes
are excluded.
Three months ended Six months ended
(in millions) July 2, July 3, Better/ July 2, July 3, Better/
2005 2004 (worse) 2005 2004 (worse)
Manufacturing
segment income $24.7 $17.6 $7.1 $35.8 $22.2 $13.6
Retail segment
income 2.6 1.4 1.2 3.9 2.2 1.7
Corporate, interest
expense and
intercompany (12.0) (11.7) (0.3) (22.7) (22.7) 0.0
Pretax internal
operating results 15.3 7.3 8.0 17.0 1.7 15.3
Warrant and
debt retirement
(loss) gain (0.4) 4.4 (4.8) 3.4 (4.0) 7.4
Income tax
(expense) benefits (0.6) 11.4 (12.0) (0.9) 11.1 (12.0)
Income (loss) -
continuing
operations 14.3 23.1 (8.8) 19.5 8.8 10.7
(Loss) income -
discontinued
operations (0.8) 0.3 (1.1) (3.3) 0.3 (3.6)
Net income $13.5 $23.4 $(9.9) $16.2 $9.1 $7.1
Second Quarter 2005 Highlights
Overall Results
* Pretax internal operating results improved 110 percent to $15.3 million
from $7.3 million in the second quarter of 2004.
Manufacturing Segment
* Manufacturing net sales increased 8 percent to $291.6 million from
$269.1 million in the second quarter of 2004.
* Manufacturing segment income for the quarter climbed 40 percent to
$24.7 million from $17.6 million in the second quarter of 2004.
* Manufacturing margins for the quarter stood at 8.5 percent, marking the
ninth consecutive quarter of year-over-year improving margins and the
segment's highest quarterly margin since 1998.
* The average home selling price climbed 10.8 percent compared to the
same period in the prior year. The Company said this increase was a result of
both higher raw material costs relative to last year's second quarter and the
shift in mix toward a higher percentage of modular homes.
* Modular home sales increased 18 percent compared to last year's second
quarter and represented approximately 20 percent of manufacturing revenues.
* Factory backlog was stable at approximately $91 million as compared to
approximately $90 million to end the second quarter of 2004.
Retail Segment
* The Company's California-based retail segment sales increased 37
percent to $38.8 million, compared to $28.3 million for the second quarter of
2004.
* Retail segment income grew 80 percent to $2.6 million, compared to $1.4
million in the same period last year.
Discontinued Operations
* Earlier this week the Company completed the sale of its remaining
traditional retail operations, which it reclassified as discontinued
operations last quarter. Since announcing its divestiture plan in the fourth
quarter of 2004, the Company has sold 49 sales lots generating approximately
$26 million of cash after related debt repayments, incurred an aggregate loss
of less than $1 million, and generated an estimated $80 million of additional
tax loss carryforwards.
Other Highlights
* Cash flow from continuing operating activities totaled $17.4 million
for the quarter, and cash and cash equivalents stood at approximately $150
million at quarter end.
* During the quarter, Champion repurchased $9.1 million of its 2007
senior notes for cash totaling $9.9 million and, as previously announced,
retired its common stock warrant for cash totaling $4.5 million.
* Earlier today it was also announced that Champion has entered into an
agreement to acquire New Era Building Systems, a leading modular homebuilder,
and its affiliates, Castle Housing of Pennsylvania and Carolina Building
Solutions, for cash consideration of $41 million, pending regulatory and
selling shareholder approval.
"This quarter was one in which we achieved several milestones in our quest
to build a better Champion," said William Griffiths, president and chief
executive officer. "It was our ninth consecutive quarter of year-over-year
improvement in manufacturing margins, and at 8.5 percent, this was the highest
quarterly margin since 1998. Our goal of achieving peak manufacturing margins
of 8.3 percent for the full year 2006 is in sight.
"In addition to making progress with our operations strategy, we also
successfully completed the divestiture of our traditional retail business
which, in the aggregate, generated net cash of approximately $26 million,"
continued Griffiths. "As we took the final step in that strategy we also took
the first step in our modular growth strategy with the announcement of the
agreement to acquire the New Era group of companies. This is expected to add
over $100 million in modular revenues annually and be immediately accretive to
earnings. It will also make Champion the largest modular homebuilder in the
United States.
"While we have made strong progress thus far in building a solid
foundation for the future, we still have many opportunities for further
improvement. We are excited about the quarter's results and today's
acquisition announcement, and are well on our way toward building a better
Champion," concluded Griffiths.
Second Quarter 2005 Conference Call
Champion Enterprises will host a conference call tomorrow, July 20, at
11 a.m. EDT to discuss these results and current business trends. To listen
to the call, please call 800-561-2813 for domestic or 617-614-3529 for
international. Passcode is 45945319. Or listen live via the website at
http://www.championhomes.net under the investor relations link. A replay of
the call will be available approximately one hour after its conclusion through
midnight, Wednesday, July 27, 2005. To access the replay, please go to the
investor relations link on the Company's website, or call 888-286-8010 for
domestic or 617-801-6888 for international, passcode is 40272982.
About Champion
Champion Enterprises, headquartered in Auburn Hills, Mich., a leading
manufacturer of factory-built housing, has produced more than 1.6 million
homes since 1953. Today, Champion operates 29 homebuilding manufacturing
facilities in North America and partners with over 2,900 independent
retailers, builders and developers. For more information, please visit
http://www.championhomes.net .
Forward Looking Statements
This news release contains certain statements, including statements
regarding the Company's financial position, future margins, growth
opportunities, future acquisitions and divestitures, modular revenues, and
earnings, 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 Six Months Ended
July 2, July 3, % July 2, July 3, %
2005 2004 Change 2005 2004 Change
Net sales:
Manufacturing $291,595 $269,084 8% $530,333 $478,940 11%
Retail (1) 38,805 28,300 37% 63,942 47,778 34%
Less:
intercompany (13,300) (26,900) (32,900) (49,500)
Total net
sales 317,100 270,484 17% 561,375 477,218 18%
Cost of sales 261,527 224,890 16% 468,538 404,167 16%
Gross margin 55,573 45,594 22% 92,837 73,051 27%
Selling, general
and administrative
expenses 36,642 33,927 8% 68,311 62,170 10%
Mark-to-market
(credit) charge
for common stock
warrant (2) (500) (3,900) (4,300) 1,200
Loss (gain) on
debt retirement (3) 901 (450) 901 2,776
Operating income 18,530 16,017 16% 27,925 6,905 304%
Interest expense, net 3,699 4,341 (15%) 7,507 9,164 (18%)
Income (loss) from
continuing
operations before
income taxes (4) 14,831 11,676 27% 20,418 (2,259) 1004%
Income tax expense
(benefit) (5) 600 (11,400) 900 (11,100)
Income from continuing
operations 14,231 23,076 (38%) 19,518 8,841 121%
(Loss) income from
discontinued
operations,
net of taxes (1) (751) 356 (3,309) 268
Net income $13,480 $23,432 (42%) $16,209 $9,109 78%
Income from
continuing
operations $14,231 $23,076 $19,518 $8,841
Less: dividends on
preferred stock (34) (259) (293) (419)
Less: amount allocated
to participating
securities (6) (195) (1,594) (793) (545)
Income from continuing
operations available
to common
shareholders $14,002 $21,223 (34%) $18,432 $7,877 134%
Basic income (loss)
per share (6):
Income from
continuing
operations $0.19 $0.30 (37%) $0.25 $0.11 127%
(Loss) income
from discontinued
operations (0.01) 0.01 (0.05) 0.01
Net income $0.18 $0.31 (42%) $0.20 $0.12 67%
Weighted shares
for basic EPS 75,176 70,657 73,861 69,380
Diluted income (loss)
per share (6):
Income from
continuing
operations $0.18 $0.29 (38%) $0.25 $0.11 127%
(Loss) income
from discontinued
operations (0.01) 0.01 (0.05) -
Net income $0.17 $0.30 (43%) $0.20 $0.11 82%
Weighted shares
for diluted EPS 76,042 72,253 74,756 71,152
See accompanying Notes to Financial Information.
CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED) (1)
(In thousands)
July 2, April 2, January 1,
2005 2005 2005
Assets
Cash and cash equivalents $149,899 $142,119 $142,266
Restricted cash 528 4,694 529
Accounts receivable, trade 41,694 34,245 22,119
Inventories 80,886 83,869 71,616
Current assets of
discontinued operations 9,780 14,751 35,463
Other current assets 13,736 13,003 13,535
Total current assets 296,523 292,681 285,528
Property, plant and
equipment, net 78,207 77,999 80,957
Goodwill 126,564 126,583 126,591
Non-current assets of
discontinued operations 4,701 6,478 7,747
Other non-current assets 13,371 15,726 16,219
$519,366 $519,467 $517,042
Liabilities, Redeemable Convertible
Preferred Stock and Shareholders' Equity
Accounts payable $33,673 $28,664 $13,819
Current liabilities of
discontinued operations 5,422 9,051 21,411
Other accrued liabilities 136,620 137,052 141,128
Total current
liabilities 175,715 174,767 176,358
Long-term debt 191,543 200,710 200,758
Long-term liabilities of
discontinued operations 342 417 432
Other long-term liabilities 34,660 40,492 41,444
Redeemable convertible
preferred stock - 20,750 20,750
Shareholders' equity 117,106 82,331 77,300
$519,366 $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 Six Months Ended
July 2, July 3, July 2, July 3,
2005 2004 2005 2004
Income from continuing
operations $14,231 $23,083 $19,518 $8,841
Adjustments:
Depreciation 2,524 2,672 5,063 5,342
Mark-to-market (credit)
charge for common
stock warrant (2) (500) (3,900) (4,300) 1,200
Loss (gain) on
debt retirement (3) 901 (450) 901 2,776
Gains on fixed
asset sales (1,029) (111) (2,624) (74)
Changes in working capital 391 (1,810) (9,143) (26,865)
Changes in
accrued liabilities (408) (1,007) (2,222) (6,025)
Decease in allow. for
tax adjustments (5) - (12,000) - (12,000)
Other 1,316 (1,745) 5,141 (967)
Cash provided by (used for)
continuing operating
activities 17,426 4,732 12,334 (27,772)
(Loss) income from
discontinued operations (751) 349 (3,309) 268
Proceeds from sales of
retail business 4,744 - 24,312 -
(Increase) decrease in
net assets of
discontinued operations (1,132) (3,841) (11,127) (7,196)
Cash provided by (used for)
discontinued operations (1) 2,861 (3,492) 9,876 (6,928)
Additions to property,
plant and equipment (2,902) (2,250) (5,370) (4,130)
Proceeds on disposal of
fixed assets 310 1,017 5,056 1,240
Other - (51) (55) (109)
Cash (used for) provided by
investing activities (2,592) (1,284) (369) (2,999)
Decrease in floor plan
payable, net - - - (29)
Repayment of industrial
revenue bond and other debt (77) (126) (128) (5,939)
Purchase of Senior
Notes (3) (9,885) (10,395) (9,885) (10,395)
Decrease (increase)
in restricted cash 4,166 6,000 1 7,710
Purchase of common
stock warrant (2) (4,500) - (4,500) -
Preferred stock issued, net - - - 12,000
Common stock issued, net 415 2,901 597 4,512
Dividends paid on
preferred stock (34) (48) (293) (160)
Cash (used for) provided
by financing activities (9,915) (1,668) (14,208) 7,699
Increase (decrease) in
cash and cash equivalents 7,780 (1,712) 7,633 (30,000)
Cash and cash equivalents
at beginning of period 142,119 117,580 142,266 145,868
Cash and cash equivalents
at end of period $149,899 $115,868 $149,899 $115,868
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 and former consumer finance business, excluding its non-
traditional California retail operation. Prior traditional retail amounts
have been restated to reflect this classification.
(2) In the quarter ended July 2, 2005 Champion recorded a $0.5 million
credit for the change in estimated fair value of an outstanding common stock
warrant for 2.2 million shares. This warrant valuation resulted in a credit
of $3.9 million in the comparable quarter a year earlier. In addition, during
the second quarter of 2005, the Company repurchased and subsequently cancelled
the common stock warrant in exchange for a cash payment of $4.5 million and
the preferred shareholder elected to immediately convert the outstanding
Series B-2 and Series C preferred stock into 3.1 million shares of common
stock under the terms of the respective preferred stock agreements.
(3) During the second quarter of 2005, the Company purchased $9.1 million
of its Senior Notes for cash consideration of $9.9 million, resulting in a
pretax loss of $0.9 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 and six months ended follows (dollars in
thousands):
Three months ended: July 2, Related July 3, Related %
2005 Sales 2004 Sales Change
Manufacturing segment income $24,667 8.5% $17,567 6.5% 40%
Retail segment income 2,602 6.7% 1,445 5.1% 80%
General corporate expenses (8,738) (6,845) (28%)
Mark-to-market credit (charge)
for stock warrant 500 3,900
(Loss) gain on debt retirement (901) 450
Intercompany eliminations 400 (500)
Interest expense, net (3,699) (4,341) 15%
Income from continuing
operations before income
taxes $14,831 4.7% $11,676 4.3% 27%
Six months ended July 2, Related July 3, Related %
2005 Sales 2004 Sales Change
Manufacturing segment income $35,857 6.8% $22,221 4.6% 61%
Retail segment income 3,869 6.1% 2,228 4.7% 74%
General corporate expenses (16,800) (12,868) (31%)
Mark-to-market credit (charge)
for stock warrant 4,300 (1,200)
Loss on debt retirement (901) (2,776)
Intercompany eliminations 1,600 (700)
Interest expense, net (7,507) (9,164) 18%
Income (loss) from continuing
operations before income
taxes $20,418 3.6% $(2,259) (0.5%) 1004%
(5) The effective tax rates for the periods presented differ from the 35
percent federal statutory rate because the Company has a 100 percent 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 during the periods
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
NOTES TO FINANCIAL INFORMATION (UNAUDITED)
CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
OTHER STATISTICAL INFORMATION (UNAUDITED)
Three Months Ended Six Months Ended
July 2, July 3, % July 2, July 3, %
2005 2004 Change 2005 2004 Change
MANUFACTURING
Homes sold
HUD Code 4,843 5,264 (8%) 8,857 9,386 (6%)
Modular 868 838 4% 1,648 1,532 8%
Canadian 264 252 5% 460 441 4%
Total homes sold 5,975 6,354 (6%) 10,965 11,359 (3%)
Less: intercompany 216 556 (61%) 555 1,002 (45%)
Homes sold to
independent
retailers/
builders 5,759 5,798 (1%) 10,410 10,357 1%
Floors sold 11,406 12,037 (5%) 21,015 21,761 (3%)
Multi-section mix 84% 83% 85% 85%
Average home prices
Total $45,200 $40,800 11% $44,700 $40,700 10%
HUD Code $42,800 $42,200
Modular $60,500 $58,600
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:
Phyllis Knight, CFO of Champion Enterprises,
+1-248-340-9090; Tim Hanson or Paul Kesman of Identity Investor
Relations, +1-248-258-2333, chb@identitypr.com , for Champion
Enterprises
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