AUBURN HILLS, Mich., Sept. 20 /PRNewswire-FirstCall/ -- The following
Management Report from Walter R. Young, Chairman, President and CEO of
Champion Enterprises, Inc. (NYSE: CHB), was posted to Champion's website and
sent to interested parties today.
With this Management Report, I'll update you on the status of our
restructuring actions, ongoing operations and financial position. Also, I'll
discuss various industry issues which have affected our industry forecasts for
this year and next.
Restructuring and Operations Update
The benefits of our recent restructuring actions are beginning to show.
Improvements are being realized in our ongoing operations and in our financial
position. The costs of these actions are inline with what we had previously
forecasted. An update for each of our segments follows.
Retail -- Results through August indicate that, as previously announced,
the 117 retail sales locations we currently operate should be at breakeven in
the third quarter. Since the end of June, we've liquidated 350 new homes at
our company-owned stores, or more than $10 million of inventory. As to market
conditions, retail traffic at our sales centers continues to hold up well and
rose about 5% per average store year-over-year in August.
Manufacturing -- Excluding costs to close and consolidate manufacturing
facilities in the third quarter, our manufacturing operations continue to be
profitable. The 39 facilities we're operating are poised for improved margins
and higher profits. Independent retailers remain conservative with their
inventory levels, affecting wholesale sales in the short run but losses
related to retailer defaults remain minimal. Retailers that have joined the
Champion Home Center (CHC) distribution network total 627 locations, up from
473 at the beginning of the year. Growing this program remains a priority.
Finance -- At HomePride Finance we continue to be pleased with the volume
and quality of loans originated. In the first two months of third quarter,
loans generated totaled $15 million, bringing originations since inception to
$21 million. With the uncertainty surrounding availability of chattel
financing, we're especially glad to have HomePride for home-only loans to
consumers who purchase Champion-built products.
Our recent joint venture with National City Mortgage Co. is a positive
step in providing real estate financing for our customers. National City
understands the mortgage process and has the resources and experience to
provide CHC's with a dedicated source of real estate financing. This alliance
is a great opportunity for company stores and independent locations to learn
the real estate loan process and to offer conforming real estate mortgages to
their customers.
Liquidity -- In July and August we generated $15 million in cash flow from
operations even after using $2.5 million for closing-related expenses. We
ended August with $94 million in unrestricted cash, which was $9 million more
than we had at the end of the second quarter. This improved cash position is
the result of our efforts to manage our businesses for cash and our
restructuring actions.
Industry Update
Deutsche -- On Monday Deutsche Financial Services announced that it is
liquidating its manufactured housing floor plan lending portfolio estimated to
be about $520 million. They will no longer approve loans after October 31 or
fund loans after November 15. Although the impact of Deutsche exiting the
industry is not known, the exit of Conseco Finance earlier this year has been
orderly with more financing coming from not only the national lenders, but
also local and regional banks. At the time of Conseco's exit, they had about
$770 million of floor plan loans outstanding. Regardless, the industry sure
didn't need this additional challenge!
As to our independent retailers, they have approximately $86 million of
floor plan loans for Champion-built homes outstanding with Deutsche. These
loans will either need to be transitioned to other lending sources or the
homes liquidated. Of this total, about $66 million is still under our
repurchase obligation. For our company stores we have a $5 million credit
line with Deutsche and less than $2 million utilized.
Conseco -- Although no one knows how the issues regarding Conseco will
unfold, we believe that a few things are highly probable. First, Conseco's
lending volume will remain tight with the level of home-only loans they
originate continuing to decrease. We expect that they will wholesale more of
their repossessions, keeping them local and liquidating them quickly.
Finally, we believe that their $25 billion loan portfolio will continue to be
serviced on an orderly basis.
Industry Forecasts -- Due to uncertainty regarding wholesale and consumer
financing, retailers continue to lower new home inventory levels. We estimate
that inventories in the retail distribution channel will be reduced by
25,000 homes this year, or by more than 25% of the December 2001 total. As a
result, we've lowered our 2002 industry wholesale shipment estimate to
170,000 homes from 180,000 previously. Our revised industry forecasts are as
follows:
2001 2002 2003
(Homes, in 000's) Actual Est. Est.
Repossessions 90 90 - 80 -11%
New retail 212 195 -8% 205 +5%
Total demand 302 285 -6% 285 -
Inventories 97 72 -26% 62 -14%
Shipments/production 193 170 -12% 195 +15%
To end on a positive note, we are pleased that one of the rating agencies
recently acknowledged our restructuring actions and confirmed our ratings as
previously assigned although they changed the outlook to negative.
We look forward to talking with you on October 16, 2002 when we release
our third quarter results.
Walt
Champion Enterprises, Inc., headquartered in Auburn Hills, Michigan, is
the industry's leading manufacturer and has produced nearly 1.6 million homes
since the company was founded. The company operates 39 homebuilding
facilities and 117 retail locations. Independent retailers, including
627 Champion Home Center locations, and approximately 400 builders and
developers also sell Champion-built homes. In addition, the company provides
financing for retail buyers of its homes. Further information can be found at
the company's website, http://www.championhomes.net .
This Management Report contains certain statements, including statements
regarding industry forecasts and assessments, expected restructuring charges,
cost improvements, profitability, and cash flow, and the effect on our
industry due to the business decisions by Deutsche and Conseco, 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 Management Report. 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, and those discussions regarding risk factors
are incorporated herein by reference.
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:
Anthony S. Cleberg 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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