Manufacturing Margin Improves to 7.8 Percent; International Revenues Climb
to $85 Million for the Quarter
AUBURN HILLS, Mich., Oct. 16 /PRNewswire-FirstCall/ -- Champion
Enterprises, Inc. (NYSE: CHB), a leader in factory-built construction,
today announced results for its third quarter ended Sept. 29, 2007.
Revenues for the quarter increased 3 percent to $357.7 million compared to
$346.5 million for the third quarter of 2006. Income from continuing
operations before income taxes increased 33 percent to $15.5 million
compared to $11.6 million for the third quarter of 2006. Net income for the
quarter increased 43 percent to $12.9 million, or $0.17 per diluted share,
compared to net income of $9.0 million, or $0.12 per diluted share, for the
same period of the prior year.
North American Manufacturing Segment
* Manufacturing segment net sales for the third quarter decreased 11
percent to $260.4 million compared to $293.4 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 $89 million in the third quarter of 2006.
* Manufacturing segment income for the third quarter increased to $20.2
million compared to $19.6 million in the third quarter of 2006 as a
result of an improved segment margin of 7.8 percent for the quarter
compared to 6.7 percent in the same period last year. Segment income
for the third quarter of last year included a non-cash pretax fixed
asset impairment charge of $1.2 million related to a plant closure.
* Segment backlogs totaled $64 million at the end of the third quarter
compared to $78 million at the same time last year and $68 million at
the end of the second quarter. The year-over-year decline in reported
backlogs was driven by the fourth quarter 2006 implementation of a
production allocation schedule at the Company's Canadian operations
limiting orders and backlogs to a forward three-month period. U.S.
backlogs at the end of the third quarter increased 48 percent compared
to the same time last year.
International Manufacturing Segment
* Driven by strong levels of spending in the U.K. prison sector,
international segment sales grew 176 percent to $85.3 million for the
quarter, up from $30.9 million in the same period of the prior
year, and increased 50 percent compared to $56.9 million last
quarter.
* Segment income increased to $6.4 million for the period from $2.0
million in the third quarter of 2006 and $4.5 million in the second
quarter, while the segment margin was 7.5 percent compared to 6.3
percent in the same period last year and 7.8 percent last quarter.
* International segment order backlogs further strengthened, with firm
contracts and orders pending contracts under framework agreements
totaling approximately $275 million, compared to approximately $185
million at the end of the third quarter of 2006 and approximately $245
million at the end of last quarter.
Retail Segment
* The retail segment reported third quarter 2007 revenues of $18.2
million compared to $31.4 million for the same period last year, a
reflection of the continuing challenges in the California housing
markets.
* Retail segment income totaled $0.7 million for the quarter, flat to
last quarter but down from $2.4 million in the third quarter of 2006.
Segment margin stood at 3.8 percent, an improvement over last quarter's
3.1 percent but down from the 7.7 percent recorded for the same period
of the prior year.
Other Highlights
* Cash and cash equivalents increased to $111.3 million as of Sept. 29,
2007 compared to $104.8 million at the end of the second quarter of
2007.
"Champion's long-term growth and diversification strategy continues to
pay dividends, as our international operations are helping to offset
continuing pressure on our manufacturing segment from difficult U.S.
housing markets. Despite an 11 percent year-over-year decline in North
American manufacturing sales, our total revenues increased 3 percent for
the quarter driven by strong growth in the international business," stated
William Griffiths, chairman, president and chief executive officer of
Champion Enterprises, Inc. "Our international segment reported a record
quarter in both sales and segment income, while backlogs continued to grow.
"In addition, despite this quarter's drop in manufacturing sales,
segment income increased as a result of higher segment margins. Past
capacity adjustments, coupled with our ongoing focus on engaging in
profitable business and managing our costs, led to an improved segment
margin of 7.8 percent this quarter compared to 6.7 percent last year.
"Our cash position also improved and now stands at $111 million leaving
us well positioned to continue to execute our growth and diversification
strategy. While we experienced a short-term increase in our receivables at
the end of the quarter, most of these receivables have already been
collected resulting in immediate working capital improvements in October.
As such, we anticipate that our cash from operations will be stronger again
next quarter and that related free cash flow will outpace 2006."
Griffiths concluded, "The aggressive steps we have taken to diversify
our footprint, strengthen our operations, and refocus our organization in
the face of soft U.S. housing markets resulted in a 43 percent increase in
net income for the quarter and a solid foundation for our future growth."
Third Quarter 2007 Conference Call
Champion Enterprises will host a conference call on Wednesday, Oct. 17,
2007 at 11 a.m. EDT to discuss these results and current business trends.
To listen to the call, please call (866) 761-0749 for domestic callers or
(617) 614-2707 for international callers. The passcode is 22182823. 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, Oct. 31, 2007. To access the
telephone replay, please call (888) 286-8010 for domestic callers or (617)
801-6888 for international callers. The passcode is 10494354. The webcast
replay will be available on the Company's Web site for 90 days under the
investor relations link.
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 backlogs and pending orders, future market conditions, areas of
management focus, the execution of Champion's growth and diversification
strategy, and cash flow projections, 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.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
(Dollars and weighted shares in thousands, except per share amounts)
Three Months Ended
September 29, September 30, %
2007 2006 Change
Net sales:
Manufacturing segment $260,379 $293,417 (11%)
International segment 85,286 30,946 176%
Retail segment 18,233 31,391 (42%)
Less: intercompany (6,200) (9,300)
Total net sales 357,698 346,454 3%
Cost of sales 296,802 289,563 2%
Gross margin 60,896 56,891 7%
Selling, general and administrative
expenses 40,082 38,738 3%
Restructuring charges - 1,200
Amortization of intangible assets 1,454 1,122 30%
Operating income 19,360 15,831 22%
Interest expense, net 3,853 4,214 (9%)
Income from continuing operations
before income taxes 15,507 11,617 33%
Income tax expense (benefit) 2,582 2,589 0%
Income from continuing operations 12,925 9,028 43%
(Loss) income from discontinued
operations, net of taxes - (13)
Net income $12,925 $9,015 43%
Basic income per share:
Income from continuing operations $0.17 $0.12 42%
(Loss) income from discontinued
operations - -
Net income $0.17 $0.12 42%
Weighted shares for basic EPS 77,062 76,456
Diluted income per share:
Income from continuing operations $0.17 $0.12 42%
(Loss) income from discontinued
operations - -
Net income $0.17 $0.12 42%
Weighted shares for diluted EPS 77,848 77,486
Nine Months Ended
September 29, September 30, %
2007 2006 Change
(Restated)
Net sales:
Manufacturing segment $717,994 $945,011 (24%)
International segment 188,704 58,077 225%
Retail segment 57,657 93,712 (38%)
Less: intercompany (16,500) (33,100)
Total net sales 947,855 1,063,700 (11%)
Cost of sales 803,074 895,677 (10%)
Gross margin 144,781 168,023 (14%)
Selling, general and administrative
expenses 113,729 115,996 (2%)
Restructuring charges - 1,200
Amortization of intangible assets 4,273 2,513 70%
Operating income 26,779 48,314 (45%)
Interest expense, net 11,616 10,295 13%
Income from continuing operations
before income taxes 15,163 38,019 (60%)
Income tax expense (benefit) 2,019 (96,714) 102%
Income from continuing operations 13,144 134,733 (90%)
(Loss) income from discontinued
operations, net of taxes - 11
Net income $13,144 $134,744 (90%)
Basic income per share:
Income from continuing operations $0.17 $1.77 (90%)
(Loss) income from discontinued
operations - -
Net income $0.17 $1.77 (90%)
Weighted shares for basic EPS 76,804 76,304
Diluted income per share:
Income from continuing operations $0.17 $1.74 (90%)
(Loss) income from discontinued
operations - -
Net income $0.17 $1.74 (90%)
Weighted shares for diluted EPS 77,616 77,512
See accompanying Notes to Consolidated Financial Information.
CHAMPION ENTERPRISES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands) (UNAUDITED) (UNAUDITED)
September 29, June 30, December 30,
2007 2007 2006
Assets:
Cash and cash equivalents $111,282 $104,755 $70,208
Accounts receivable, trade 102,456 73,646 47,645
Inventories 81,961 83,004 102,350
Deferred tax assets 29,145 31,565 32,303
Other current assets 10,735 11,836 10,677
Total current assets 335,579 304,806 263,183
Property, plant and equipment, net 105,182 106,653 112,527
Goodwill and other intangible assets,
net 336,181 335,537 335,464
Deferred tax assets 80,586 76,880 71,600
Other non-current assets 15,967 17,012 17,841
Total assets $873,495 $840,888 $800,615
Liabilities and Shareholders' Equity:
Accounts payable $110,380 $88,363 $54,607
Other accrued liabilities 142,383 149,223 148,596
Total current liabilities 252,763 237,586 203,203
Long-term debt 254,090 253,288 252,449
Deferred tax liabilities 9,621 10,178 10,600
Other long-term liabilities 32,581 32,504 32,601
Shareholders' equity 324,440 307,332 301,762
Total liabilities and shareholders'
equity $873,495 $840,888 $800,615
See accompanying Notes to Consolidated Financial Information.
CHAMPION ENTERPRISES, INC.
CONSOLIDATED CONDENSED CASH FLOW STATEMENTS (UNAUDITED)
(In thousands)
Three Months Ended Nine Months Ended
September September September September
29, 2007 30, 2006 29, 2007 30, 2006
(Restated)
Net income $12,925 $9,015 $13,144 $134,744
Loss (income) from discontinued
operations - 13 - (11)
Adjustments:
Depreciation and amortization 5,004 4,868 15,036 12,932
Stock-based compensation 679 369 2,235 3,717
Change in deferred taxes 72 2,300 (4,420) (99,600)
Fixed asset impairment charges - 1,200 - 1,200
(Gain) loss on disposal of fixed
assets (40) 58 (633) (4,470)
Increase/decrease:
Accounts receivable (27,948) 645 (53,107) 11,844
Inventories 1,274 (2,683) 20,979 3,269
Accounts payable 20,829 4,536 53,114 4,270
Accrued liabilities (6,695) (1,420) (9,047) (11,814)
Other, net (1,419) 1,307 (2,162) 3,321
Cash provided by continuing
operating activities 4,681 20,208 35,139 59,402
Additions to property, plant and
equipment (1,847) (5,221) (5,494) (14,279)
Acquisitions - (30,098) - (153,290)
Proceeds from disposal of fixed
assets 236 (33) 3,640 5,730
Distributions from unconsolidated
affiliates - - 884 -
Cash used for investing activities (1,611) (35,352) (970) (161,839)
Payments on long-term debt (541) (547) (1,577) (1,376)
Proceeds from term loan - - - 78,561
Increase in deferred financing
costs - (81) - (1,076)
Decrease in restricted cash - 316 15 698
Common stock issued, net 873 - 2,294 1,955
Cash provided by (used for)
financing activities 332 (312) 732 78,762
Cash provided by discontinued
operations 193 114 285 1,168
Effect of exchange rate changes on
cash and cash equivalents 2,932 135 5,888 1,967
Increase (decrease) in cash and
cash equivalents 6,527 (15,207) 41,074 (20,540)
Cash and cash equivalents at
beginning of period 104,755 121,646 70,208 126,979
Cash and cash equivalents at end
of period $111,282 $106,439 $111,282 $106,439
See accompanying Notes to Consolidated Financial Information.
CHAMPION ENTERPRISES, INC.
NOTES TO CONSOLIDATED 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 from continuing operations before
income taxes for the three and nine months ended are as follows
(dollars in thousands):
Three months ended: September Related September Related
29, 2007 Sales 30, 2006 Sales
Manufacturing segment income $20,228 7.8% $19,553 6.7%
International segment income 6,362 7.5% 1,959 6.3%
Retail segment income 689 3.8% 2,425 7.7%
General corporate expenses (6,665) (7,184)
Amortization of intangible assets (1,454) (1,122)
Intercompany eliminations 200 200
Interest expense, net (3,853) (4,214)
Income from continuing operations
before income taxes $15,507 4.3% $11,617 3.4%
Nine months ended: September Related September Related
29, 2007 Sales 30, 2006 Sales
Manufacturing segment income $37,541 5.2% $66,558 7.0%
International segment income 13,944 7.4% 3,158 5.4%
Retail segment income 2,227 3.9% 6,317 6.7%
General corporate expenses (23,360) (24,406)
Amortization of intangible assets (4,273) (2,513)
Intercompany eliminations 700 (800)
Interest expense, net (11,616) (10,295)
Income from continuing operations
before income taxes $15,163 1.6% $38,019 3.6%
(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 expense for the nine months ended
September 29, 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 September 29, 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.
OTHER STATISTICAL INFORMATION (UNAUDITED)
Three months ended Nine months ended
September September September September
29, 30, % 29, 30, %
2007 2006 Change 2007 2006 Change
MANUFACTURING SEGMENT
Units sold:
HUD-Code 2,808 3,587 (22%) 7,720 12,537 (38%)
Modular 980 1,215 (19%) 2,749 3,455 (20%)
Canadian 441 319 38% 1,215 857 42%
Other 29 15 93% 51 58 (12%)
Total units sold 4,258 5,136 (17%) 11,735 16,907 (31%)
Less: intercompany 70 126 (44%) 220 479 (54%)
Units sold to independent
retailers / builders 4,188 5,010 (16%) 11,515 16,428 (30%)
Floors sold 8,073 9,917 (19%) 22,536 32,279 (30%)
Multi-section mix 77% 82% 78% 80%
Average unit prices,
excluding delivery
Total $54,800 $52,400 5% $55,000 $51,100 8%
HUD-Code $44,300 $45,900 (3%) $45,000 $45,100 0%
Modular $77,000 $68,400 13% $76,400 $70,300 9%
SOURCE Champion Enterprises, Inc.
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Related links:
http://www.championhomes.com
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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