Laurie Van Raemdonck
Vice President, Investor Relations
(248) 340-7731
lvanraemdonck@championhomes.net
or
Phyllis Knight
Executive Vice President and CFO
(248) 340-9090
Champion Enterprises Reports First Quarter 2007 Results
International Revenues Increase While Weakness Persists in the U.S. HUD-Code
and Broader Housing Markets
AUBURN HILLS, Mich., April 17, 2007 – Champion Enterprises, Inc. (NYSE: CHB), a leader in
factory-built construction, today announced results for its first quarter ended March 31, 2007.
Revenues for the quarter decreased 25 percent to $259.8 million compared to $346.5 million for the
first quarter of 2006. The Company reported a net loss for the quarter of $7.2 million, or $0.09
per diluted share, compared to net income of $13.6 million, or $0.18 per diluted share, for the
same period of the prior year.
“Despite strong contributions from our non-U.S. operations, this quarter’s results demonstrate the
difficult markets we continue to face in our domestic operations,” stated William C. Griffiths,
chairman, president and chief executive officer of Champion Enterprises, Inc. “Seasonally, the
first quarter is always our most challenging, and this was no exception. As a result of the
continuing deterioration in U.S. housing markets, we were only able to operate our U.S.
manufacturing plants at 44 percent capacity utilization during the quarter even after reducing our
production capacity by over 20 percent in the last year.
“While our order intake rates and backlogs have seen a seasonal increase over the last several
weeks, orders continue to run below last year’s rate, indicating that difficult market conditions
may persist well into the year.”
Mr. Griffiths concluded, “In light of market conditions, we have intensified our focus on cost
control, closed our sixth plant in less than 12 months, reduced our working capital investment by
$17 million and curtailed our capital spending. These actions, along with our international
diversification, enabled us to generate positive free cash flow during our most challenging
quarter. Strong cash returns will continue to fuel the future execution of our growth and
diversification strategy.”
Champion Enterprises Reports First Quarter 2007 Results
Page 2
North American Manufacturing Segment
| • |
|
Manufacturing segment net sales for the first quarter decreased 40
percent to $199.3 million compared to $331.7 million in the same
period of the prior year. Excluding approximately $23 million of
revenues from the sale of homes to FEMA during the first quarter
of last year, net sales fell 35 percent. |
| |
| • |
|
Revenues from the sale of modular homes in the quarter totaled $63
million, representing 32 percent of manufacturing segment sales,
down from $81 million in the first quarter of 2006, while homes
sold into Canada grew 14 percent compared to the first quarter of
2006 and increased 25 percent over last quarter. |
| |
| • |
|
Manufacturing segment income for the first quarter totaled $0.1
million compared to $26.0 million in the first quarter of 2006.
Segment income included $1.3 million of restructuring charges and
$0.8 million of gains from the sale of property in the first
quarter of 2007, compared to $4.0 million of property sale gains
in the prior year. Despite low capacity utilization, the segment
was able to slightly exceed breakeven. |
| |
| • |
|
Segment backlogs improved to $42 million at the end of the first
quarter compared to $36 million at the end of 2006 and $71 million
last year. |
| |
| • |
|
During the first quarter of 2007, the Company closed a plant in
Pennsylvania, where it continues to operate three facilities. |
International Manufacturing Segment
| • |
|
International segment sales totaled $46.5 million for the
quarter, up from $32.6 million last quarter, while segment income
increased to $3.1 million for the period from $2.5 million in the
fourth quarter of 2006 resulting in a segment margin of 6.7
percent compared to 7.6 percent last quarter. |
| |
| • |
|
International segment order backlogs further strengthened, with
firm contracts and orders pending contracts under framework
agreements totaling approximately $250 million, compared to
approximately $225 million at the end of last quarter. |
Retail Segment
| • |
|
The Company’s California-based retail segment reported first
quarter 2007 revenues of $18.1 million compared to $27.3 million
for the same period last year. |
| |
| • |
|
Retail segment income totaled $0.9 million for the quarter
compared to $1.5 million in 2006, and the segment margins were
4.8 percent compared to 5.5 percent for the first quarter of
2006. |
Other Highlights
| • |
|
Cash and cash equivalents increased to $76.6 million at the end
of the quarter compared to $70.2 million at the end of 2006. |
Champion Enterprises Reports First Quarter 2007 Results
Page 3
| • |
|
Cash flow from continuing operating activities totaled $6.9
million for the quarter ended March 31, 2007 compared to $27.0
million last year. Approximately $17 million of the $20.1
million decrease was the result of non-recurring FEMA collections
during the first 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 March 31, 2007. The Company was in
compliance with both requirements, as amended, for the period. |
First Quarter 2007 Conference Call
Champion Enterprises will host a conference call on Wednesday, April 18, 2007 at 11 a.m. EDT to
discuss these results and current business trends. To listen to the call, please call (888)
482-0024 for domestic callers or (617) 801-9702 for international callers. The passcode is
11902308. The call may also be heard live at 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, May 2, 2007. To access the telephone replay, please call (888) 286-8010 for
domestic callers or (617) 801-6888 for international callers. The passcode is 89071314. 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. Champion produces manufactured and modular
homes through its family of homebuilders, as well as modular buildings for government and
commercial applications. For more information, please visit
www.championhomes.com.
Forward-Looking Statements
This news release contains certain statements, including statements regarding future market
conditions, the execution of 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 –
CHB/ 4
CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
(Dollars and weighted shares in thousands, except per share amounts)
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
|
|
|
| |
|
March 31, |
|
|
April 1, |
|
|
% |
|
| |
|
2007 |
|
|
2006 |
|
|
Change |
|
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
Manufacturing segment |
|
$ |
199,296 |
|
|
$ |
331,651 |
|
|
|
(40 |
%) |
International segment |
|
|
46,531 |
|
|
|
— |
|
|
|
|
|
Retail segment |
|
|
18,070 |
|
|
|
27,278 |
|
|
|
(34 |
%) |
Less: intercompany |
|
|
(4,100 |
) |
|
|
(12,400 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales |
|
|
259,797 |
|
|
|
346,529 |
|
|
|
(25 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
227,784 |
|
|
|
292,236 |
|
|
|
(22 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin |
|
|
32,013 |
|
|
|
54,293 |
|
|
|
(41 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses |
|
|
36,900 |
|
|
|
37,231 |
|
|
|
(1 |
%) |
Amortization of intangible assets |
|
|
1,402 |
|
|
|
92 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income |
|
|
(6,289 |
) |
|
|
16,970 |
|
|
|
(137 |
%) |
Interest expense, net |
|
|
4,040 |
|
|
|
2,070 |
|
|
|
95 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations
before income taxes |
|
|
(10,329 |
) |
|
|
14,900 |
|
|
|
(169 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (benefit) expense |
|
|
(3,090 |
) |
|
|
1,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations |
|
|
(7,239 |
) |
|
|
13,700 |
|
|
|
(153 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of taxes |
|
|
(7 |
) |
|
|
(53 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(7,246 |
) |
|
$ |
13,647 |
|
|
|
(153 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic (loss) income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations |
|
$ |
(0.09 |
) |
|
$ |
0.18 |
|
|
|
(150 |
%) |
Loss from discontinued operations |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(0.09 |
) |
|
$ |
0.18 |
|
|
|
(150 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted shares for basic EPS |
|
|
76,557 |
|
|
|
76,081 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted (loss) income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations |
|
$ |
(0.09 |
) |
|
$ |
0.18 |
|
|
|
(150 |
%) |
Loss from discontinued operations |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(0.09 |
) |
|
$ |
0.18 |
|
|
|
(150 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted shares for diluted EPS |
|
|
76,557 |
|
|
|
77,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to Financial Information.
(more)
CHB/ 5
CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
| |
|
|
|
|
|
|
|
|
| |
|
(UNAUDITED) |
|
|
| |
|
March 31, |
|
December 30, |
| |
|
2007 |
|
2006 |
| |
|
|
Assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
76,571 |
|
|
$ |
70,208 |
|
Accounts receivable, trade |
|
|
58,099 |
|
|
|
47,645 |
|
Inventories |
|
|
93,046 |
|
|
|
102,350 |
|
Deferred tax asset |
|
|
32,126 |
|
|
|
32,303 |
|
Other current assets |
|
|
9,834 |
|
|
|
10,677 |
|
| |
|
|
Total current assets |
|
|
269,676 |
|
|
|
263,183 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
|
110,598 |
|
|
|
112,527 |
|
Goodwill and other intangible assets |
|
|
334,012 |
|
|
|
335,464 |
|
Deferred tax asset |
|
|
76,235 |
|
|
|
71,600 |
|
Other non-current assets |
|
|
17,245 |
|
|
|
17,841 |
|
| |
|
|
Total assets |
|
$ |
807,766 |
|
|
$ |
800,615 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Equity: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
72,784 |
|
|
$ |
54,607 |
|
Other accrued liabilities |
|
|
144,791 |
|
|
|
148,596 |
|
| |
|
|
Total current liabilities |
|
|
217,575 |
|
|
|
203,203 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
251,956 |
|
|
|
252,449 |
|
Deferred tax liability |
|
|
10,327 |
|
|
|
10,600 |
|
Other long-term liabilities |
|
|
32,562 |
|
|
|
32,601 |
|
Shareholders’ equity |
|
|
295,346 |
|
|
|
301,762 |
|
| |
|
|
Total liabilities and shareholders’ equity |
|
$ |
807,766 |
|
|
$ |
800,615 |
|
| |
|
|
See accompanying Notes to Financial Information.
(more)
CHB/ 6
CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED CASH FLOW STATEMENTS (UNAUDITED)
(In thousands)
| |
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
| |
|
March 31, |
|
April 1, |
| |
|
2007 |
|
2006 |
| |
|
|
Net (loss) income |
|
$ |
(7,246 |
) |
|
$ |
13,647 |
|
Loss from discontinued operations |
|
|
7 |
|
|
|
53 |
|
Adjustments: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
5,027 |
|
|
|
3,231 |
|
Stock-based compensation |
|
|
819 |
|
|
|
1,817 |
|
Changes in deferred taxes |
|
|
(4,235 |
) |
|
|
— |
|
Fixed asset impairment charge |
|
|
200 |
|
|
|
— |
|
Gain on disposal of fixed assets |
|
|
(800 |
) |
|
|
(3,986 |
) |
Changes in working capital |
|
|
16,949 |
|
|
|
18,986 |
|
Changes in accrued liabilities |
|
|
(5,902 |
) |
|
|
(10,491 |
) |
Other, net |
|
|
2,083 |
|
|
|
3,763 |
|
| |
|
|
Cash provided by continuing operating activities |
|
|
6,902 |
|
|
|
27,020 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Additions to property, plant and equipment |
|
|
(1,878 |
) |
|
|
(4,511 |
) |
Acquisitions |
|
|
— |
|
|
|
(22,828 |
) |
Proceeds on disposal of fixed assets |
|
|
818 |
|
|
|
4,620 |
|
| |
|
|
Cash used for investing activities |
|
|
(1,060 |
) |
|
|
(22,719 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
Payments on long-term debt |
|
|
(493 |
) |
|
|
(301 |
) |
Increase in deferred financing costs |
|
|
— |
|
|
|
(15 |
) |
Decrease in restricted cash |
|
|
15 |
|
|
|
— |
|
Common stock issued, net |
|
|
464 |
|
|
|
622 |
|
| |
|
|
Cash (used for) provided by financing activities |
|
|
(14 |
) |
|
|
306 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Cash provided by discontinued operations |
|
|
219 |
|
|
|
550 |
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
316 |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Increase in cash and cash equivalents |
|
|
6,363 |
|
|
|
5,157 |
|
Cash and cash equivalents at beginning of period |
|
|
70,208 |
|
|
|
126,979 |
|
| |
|
|
Cash and cash equivalents at end of period |
|
$ |
76,571 |
|
|
$ |
132,136 |
|
| |
|
|
See accompanying Notes to Financial Information.
(more)
CHB/ 7
CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL INFORMATION (UNAUDITED)
(1) The Company’s international segment consists of Caledonian Building Systems Limited, which was
acquired on April 7, 2006.
(2) In the second quarter of 2006 the Company reversed its deferred tax asset valuation allowance.
The Company’s earnings subsequent to this reversal are fully taxed for financial reporting
purposes. Income tax benefit for the quarter ended March 31, 2007 is based on the Company’s
estimated effective consolidated tax rate for the full year after consideration of both estimated
annual pretax results and the related statutory tax rates in the three countries in which the
Company operates. The tax benefit for the first quarter of 2007 includes a $0.5 million benefit
from the settlement of a tax uncertainty that was fully provided for in prior periods. Income tax
expense for the quarter ended April 1, 2006, was affected by the deferred tax valuation allowance
and consisted primarily of foreign income tax expense.
(3) 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 (loss) income from continuing operations before income
taxes for the three months ended are as follows (dollars in thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
March 31, |
|
|
Related |
|
|
April 1, |
|
|
Related |
|
| Three months ended: |
|
2007 |
|
|
Sales |
|
|
2006 |
|
|
Sales |
|
| |
|
|
Manufacturing segment income |
|
$ |
96 |
|
|
|
— |
|
|
$ |
25,966 |
|
|
|
7.8 |
% |
International segment income |
|
|
3,124 |
|
|
|
6.7 |
% |
|
|
— |
|
|
|
— |
|
Retail segment income |
|
|
872 |
|
|
|
4.8 |
% |
|
|
1,513 |
|
|
|
5.5 |
% |
General corporate expenses |
|
|
(9,279 |
) |
|
|
|
|
|
|
(9,617 |
) |
|
|
|
|
Amortization of intangible assets |
|
|
(1,402 |
) |
|
|
|
|
|
|
(92 |
) |
|
|
|
|
Intercompany eliminations |
|
|
300 |
|
|
|
|
|
|
|
(800 |
) |
|
|
|
|
Interest expense, net |
|
|
(4,040 |
) |
|
|
|
|
|
|
(2,070 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations
before income taxes |
|
$ |
(10,329 |
) |
|
|
(4.0 |
%) |
|
$ |
14,900 |
|
|
|
4.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4) The Company’s discontinued operations consist primarily of its traditional retail business,
which was disposed of in 2005.
(5) Gains on disposal of fixed assets resulted primarily from the sale of an idle plant in the
first quarter of 2007 and the sale of an investment property in Florida and an idle plant in the
first quarter of 2006.
(6) The results of operations for Highland Manufacturing, Caledonian and North American Housing
are not included in the Company’s results from continuing operations for the three months ended
April 1, 2006 as each was acquired at or subsequent to the close of the quarter. The assets and
liabilities of Highland Manufacturing are included in the consolidated balance sheet as of April 1,
2006.
(more)
CHB/ 8
CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
OTHER STATISTICAL INFORMATION (UNAUDITED)
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three months ended |
|
|
| |
|
March 31, |
|
April 1, |
|
% |
| |
|
2007 |
|
2006 |
|
Change |
| |
|
|
MANUFACTURING |
|
|
|
|
|
|
|
|
|
|
|
|
Units sold: |
|
|
|
|
|
|
|
|
|
|
|
|
HUD Code |
|
|
2,160 |
|
|
|
4,765 |
|
|
|
(55 |
%) |
Modular |
|
|
767 |
|
|
|
994 |
|
|
|
(23 |
%) |
Canadian |
|
|
344 |
|
|
|
302 |
|
|
|
14 |
% |
Other |
|
|
12 |
|
|
|
18 |
|
|
|
(33 |
%) |
| |
|
|
|
|
|
|
Total units sold |
|
|
3,283 |
|
|
|
6,079 |
|
|
|
(46 |
%) |
Less: intercompany |
|
|
64 |
|
|
|
181 |
|
|
|
(65 |
%) |
| |
|
|
|
|
|
|
Units sold to independent retailers / builders |
|
|
3,219 |
|
|
|
5,898 |
|
|
|
(45 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Floors sold |
|
|
6,365 |
|
|
|
11,314 |
|
|
|
(44 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Multi-section mix |
|
|
79 |
% |
|
|
75 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average unit prices, excluding delivery |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
55,000 |
|
|
$ |
49,700 |
|
|
|
11 |
% |
HUD Code |
|
$ |
45,500 |
|
|
$ |
43,600 |
|
|
|
4 |
% |
Modular |
|
$ |
77,200 |
|
|
$ |
77,000 |
|
|
|
0 |
% |
#####
