International Segment Growth Drives 14 Percent Increase in Consolidated Revenues, but Continuing Weakness in the U.S., along with Restructuring and Other Charges, Result in Net Loss for the Quarter
TROY, Mich., April 15 /PRNewswire-FirstCall/ -- Champion Enterprises, Inc. , a leader in factory-built construction, today announced results for its first quarter ended March 29, 2008. Revenues for the quarter increased 14.2 percent to $296.7 million compared to $259.8 million for the first quarter of 2007. The Company reported a net loss for the quarter of $20.5 million, or $0.26 per diluted share, compared to a net loss of $7.2 million, or $0.09 per diluted share, for the same period of the prior year.
The loss before income taxes in the first quarter of 2008 included the following items totaling $13.8 million: charges totaling $9.8 million related to the Company's previously announced reorganization of its North American manufacturing operations and closure of two manufacturing facilities, foreign currency transaction losses of $2.3 million related to intercompany loans issued in connection with its international acquisitions, $1.8 million of expense recorded to reduce the value of inventory at its California-based retail operations and $0.1 million of gains from the sale of property. The pretax loss for the first quarter of 2007 included $1.3 million of restructuring charges and $0.8 million of gains from the sale of property.
"Our first quarter results were impacted by a number of items leading to a reported operating loss of $17.0 million. After adjusting for these items, our consolidated results at the operating line actually improved over the prior year, and our manufacturing segment was better than breakeven," stated William Griffiths, chairman, president and chief executive officer of Champion Enterprises, Inc.
"Despite closing four plants in 2007, our U.S. manufacturing facilities operated at only 38 percent capacity utilization during the quarter compared to 44 percent for the first quarter of last year, severely straining our ability to operate profitably in our seasonally slowest quarter. We took additional steps during the quarter to further reduce costs by closing two plants and reducing our North American regional offices from four to two, strengthening our position as we enter the second quarter.
"Meanwhile, our international segment reported another record quarter with sales increasing 137 percent to $110.4 million, and our Canadian operations, bolstered by the acquisition of SRI Homes at the end of last year, remain strong. Non-U.S. revenues represented just over 50 percent of our sales this quarter. This diversification has helped to offset the effects of difficult U.S. housing markets," Griffiths continued.
North American Manufacturing Segment
-- Manufacturing segment net sales for the first quarter decreased 8.9
percent to $181.5 million compared to $199.3 million in the same
period of the prior year.
-- The manufacturing segment reported a loss of $9.0 million for the
first quarter compared to segment income of $0.1 million in the first
quarter of 2007. The segment loss for the quarter ended March 29,
2008 was driven by $9.3 million of restructuring charges, including
$7.0 million of non-cash fixed asset impairment charges related to the
Company's closed plant in Oregon and idled facility in Indiana,
partially offset by $0.1 million of gains on the sale of property.
Segment income for the first quarter of 2007 included $1.3 million of
restructuring charges and $0.8 million of gains on the sale of
property.
-- Segment backlogs totaled $25 million at March 29, 2008, compared to
$42 million at the end of last year's first quarter and $56 million at
the end of 2007. Since the end of the first quarter, backlogs have
improved by 43 percent, compared to last year's increase of 7 percent
over the same two-week period.
-- Revenues from the sale of modular homes in the U.S. totaled $49
million for the quarter, representing approximately 27 percent of
manufacturing segment sales, down from $63 million in the first
quarter of 2007. A significant portion of the year-over-year decrease
is due to the completion in 2007 of the Company's military housing
project at Fort Lewis Army Post in Washington state, which also drove
a decline of approximately $8 million in year-over-year backlogs.
International Manufacturing Segment
-- International segment sales grew 137 percent to $110.4 million for the
quarter, up from $46.5 million in the same period of the prior year.
-- Segment income increased to $8.4 million for the period from $3.1
million in the first quarter of 2007, while the segment margin was 7.6
percent compared to 6.7 percent in the same period last year.
-- International segment order backlogs remain strong, with firm
contracts and orders pending contracts under framework agreements
totaling approximately $210 million, compared to approximately $250
million at both the end of 2007 and the end of last year's first
quarter.
Retail Segment
-- The retail segment reported first quarter 2008 revenues of $9.0
million, down from $18.1 million for the same period last year.
-- The retail segment reported a loss of $2.8 million for the quarter,
compared to $0.9 million of segment income in the first quarter of
2007. The segment loss for the first quarter of 2008 included $1.8
million of expense to reduce inventory values to reflect current
housing market conditions, primarily in southern California.
Other Items
-- Cash, cash equivalents and short-term investments totaled $105.4
million as of March 29, 2008 compared to $135.4 million at the end of
2007 and $76.6 million at the end of the first quarter of 2007.
-- Cash used for operations totaled $26.3 million for the quarter ended
March 29, 2008 compared to cash provided of $6.9 million for the same
period last year.
In conclusion Griffiths stated, "While the quarter's results clearly show the difficulties we continue to face in the U.S., we remain cautiously optimistic that conditions will improve as 2008 unfolds. Champion's U.S. housing business provides an affordable housing alternative to consumers which, we believe, will become a significant advantage in today's tighter credit markets.
"Further, our strong financial position will allow us to continue driving our international expansion strategy for the long-term benefit of our stakeholders."
First Quarter 2008 Conference Call
Champion Enterprises will host a conference call on Wednesday, April 16, 2008 at 11 a.m. EDT to discuss these results and current business trends. To listen to the call, please call (888) 724-9513 for domestic callers or (913) 312-1493 for international callers. The passcode is 2243077. 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, April 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 2243077. A web-cast 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 33 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, future market conditions, the advantage of affordable housing, Champion's international expansion strategy, and the long-term benefit of Champion's stakeholders, 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.
- Tables Follow -
CHAMPION ENTERPRISES, INC.
CONSOLIDATED FINANCIAL SUMMARY
(Dollars and weighted shares in thousands, except per share amounts)
(UNAUDITED)
Three Months Ended
---------------------
March 29, March 31, %
2008 2007 Change
--------- --------- ---------
Net sales:
Manufacturing segment $181,485 $199,296 (8.9%)
International segment 110,366 46,531 137.2%
Retail segment 9,047 18,070 (49.9%)
Less: intercompany (4,200) (4,100)
--------- ---------
Total net sales 296,698 259,797 14.2%
Cost of sales 260,130 227,784 14.2%
--------- ---------
Gross margin 36,568 32,013 14.2%
Selling, general and administrative
expenses 39,303 35,786 9.8%
Restructuring charges 9,471 1,121
Foreign currency transaction losses 2,351 -
Amortization of intangible assets 2,469 1,402 76.1%
--------- ---------
Operating loss (17,026) (6,296) 170.4%
Interest expense, net 3,873 4,040 (4.1%)
--------- ---------
Loss before income taxes (20,899) (10,336) 102.2%
Income tax benefit (415) (3,090) (86.6%)
--------- ---------
Net loss $(20,484) $(7,246) 182.7%
========= =========
Basic loss per share: $(0.26) $(0.09) 188.9%
========= =========
Weighted shares for basic EPS 77,472 76,557
========= =========
Diluted loss per share: $(0.26) $(0.09) 188.9%
========= =========
Weighted shares for diluted EPS 77,472 76,557
========= =========
See accompanying Notes to Consolidated Financial Information.
CHAMPION ENTERPRISES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
(UNAUDITED)
March 29, December 29,
2008 2007
------------ ------------
Assets:
Cash and cash equivalents $95,405 $135,408
Short-term investments 9,975 -
Accounts receivable 125,833 89,646
Inventories 94,704 90,782
Deferred tax assets 28,760 29,746
Other current assets 9,000 14,827
------------ ------------
Total current assets 363,677 360,409
------------ ------------
Property, plant and equipment, net 104,834 116,984
Goodwill and other intangible assets,
net 431,458 433,151
Deferred tax assets 93,085 87,983
Other non-current assets 22,707 23,696
------------ ------------
Total assets $1,015,761 $1,022,223
============ ============
Liabilities and Shareholders' Equity:
Short-term debt $29,628 $25,884
Accounts payable 137,494 119,390
Other accrued liabilities 167,968 173,052
------------ ------------
Total current liabilities 335,090 318,326
------------ ------------
Long-term debt 342,671 342,897
Deferred tax liabilities 6,725 7,065
Other long-term liabilities 34,359 34,089
Shareholders' equity 296,916 319,846
------------ ------------
Total liabilities and shareholders'
equity $1,015,761 $1,022,223
============ ============
See accompanying Notes to Consolidated Financial Information.
CHAMPION ENTERPRISES, INC.
CONSOLIDATED CONDENSED CASH FLOW STATEMENTS
(In thousands)
(UNAUDITED)
Three Months Ended
----------------------------
March 29, March 31,
2008 2007
----------------------------
Net loss $(20,484) $(7,246)
Adjustments:
Depreciation and amortization 6,107 5,027
Stock-based compensation 560 819
Change in deferred taxes (3,780) (4,235)
Fixed asset impairment charges 7,000 200
Insurance proceeds 2,500 -
Gain on disposal of fixed assets (98) (800)
Foreign currency transaction losses 2,351 -
Increase/decrease:
Accounts receivable (31,635) (10,427)
Inventories (3,384) 9,344
Accounts payable 14,297 18,032
Accrued liabilities 463 (5,902)
Other, net (245) 2,090
----------------------------
Cash (used for) provided by operating
activities (26,348) 6,902
----------------------------
Proceeds on disposal of fixed assets 1,147 818
Purchase of short-term investments (9,975) -
Additions to property, plant and
equipment (2,275) (1,878)
Acquisitions (2,323) -
----------------------------
Cash used for investing activities (13,426) (1,060)
----------------------------
Payments on long-term debt (49) (493)
Decrease in restricted cash - 15
Common stock issued, net 65 464
----------------------------
Cash provided by (used for) financing
activities 16 (14)
----------------------------
Cash (used for) provided by
discontinued operations (22) 219
Effect of exchange rate changes on
cash and cash equivalents (223) 316
(Decrease) increase in cash and cash
equivalents (40,003) 6,363
Cash and cash equivalents at
beginning of period 135,408 70,208
----------------------------
Cash and cash equivalents at end of
period $95,405 $76,571
============================
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 for 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 loss before income taxes for the three
months ended is as follows (dollars in thousands):
Three months ended: March 29, Related March 31, Related
2008 Sales 2007 Sales
-------------------------------------
Manufacturing segment (loss) income $(9,023) -5.0% $96 0.0%
International segment income 8,389 7.6% 3,124 6.7%
Retail segment (loss) income (2,764) -30.6% 872 4.8%
General corporate expenses (8,608) (9,286)
Amortization of intangible assets (2,469) (1,402)
Intercompany eliminations (200) 300
Foreign currency transaction losses (2,351) -
Interest expense, net (3,873) (4,040)
---------- ----------
Loss before income taxes $(20,899) (7.0%) $(10,336) (4.0%)
========== ==========
(3) Gain on disposal of fixed assets resulted primarily from the sale of
an idle plant in the first quarter of 2008 and 2007.
(4) During the quarter ended March 29, 2008, $9.8 million of restructuring
charges were incurred in connection with the Company's decision to close a
manufacturing facility in Oregon, 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 first quarter of 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.
CHAMPION ENTERPRISES, INC.
OTHER STATISTICAL INFORMATION (UNAUDITED)
Three months ended
----------------------
March 29, March 31, %
2008 2007 Change
-------------------------------
MANUFACTURING SEGMENT
Units sold:
HUD-Code 1,561 2,160 (28%)
Modular 669 767 (13%)
Canadian 564 344 64%
Other 27 12 125%
----------------------
Total units sold 2,821 3,283 (14%)
Less: intercompany 63 64 (2%)
----------------------
Units sold to independent retailers /
builders 2,758 3,219 (14%)
Floors sold 4,988 6,365 (22%)
Multi-section mix 66% 79%
Average unit prices, excluding delivery
Total $56,600 $55,000 3%
HUD-Code $45,500 $45,500 0%
Modular $69,100 $77,200 (10%)
Champion Enterprises, Inc.
