TROY, Mich., Aug. 13 /PRNewswire-FirstCall/ -- Champion
Enterprises, Inc. (NYSE:CHB), a leader in factory-built
construction, today announced the results for its second quarter
ended July 4, 2009. Revenues for the quarter decreased 55.2 percent
to $129.5 million compared to $289.2 million for the second quarter
of 2008. The Company reported a loss before income taxes of $13.3
million for the second quarter compared to pretax income of $3.6
million in the same period of 2008. The Company's second quarter
2009 net loss totaled $13.3 million, or $0.17 per diluted share,
compared to net income of $3.4 million, or $0.04 per diluted share,
for the second quarter of 2008. The loss before income taxes in the
second quarter of 2009 included the following items totaling $0.7
million of expense: restructuring and other plant closing charges
totaling $2.7 million and foreign currency transaction gains on
intercompany loans of $2.0 million. Second quarter 2008 pretax
income included foreign currency transaction gains of $0.6 million.
"We are pleased that our results improved over the first quarter,
though difficult market conditions have persisted resulting in a
net loss for the quarter. In an effort to reduce losses going
forward, we closed or idled three unprofitable plants in the U.S.
during the quarter," stated William Griffiths, chairman, president
and chief executive officer of Champion Enterprises, Inc. "In
Canada, our second quarter unit sales fell 63 percent from last
year, causing a significant portion of the unfavorable variance in
year over year manufacturing segment results. The reduction in
manufacturing orders was at least in part driven by a reduction in
Canadian retailer inventory in the face of limited availability of
retailer financing and the general economic slowdown. However,
order rates in Canada have shown steady improvement over the last
several months and have more recently approached and, in some
cases, even exceeded last year's levels. In addition, backlogs in
the U.K. have held strong, and our outlook for this business in the
second half of the year remains favorable," Griffiths continued.
"While conditions both in the U.S. and abroad remain difficult, our
U.S. markets are beginning to show some signs of stabilization and
we are encouraged by signs of improvements in our non-U.S.
businesses over the next several quarters. As a result, we are
optimistic that the worst of this cycle may be behind us,"
concluded Griffiths. North American Manufacturing Segment --
Manufacturing segment net sales for the second quarter decreased
52.0 percent to $101.3 million compared to $211.3 million in the
same period of the prior year, but up from $77.7 million in the
prior quarter. -- Revenues from the sale of modular homes in the
U.S. totaled $30 million for the quarter, down from $49 million in
the second quarter of 2008, but up from $26 million in the prior
quarter. -- The manufacturing segment reported a loss of $3.7
million for the quarter compared to segment income of $13.6 million
in the second quarter of 2008 and a loss of $6.1 million in the
prior quarter. -- During the second quarter, the Company closed its
manufacturing facility in Colorado and one of its two plants in
Florida and idled one of its three plants in California. Primarily
as a result of these restructuring actions, the Company recorded
pretax charges totaling $2.7 million in the quarter including
non-cash asset impairment charges of $2.0 million. Champion now
operates 22 manufacturing facilities in North America. -- Segment
backlogs totaled $17 million at July 4, 2009, an improvement over
$10 million at the end of the first quarter of 2009 but down from
$42 million at the end of last year's second quarter. International
Manufacturing Segment -- International segment revenues decreased
70.0 percent to $21.2 million for the quarter from $70.5 million in
the second quarter of 2008 as a result of reduced prison sector
revenues and the slowdown in construction activity caused by
difficult economic conditions in the U.K. In addition, $5.4 million
of the decline in sales was caused by the decrease in exchange
rates from the prior year second quarter. Revenues totaled $21.7
million in the prior quarter. -- International segment income
decreased to $1.1 million for the second quarter of 2009 from $3.9
million in the same period of the prior year, but increased from
$0.1 million in the prior quarter. The segment margin for the
quarter was 5.0 percent, down from 5.5 percent in the second
quarter of 2008. -- International segment order backlogs remained
strong during the quarter, with firm contracts and orders pending
contracts under framework agreements totaling approximately $165
million at July 4, 2009 compared to approximately $155 million at
the end of last quarter. This increase during the quarter was the
result of the increase in quarter-end exchange rates, as backlogs
otherwise remained steady. Retail Segment -- Retail segment second
quarter 2009 revenues totaled $7.5 million, flat to the prior
quarter but down 20.5 percent from $9.4 million for the same period
last year. -- On lower sales, retail segment results improved to a
loss of $0.6 million for the quarter compared to a loss of $1.0
million in the second quarter of 2008. Other Items -- Cash used for
operating activities totaled $15.9 million for the second quarter
of 2009 compared to cash provided of $14.1 million for the same
period of the prior year. The unfavorable variance was primarily
the result of reduced earnings and cash used for international
segment working capital in the quarter compared to cash provided in
the prior year quarter. -- During the second quarter, the Company
repaid the remaining $6.7 million of its Senior Notes due 2009 and
borrowed $1.3 million under its revolving line of credit. -- Cash,
cash equivalents and short-term investments totaled $26.5 million
as of July 4, 2009 compared to $47.8 million at the end of the
first quarter and $91.3 million at the end of the second quarter of
2008. Inclusive of available borrowing capacity under its revolving
line of credit, Champion's total liquidity stood at $27.0 million
as of July 4, 2009 compared to $49.2 million at the end of last
quarter. As a result of deteriorating operating results during the
first half of 2009, the Company was not in compliance with the
financial covenants contained in its senior secured credit facility
pertaining both to the required level of twelve-month adjusted
EBITDA and the required minimum level of total liquidity. The
Company has obtained a waiver for an initial period of 30 days
while it works together with its lenders to arrive at a longer-term
solution. "The difficult operating environment coupled with
challenging conditions in the M&A market led to disappointing
results with respect to certain significant asset sales that we
hoped to complete during the quarter," stated Phyllis Knight,
executive vice president and chief financial officer. "We are
actively engaged in discussions with a third party that has
expressed an interest in making an investment in the Company. At
the same time, we are also working with our lenders to find a more
permanent solution either in connection with or as an alternative
to this potential recapitalization. We appreciate the ongoing
support and cooperation that our lenders have shown as the Company
works through these unprecedented difficulties in the markets we
serve," concluded Knight. Second Quarter 2009 Conference Call
Champion Enterprises, Inc., will host a conference call on Friday,
Aug. 14, 2009 at 9 a.m. EDT to discuss these results and current
business trends. To listen to the call, please call (888) 298-3451
for domestic callers or (719) 325-2488 for international callers.
The passcode is 4458528. The call may also be heard live over the
Internet 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,
Aug. 21, 2009. To access the telephone replay, please call (888)
203-1112 for domestic callers or (719) 457-0820 for international
callers. The passcode is 4458528. A webcast replay will be
available on the Company's Web site for at least 90 days under the
"Investors" link. About Champion Troy, Michigan-based Champion
Enterprises, Inc., a leader in factory-built construction, operates
27 manufacturing facilities in North America and the United Kingdom
distributing its products through 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 the outlook for U.K. profitability and cash
from operations, results for the remainder of 2009, backlogs and
pending orders, compliance with debt covenants and negotiations,
targeted asset sales, and the Company's participation in a
recovery, 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 and there can be no
assurance that the Company will be successful in its efforts to
restructure its outstanding debt or avoid seeking protection under
the U.S. Bankruptcy Code or similar laws. These factors are
discussed in the Company's most recently filed Forms 10-Q, 10-K and
other filings with the Securities and Exchange Commission, in each
case under the section entitled "Forward-Looking Statements" or
"Risk Factors" 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
Six Months Ended ------------------ ---------------- July 4, June
28, % July 4, June 28, % 2009 2008 Change 2009 2008 Change ----
---- ------ ---- ---- ------ Net sales: Manufacturing segment
$101,307 $211,273 (52.0%) $178,984 $392,758 (54.4%) International
segment 21,161 70,513 (70.0%) 42,904 180,879 (76.3%) Retail segment
7,470 9,398 (20.5%) 14,876 18,445 (19.3%) Less: intercompany (400)
(2,000) (2,000) (6,200) ---- ------ ------ ------ Total net sales
129,538 289,184 (55.2%) 234,764 585,882 (59.9%) Cost of sales
113,961 246,722 213,656 506,852 ------- ------- ------- -------
Gross margin 15,577 42,462 21,108 79,030 Selling, general and
administrative expenses 21,858 33,015 43,153 72,318 Insurance gain
- - (4,295) - Restructuring charges 2,220 - 2,358 9,471 Foreign
currency transaction (gains) losses (1,963) (576) (1,321) 1,775
Amortization of intangible assets 1,953 2,382 3,812 4,851 -----
----- ----- ----- Operating (loss) income (8,491) 7,641 (22,599)
(9,385) Interest expense, net 4,814 4,089 9,333 7,962 ----- -----
----- ----- (Loss) income before income taxes (13,305) 3,552
(31,932) (17,347) Income tax expense (benefit) 8 202 (981) (213) -
--- ---- ---- Net (loss) income $(13,313) $3,350 $(30,951)
$(17,134) ======== ====== ======== ======== Basic (loss) income per
share $(0.17) $0.04 $(0.40) $(0.22) ====== ===== ====== ======
Weighted shares for basic EPS 77,762 77,738 77,730 77,605 ======
====== ====== ====== Diluted (loss) income per share $(0.17) $0.04
$(0.40) $(0.22) ====== ===== ====== ====== Weighted shares for
diluted EPS 77,762 77,929 77,730 77,605 ====== ====== ====== ======
See accompanying Notes to Consolidated Financial Information.
CHAMPION ENTERPRISES, INC. CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands) (UNAUDITED) (UNAUDITED) July 4, April 4, January 3,
2009 2009 2009 ---- ---- ---- Assets: Cash and cash equivalents
$26,479 $47,849 $52,787 Accounts receivable 26,775 28,096 33,935
Inventories 37,394 44,217 52,960 Deferred tax assets 653 665 673
Other current assets 6,493 6,428 9,839 ----- ----- ----- Total
current assets 97,794 127,255 150,194 ------ ------- -------
Property, plant and equipment, net 91,447 94,199 96,863 Goodwill
and other intangible assets, net 387,974 374,766 375,692 Other
non-current assets 19,212 20,208 22,260 ------ ------ ------ Total
assets $596,427 $616,428 $645,009 ======== ======== ========
Liabilities and Shareholders' Equity: Short-term debt $130,378
$130,248 $12,229 Accounts payable 57,641 59,424 70,050 Other
accrued liabilities 81,643 95,049 105,353 ------ ------ -------
Total current liabilities 269,662 284,721 187,632 ------- -------
------- Long-term debt 193,579 193,659 300,851 Deferred tax
liabilities 38,106 37,011 36,592 Other long-term liabilities 31,415
31,393 33,111 Shareholders' equity 63,665 69,644 86,823 ------
------ ------ Total liabilities and shareholders' equity $596,427
$616,428 $645,009 ======== ======== ======== See accompanying Notes
to Consolidated Financial Information. CHAMPION ENTERPRISES, INC.
CONSOLIDATED CONDENSED CASH FLOW STATEMENTS (UNAUDITED) (In
thousands) Three Months Ended Six Months Ended ------------------
----------------- July 4, June 28, July 4, June 28, 2009 2008 2009
2008 ---- ---- ---- ---- Net (loss) income $(13,313) $3,350
$(30,951) $(17,134) Adjustments: Depreciation and amortization
4,672 5,705 9,275 11,812 Stock-based compensation 140 297 335 857
Change in deferred taxes 554 (4,828) 943 (8,608) Loss (gain) on
disposal of fixed assets 70 (41) (179) (139) Gain on insurance
settlement - - (4,295) - Foreign currency transaction (gains)
losses (1,963) (576) (1,321) 1,775 Non-cash financing expenses
1,400 225 2,637 447 Fixed asset impairment charges 1,525 - 1,525
7,000 LCM inventory charge 515 - 515 2,100 Insurance proceeds - -
3,161 2,500 Increase/decrease: Accounts receivable 3,152 30,310
6,323 (2,653) Inventories 6,945 12,095 15,614 6,611 Accounts
payable (5,704) (9,921) (17,020) 4,376 Accrued liabilities (15,223)
(22,050) (23,289) (21,587) Other assets, net 1,320 (432) 2,310
(899) ----- ---- ----- ---- Cash (used for) provided by operating
activities (15,910) 14,134 (34,417) (13,542) ------- ------ -------
------- Additions to property, plant and equipment (99) (3,441)
(406) (5,716) Insurance proceeds on PP&E - - 4,052 -
Acquisitions and related payments - (177) - (2,500) Purchase of
short-term investments - - - (10,000) Redemption of short-term
investments - 3,025 - 3,050 Proceeds on disposal of fixed assets
614 53 1,188 2,528 --- -- ----- ----- Cash provided by (used for)
investing activities 515 (540) 4,834 (12,638) --- ---- -----
------- Payments on debt (7,302) (25,608) (7,839) (25,657) Proceeds
from Revolver debt 1,284 - 11,284 - Payments for deferred financing
costs (67) - (245) - Common stock issued, net - 372 - 437 - --- -
--- Cash (used for) provided by financing activities (6,085)
(25,236) 3,200 (25,220) ------ ------- ----- ------- Cash used for
discontinued operations (78) (65) (135) (87) Effect of exchange
rate changes on cash and cash equivalents 188 672 210 449 --- ---
--- --- Decrease in cash and cash equivalents (21,370) (11,035)
(26,308) (51,038) Cash and cash equivalents at beginning of period
47,849 95,405 52,787 135,408 ------ ------ ------ ------- Cash and
cash equivalents at end of period $26,479 $84,370 $26,479 $84,370
======= ======= ======= ======= See accompanying Notes to
Consolidated Financial Information. CHAMPION ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED) (1) 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,
losses on debt retirements and general corporate expenses. A
reconciliation of (loss) income before income taxes for the three
and six months ended is as follows (dollars in thousands): As a %
of As a % of Three months ended: July 4, Related June 28, Related
------------------ 2009 Sales 2008 Sales ---- ----- ---- -----
Manufacturing segment (loss) income $(3,672) (3.6)% $13,595 6.4%
International segment income 1,061 5.0% 3,889 5.5% Retail segment
loss (644) (8.6)% (1,043) (11.1)% General corporate expenses
(5,546) (7,094) Amortization of intangible assets (1,953) (2,382)
Intercompany eliminations 300 100 Foreign currency transaction
gains 1,963 576 Interest expense, net (4,814) (4,089) ------ ------
(Loss) income before income taxes $(13,305) (10.3%) $3,552 1.2%
======== ====== As a % of As a % of Six months ended: July 4,
Related June 28, Related ---------------- 2009 Sales 2008 Sales
---- ----- ---- ----- Manufacturing segment (loss) income $(9,778)
(5.5)% $4,572 1.2% International segment income 1,125 2.6% 12,278
6.8% Retail segment loss (802) (5.4)% (3,807) (20.6)% General
corporate expenses (11,353) (15,702) Amortization of intangible
assets (3,812) (4,851) Intercompany eliminations 700 (100) Foreign
currency transaction gains (losses) 1,321 (1,775) Interest expense,
net (9,333) (7,962) ------ ------ Loss before income taxes
$(31,932) (13.6%) $(17,347) (3.0%) ======== ======== (2) For the
year-to-date period ended July 4, 2009, the Company recognized a
$4.3 million gain from the settlement of its property and business
interruption insurance claims related to the manufacturing facility
in Tennessee that was destroyed by fire in February 2008. This gain
was recorded in the manufacturing segment. The Company received
insurance proceeds of $7.5 million throughout 2008 and $7.2 million
in the first quarter of 2009. (3) For the three and six month
periods ended July 4, 2009, the Company incurred restructuring and
other plant closing charges totaling $2.7 million and $2.9 million,
respectively, primarily for the announced closure of two plants and
idling of one plant in the U.S. in the second quarter. The second
quarter 2009 charges were recorded in the manufacturing segment
with $0.5 million recorded in cost of sales and the balance
reported as restructuring charges. During the six months ended June
28, 2008, the Company incurred $9.8 million of restructuring and
other plant closing charges in connection with the Company's
decision to close two manufacturing facilities and reduce the
number of North American regional offices. Charges totaling $9.3
million were recorded in the manufacturing segment with the
remaining $0.5 million included in general corporate expenses. A
portion of the 2008 charges, totaling $0.3 million, were recorded
in cost of sales with the balance reported as restructuring
charges. (4) For the year-to-date period ended June 28, 2008, the
Company's retail segment recorded a $1.8 million charge to reduce
inventory values to estimated market value. This charge was
included in cost of sales. (5) For the quarter and year-to-date
periods ended July 4, 2009, the Company borrowed $1.3 million and
$11.3 million, respectively, under its revolving line of credit.
(6) The outstanding debt under the Company's senior credit
facility, totaling $129.8 million at July 4, 2009, is classified as
short-term portion of debt because in light of current market
conditions and absent further unscheduled reductions of
indebtedness under the Credit Agreement or further amendment to the
Credit Agreement, it is likely that the Company will not be in
compliance with the financial covenants for the third and fourth
quarters of 2009 or the more restrictive pre-Amendment covenants
beginning in 2010. (7) During the second quarter of 2009, the
Company's Senior Notes due 2009 totaling $6.7 million matured and
were paid in full. (8) During the quarter ended June 28, 2008, the
Company repaid the $24.0 million (CAD) note issued in connection
with its acquisition of SRI Homes. (9) Proceeds on disposal of
fixed assets resulted primarily from the sale of land and
miscellaneous assets for the year-to-date period ended July 4, 2009
and from the sale of a closed plant during the same period in 2008.
CHAMPION ENTERPRISES, INC. OTHER STATISTICAL INFORMATION
(UNAUDITED) Three months ended Six Months Ended ------------------
----------------- July 4, June 28, % July 4, June 28, % 2009 2008
Change 2009 2008 Change ---- ---- ------ ---- ---- ------
MANUFACTURING SEGMENT Units sold: HUD-Code 1,035 1,697 (39.0%)
1,709 3,258 (47.5%) Modular 397 652 (39.1%) 699 1,321 (47.1%)
Canadian 271 733 (63.0%) 473 1,297 (63.5%) Other 6 72 (91.7%) 11 99
(88.9%) - -- -- -- Total units sold 1,709 3,154 (45.8%) 2,892 5,975
(51.6%) Less: intercompany (18) (35) (48.6%) (31) (98) (68.4%) ---
--- --- --- Units sold to independent retailers / builders 1,691
3,119 (45.8%) 2,861 5,877 (51.3%) Floors sold 3,025 5,649 (46.5%)
5,234 10,637 (50.8%) Multi-section mix 65% 69% 67% 67% Average unit
prices, excluding delivery Total $51,800 $57,800 (10.4%) $53,800
$57,200 (5.9%) HUD-Code $41,200 $45,400 (9.3%) $42,800 $45,400
(5.7%) Modular $70,700 $70,800 (0.1%) $75,400 $70,000 7.7%
DATASOURCE: Champion Enterprises, Inc. CONTACT: Laurie Van
Raemdonck, Vice President, Investor Relations, +1-248-614-8267, ,
or Phyllis Knight, Executive Vice President and CFO,
+1-248-614-8200 Web Site: http://www.championhomes.com/
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