TROY, Mich., Feb. 18 /PRNewswire-FirstCall/ -- Champion Enterprises, Inc.
(NYSE: CHB), a leader in factory-built construction, today announced the
results for its fourth quarter and fiscal year ended Jan. 3, 2009. Revenues
for the quarter decreased 42.3 percent to $187.9 million compared to $325.6
million for the fourth quarter of 2007. The Company reported a loss before
income taxes of $26.6 million for the fourth quarter compared to a pretax loss
of $11.2 million in the same period of 2007. The Company's fourth quarter
2008 net loss totaled $20.8 million, or $0.27 per diluted share, compared to a
net loss of $6.0 million, or $0.08 per diluted share, for the fourth quarter
of 2007.
The loss before income taxes in the fourth quarter of 2008 included the
following items totaling $17.4 million: foreign currency transaction losses
of $8.7 million, $6.3 million impairment charge related to retail segment
inventory, $1.2 million restructuring charge, $0.6 million loss on debt
retirement and $0.6 million of expense recorded in connection with the earn
out provisions of the ModularUK acquisition. In addition, the Company
recorded a non-cash income tax benefit of $6.2 million in the quarter to
reduce its deferred tax asset valuation allowance.
The fourth quarter 2007 pretax loss included the following items totaling
$11.4 million: $6.4 million of expense recorded in connection with the earn
out provisions of the Caledonian acquisition, $4.5 million loss on debt
retirement and plant closing charges totaling $3.6 million, partially offset
by income of $2.1 million from the settlement of insurance claims and $1.0
million of foreign currency transaction gains.
Revenues for the full year 2008 decreased 18.9 percent to $1.03 billion
compared to $1.27 billion reported for 2007. The Company reported a loss
before income taxes of $52.0 million for the year ended Jan. 3, 2009 compared
to pretax income of $3.9 million in the prior year. For the full year,
Champion's 2008 and 2007 pretax results were unfavorably impacted by special
items such as those highlighted above totaling $36.8 million and $12.7
million, respectively. The Company's 2008 net loss totaled $199.5 million, or
$2.57 per diluted share, compared to net income of $7.2 million, or $0.09 per
diluted share, in 2007. The net loss in 2008 included a non-cash charge of
$164.5 million to provide a valuation allowance for its U.S. deferred tax
assets.
"Difficult global economic conditions had a negative impact on each
segment of Champion's business in the fourth quarter," stated William
Griffiths, chairman, president and chief executive officer of Champion
Enterprises, Inc. "In this challenging environment, we remain focused on
reducing costs and preserving liquidity. Since the beginning of 2008, we have
idled or closed four plants in the U.S., reduced companywide staffing by 42
percent and curtailed other spending. Together, these actions have reduced
annual fixed costs by over $30 million.
"Given that any market improvement is unlikely in the first half of the
year, we will continue to focus on reducing expenses and other initiatives to
maintain our strong liquidity position," Griffiths concluded.
North American Manufacturing Segment
-- Manufacturing segment net sales for the fourth quarter decreased 37.7
percent to $139.5 million compared to $224.0 million in the same period of the
prior year.
-- Revenues from the sale of modular homes in the U.S. totaled $37 million
for the quarter, down from $71 million in the fourth quarter of 2007.
-- The manufacturing segment reported a loss of $0.3 million for the
quarter compared to segment income of $2.6 million in the fourth quarter of
2007. The segment loss for the quarter ended Jan. 3, 2009 included $0.6
million of restructuring costs. Segment income in the fourth quarter of 2007
was reduced by $3.6 million for charges related to the closure of the
Company's manufacturing facility in Alabama. The decline in segment income
was driven by the significant drop in revenues as well as production
inefficiencies resulting from lower backlog levels and factory utilization
throughout the quarter.
-- Segment backlogs totaled $7 million at Jan. 3, 2009 compared to $40
million at the end of the third quarter of 2008 and $56 million at the end of
2007.
-- As a result of weak market conditions, the Company idled one of its two
plants in Virginia during the fourth quarter and one of its two plants in
Indiana at the beginning of February 2009. No restructuring charges were
incurred as a result of these actions. Champion now operates 25 manufacturing
facilities in North America.
International Manufacturing Segment
-- International segment net sales decreased 54.5 percent to $41.9 million
for the quarter from $92.1 million in the same period of the prior year
primarily as a result of reduced prison sector revenues.
-- Segment income for the quarter was $1.3 million, down from $3.4 million
in the same period of the prior year. Contingent consideration expenses
totaling $0.6 million in the fourth quarter of 2008 and $6.4 million in the
fourth quarter of 2007 were recorded in connection with the earn out
provisions of the 2008 acquisition of ModularUK and the 2006 acquisition of
Caledonian, respectively. Fourth quarter 2007 results also included $2.1
million of income from the settlement of insurance claims. The segment margin
for the quarter was 3.1 percent compared to 3.7 percent in the same period
last year.
-- For the year ended Jan. 3, 2009, international segment revenues totaled
$279.6 million, down 0.4 percent from 2007 revenues of $280.8 million.
Segment income in 2008 totaled $16.3 million compared to $17.4 million in
2007, and the segment margin for the year was 5.8 percent compared to 6.2
percent in the prior period.
-- International segment order backlogs decreased during the quarter, with
firm contracts and orders pending contracts under framework agreements
totaling approximately $150 million at Jan. 3, 2009 compared to approximately
$235 million at the end of the third quarter.
-- The weakening of the British pound relative to the U.S. dollar during
2008 resulted in declines in sales and segment income of $12.4 million and
$0.6 million, respectively, in the fourth quarter and $17.7 million and $1.0
million, respectively, for the full year. In addition, approximately half of
the decrease in segment backlogs during the quarter was caused by changes in
the exchange rate.
Retail Segment
-- Retail segment fourth quarter 2008 revenues totaled $7.5 million, down
52.6 percent from $15.7 million for the same period last year.
-- The retail segment reported a loss of $7.2 million for the quarter
compared to a segment loss of $0.3 million in the fourth quarter of 2007. The
fourth quarter 2008 segment loss included a $6.3 million impairment charge to
reduce the value of aged inventory.
Other Items
-- Cash used for operating activities totaled $3.4 million for the quarter
ended Jan. 3, 2009 compared to cash provided of $45.2 million for the same
period of the prior year. The unfavorable variance was the result of reduced
earnings and a significantly lower level of cash provided by international
segment working capital in the quarter.
-- Cash, cash equivalents and short-term investments totaled $52.8 million
as of Jan. 3, 2009 compared to $99.7 million at the end of last quarter and
$135.4 million at the end of 2007. The Company used $33.5 million of cash
during the fourth quarter to reduce debt pursuant to the amendment of its
senior secured credit agreement. With $12.8 million of available borrowing
capacity under its revolving line of credit, Champion's total liquidity stood
at $65.6 million at year end.
-- Total debt decreased during the quarter by $50 million from $363
million at the end of the third quarter to $313 million as of Jan. 3, 2009.
Approximately $16 million of the decline was the result of exchange rate
changes.
-- Available U.S. federal tax loss carryforwards totaled approximately
$346 million at Jan. 3, 2009 and may be utilized by the Company to offset
future taxable income generated in the U.S. until the carryforwards expire in
2023 through 2028.
Fourth Quarter and Year-End 2008 Conference Call
Champion Enterprises will host a conference call on Thursday, Feb. 19,
2009 at 11 a.m. EST to discuss these results and current business trends. To
listen to the call, please call (888) 690-2899 for domestic callers or (913)
312-1381 for international callers. The passcode is 8270458. The call may
also be heard live over the Internet at 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, Feb. 27, 2009. To access the
telephone replay, please call (888) 203-1112 for domestic callers or (719)
457-0820 for international callers. The passcode is 8270458. 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 30 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 www.championhomes.com.
Forward-Looking Statements
This news release contains certain statements, including statements
regarding cost reductions, market improvement, maintenance of liquidity,
backlogs and pending orders and the use of U.S. federal tax loss
carryforwards, 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.
CHAMPION ENTERPRISES, INC.
CONSOLIDATED FINANCIAL SUMMARY
(Dollars and weighted shares in thousands, except per share amounts)
(UNAUDITED)
Three Months Ended Twelve Months Ended
------------------ --------------------
Jan. 3, Dec. 29, % Jan. 3, Dec. 29, %
2009 2007 Change 2009 2007 Change
--------- -------- ------- ---------- --------- -------
Net sales:
Manufacturing
segment $139,511 $223,951 (37.7%) $727,331 $941,945 (22.8%)
International
segment 41,886 92,110 (54.5%) 279,641 280,814 (0.4%)
Retail segment 7,464 15,749 (52.6%) 36,521 73,406 (50.2%)
Less:
intercompany (1,000) (6,200) (10,300) (22,700)
--------- --------- ---------- ----------
Total net sales 187,861 325,610 (42.3%) 1,033,193 1,273,465 (18.9%)
Cost of sales 171,460 280,527 906,685 1,083,601
--------- --------- ---------- ----------
Gross margin 16,401 45,083 126,508 189,864
Selling, general
and administrative
expenses 25,803 45,534 130,756 158,142
Restructuring
charges 1,212 2,659 10,683 3,780
Foreign currency
transaction
losses (gains) 8,685 (1,008) 10,536 (1,008)
Amortization of
intangible assets 2,054 1,454 9,251 5,727
--------- --------- ---------- ----------
Operating (loss)
income (21,353) (3,556) (34,718) 23,223
Loss on debt
retirement 608 4,543 608 4,543
Interest expense,
net 4,633 3,115 16,692 14,731
--------- --------- ---------- ----------
(Loss) income before
income taxes (26,594) (11,214) (52,018) 3,949
Income tax expense
(benefit) (5,789) (5,262) 147,442 (3,243)
--------- --------- ---------- ----------
Net (loss) income $(20,805) $(5,952) $(199,460) $7,192
========= ========= ========== ==========
Basic (loss)
income per share $(0.27) $(0.08) $(2.57) $0.09
========= ========= ========== ==========
Weighted shares
for basic EPS 77,787 77,248 77,700 76,916
========= ========= ========== ==========
Diluted (loss)
income per share $(0.27) $(0.08) $(2.57) $0.09
========= ========= ========== ==========
Weighted shares
for diluted EPS 77,787 77,248 77,700 77,719
========= ========= ========== ==========
See accompanying Notes to Consolidated Financial Information.
CHAMPION ENTERPRISES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
(UNAUDITED)
Jan. 3, Sept. 27, Dec. 29,
2009 2008 2007
-------- --------- -----------
Assets:
Cash and cash equivalents $52,787 $92,760 $135,408
Short-term investments - 6,950 -
Accounts receivable 33,935 71,537 89,646
Inventories 52,960 71,059 90,782
Deferred tax assets 673 654 29,746
Other current assets 9,839 7,166 14,827
-------- --------- -----------
Total current assets 150,194 250,126 360,409
-------- --------- -----------
Property, plant and equipment, net 96,863 105,785 116,984
Goodwill and other intangible assets,
net 375,692 418,722 433,151
Deferred tax assets - - 87,983
Other non-current assets 22,260 21,118 23,696
-------- --------- -----------
Total assets $645,009 $795,751 $1,022,223
======== ========= ===========
Liabilities and Shareholders' Equity:
Short-term debt $12,229 $43,716 $25,884
Accounts payable 70,050 111,707 119,390
Other accrued liabilities 105,353 117,382 173,052
-------- --------- -----------
Total current liabilities 187,632 272,805 318,326
-------- --------- -----------
Long-term debt 300,851 319,364 342,897
Deferred tax liabilities 36,592 37,852 7,065
Other long-term liabilities 33,111 33,868 34,089
Shareholders' equity 86,823 131,862 319,846
-------- --------- -----------
Total liabilities and shareholders'
equity $645,009 $795,751 $1,022,223
======== ========= ===========
See accompanying Notes to Consolidated Financial Information.
CHAMPION ENTERPRISES, INC.
CONSOLIDATED CONDENSED CASH FLOW STATEMENTS
(In thousands) (UNAUDITED)
Three Months Ended Twelve Months Ended
------------------- --------------------
Jan. 3, Dec. 29, Jan. 3, Dec. 29,
2009 2007 2009 2007
------------------- --------------------
Net (loss) income $(20,805) $(5,952) $(199,460) $7,192
Adjustments:
Depreciation and amortization 4,938 5,027 22,478 20,063
Stock-based compensation (822) 740 (476) 2,975
Change in deferred taxes (8,340) (13,217) 136,186 (17,637)
Fixed asset impairment charges - 2,000 7,000 2,000
Compensation portion of UK
earnout payment - - (5,884) -
Insurance proceeds 1,687 - 7,478 -
LCM inventory charge 6,300 - 14,100 -
Gain on disposal of fixed
assets (270) (566) (505) (1,199)
Loss on debt retirement 608 4,543 608 4,543
Foreign currency transaction
losses (gains) 8,685 (1,008) 10,536 (1,008)
Increase/decrease:
Accounts receivable 28,091 24,695 42,678 (28,412)
Inventories 9,587 3,045 21,648 24,024
Accounts payable (25,646) 8,116 (28,295) 61,230
Accrued liabilities (6,942) 14,780 (44,370) 5,733
Other, net (520) 2,963 248 801
------------------- --------------------
Cash (used for) provided by
operating activities (3,449) 45,166 (16,030) 80,305
------------------- --------------------
Additions to property, plant and
equipment (758) (4,707) (12,179) (10,201)
Acquisitions and related payments - (96,208) (8,892) (96,208)
Purchase of short-term
investments - - (10,000) -
Redemption of short-term
investments 6,950 - 10,000 -
Proceeds on disposal of fixed
assets 707 847 3,557 4,487
Distributions from unconsolidated
affiliates 9 - 9 884
------------------- --------------------
Cash provided by (used for)
investing activities 6,908 (100,068) (17,505) (101,038)
------------------- --------------------
Proceeds from Convertible Notes - 180,000 - 180,000
Redemption of Senior Notes - (79,728) - (79,728)
Payments on debt (34,067) (14,752) (61,174) (16,329)
Proceeds from Revolver debt - - 25,000 -
Increase in deferred financing
costs (2,744) (5,939) (2,744) (5,939)
Decrease in restricted cash - - - 15
Common stock issued, net - 1,507 437 3,801
------------------- --------------------
Cash (used for) provided by
financing activities (36,811) 81,088 (38,481) 81,820
------------------- --------------------
Cash provided by (used for)
discontinued operations 31 (223) 124 62
Effect of exchange rate changes
on cash and cash equivalents (6,652) (1,837) (10,729) 4,051
------------------- --------------------
(Decrease) increase in cash and
cash equivalents (39,973) 24,126 (82,621) 65,200
Cash and cash equivalents at
beginning of period 92,760 111,282 135,408 70,208
------------------- --------------------
Cash and cash equivalents at end
of period $52,787 $135,408 $52,787 $135,408
=================== ====================
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 beginning in 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, losses on debt retirements and
general corporate expenses. A reconciliation of (loss) income before income
taxes for the three and twelve months ended is as follows (dollars in
thousands):
As a As a
% of % of
Three months ended: Jan. 3, Related Dec. 29, Related
2009 Sales 2007 Sales
-----------------------------------
Manufacturing segment (loss) income $(271) (0.2)% $2,565 1.1%
International segment income 1,315 3.1% 3,449 3.7%
Retail segment loss (7,172) (96.1)% (316) (2.0)%
General corporate expenses (4,986) (8,439)
Amortization of intangible assets (2,054) (1,454)
Loss on debt retirement (608) (4,543)
Intercompany eliminations 500 (369)
Foreign currency transaction (losses)
gains (8,685) 1,008
Interest expense, net (4,633) (3,115)
--------- ---------
Loss before income taxes $(26,594) (14.2%) $(11,214) (3.4%)
========= =========
As a As a
% of % of
Twelve months ended: Jan. 3, Related Dec. 29, Related
2009 Sales 2007 Sales
-----------------------------------
Manufacturing segment income $13,054 1.8% $40,106 4.3%
International segment income 16,266 5.8% 17,393 6.2%
Retail segment (loss) income (18,163) (49.7)% 1,911 2.6%
General corporate expenses (26,788) (31,799)
Amortization of intangible assets (9,251) (5,727)
Loss on debt retirement (608) (4,543)
Intercompany eliminations 700 331
Foreign currency transaction (losses)
gains (10,536) 1,008
Interest expense, net (16,692) (14,731)
--------- ---------
(Loss) income before income taxes $(52,018) (5.0%) $3,949 0.3%
========= =========
(3) During the year ended January 3, 2009, the Company provided a
valuation allowance for 100% of its U.S. deferred tax assets resulting in a
non-cash charge of $164.5 million. In addition to this tax charge, the tax
provision for the full year also includes a tax benefit for the U.S. losses
and foreign tax expense of $9.6 million.
(4) For the three and twelve month periods ended January 3, 2009, the
Company's retail segment recorded charges of $6.3 million and $14.1 million,
respectively, to reduce inventory values to estimated market value. These
charges are included in cost of sales.
(5) During the fourth quarter and year ended January 3, 2009, charges
totaling $1.2 million and $11.0 million, respectively, were incurred in
connection with the reduction in corporate staff by 45 positions in the fourth
quarter and the closure of two manufacturing facilities in Oregon and Indiana
and the reduction in North American regional offices in the first quarter.
Charges totaling $0.6 million and $9.9 million were recorded in the
manufacturing segment with the remaining $0.6 million and $1.1 million
included in general corporate expenses for the three and twelve month periods
ended January 3, 2009, respectively. A portion of the first quarter 2008
charges, totaling $0.3 million, were recorded in cost of sales with the
balance reported as restructuring charges.
During the fourth quarter and year ended December 29, 2007, charges
totaling $3.6 million and $4.9 million, respectively, were incurred in
connection with the closure of a manufacturing facility in Alabama in the
fourth quarter and a facility in Pennsylvania during the first quarter. These
charges were recorded in the manufacturing segment. A portion of these
charges, totaling $0.9 million in the fourth quarter and $1.1 million for the
year, were recorded in cost of sales, with the balance reported as
restructuring charges.
(6) During the fourth quarter of 2008, the Company recognized a pretax
foreign currency translation gain of $15.9 million related to its sterling-
denominated term loan. This gain, net of $6.2 million of deferred income tax
expense, is reflected in the other comprehensive income component of
stockholders' equity. The Company's net deferred tax assets decreased by $6.2
million as a result of this adjustment requiring a corresponding reduction to
the related valuation allowance. The non-cash deferred income tax benefit of
$6.2 million recorded to reduce the deferred tax asset valuation allowance is
included in the Company's net loss for the quarter.
(7) Fourth quarter 2008 international segment income was reduced by $0.6
million of expense recorded in connection with the earn out provisions of the
ModularUK Building Systems acquisition in February 2008.
(8) During the fourth quarter and year ended December 29, 2007, the
Company accrued an estimated payment of $13.3 million of contingent
consideration related to the fiscal 2007 performance of Caledonian Building
Systems Limited, acquired by Champion in 2006. Approximately $6.9 million of
the amount accrued was recorded as an increase to goodwill while the remaining
$6.4 million was recorded as compensation expense in the international
segment. During the third quarter of 2008, the Company settled this
obligation for $12.3 million, $1.0 million less than the amount accrued in
2007 as a result of changes in the exchange rate. Approximately $6.4 million
of the payment is included in acquisitions and related payments on the cash
flow statement with the remaining $5.9 million reflected as a reduction of
cash flow from operating activities.
(9) During the year ended January 3, 2009 the Company repaid the $24.0
million (CAD) note issued in connection with its acquisition of SRI.
(10) The Company borrowed $25.0 million under its revolving line of credit
during the third quarter of 2008 and in October 2008 repaid $10.0 million of
the revolving loan and $23.5 million of its term debt pursuant to an amendment
of its senior secured credit agreement.
(11) Gains on disposal of fixed assets resulted primarily from the sale of
two idle plants in both 2008 and 2007.
CHAMPION ENTERPRISES, INC.
OTHER STATISTICAL INFORMATION (UNAUDITED)
Three months ended Twelve Months Ended
------------------ -------------------
Jan. 3, Dec. 29, % Jan. 3, Dec. 29, %
2009 2007 Change 2009 2007 Change
-------------------------- --------------------------
MANUFACTURING
SEGMENT
Units sold:
HUD-Code 1,411 2,251 (37.3%) 6,399 9,971 (35.8%)
Modular 502 921 (45.5%) 2,507 3,670 (31.7%)
Canadian 414 422 (1.9%) 2,332 1,637 42.5%
Other 38 17 123.5% 168 68 147.1%
------------------ ------------------
Total units sold 2,365 3,611 (34.5%) 11,406 15,346 (25.7%)
Less: intercompany (25) (92) (72.8%) (156) (312) (50.0%)
------------------ ------------------
Units sold to
independent
retailers /
builders 2,340 3,519 (33.5%) 11,250 15,034 (25.2%)
Floors sold 4,126 6,697 (38.4%) 20,177 29,233 (31.0%)
Multi-section mix 67% 75% 68% 77%
Average unit prices,
excluding delivery
Total $53,900 $55,700 (3.2%) $56,100 $55,100 1.8%
HUD-Code $43,200 $45,000 (4.0%) $44,700 $45,000 (0.7%)
Modular $70,500 $73,000 (3.4%) $69,600 $76,500 (9.0%)
