Exhibit 99.1
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Investor and Media Contacts: |
| Phyllis A. Knight | | Colleen T. Bauman |
| Chief Financial Officer | | Investor Relations |
| (248) 340-9090 | | (248) 340-7731 |
CHAMPION ENTERPRISES, INC.
REPORTS PROFITABLE SECOND QUARTER
Net income of $0.30 per diluted share reported
Auburn Hills, Mich., July 23, 2004—Champion Enterprises, Inc. (NYSE: CHB), one of the nation’s leading housing manufacturers, today reported results for its second quarter and six months ended July 3, 2004. For the quarter, net income was $23.4 million, or $0.30 per diluted share, compared to $3.0 million, or $0.04 per diluted share, in the second quarter of 2003. Revenues for the quarter were $306 million, up from $296 million in the comparable 2003 period. Champion’s improved results reflect the company’s focus on strengthening operations in both its manufacturing and retail segments despite difficult market conditions in certain geographic regions. The current quarter’s results were helped by a $12 million income tax benefit and a $3.9 million credit for valuation of common stock warrants. Comparisons of year-over-year net sales, income from continuing operations and net income are shown below:
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| | | July 3, | | June 28, | | July 3, | | June 28, |
(In millions, except EPS)
| | 2004
| | 2003
| | 2004
| | 2003
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| Net sales | | $ | 306.1 | | | $ | 295.7 | | | $ | 543.2 | | | $ | 538.5 | |
| Income (loss)-cont. operations | | $ | 23.5 | | | $ | 6.0 | | | $ | 8.0 | | | ($ | 8.1 | ) |
| Per diluted share | | $ | 0.30 | | | $ | 0.09 | | | $ | 0.10 | | | ($ | 0.22 | ) |
| Net income (loss) | | $ | 23.4 | | | $ | 3.0 | | | $ | 9.1 | | | ($ | 18.4 | ) |
| Per diluted share | | $ | 0.30 | | | $ | 0.04 | | | $ | 0.11 | | | ($ | 0.40 | ) |
2004 Second Quarter Highlights
| | • | | Pretax internal operating results improved year-over-year by $8.5 million for the quarter and $25.2 million year-to-date; |
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| | • | | For the second quarter, a 6.5% margin was reported by the manufacturing segment on net sales of $269 million, representing the highest profitability level since the third quarter of 2001; |
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| | • | | Retail operations earned segment income of $2.0 million — the first profitable quarter in four years and enough to bring year-to-date segment income to $1.8 million; |
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| | • | | Modular homes sold increased 32% and now represent more than 13% of Champion’s total manufacturing home shipments; |
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| | • | | Based on the most recently available MHI data, Champion’s HUD Code wholesale market share expanded for the April through May period to 16.2%, bringing year-to-date market share to 15.1% from 14.3% at the end of March; and |
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| | • | | During the quarter, operations generated $2.3 million in cash flow and debt was further reduced through the repurchase of $10.9 million of Senior Notes due 2009 for $10.4 million of cash. |
Management Comments and Outlook
Al Koch, Chairman, President and Chief Executive Officer, commented, “Champion’s manufacturing and retail operations continued to make meaningful progress to drive better results. We are encouraged by improving conditions in many of our key markets. Champion’s broad geographic footprint and range of product offerings are real strengths when our industry recovery begins to take hold. We again saw significant sales growth in our modular business, which is a positive trend for our company.
“Based on shipments reported to date, we expect HUD Code industry wholesale shipments in 2004 will most likely trend toward the low end of our original forecast, which was 135,000 homes. We remain optimistic, however, that a stronger consumer financing environment will begin to emerge later this year and that repossessions will continue to trend downward. Based on Champion’s results in the first half of this year, our goal of achieving profitability for 2004, excluding possible capital structure related items, appears likely to be reached despite relatively flat HUD Code industry shipments. Champion’s improved operations and balance sheet position us well for when the industry rebounds.” Koch concluded.
Operating Results
Below is a summary of Champion’s pretax internal operating results, which management regards as a useful measure in evaluating its core operations of producing and selling manufactured housing because non-cash capital structure related items and income taxes are excluded:
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(In millions)
| | 2004
| | 2003
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| | 2004
| | 2003
| | (worse)
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| Manufacturing segment income | | $ | 17.6 | | | $ | 13.0 | | | $ | 4.6 | | | $ | 22.2 | | | $ | 6.2 | | | $ | 16.0 | |
| Retail segment income (loss) | | | 2.0 | | | | (0.7 | ) | | | 2.7 | | | | 1.8 | | | | (3.4 | ) | | | 5.2 | |
| General corporate expenses | | | (6.8 | ) | | | (6.4 | ) | | | (0.4 | ) | | | (12.8 | ) | | | (13.7 | ) | | | 0.9 | |
| Intercompany eliminations | | | (0.5 | ) | | | 0.1 | | | | (0.6 | ) | | | (0.7 | ) | | | 0.6 | | | | (1.3 | ) |
| Interest expense, net | | | (4.6 | ) | | | (6.8 | ) | | | 2.2 | | | | (9.6 | ) | | | (14.0 | ) | | | 4.4 | |
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| Pretax internal operating results | | | 7.7 | | | | (0.8 | ) | | | 8.5 | | | | 0.9 | | | | (24.3 | ) | | | 25.2 | |
| Mark-to-market credit (charge) for stock warrants | | | 3.9 | | | | — | | | | 3.9 | | | | (1.2 | ) | | | — | | | | (1.2 | ) |
| Debt retirement gain (loss) | | | 0.5 | | | | 7.1 | | | | (6.6 | ) | | | (2.8 | ) | | | 13.8 | | | | (16.6 | ) |
| Income tax (expense) benefits | | | 11.4 | | | | (0.3 | ) | | | 11.7 | | | | 11.1 | | | | 2.4 | | | | 8.7 | |
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| Income (loss)-cont. operations | | | 23.5 | | | | 6.0 | | | | 17.5 | | | | 8.0 | | | | (8.1 | ) | | | 16.1 | |
| Income (loss)-discont. operations | | | (0.1 | ) | | | (3.0 | ) | | | 2.9 | | | | 1.1 | | | | (10.3 | ) | | | 11.4 | |
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| Net income | | $ | 23.4 | | | $ | 3.0 | | | $ | 20.4 | | | $ | 9.1 | | | ($ | 18.4 | ) | | $ | 27.5 | |
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Manufacturing-In the second quarter of 2004, manufacturing net sales increased slightly to $269 million from $263 million in the year earlier period and segment income rose to 6.5% of revenues from 4.9% a year ago. The manufacturing segment had earnings before interest, income taxes and general corporate expenses of $17.6 million for the second quarter of the year, which included $0.8 million of costs related to closed manufacturing facilities. During the quarter a homebuilding facility in Alabama was consolidated at minimal closing costs. At the end of the second quarter of 2004, the company had unfilled manufacturing orders totaling $90 million, an 88% improvement from $48 million a year earlier when five additional manufacturing facilities were operating.
Retail-For the quarter ended July 3, 2004, Champion’s retail operations reported $2.0 million of segment income, consisting of $1.6 million at ongoing locations and $0.4 million at closed locations, which included a $0.6 million gain on the sale of a sales center. The quarter’s results were significantly improved from the loss of $0.7 million in the second quarter of 2003. Revenues for the quarter were off 5% year-over-year although the company was operating an average of 33% fewer locations. The average new home retail sales price increased 27% to $95,500 and the average number of homes sold per store per month rose 13% for new homes and 22% for total homes.
Other-Results in the second quarter of 2004 included a mark-to-market credit of $3.9 million related to the company’s outstanding common stock warrants for 2.2 million shares as a result of the decrease in Champion’s common stock price during the quarter. Year-to-date, the company recorded a net charge of $1.2 million to value these warrants. A gain on debt retirement of $0.5 million was recorded in this year’s second quarter and a net loss of $2.8 million was recorded in the year-to-date period. Net interest expense decreased 33% versus the year earlier quarter as a result of debt reduction completed in 2003 and 2004. A $12 million income tax benefit was recorded in this year’s second quarter as a result of decreasing the allowance for tax adjustments. Income from discontinued operations of $1.1 million for the year-to-date period ended July 3, 2004 resulted from the settlement of contractual obligations.
Financial Position
At the end of June 2004, cash and cash equivalents totaled $116 million and long-term debt was $202 million. Net debt (total debt less cash and cash equivalents) was $100 million at quarter end, an improvement from $114 million at the start of the year and from $198 million a year ago. During the quarter, the company generated $2.3 million in cash flow from continuing operations and used $10.4 million to repurchase $10.9 million of Senior Notes. Cash flow from operations in the second quarter of 2003 totaled $61.9 million, which included a $60.7 million income tax refund.
Conference Call
Koch and other executive officers of the company will review results in a conference call for investors and analysts beginning at 11:00 am eastern time today. To participate in the conference call, please call the number below:
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| | | Dial-in #: | | | (866) 800-8648 | |
| | Pass code #: | | | 97792623 | |
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A replay of the conference call will be available after 1:00 pm eastern time today through midnight on Friday, July 30, 2004. The recording may be heard by dialing the number below:
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| | | Dial-in #: | | | (888) 286-8010 | |
| | Pass code #: | | | 61880346 | |
About Champion
Champion Enterprises, Inc., headquartered in Auburn Hills, Michigan, is one of the industry’s leading manufacturers and has produced over 1.6 million homes since the company was founded. The company operates 29 homebuilding facilities in 14 states and two Canadian provinces and 79 retail locations in 21 states. Independent retailers, including more than 800 Champion Home Center locations, and approximately 500 builders and developers also sell Champion-built homes. Further information can be found at the company’s website, www.championhomes.net.
Forward Looking Statements
This news release contains certain statements, including statements regarding industry shipments, consumer financing, and repossessions, and statements regarding the company’s financial position, expected results, improved operations, balance sheet strength and unfilled manufacturing orders, that 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.
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CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
(Dollars and weighted shares in thousands, except per share amounts)
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| | | Three Months Ended
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| | | July 3, | | June 28, | | % | | July 3, | | June 28, | | % |
| | | 2004
| | 2003
| | Change
| | 2004
| | 2003
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| Net sales: | | | | | | | | | | | | | | | | | | | | | | | | |
| Manufacturing | | $ | 269,083 | | | $ | 263,067 | | | | 2 | % | | $ | 478,939 | | | $ | 472,264 | | | | 1 | % |
| Retail | | | 63,923 | | | | 67,040 | | | | (5 | %) | | | 113,752 | | | | 128,161 | | | | (11 | %) |
| Less: intercompany | | | (26,900 | ) | | | (34,454 | ) | | | | | | | (49,500 | ) | | | (61,975 | ) | | | | |
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| Total net sales | | | 306,106 | | | | 295,653 | | | | 4 | % | | | 543,191 | | | | 538,450 | | | | 1 | % |
| Cost of sales | | | 252,495 | | | | 246,471 | | | | 2 | % | | | 454,979 | | | | 456,927 | | | | 0 | % |
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| Gross margin | | | 53,611 | | | | 49,182 | | | | 9 | % | | | 88,212 | | | | 81,523 | | | | 8 | % |
| Selling, general and administrative expenses | | | 41,357 | | | | 43,219 | | | | (4 | %) | | | 77,780 | | | | 91,882 | | | | (15 | %) |
| Mark-to-market (credit) charge for common stock warrants (1) | | | (3,900 | ) | | | — | | | | | | | | 1,200 | | | | — | | | | | |
| (Gain) loss on debt retirement (2) | | | (450 | ) | | | (7,130 | ) | | | | | | | 2,776 | | | | (13,833 | ) | | | | |
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| Operating income | | | 16,604 | | | | 13,093 | | | | 27 | % | | | 6,456 | | | | 3,474 | | | | 86 | % |
| Interest expense, net | | | 4,552 | | | | 6,840 | | | | (33 | %) | | | 9,583 | | | | 13,977 | | | | (31 | %) |
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| Income (loss) from continuing operations before income taxes (3) | | | 12,052 | | | | 6,253 | | | | 93 | % | | | (3,127 | ) | | | (10,503 | ) | | | 70 | % |
| Income tax expense (benefits) (4) | | | (11,400 | ) | | | 300 | | | | | | | | (11,100 | ) | | | (2,400 | ) | | | | |
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| Income (loss) from continuing operations | | | 23,452 | | | | 5,953 | | | | 294 | % | | | 7,973 | | | | (8,103 | ) | | | 198 | % |
| Income (loss) from discontinued operations net of taxes (5) | | | (20 | ) | | | (2,926 | ) | | | | | | | 1,136 | | | | (10,295 | ) | | | | |
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| Net income (loss) | | $ | 23,432 | | | $ | 3,027 | | | | 674 | % | | $ | 9,109 | | | $ | (18,398 | ) | | | 150 | % |
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| Income (loss) from continuing operations | | $ | 23,452 | | | $ | 5,953 | | | | | | | $ | 7,973 | | | $ | (8,103 | ) | | | | |
| Less: preferred stock dividends | | | (259 | ) | | | (169 | ) | | | | | | | (419 | ) | | | (455 | ) | | | | |
| Less: amount allocated to participating securities (6) | | | (1,618 | ) | | | (217 | ) | | | | | | | (489 | ) | | | — | | | | | |
| Less: charge to retained earnings for induced preferred stock conversion (1) | | | — | | | | — | | | | | | | | — | | | | (3,488 | ) | | | | |
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| Income (loss) from continuing operations available to common shareholders | | $ | 21,575 | | | $ | 5,567 | | | | 288 | % | | $ | 7,065 | | | $ | (12,046 | ) | | | 159 | % |
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| Basic income (loss) per share (6): | | | | | | | | | | | | | | | | | | | | | | | | |
| Income (loss) from continuing operations | | $ | 0.31 | | | $ | 0.10 | | | | 210 | % | | $ | 0.10 | | | $ | (0.22 | ) | | | 145 | % |
| Income (loss) from discontinued operations | | | — | | | | (0.05 | ) | | | | | | | 0.02 | | | | (0.18 | ) | | | | |
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| Net income (loss) | | $ | 0.31 | | | $ | 0.05 | | | | 520 | % | | $ | 0.12 | | | $ | (0.40 | ) | | | 130 | % |
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| Weighted shares for basic EPS | | | 70,657 | | | | 56,757 | | | | | | | | 69,380 | | | | 55,641 | | | | | |
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| Diluted income (loss) per share (6): | | | | | | | | | | | | | | | | | | | | | | | | |
| Income (loss) from continuing operations | | $ | 0.30 | | | $ | 0.09 | | | | 233 | % | | $ | 0.10 | | | $ | (0.22 | ) | | | 145 | % |
| Income (loss) from discontinued operations | | | — | | | | (0.05 | ) | | | | | | | 0.01 | | | | (0.18 | ) | | | | |
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| Net income (loss) | | $ | 0.30 | | | $ | 0.04 | | | | 650 | % | | $ | 0.11 | | | $ | (0.40 | ) | | | 128 | % |
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| Weighted shares for diluted EPS | | | 72,253 | | | | 61,624 | | | | | | | | 71,152 | | | | 55,641 | | | | | |
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See accompanying Notes to Financial Information.
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CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
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| | | Unaudited | | Unaudited | | | | | | Unaudited |
| | | July 3, | | April 3, | | January 3, | | June 28, |
| Assets | | 2004
| | 2004
| | 2004
| | 2003
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| Cash and cash equivalents | | $ | 115,868 | | | $ | 117,580 | | | $ | 145,868 | | | $ | 129,436 | |
| Restricted cash | | | 631 | | | | 6,631 | | | | 8,341 | | | | 664 | |
| Accounts receivable, trade | | | 30,673 | | | | 32,153 | | | | 13,773 | | | | 46,090 | |
| Inventories | | | 119,104 | | | | 112,467 | | | | 98,824 | | | | 120,424 | |
| Current assets of discontinued operations (5) | | | — | | | | — | | | | — | | | | 19,196 | |
| Other current assets | | | 19,381 | | | | 18,047 | | | | 18,325 | | | | 16,149 | |
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| Total current assets | | | 285,657 | | | | 286,878 | | | | 285,131 | | | | 331,959 | |
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| Property, plant and equipment, net | | | 93,524 | | | | 94,564 | | | | 95,821 | | | | 119,120 | |
| Goodwill | | | 126,516 | | | | 126,522 | | | | 126,537 | | | | 160,944 | |
| Non-current assets of discontinued operations (5) | | | 15 | | | | 22 | | | | 68 | | | | 4,836 | |
| Other non-current assets | | | 19,274 | | | | 19,949 | | | | 20,743 | | | | 23,103 | |
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| | | $ | 524,986 | | | $ | 527,935 | | | $ | 528,300 | | | $ | 639,962 | |
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| Liabilities, Redeemable Convertible Preferred | | | | | | | | | | | | | | | | |
| Stock and Shareholders’ Equity | | | | | | | | | | | | | | | | |
| Floor plan payable | | $ | 14,058 | | | $ | 13,597 | | | $ | 14,123 | | | $ | 19,453 | |
| Accounts payable | | | 33,806 | | | | 33,278 | | | | 26,724 | | | | 45,333 | |
| Current liabilities of discontinued operations (5) | | | 190 | | | | 1,652 | | | | 3,173 | | | | 11,563 | |
| Other accrued liabilities | | | 155,506 | | | | 159,508 | | | | 167,624 | | | | 167,640 | |
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| Total current liabilities | | | 203,560 | | | | 208,035 | | | | 211,644 | | | | 243,989 | |
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| Long-term debt (2) | | | 201,627 | | | | 212,631 | | | | 245,468 | | | | 290,652 | |
| Other long-term liabilities | | | 36,816 | | | | 52,777 | | | | 47,510 | | | | 53,140 | |
| Redeemable convertible preferred stock (1) | | | 20,750 | | | | 20,750 | | | | 8,689 | | | | 13,568 | |
| Shareholders’ equity | | | 62,233 | | | | 33,742 | | | | 14,989 | | | | 38,613 | |
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| | | $ | 524,986 | | | $ | 527,935 | | | $ | 528,300 | | | $ | 639,962 | |
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See accompanying Notes to Financial Information.
CHB/ 7
CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED CASH FLOW STATEMENTS (UNAUDITED)
(In thousands)
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| | | Three Months Ended
| | Six Months Ended
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| | | July 3, | | June 28, | | July 3, | | June 28, |
| | | 2004
| | 2003
| | 2004
| | 2003
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| Income (loss) from continuing operations | | $ | 23,452 | | | $ | 5,953 | | | $ | 7,973 | | | $ | (8,103 | ) |
| Adjustments: | | | | | | | | | | | | | | | | |
| Depreciation and amortization | | | 2,968 | | | | 4,103 | | | | 5,953 | | | | 8,376 | |
| Mark-to-market (credit) charge for common stock warrants (1) | | | (3,900 | ) | | | — | | | | 1,200 | | | | — | |
| (Gain) loss on debt retirement (2) | | | (450 | ) | | | (7,130 | ) | | | 2,776 | | | | (13,833 | ) |
| Gains on fixed asset sales | | | (688 | ) | | | (844 | ) | | | (713 | ) | | | (1,834 | ) |
| Changes in cash collateral deposits (7) | | | — | | | | — | | | | — | | | | 9,600 | |
| Refundable income taxes | | | 99 | | | | 60,749 | | | | 376 | | | | 60,749 | |
| Changes in working capital | | | (4,629 | ) | | | (1,179 | ) | | | (30,098 | ) | | | (18,271 | ) |
| Changes in accrued liabilities | | | (3,072 | ) | | | (3,507 | ) | | | (10,485 | ) | | | (8,597 | ) |
| Decrease in allow. for tax adjustments (4) | | | (12,000 | ) | | | — | | | | (12,000 | ) | | | — | |
| Other | | | 496 | | | | 3,723 | | | | 2,291 | | | | 5,218 | |
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| Cash provided by (used for) continuing operations | | | 2,276 | | | | 61,868 | | | | (32,727 | ) | | | 33,305 | |
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| Income (loss) from discontinued operations (5) | | | (20 | ) | | | (2,926 | ) | | | 1,136 | | | | (10,295 | ) |
| (Increase) decrease in net assets of discontinued operations (5) | | | (1,462 | ) | | | 8,824 | | | | (2,983 | ) | | | 10,280 | |
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| Cash provided by (used for) discontinued operations | | | (1,482 | ) | | | 5,898 | | | | (1,847 | ) | | | (15 | ) |
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| Additions to property, plant and equipment | | | (2,250 | ) | | | (1,855 | ) | | | (4,130 | ) | | | (3,055 | ) |
| Acquisition related deferred purchase price payments | | | — | | | | (1,382 | ) | | | — | | | | (3,882 | ) |
| Proceeds on disposal of fixed assets | | | 1,017 | | | | 1,234 | | | | 1,240 | | | | 5,076 | |
| Other | | | (51 | ) | | | (141 | ) | | | (109 | ) | | | (343 | ) |
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| Cash used for investing activities | | | (1,284 | ) | | | (2,144 | ) | | | (2,999 | ) | | | (2,204 | ) |
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| Increase (decrease) in floor plan payable, net | | | 461 | | | | 2,276 | | | | (65 | ) | | | 2,306 | |
| Repayment of industrial revenue bond and other debt | | | (141 | ) | | | (180 | ) | | | (6,029 | ) | | | (326 | ) |
| Purchase of Senior Notes (2) | | | (10,395 | ) | | | (15,276 | ) | | | (10,395 | ) | | | (35,830 | ) |
| Decrease in restricted cash (7) | | | 6,000 | | | | — | | | | 7,710 | | | | 50,229 | |
| Preferred stock issued, net | | | — | | | | — | | | | 12,000 | | | | — | |
| Increase in short-term borrowings | | | — | | | | 7,000 | | | | — | | | | 7,000 | |
| Common stock issued, net | | | 2,901 | | | | — | | | | 4,512 | | | | 300 | |
| Dividends paid on preferred stock | | | (48 | ) | | | (286 | ) | | | (160 | ) | | | (768 | ) |
| Deferred financing costs | | | — | | | | (159 | ) | | | — | | | | (1,942 | ) |
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| Cash provided by (used for) financing activities | | | (1,222 | ) | | | (6,625 | ) | | | 7,573 | | | | 20,969 | |
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| Increase (decrease) in cash and cash equivalents | | | (1,712 | ) | | | 58,997 | | | | (30,000 | ) | | | 52,055 | |
| Cash and cash equivalents at beginning of period | | | 117,580 | | | | 70,439 | | | | 145,868 | | | | 77,381 | |
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| Cash and cash equivalents at end of period | | $ | 115,868 | | | $ | 129,436 | | | $ | 115,868 | | | $ | 129,436 | |
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See accompanying Notes to Financial Information.
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CHB/ 8
CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL INFORMATION (UNAUDITED)
(1) As a result of fluctuations in the company’s common stock price, during the three and six months ended July 3, 2004 Champion recorded a $3.9 million credit and a $1.2 million net charge, respectively, for the change in estimated fair value of outstanding common stock warrants for 2.2 million shares issued in connection with the Series C preferred stock. During the first quarter of 2004, the preferred shareholder exercised its right to purchase $12 million of Series B-2 preferred stock. During the first quarter of 2003, the company agreed to accelerate the reduction in the conversion price for its Series C preferred stock. This amendment to the preferred stock terms was accounted for as an induced conversion, resulting in a charge directly to retained earnings of $3.5 million and an increase in the loss per share of $0.06 per diluted share.
(2) In the quarter ended July 3, 2004, the company recorded a gain of $0.5 million and used $10.4 million of cash to repurchase $10.9 million of Senior Notes due 2009. In the year-to-date period of 2004, the company also issued 3.9 million shares of its common stock in exchange for $27 million of its Senior Notes due 2007 and 2009, resulting in a pretax loss of $3.2 million. In the second quarter of 2003, the company recorded pretax gains of $7.1 million resulting from the purchase and retirement of $22.7 million of its Senior Notes for total cash payments of $15.3 million. In the year-to-date period of 2003, the company recorded pretax gains of $13.8 million resulting from the purchase and retirement of $50.5 million of Senior Notes for total payments of $35.8 million. As of the dates below, long-term debt consisted of the following (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | July 3, | | April 3, | | Jan. 3, | | June 28, | | Reduction
|
| | | 2004
| | 2004
| | 2004
| | 2003
| | 3 Months
| | 6 Months
| | 12 Months
|
| Senior Notes due 2007 | | $ | 97,510 | | | $ | 97,510 | | | $ | 111,010 | | | $ | 135,010 | | | $ | — | | | $ | (13,500 | ) | | $ | (37,500 | ) |
| Senior Notes due 2009 | | | 89,273 | | | | 100,215 | | | | 113,715 | | | | 134,450 | | | | (10,942 | ) | | | (24,442 | ) | | | (45,177 | ) |
| Industrial revenue bonds | | | 12,430 | | | | 12,430 | | | | 18,145 | | | | 18,145 | | | | — | | | | (5,715 | ) | | | (5,715 | ) |
| Other | | | 2,414 | | | | 2,476 | | | | 2,598 | | | | 3,047 | | | | (62 | ) | | | (184 | ) | | | (633 | ) |
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| | | $ | 201,627 | | | $ | 212,631 | | | $ | 245,468 | | | $ | 290,652 | | | $ | (11,004 | ) | | $ | (43,841 | ) | | $ | (89,025 | ) |
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(3) The company evaluates the performance of its manufacturing and retail segments based on earnings (loss) before interest, income taxes and general corporate expenses. A reconciliation of income (loss) from continuing operations before income taxes for the periods presented follows (dollars in thousands):
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| | | July 3, | | Related | | June 28, | | Related | | % |
Three months ended:
| | 2004
| | Sales
| | 2003
| | Sales
| | Change
|
| Manufacturing segment income | | $ | 17,567 | | | | 6.5 | % | | $ | 13,003 | | | | 4.9 | % | | | 35 | % |
| Retail segment income (loss) | | | 2,033 | | | | 3.2 | % | | | (737 | ) | | | (1.1 | %) | | | 376 | % |
| General corporate expenses | | | (6,846 | ) | | | | | | | (6,449 | ) | | | | | | | (6 | %) |
| Mark-to-market credit for stock warrants | | | 3,900 | | | | | | | | — | | | | | | | | | |
| Gain on debt retirement | | | 450 | | | | | | | | 7,130 | | | | | | | | | |
| Intercompany eliminations | | | (500 | ) | | | | | | | 146 | | | | | | | | | |
| Interest expense, net | | | (4,552 | ) | | | | | | | (6,840 | ) | | | | | | | 33 | % |
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| Income from continuing operations before income taxes | | $ | 12,052 | | | | 3.9 | % | | $ | 6,253 | | | | 2.1 | % | | | 93 | % |
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| | | July 3, | | Related | | June 28, | | Related | | % |
Six months ended:
| | 2004
| | Sales
| | 2003
| | Sales
| | Change
|
| Manufacturing segment income | | $ | 22,221 | | | | 4.6 | % | | $ | 6,157 | | | | 1.3 | % | | | 261 | % |
| Retail segment income (loss) | | | 1,780 | | | | 1.6 | % | | | (3,420 | ) | | | (2.7 | %) | | | 152 | % |
| General corporate expenses | | | (12,869 | ) | | | | | | | (13,721 | ) | | | | | | | 6 | % |
| Mark-to-market charge for stock warrants | | | (1,200 | ) | | | | | | | — | | | | | | | | | |
| (Loss) gain on debt retirement | | | (2,776 | ) | | | | | | | 13,833 | | | | | | | | | |
| Intercompany eliminations | | | (700 | ) | | | | | | | 625 | | | | | | | | | |
| Interest expense, net | | | (9,583 | ) | | | | | | | (13,977 | ) | | | | | | | 31 | % |
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| Loss from continuing operations before income taxes | | $ | (3,127 | ) | | | (0.6 | %) | | $ | (10,503 | ) | | | (2.0 | %) | | | 70 | % |
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For the quarter ended July 3, 2004, manufacturing segment results included costs of $0.8 million and retail segment results included income of $0.4 million related to closed locations. Retail segment income at closed locations included a $0.6 million gain from the sale of an idle sales center. For the six months ended July 3, 2004, manufacturing and retail segment income (loss) included net costs of $1.9 million and $0.1 million, respectively, related to closed locations.
(4) The effective tax rates for the periods presented differ from the 35% federal statutory rate because the company has a 100% deferred tax asset valuation allowance. In addition, the company is in a federal tax loss carryforward position and tax benefits can only be recorded to the extent of current taxable income. The income tax benefit in 2004 included a $12 million decrease in the allowance for tax adjustments, partially offset by state and foreign income taxes. The income tax benefit for 2003 included $3.0 million recorded to reduce the deferred tax asset valuation allowance following the completion of the company’s 2002 federal income tax return, which resulted in a larger refund than previously estimated, partially offset by state and foreign income taxes.
(5) In 2003 the company exited its consumer finance business, HomePride Finance Corp. Related amounts are presented as discontinued operations. In the year-to-date period of 2004, the company recorded income from discontinued operations due to the settlement of contractual obligations.
(6) EPS for periods reported reflect the adoption of EITF 03-06, which requires the use of the two-class method for enterprises with participating securities. The company’s participating securities consist of its convertible preferred stock and common stock warrants, which may participate in dividends paid on common stock pursuant to the terms of the securities. The company has no plans to pay dividends on its common stock in the near term.
(7) During the first quarter of 2003, the company finalized a $75 million revolving credit facility, which was used to issue letters of credit to replace cash collateral and resulted in the release of $49.8 million of restricted cash and $9.6 million of cash deposits. At the end of June 2004, the company had $59.8 million of letters of credit issued and no borrowings outstanding under this facility.
(more)
CHB/ 9
CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
OTHER STATISTICAL INFORMATION (UNAUDITED)
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| | | Three Months Ended
| | | | | | Six Months Ended
| | |
| | | July 3, | | June 28, | | % | | July 3, | | June 28, | | % |
| | | 2004
| | 2003
| | Change
| | 2004
| | 2003
| | Change
|
MANUFACTURING | | | | | | | | | | | | | | | | | | | | | | | | |
| Homes sold | | | | | | | | | | | | | | | | | | | | | | | | |
| HUD Code | | | | | | | | | | | | | | | | | | | | | | | | |
| Multi-section | | | 4,384 | | | | 5,165 | | | | (15 | %) | | | 7,995 | | | | 9,475 | | | | (16 | %) |
| Single-section | | | 880 | | | | 874 | | | | 1 | % | | | 1,391 | | | | 1,577 | | | | (12 | %) |
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| Total HUD Code | | | 5,264 | | | | 6,039 | | | | (13 | %) | | | 9,386 | | | | 11,052 | | | | (15 | %) |
| Modular | | | 838 | | | | 636 | | | | 32 | % | | | 1,532 | | | | 1,085 | | | | 41 | % |
| Canadian | | | 252 | | | | 250 | | | | 1 | % | | | 441 | | | | 459 | | | | (4 | %) |
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| Total homes sold | | | 6,354 | | | | 6,925 | | | | (8 | %) | | | 11,359 | | | | 12,596 | | | | (10 | %) |
| Less: intercompany | | | 556 | | | | 838 | | | | (34 | %) | | | 1,002 | | | | 1,568 | | | | (36 | %) |
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| Homes sold to independent retailers/builders | | | 5,798 | | | | 6,087 | | | | (5 | %) | | | 10,357 | | | | 11,028 | | | | (6 | %) |
| Total floors sold | | | 12,037 | | | | 13,131 | | | | (8 | %) | | | 21,761 | | | | 23,849 | | | | (9 | %) |
| Floors sold per average plant | | | 408 | | | | 375 | | | | 9 | % | | | 732 | | | | 667 | | | | 10 | % |
| Multi-section mix | | | 83 | % | | | 85 | % | | | | | | | 85 | % | | | 84 | % | | | | |
| Average home prices | | | | | | | | | | | | | | | | | | | | | | | | |
| Total | | $ | 40,800 | | | $ | 36,500 | | | | 12 | % | | $ | 40,700 | | | $ | 36,100 | | | | 13 | % |
| HUD Code | | $ | 38,400 | | | | | | | | | | | $ | 38,400 | | | | | | | | | |
| Modular | | $ | 53,300 | | | | | | | | | | | $ | 52,500 | | | | | | | | | |
| Manufacturing facilities at period end | | | 29 | | | | 34 | | | | (15 | %) | | | 29 | | | | 34 | | | | (15 | %) |
RETAIL | | | | | | | | | | | | | | | | | | | | | | | | |
| Homes sold | | | | | | | | | | | | | | | | | | | | | | | | |
| New homes | | | 623 | | | | 821 | | | | (24 | %) | | | 1,105 | | | | 1,598 | | | | (31 | %) |
| Pre-owned homes | | | 287 | | | | 292 | | | | (2 | %) | | | 591 | | | | 600 | | | | (2 | %) |
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| Total homes sold | | | 910 | | | | 1,113 | | | | (18 | %) | | | 1,696 | | | | 2,198 | | | | (23 | %) |
| % Champion-produced new homes sold | | | 89 | % | | | 93 | % | | | | | | | 90 | % | | | 95 | % | | | | |
| New multi-section mix | | | 90 | % | | | 85 | % | | | | | | | 91 | % | | | 84 | % | | | | |
| Average number of new homes in inventory per sales center at period end | | | 13.3 | | | | 14.7 | | | | (10 | %) | | | 13.3 | | | | 14.7 | | | | (10 | %) |
| Average new home retail price | | $ | 95,500 | | | $ | 75,400 | | | | 27 | % | | $ | 94,600 | | | $ | 73,900 | | | | 28 | % |
| Average number of new homes sold per sales center per month | | | 2.6 | | | | 2.3 | | | | 13 | % | | | 2.3 | | | | 2.3 | | | | 0 | % |
| Average number of total homes sold per sales center per month | | | 3.9 | | | | 3.2 | | | | 22 | % | | | 3.6 | | | | 3.1 | | | | 16 | % |
| Sales centers at period end | | | 79 | | | | 115 | | | | (31 | %) | | | 79 | | | | 115 | | | | (31 | %) |
CONSOLIDATED AT PERIOD END (in thousands) | | | | | | | | | | | | | | | | | | | | | | | | |
| Contingent repurchase obligations (est.) | | $ | 260,000 | | | $ | 260,000 | | | | | | | $ | 260,000 | | | $ | 260,000 | | | | | |
| Champion-produced field inventories (est.) | | $ | 510,000 | | | $ | 580,000 | | | | (12 | %) | | $ | 510,000 | | | $ | 580,000 | | | | (12 | %) |
| Shares issued and outstanding | | | 71,059 | | | | 56,777 | | | | 25 | % | | | 71,059 | | | | 56,777 | | | | 25 | % |
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