SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 17, 2002
Champion Enterprises, Inc.
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(Exact name of registrant as specified in its charter)
Michigan
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State or other jurisdiction of incorporation
1-9751 38-2743168
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Commission File Number IRS Employer Identification No.
2701 Cambridge Court, Suite 300, Auburn Hills, Michigan 48326
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (248) 340-9090
Item 5. Other Events.
The following press release was issued by the Registrant on April 17,
2002. The format of the financial statements have been slightly modified from
those included in the press release to comply with certain Securities and
Exchange Commission rules.
CHAMPION ENTERPRISES, INC.
REPORTS FIRST QUARTER RESULTS
Auburn Hills, Mich., April 17, 2002--Champion Enterprises, Inc. (NYSE:
CHB), the nation's leading housing manufacturer, today reported results for its
first quarter ended March 30, 2002. For the three month period, Champion had a
net loss of $12 million, or $0.25 per diluted share, on net sales of $306
million. In the comparable quarter a year ago, the company reported a net loss
of $26 million, or $0.55 per diluted share, on net sales of $326 million. The
prior year included pretax non-cash fixed asset impairment charges of $5.5
million ($3.4 million after tax or $0.07 per diluted share), other retail
closing costs of $2.2 million ($1.4 million after tax or $0.03 per diluted
share) and goodwill amortization expense of $2.9 million ($2.2 million after tax
or $0.05 per diluted share).
Despite the 6% decline in net sales, gross margin as a percent of net
sales improved to 14.5% from 13.7% in the prior year due to higher average home
selling prices, improved cost structure and manufacturing efficiencies. Selling,
general and administrative expenses decreased 21% as a result of operating fewer
sales centers, elimination of goodwill amortization expense, retail closing
costs in the prior year, reduced wholesale repurchase losses and less marketing
costs. As a percent of net sales, the company's operating loss improved by 617
basis points for the quarter.
Chairman, President, and Chief Executive Officer, Walter R. Young,
commented, "We are encouraged that our ongoing programs to lower breakeven
points have resulted in improved margins on reduced sales. Our results this
quarter were hurt by lower sales volume due to seasonality and the retail time
delay for the shift to real estate mortgages, particularly as a result of Texas
legislation. When a real estate mortgage is used, 60 days or more are added to
our selling process."
Operations
Manufacturing - For the three month period, wholesale revenues rose 2% to $267
million from $261 million one year earlier and segment income improved to $1.3
million from a loss of $10.5 million in the first quarter of 2001. Losses
related to retailer defaults dropped
to $250,000 in the first quarter of 2002 from $2 million in the comparable
quarter a year earlier. The number of independent retail locations that are part
of the company's Champion Home Center distribution network increased to 546
locations currently from 438 a year ago and 522 at the beginning of the year.
Champion's incoming order rate in this year's first quarter dropped
approximately 5% year-over-year, resulting in unfilled wholesale orders of $13
million at quarter end for the 47 plants operated. This amount compares to $19
million at 51 plants a year earlier. During the quarter, two small manufacturing
facilities were idled.
Retail - Year-over-year retail revenues dropped 26% for the quarter and the
retail loss was reduced to $8.1 million from $14.8 million a year ago. Champion
currently has 214 company-owned stores compared to 230 locations at the end of
March 2001. The average selling price of new homes sold by company stores rose
11% from the first quarter of 2001. Inventory at company-owned retailers
averaged 14 new homes per location, down from 18 homes a year ago.
Finance Company and Capital Structure Update
As previously announced, Champion has entered into an agreement to
acquire the manufactured housing loan origination business of CIT Group Inc. for
approximately $5 million. Champion expects to complete this acquisition within a
week and to operate its loan origination business through its wholly owned
subsidiary, HomePride Finance Corp. In connection with this transaction,
Champion expects to close on a $150 million warehouse facility to support
HomePride's finance operations. Also, this Friday the company plans to terminate
its bank revolving credit facility and cash collateralize $35 million in letters
of credit. On April 2, 2002 Champion completed a $25 million private placement
of convertible preferred stock with Fletcher International, Inc.
Industry Update
In the first two months of 2002, year-over-year industry shipments rose
8.5%. For 2002 the company estimates industry wholesale shipments of 200,000
homes, up 4% from 2001 levels, and industry retail sales of 208,000 new homes,
down 2% from 2001 levels. Using these estimates industry new home inventory is
expected to drop by 8,000 homes this year. Champion estimates that industry
repossessions will be 90,000 homes in 2002, which will be flat with 2001 levels
and begin to trend down next year. The company estimates that cash and real
estate mortgages now represent 60% of industry funding.
Outlook
Young concluded, "We are excited to be starting up our loan
origination operations within the next few weeks, particularly seeing the market
share gains realized by some of the vertically integrated manufactured housing
companies having consumer credit availability during these times. Through
HomePride we will be generating loans for customers at our company-owned stores
and select independents. Overall we still expect to be at about breakeven this
year. Although our finance platform, which will account for its structured
securitizations using the portfolio method of accounting, is expected to lose
money in 2002, it should be profitable next year as well as drive improvements
at our retail and manufacturing operations."
Champion Enterprises, Inc., headquartered in Auburn Hills, Michigan, is
the industry's leading manufacturer and has produced nearly 1.6 million homes
since the company was founded. The company operates 47 homebuilding facilities
in 16 states and two Canadian provinces and 214 retail locations in 27 states.
Independent retailers, including 546 Champion Home Center locations, and
approximately 400 builders and developers also sell Champion-built homes.
Further information can be found at the company's website,
www.championhomes.net.
This news release contains certain statements, including statements
regarding the proposed completion of the CIT acquisition and related capital
structure transactions, industry financing, real estate loans, wholesale
shipments, repossessions and retail sales estimates and lending availability,
forecasts of expected results, future cash flows and liquidity, and growth
opportunities 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, and those discussions regarding
risk factors are incorporated herein by reference.
CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL SUMMARY
(Dollars and weighted shares in thousands, except per share amounts)
Three Months Ended
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March 30, March 31, %
2002 2001 Change
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Net sales:
Manufacturing $ 266,652 $ 260,510 2%
Retail 80,125 108,402 (26%)
Less: intercompany (40,400) (42,600)
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Total net sales 306,377 326,312 (6%)
Cost of sales 261,868 281,504 (7%)
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Gross margin 44,509 44,808 (1%)
Selling, general and administrative expenses (1) 58,238 74,063 (21%)
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Operating loss before impairment charges (13,729) (29,255) 53%
Fixed asset impairment charges (1) -- (5,500) 100%
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Operating loss (2) (13,729) (34,755) 60%
Interest expense, net 4,817 6,428 (25%)
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Loss before income taxes (18,546) (41,183) 55%
Income tax benefits (3) (6,700) (15,100)
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Net loss (11,846) (26,083) 55%
Less: dividend on preferred stock 250 --
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Loss available to common shareholders $ (12,096) $ (26,083) 54%
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Basic and diluted loss per share $ (0.25) $ (0.55) 55%
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Weighted shares for basic and diluted EPS 48,506 47,496
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See accompanying Notes to Financial Information.
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CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
OTHER STATISTICAL INFORMATION
Three Months Ended
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March 30, March 31, %
2002 2001 Change
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MANUFACTURING
Homes sold 7,745 8,210 (6%)
Less: intercompany 1,092 1,239 (12%)
Homes sold to
independent retailers/builders 6,653 6,971 (5%)
Floors sold 14,435 14,696 (2%)
Multi-section mix 82% 76%
Average home price $ 33,100 $ 30,500 9%
Manufacturing facilities at period end 47 51 (8%)
RETAIL
Homes sold
New homes 1,194 1,824 (35%)
Pre-owned homes 347 513 (32%)
Total homes sold 1,541 2,337 (34%)
% Champion-produced new homes sold 94% 84%
New multi-section mix 79% 69%
Average new home price $ 61,600 $ 55,500 11%
Average number of new homes in inventory
per sales center at period end 14 18 (22%)
Sales centers at period end 214 230 (7%)
CONSOLIDATED (in thousands)
Contingent repurchase obligations $310,000 $360,000 (14%)
Champion-produced field inventories $631,000 $713,000 (12%)
Shares issued and outstanding 48,706 47,544 2%
Depreciation expense $ 5,859 $ 6,457 (9%)
See accompanying Notes to Financial Information.
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CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
March 30, Dec. 29, March 31,
ASSETS 2002 2001 2001
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Cash and cash equivalents $ 25,280 $ 69,456 $ 19,029
Accounts receivable, trade 42,472 27,507 50,579
Inventories 174,339 172,276 211,607
Deferred taxes and other 90,204 76,385 89,900
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Total current assets 332,295 345,624 371,115
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Property and equipment, net 172,836 177,430 193,760
Goodwill, net 258,964 258,967 271,061
Deferred taxes and other assets 76,603 76,131 80,726
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$840,698 $858,152 $916,662
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LIABILITIES AND SHAREHOLDERS' EQUITY
Floor plan payable $ 63,713 $ 70,919 $102,923
Accounts payable 59,648 47,559 62,588
Other accrued liabilities 164,130 174,036 180,678
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Total current liabilities 287,491 292,514 346,189
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Long-term debt 224,858 224,926 225,496
Notes payable to bank -- -- 5,000
Other long-term liabilities 45,697 48,678 68,656
Convertible preferred stock 20,000 20,000 --
Shareholders' equity 262,652 272,034 271,321
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$840,698 $858,152 $916,662
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See accompanying Notes to Financial Information.
CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL INFORMATION
(1) For the quarter ended March 31, 2001, costs related to closed operations
included $2.2 million ($1.4 million after tax) in selling, general and
administrative expenses for lease termination and other costs and $5.5 million
($3.4 million after tax) for non-cash fixed asset impairment charges.
(2) Segment EBITA consists of earnings (loss) before interest, taxes and
goodwill amortization, and includes fixed asset impairment charges and other
costs related to closed operations. A reconciliation of operating income (loss)
follows (dollars in thousands):
% of % of
March 30, Related March 31, Related %
Three months ended: 2002 Sales 2001 Sales Change
---------------- ------------ ---------------- ------------ ---------------
Manufacturing EBITA (loss) $ 1,303 0.5% $ (10,456) -4.0% 112%
Retail EBITA (loss) (8,078) -10.1% (14,838) -13.7% 46%
General corporate expenses (6,954) (6,582) (6%)
Goodwill amortization - (2,879)
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Operating loss $ (13,729) -4.5% $ (34,755) -10.7% 60%
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(3) The difference between taxes at the 35% federal statutory rate and taxes
provided is due to state income taxes and nondeductible items, primarily
goodwill.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CHAMPION ENTERPRISES, INC.
/S/ ANTHONY S. CLEBERG
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Anthony S. Cleberg
Executive Vice President and
Chief Financial Officer
April 17, 2002