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): February 13, 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 February
13, 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 2001 YEAR END AND
FOURTH QUARTER RESULTS
Auburn Hills, Mich., February 13, 2002--Champion Enterprises, Inc.
(NYSE: CHB), the nation's leading housing manufacturer, today reported results
for the year and fourth quarter ended December 29, 2001. For the year Champion
had a net loss of $28 million, or $0.59 per diluted share, on revenues of $1.5
billion and generated $67 million in cash flows from operations. In 2000 the
company reported a net loss of $147 million, or $3.12 per diluted share, on
revenues of $1.9 billion. The prior year included non-cash goodwill impairment
charges of $190 million ($128 million after tax or $2.70 per diluted share).
For the fourth quarter of 2001, the company reported a loss of $0.10 per diluted
share, down from a loss of $0.42 per share a year ago excluding the goodwill
impairment charges. Revenues in the quarter were $366 million, down 5% from the
comparable quarter a year earlier. For the three-month period, the company's
manufacturing operations reported revenues of $323 million and segment income of
$19 million, or 6% of sales. Retail operations had quarterly revenues totaling
$95 million and reported an operating loss of $10 million, including $1.2
million for non-cash fixed asset impairment charges related to closed locations.
Chairman, President, and Chief Executive Officer, Walter R. Young, commented,
"We're glad to have 2001 behind us, particularly with the challenging industry
conditions under which we are operating. We don't like losing money, but are
pleased that we made solid progress to improve our three operating platforms and
to better position the company for growth in the housing industry. Although
still focused on liquidity and cash flows, we are increasing our emphasis on
growing operations."
Operating Results
For the year, Champion's manufacturing operations improved margins as a percent
of revenues to 4.2% in 2001 from 3.3% in 2000 despite a 17% drop in revenues.
Wholesale revenues were $1.3 billion and segment income totaled $54 million,
which included $3.3 million of impairment charges related to closed homebuilding
facilities. In 2000 wholesale revenues were $1.6 billion and segment income was
$51 million, which included $2.5 million of impairment charges related to closed
plants and $6.9 million of gains from property insurance settlements. Unfilled
wholesale orders at year end totaled approximately $18 million at the 49 plants
operated, up from $15 million at 53 plants a year earlier.
Retail operations had revenues of $453 million for 2001 and a loss of $33
million, including costs of $6.6 million to close 42 retail locations and a $3.7
million charge for losses on loans and transition costs for alternative
financing sources. Prior year retail revenues were $607 million and the segment
reported a loss of $9 million, which included $5.8 million of costs related to
closing 62 retail locations.
Traditional Markets
Manufacturing Operations - The number of independent retail locations that are
part of the Champion Home Center distribution network rose from 423 at the
beginning of 2001 to 522 locations currently. Due to efforts to keep inventories
in line with demand, in 2001 independent retailers, which accounted for
approximately 79% of the company's wholesale homes sold, decreased inventories
of Champion-produced homes by 20%. Losses related to retailer defaults dropped
to $3.9 million in 2001 from $6 million in 2000, with $400,000 in the fourth
quarter compared to $2.3 million a year ago.
Retail Operations - At year end Champion's 218 company-owned stores had an
average inventory of 14 new homes per location, down from 18 homes at the 260
locations operated at December 2000. In addition to reducing retail inventories
by approximately $47 million, the quality of retail inventory improved with
newer homes now representing a higher percent of total inventory than a year
ago. During the year the company closed 42 retail stores, reduced expenses, and
lowered its breakeven point to 3.5 new homes per month per location. The company
has about $80 million in floor plan credit lines available and $71 million of
floor plan liability outstanding.
New Markets
Genesis Operations - Champion sold 2,700 homes through 400 builders and
developers in 2001. These homes, up 35% from the previous year, represented 13%
of wholesale revenues and 7% of wholesale homes sold. In 2000 the company sold
2,000 homes to 200 builders and developers, representing 7% of wholesale
revenues and 4% of wholesale homes sold. Currently 11 plants, designated as
Genesis facilities, are targeting sales to builders and developers and are going
after new markets for Champion-produced homes.
Liquidity and Capital Structure
During 2001 the company improved its capital structure with a $20 million
convertible preferred stock issuance and ended the year with $69 million in
cash, no bank borrowings outstanding and total debt of $297 million. Net working
capital (accounts receivable and inventories less accounts payable) dropped by
$54 million, or 26%. In 2001 $44 million was used to reduce debt and $7 million
for capital expenditures. Total debt as a percent of total capital, net of cash,
was reduced to 43.8% from 49.5% at the beginning of the year.
Executive Vice President and Chief Financial Officer, Anthony S. Cleberg,
commented, "Year end is our seasonal low point where we see strong cash balances
and a lower borrowing base under our bank credit facility because of reduced
accounts receivable. This borrowing base was $37 million at December 2001. As we
enter the selling season, we will use cash but expect that the borrowing base
will increase to maintain our overall liquidity. We are very pleased with the
liquidity improvements made during the year."
Cleberg continued, "As a result of adopting SFAS 142 in this year's
first quarter, we do not expect to record an asset impairment charge. In
addition, by eliminating goodwill amortization expense, earnings will increase
by $0.17 per diluted share in 2002. With respect to recent accounting issues
that have been in the news lately, we believe that we have no material
exposure."
Industry Update
In 2001 U.S. industry wholesale shipments were 193,000 homes, down 22.9%
compared to 2000. In the fourth quarter of 2001, year-over-year industry
shipments rose 3.5%, the first quarterly increase since the first quarter of
1999. For the year we estimate industry retail sales were 210,000 new homes, off
25.7% from levels in 2000. Industry repossessions were an estimated 90,000 homes
in 2001 and we expect
will be flat in 2002. New retail inventories dropped by approximately 17,000
homes during 2001.
"Despite the contraction in traditional consumer financing, industry lending
availability, driven by the use of real estate financing, should be sufficient
to meet expected demand. Our estimate is that real estate loans represented
about 50% of total industry new home financing in 2001, up from 20% a year
earlier. We expect real estate loans should grow to near 70% of industry new
home financing in 2002. We're also estimating industry wholesale shipments of
200,000 homes and new retail sales of 208,000 homes for the year even with a
flat economy forecasted," Young said.
Outlook
"We see relative improvement already this year, with same store consumer traffic
at company-owned locations up from fourth quarter levels and slightly ahead of a
year ago," Young continued. "Even with a probable loss for the seasonally slower
first quarter, we expect to be profitable for the entire year."
Young concluded, "We're excited to be back on track to deliver profitable
growth. Our efforts since mid-1999 to reduce expenses, capacity, inventories and
debt better position us for growth in the months ahead. This growth should be in
both our traditional markets as well as new markets with Genesis homes to
builders and developers."
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 49 homebuilding facilities and 218
retail locations. Champion's homes are also sold by more than 1,000 independent
retail locations that have joined either the Champion Home Center or the
Alliance of Champions retail distribution networks. Further information can be
found at the company's website, www.championhomes.net.
This news release contains certain statements, including statements regarding
industry financing, real estate loans, shipments, repossessions and retail sales
estimates and lending availability, forecasts of expected results, future cash
flows and liquidity, exposure relating to accounting issues, 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 that discussion regarding risk factors is
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 Twelve Months Ended
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Dec. 29, Dec. 30, % Dec. 29, Dec. 30, %
2001 2000 Chg. 2001 2000 Chg.
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Net sales:
Manufacturing $322,601 $310,498 4% $1,296,315 $1,564,026 (17%)
Retail 95,468 123,648 (23%) 452,910 606,708 (25%)
Less: intercompany (52,000) (47,000) (201,000) (249,000)
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Total net sales 366,069 387,146 (5%) 1,548,225 1,921,734 (19%)
Cost of sales 299,746 330,415 (9%) 1,283,216 1,619,903 (21%)
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Gross margin 66,323 56,731 17% 265,009 301,831 (12%)
Selling, general and
administrative expenses (4) 66,610 75,311 (12%) 275,973 294,786 (6%)
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Operating income (loss) before
impairment charges (287) (18,580) (10,964) 7,045
Impairment charges
Goodwill (1) - (189,700) - (189,700)
Fixed assets (2) (1,200) (6,500) (7,700) (10,500)
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Operating loss (3) (1,487) (214,780) (18,664) (193,155)
Interest expense, net 5,224 6,602 (21%) 22,624 27,177 (17%)
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Loss before income taxes (6,711) (221,382) (41,288) (220,332)
Income tax benefits (5) (1,900) (73,900) (13,400) (73,000)
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Net loss (4,811) (147,482) (27,888) (147,332)
Less: dividend on preferred stock 250 - 500 -
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Loss available to common shareholders ($5,061) ($147,482) ($28,388) ($147,332)
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Basic and diluted loss per share ($0.10) ($3.12) ($0.59) ($3.12)
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Weighted shares for basic and diluted EPS 48,247 47,257 47,887 47,252
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See accompanying Notes to Financial Information.
CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
OTHER STATISTICAL INFORMATION
Three Months Ended Twelve Months Ended
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Dec. 29, Dec. 30, % Dec. 29, Dec. 30, %
2001 2000 Chg. 2001 2000 Chg.
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MANUFACTURING
Homes sold 9,482 9,737 (3%) 39,551 52,442 (25%)
Less: intercompany 1,530 1,534 - 5,785 8,274 (30%)
Homes sold to
independent retailers/builders 7,952 8,203 (3%) 33,766 44,168 (24%)
Floors sold 17,471 17,466 - 71,487 90,458 (21%)
Multi-section mix 80% 77% 77% 71%
Average home price $32,600 $30,500 7% $31,400 $28,500 10%
Manufacturing facilities at period end 49 53 (8%) 49 53 (8%)
RETAIL
Homes sold
New homes 1,581 2,216 (29%) 7,578 11,483 (34%)
Pre-owned homes 394 594 (34%) 1,897 2,863 (34%)
Total homes sold 1,975 2,810 (30%) 9,475 14,346 (34%)
% Champion-produced new homes sold 93% 79% 88% 73%
New multi-section mix 74% 68% 72% 62%
Average new home price $56,800 $52,100 9% $56,200 $49,600 13%
Average number of new homes in inventory
per sales center at period end 14 18 (22%) 14 18 (22%)
Sales centers at period end 218 260 (16%) 218 260 (16%)
CONSOLIDATED (in thousands)
Contingent repurchase obligations $300,000 $430,000 (30%) $300,000 $430,000 (30%)
Champion-produced field inventories $625,000 $780,000 (20%) $625,000 $780,000 (20%)
Shares issued and outstanding 48,320 47,357 2% 48,320 47,357 2%
See accompanying Notes to Financial Information.
CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
Dec. 29, Sept. 29, Dec. 30,
ASSETS 2001 2001 2000
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Cash and cash equivalents $ 69,456 $ 65,907 $ 50,143
Accounts receivable, trade 27,507 68,021 31,132
Inventories 172,276 175,267 217,765
Deferred taxes and other 76,385 74,963 77,493
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Total current assets 345,624 384,158 376,533
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Property and equipment, net 177,430 182,786 207,277
Goodwill, net 258,967 265,213 273,970
Deferred taxes and other assets 76,131 79,597 84,276
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$858,152 $911,754 $942,056
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LIABILITIES AND SHAREHOLDERS' EQUITY
Floor plan payable $ 70,919 $ 68,084 $114,198
Accounts payable 47,559 76,087 43,103
Other accrued liabilities 174,036 194,046 185,552
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Total current liabilities 292,514 338,217 342,853
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Long-term debt 224,926 224,592 225,634
Other long-term liabilities 48,678 55,285 76,760
Convertible preferred stock 20,000 20,000 --
Shareholders' equity 272,034 273,660 296,809
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$858,152 $911,754 $942,056
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See accompanying Notes to Financial Information.
CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL INFORMATION
(1) During the quarter ended December 30, 2000, the company recorded non-cash
goodwill impairment charges of $190 million ($128 million after tax), consisting
of $180 million for retail and $10 million for manufacturing.
(2) For the periods presented non-cash pretax asset impairment charges were
recorded related to closed operations. In 2001 these charges were $1.2 million
for the three month period and $7.7 million for the twelve month period. In 2000
these charges were $6.5 million for the three month period and $10.5 million for
the twelve month period.
(3) 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):
Dec. 29, % of Dec. 30, % of %
Three months ended: 2001 Related Sales 2000 Related Sales Chg.
--------------- ---------------- --------------- ---------------- ----
Manufacturing EBITA $19,319 6.0% $3,228 1.0% 498%
Retail EBITA (loss) (10,417) -10.9% (15,176) -12.3% 31%
General corporate expenses (7,449) (9,943) -25%
Intercompany profit elimination - 200
Goodwill amortization (2,940) (3,389)
Goodwill impairment charges - (189,700)
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Operating loss ($1,487) -0.4% ($214,780) -55.5%
=============== ===============
Dec. 29, % of Dec. 30, % of
Twelve months ended: 2001 Related Sales 2000 Related Sales
--------------- ---------------- --------------- ----------------
Manufacturing EBITA $54,131 4.2% $50,974 3.3% 6%
Retail EBITA (loss) (33,154) -7.3% (9,109) -1.5% -264%
General corporate expenses (28,023) (30,803) -9%
Intercompany profit elimination - 4,200
Loss from independent
retailer bankruptcy - (5,000)
Goodwill amortization (11,618) (13,717)
Goodwill impairment charges - (189,700)
--------------- ---------------
Operating loss ($18,664) -1.2% ($193,155) -10.1%
=============== ===============
(4) For the twelve months ended December 29, 2001, pretax charges of $3.7
million were recorded for losses on loans and transition costs for alternative
financing sources and $2.2 million for lease termination and other costs related
to closed retail operations. For the three months ended December 30, 2000, lease
termination and other costs of $1.1 million were recorded. The twelve months
then ended includes $6.9 million of property insurance gains and $1.8 million of
lease termination and other costs.
(5) The difference between taxes at the 35% federal statutory rate and taxes
provided is due to state income taxes and nondeductible items, primarily
goodwill.
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
February 13, 2002