Champion Enterprises, Inc. Reports Record First Quarter Results
Earnings from continuing operations increase 33 percent to $0.36 per diluted share . Wholesale home shipments up 14 percent . Champion now operates 148 retail sales centers
AUBURN HILLS, Mich., April 22 /PRNewswire/ - Champion Enterprises, Inc. (NYSE: CHB - news) reported record first quarter sales and earnings for the quarter ended April 4, 1998. Income from continuing operations for the quarter reached $17.6 million, up 29 percent from last year. Diluted earnings per share from continuing operations were $0.36 for the quarter, an increase of 33 percent compared to $0.27 per share last year. Net income of $0.36 per diluted share rose 29 percent from last year's $0.28 per share, which included $0.01 per share from discontinued operations. Consolidated net sales revenues for the first quarter grew 28 percent to $463 million. Prior year amounts have been restated to classify the commercial vehicles business as discontinued operations because it was sold in the first quarter of 1998.
Champion's Chairman, President and Chief Executive Officer, Walter R. Young, Jr., commented, ''The first quarter was an outstanding start to the year for Champion. We earned record first quarter profits. To date this year, we also acquired seven retail operations with 122 sales centers and 1997 sales of approximately $385 million. Manufacturing margins climbed due to improved material costs and higher volumes. Retail margins were strong as a result of volumes and finance related income. Pretax earnings as a percent of sales rose 11 basis points, which is very impressive in light of the non-cash accounting charges taken for Champion produced homes in retail inventories. Total gross margin and SG&A expenses were higher in 1998 due to expanded retail operations.''
Wholesale shipments up 14 percent
Champion's Chief Operating Officer, Philip C. Surles, commented on manufacturing operations, ''Our manufacturers showed significant improvement over last year's first quarter. Wholesale shipments climbed 14 percent to 16,175 homes. Shipments to independent retailers rose 8 percent and the rest of the improvement came from shipments to company-owned retailers. Industry U.S. wholesale home shipments were up 3.2 percent for the first two months of 1998. The company's wholesale floor shipments rose 18 percent as multi-section homes comprised 60 percent of homes sold compared to 55 percent last year.''
Surles continued, ''Incoming wholesale order rates for the quarter improved 21 percent over last year, including orders taken at the Nashville, Tennessee trade show in both years. This year's Nashville show in March resulted in wholesale orders totaling over $31 million, an increase of about 60 percent over last year's Nashville show which was held in April. As a result of strong order activity around the country, unfilled orders at the end of the quarter were approximately $75 million, compared to $55 million last year, including Nashville results. We are pleased with the results achieved at the various trade shows and we look forward to the spring selling season.''
Manufacturing operating margins improved over last year because of lower material costs and a reduction in fixed costs as a percent of sales and production efficiencies attributed to higher sales volumes. Last year's first quarter operating margins were impacted by start-up costs at three plants, low levels of unfilled orders, and the restructuring of the product line at the company's Redman Indiana facilities. In March 1998, Champion started up a new manufacturing facility in North Carolina and another facility in that state should come on line during the second quarter. Also during the second quarter construction will start on a new facility in Texas.
Retail expansion continues
To date this year, Champion has acquired seven retail organizations with 122 sales centers in 19 states. Together with previously owned retail locations and four new retail locations opened in 1998, Champion now operates 148 sales centers in 21 states with aggregate 1997 retail sales of approximately $450 million. Because of the dates of the acquisitions, only 118 of these retail locations contributed to results for the quarter. Retail shipments for the quarter included 1,484 new homes, of which 620 were produced by Champion. Multi-section homes comprised 52 percent of new homes sold.
Joseph H. Stegmayer, President, Retail Operations and Chief Financial Officer, commented on retail operations, ''Our greatly expanded retail organization reported sales revenues of $67 million for the quarter. Since most of our retail centers were acquired after the beginning of the year, these sales revenues do not represent a full quarter's results. Our retailers experienced strong customer traffic and sales nationwide. We expect the retail acquisitions to be slightly accretive this year, and to contribute more significantly in 1999. We anticipate that company-owned retailers will sell more Champion products over time, particularly since a current non-Champion supplier of homes has decided to discontinue supplying homes. Champion plans to have sufficient manufacturing capacity to provide homes to these retailers.''
Stegmayer continued, ''During the first quarter of 1998, Champion paid $160 million in cash in connection with its retail acquisitions. At the end of the quarter, the company continued to have a strong balance sheet with a debt to total capitalization ratio of 0.4 to 1. The company plans to increase its bank credit facility to provide additional capital to accommodate its retail growth strategy. While we anticipate internal growth of 20 to 25 new retail centers in 1998, we continue to pursue attractive acquisition opportunities.''
Committed to 15 percent EPS growth
Young concluded, ''Our number one priority is to increase shareholder value. Our retail strategy includes plans to acquire well-managed retail organizations and expand them to achieve at least $1 billion in retail revenues by the year 2000. We also expect our manufacturing operations to continue their solid growth. We are committed to our long-term goal of a minimum 15 percent compound annual growth in earnings per share.'' |
