Champion Enterprises, Inc. Reports Record Quarter Earnings
-- Earnings up 41 percent to $0.52 per diluted share -- Revenues increase 32 percent -- Long-term outlook remains strong
AUBURN HILLS, Mich., July 22 /PRNewswire/ -- Champion Enterprises, Inc. (NYSE: CHB - news), the nation's largest housing manufacturer, today reported record results for the second quarter ended July 4, 1998. Diluted earnings per share reached $0.52, rising 41 percent from $0.37 for last year's second quarter. For the three-month period, consolidated revenues rose 32 percent to $583 million and income from continuing operations grew 43 percent to $26 million. Prior year amounts have been restated to classify the commercial vehicles business, which was sold in the first quarter of 1998, as discontinued operations.
For the year-to-date period, income from continuing operations was $0.88 per diluted share, up 38 percent compared to $0.64 per share last year. Net income was $43 million, or $0.88 per diluted share, up from $32 million, or $0.65 per share, last year, which included $0.01 per share of income from discontinued operations. Consolidated revenues reached $1 billion for the six months, rising 30 percent from 1997.
Commenting on the results, Walter R. Young, Jr., Chairman, President and Chief Executive Officer, said, ''We are pleased to report the highest quarterly earnings and revenues in Champion's 45-year history. Operating margins for the quarter rose to 8 percent of sales from 6.8 percent a year ago and to 7.4 percent from 6.5 percent for the six-month period. These outstanding results reflect the increased demand for our homes and the significant contribution of our retail operations. Lower material costs also contributed to manufacturing profitability.''
Manufacturing revenues increase 14 percent
Champion's manufacturing operations reported quarterly revenues of $494 million, up 14 percent from last year's second quarter. Wholesale home shipments increased 7 percent to 18,456 homes, and floors sold rose 12 percent. For the quarter, multi-section home sales increased 20 percent, comprising 62 percent of total homes sold compared to 55 percent last year. For the first five months of 1998, U.S. industry wholesale shipments increased 3.4 percent in homes and 6.2 percent in floors.
Philip C. Surles, Chief Operating Officer, said, ''Higher volume and lower material costs enhanced manufacturing margins significantly in the quarter. Strong order activity around the country resulted in unfilled orders for housing totaling approximately $100 million at quarter end, up 150 percent from a year ago. So far in 1998 we have opened two new manufacturing facilities in North Carolina and should have another Texas facility operational in the third quarter. In addition, we recently broke ground for a new facility in Idaho. By this fall we should have 59 home building facilities, which we believe should be sufficient capacity to meet expected demand.''
Retail operations exceed expectations
During the quarter Champion's retail operations posted strong earnings on revenues of $144 million. Company-owned retail home centers totaled 188 locations at July 4, 1998, up from 143 at the end of March. Of the increase, 15 new stores were opened through internal expansions and 30 were added through acquisitions. Retail homes sold for the quarter were 3,061 new homes, 45 percent of which were produced by Champion facilities.
Joseph H. Stegmayer, President, Retail Operations and Chief Financial Officer, explained, ''Our retail operations are making a greater contribution to earnings than we had anticipated due to higher operating margins and finance related income. Retail traffic continues to be strong. To date this year, we have acquired retailers with 1997 sales of approximately $490 million for $254 million in cash, $12 million in stock, and contingent amounts based on future profits. By the end of 1998, we expect to have opened a total of 40 new stores through internal expansions during the year and be operating at least 220 home centers. We have established a strong presence in the retail distribution of housing and are well on our way to achieving our goal of at least $1 billion in retail revenues by the year 2000.''
Balance sheet remains strong
Quarter end bank debt totaled $162 million, up from $102 million at the end of March, largely as a result of additional retail acquisitions. Debt was 43 percent of total capital, compared to 37 percent at April 4, 1998. Capital spending for internal expansions, including new home centers and construction of four home building facilities, is expected to total approximately $58 million in 1998. Remaining availability under Champion's $325 million credit facility provides ample capital for this additional internal growth as well as future acquisitions.
Outlook continues positive
''Using the first half of the year as an indicator, 1998 should be another year of record earnings for Champion. Our long-term strategy is to focus on strengthening our independent and company-owned retailers through marketing, people development and customer service programs. As new retail locations begin to sell Champion-produced homes, overall sales and margins should continue to improve. Champion's number one priority is to increase shareholder value and we remain committed to our goal of a minimum 15 percent compound annual growth in earnings per share,'' concluded Young.
This news release contains certain statements, including the company's retail strategy, sales, margins and earnings projections, and number of locations, which 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 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 Item 1 Business of the company's 1997 Form 10-K, and this discussion regarding risk factors is incorporated herein by reference.
Champion Enterprises, Inc., headquartered in Auburn Hills, Michigan, is the number one company in the manufactured housing industry and has produced more than 1.3 million homes since the company was founded. For the year ended January 3, 1998, revenues were $1.68 billion and diluted earnings from continuing operations were $1.45 per share. The company currently has 57 home building facilities in 33 locations and 188 retail home centers in 22 states. Its homes are also sold by 3,500 independent retail locations. |
