Champion Enterprises Reports Second Quarter 2009 Results

TROY, Mich., Aug. 13  /PRNewswire-FirstCall/ -- Champion Enterprises, Inc. (NYSE:CHB), a leader in factory-built construction, today announced the results for its second quarter ended July 4, 2009.  Revenues for the quarter decreased 55.2 percent to $129.5 million compared to $289.2 million for the second quarter of 2008.  The Company reported a loss before income taxes of $13.3 million for the second quarter compared to pretax income of $3.6 million in the same period of 2008. The Company's second quarter 2009 net loss totaled $13.3 million, or $0.17 per diluted share, compared to net income of $3.4 million, or $0.04 per diluted share, for the second quarter of 2008.

The loss before income taxes in the second quarter of 2009 included the following items totaling $0.7 million of expense: restructuring and other plant closing charges totaling $2.7 million and foreign currency transaction gains on intercompany loans of $2.0 million.  Second quarter 2008 pretax income included foreign currency transaction gains of $0.6 million.

"We are pleased that our results improved over the first quarter, though difficult market conditions have persisted resulting in a net loss for the quarter.  In an effort to reduce losses going forward, we closed or idled three unprofitable plants in the U.S. during the quarter," stated William Griffiths, chairman, president and chief executive officer of Champion Enterprises, Inc.

"In Canada, our second quarter unit sales fell 63 percent from last year, causing a significant portion of the unfavorable variance in year over year manufacturing segment results.  The reduction in manufacturing orders was at least in part driven by a reduction in Canadian retailer inventory in the face of limited availability of retailer financing and the general economic slowdown.  However, order rates in Canada have shown steady improvement over the last several months and have more recently approached and, in some cases, even exceeded last year's levels.  In addition, backlogs in the U.K. have held strong, and our outlook for this business in the second half of the year remains favorable," Griffiths continued.

"While conditions both in the U.S. and abroad remain difficult, our U.S. markets are beginning to show some signs of stabilization and we are encouraged by signs of improvements in our non-U.S. businesses over the next several quarters.  As a result, we are optimistic that the worst of this cycle may be behind us," concluded Griffiths.

  North American Manufacturing Segment


  --  Manufacturing segment net sales for the second quarter decreased 52.0
      percent to $101.3 million compared to $211.3 million in the same
      period of the prior year, but up from $77.7 million in the prior
      quarter.


  --  Revenues from the sale of modular homes in the U.S. totaled $30
      million for the quarter, down from $49 million in the second quarter
      of 2008, but up from $26 million in the prior quarter.


  --  The manufacturing segment reported a loss of $3.7 million for the
      quarter compared to segment income of $13.6 million in the second
      quarter of 2008 and a loss of $6.1 million in the prior quarter.


  --  During the second quarter, the Company closed its manufacturing
      facility in Colorado and one of its two plants in Florida and idled
      one of its three plants in California.  Primarily as a result of these
      restructuring actions, the Company recorded pretax charges totaling
      $2.7 million in the quarter including non-cash asset impairment
      charges of $2.0 million.  Champion now operates 22 manufacturing
      facilities in North America.


  --  Segment backlogs totaled $17 million at July 4, 2009, an improvement
      over $10 million at the end of the first quarter of 2009 but down from
      $42 million at the end of last year's second quarter.

  International Manufacturing Segment


  --  International segment revenues decreased 70.0 percent to $21.2 million
      for the quarter from $70.5 million in the second quarter of 2008 as a
      result of reduced prison sector revenues and the slowdown in
      construction activity caused by difficult economic conditions in the
      U.K.  In addition, $5.4 million of the decline in sales was caused by
      the decrease in exchange rates from the prior year second quarter. 
      Revenues totaled $21.7 million in the prior quarter.


  --  International segment income decreased to $1.1 million for the second
      quarter of 2009 from $3.9 million in the same period of the prior
      year, but increased from $0.1 million in the prior quarter.  The
      segment margin for the quarter was 5.0 percent, down from 5.5 percent
      in the second quarter of 2008.


  --  International segment order backlogs remained strong during the
      quarter, with firm contracts and orders pending contracts under
      framework agreements totaling approximately $165 million at July 4,
      2009 compared to approximately $155 million at the end of last
      quarter.  This increase during the quarter was the result of the
      increase in quarter-end exchange rates, as backlogs otherwise remained
      steady.

  Retail Segment


  --  Retail segment second quarter 2009 revenues totaled $7.5 million, flat
      to the prior quarter but down 20.5 percent from $9.4 million for the
      same period last year.


  --  On lower sales, retail segment results improved to a loss of $0.6
      million for the quarter compared to a loss of $1.0 million in the
      second quarter of 2008.

  Other Items


  --  Cash used for operating activities totaled $15.9 million for the
      second quarter of 2009 compared to cash provided of $14.1 million for
      the same period of the prior year.  The unfavorable variance was
      primarily the result of reduced earnings and cash used for
      international segment working capital in the quarter compared to cash
      provided in the prior year quarter.


  --  During the second quarter, the Company repaid the remaining $6.7
      million of its Senior Notes due 2009 and borrowed $1.3 million under
      its revolving line of credit.


  --  Cash, cash equivalents and short-term investments totaled $26.5
      million as of July 4, 2009 compared to $47.8 million at the end of the
      first quarter and $91.3 million at the end of the second quarter of
      2008.  Inclusive of available borrowing capacity under its revolving
      line of credit, Champion's total liquidity stood at $27.0 million as
      of July 4, 2009 compared to $49.2 million at the end of last quarter.




As a result of deteriorating operating results during the first half of 2009, the Company was not in compliance with the financial covenants contained in its senior secured credit facility pertaining both to the required level of twelve-month adjusted EBITDA and the required minimum level of total liquidity.  The Company has obtained a waiver for an initial period of 30 days while it works together with its lenders to arrive at a longer-term solution.

"The difficult operating environment coupled with challenging conditions in the M&A market led to disappointing results with respect to certain significant asset sales that we hoped to complete during the quarter," stated Phyllis Knight, executive vice president and chief financial officer.

"We are actively engaged in discussions with a third party that has expressed an interest in making an investment in the Company.  At the same time, we are also working with our lenders to find a more permanent solution either in connection with or as an alternative to this potential recapitalization.  We appreciate the ongoing support and cooperation that our lenders have shown as the Company works through these unprecedented difficulties in the markets we serve," concluded Knight.

Second Quarter 2009 Conference Call

Champion Enterprises, Inc., will host a conference call on Friday, Aug. 14, 2009 at 9 a.m. EDT to discuss these results and current business trends.  To listen to the call, please call [phone] for domestic callers or [phone] for international callers.  The passcode is 4458528.  The call may also be heard live over the Internet at http://www.championhomes.com/ under the "Investors" link.

A telephone replay of the call will be available approximately two hours after the call's conclusion through Friday, Aug. 21, 2009.  To access the telephone replay, please call [phone] for domestic callers or [phone] for international callers.  The passcode is 4458528.  A webcast replay will be available on the Company's Web site for at least 90 days under the "Investors" link.

About Champion

Troy, Michigan-based Champion Enterprises, Inc., a leader in factory-built construction, operates 27 manufacturing facilities in North America and the United Kingdom distributing its products through independent retailers, builders and developers.  The Champion family of builders produces manufactured and modular homes, as well as modular buildings for government and commercial applications.  For more information, please visit http://www.championhomes.com/.

Forward-Looking Statements

This news release contains certain statements, including statements regarding the outlook for U.K. profitability and cash from operations, results for the remainder of 2009, backlogs and pending orders, compliance with debt covenants and negotiations, targeted asset sales, and the Company's participation in a recovery, each of which could be construed to be forward-looking statements within the meaning of the Securities 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 and there can be no assurance that the Company will be successful in its efforts to restructure its outstanding debt or avoid seeking protection under the U.S. Bankruptcy Code or similar laws. These factors are discussed in the Company's most recently filed Forms 10-Q, 10-K and other filings with the Securities and Exchange Commission, in each case under the section entitled "Forward-Looking Statements" or "Risk Factors" and those discussions regarding risk factors are incorporated herein by reference.

  CHAMPION ENTERPRISES, INC.
  CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
  (Dollars and weighted shares in thousands, except per share amounts)

                    Three Months Ended          Six Months Ended
                    ------------------          ----------------
                     July 4,  June 28,    %     July 4,    June 28,   %
                      2009      2008   Change    2009       2008    Change
                      ----      ----   ------    ----       ----    ------
  Net sales:
    Manufacturing
     segment        $101,307  $211,273  (52.0%) $178,984  $392,758  (54.4%)
    International
     segment          21,161    70,513  (70.0%)   42,904   180,879  (76.3%)
    Retail segment     7,470     9,398  (20.5%)   14,876    18,445  (19.3%)
    Less:
     intercompany       (400)   (2,000)           (2,000)   (6,200)
                        ----    ------            ------    ------
    Total net sales  129,538   289,184  (55.2%)  234,764   585,882  (59.9%)

  Cost of sales      113,961   246,722           213,656   506,852
                     -------   -------           -------   -------

  Gross margin        15,577    42,462            21,108    79,030

  Selling, general
   and administrative
   expenses           21,858    33,015            43,153    72,318
  Insurance gain           -         -            (4,295)        -
  Restructuring
   charges             2,220         -             2,358     9,471
  Foreign currency
   transaction
   (gains) losses     (1,963)     (576)           (1,321)    1,775
  Amortization
   of intangible
   assets              1,953     2,382             3,812     4,851
                       -----     -----             -----     -----

  Operating (loss)
   income             (8,491)    7,641           (22,599)   (9,385)

  Interest expense,
   net                 4,814     4,089             9,333     7,962
                       -----     -----             -----     -----

  (Loss) income
   before income
   taxes             (13,305)    3,552           (31,932)  (17,347)

  Income tax
   expense (benefit)       8       202              (981)     (213)
                           -       ---              ----      ----

  Net (loss) income $(13,313)   $3,350          $(30,951) $(17,134)
                    ========    ======          ========  ========

  Basic (loss)
   income per share   $(0.17)    $0.04            $(0.40)   $(0.22)
                      ======     =====            ======    ======

  Weighted shares
   for basic EPS      77,762    77,738            77,730    77,605
                      ======    ======            ======    ======

  Diluted (loss)
   income per share   $(0.17)    $0.04            $(0.40)   $(0.22)
                      ======     =====            ======    ======

  Weighted shares
   for diluted EPS    77,762    77,929            77,730    77,605
                      ======    ======            ======    ======


  See accompanying Notes to Consolidated Financial Information.



  CHAMPION ENTERPRISES, INC.
  CONSOLIDATED CONDENSED BALANCE SHEETS
  (In thousands)
                                        (UNAUDITED) (UNAUDITED)
                                          July 4,     April 4,  January 3,
                                            2009        2009        2009
                                            ----        ----        ----
  Assets:
  Cash and cash equivalents               $26,479     $47,849     $52,787
  Accounts receivable                      26,775      28,096      33,935
  Inventories                              37,394      44,217      52,960
  Deferred tax assets                         653         665         673
  Other current assets                      6,493       6,428       9,839
                                            -----       -----       -----
    Total current assets                   97,794     127,255     150,194
                                           ------     -------     -------

  Property, plant and equipment, net       91,447      94,199      96,863
  Goodwill and other intangible assets,
   net                                    387,974     374,766     375,692
  Other non-current assets                 19,212      20,208      22,260
                                           ------      ------      ------
    Total assets                         $596,427    $616,428    $645,009
                                         ========    ========    ========

  Liabilities and Shareholders' Equity:
  Short-term debt                        $130,378    $130,248     $12,229
  Accounts payable                         57,641      59,424      70,050
  Other accrued liabilities                81,643      95,049     105,353
                                           ------      ------     -------
    Total current liabilities             269,662     284,721     187,632
                                          -------     -------     -------

  Long-term debt                          193,579     193,659     300,851
  Deferred tax liabilities                 38,106      37,011      36,592
  Other long-term liabilities              31,415      31,393      33,111
  Shareholders' equity                     63,665      69,644      86,823
                                           ------      ------      ------
    Total liabilities and shareholders'
     equity                              $596,427    $616,428    $645,009
                                         ========    ========    ========


  See accompanying Notes to Consolidated Financial Information.



  CHAMPION ENTERPRISES, INC.
  CONSOLIDATED CONDENSED CASH FLOW STATEMENTS (UNAUDITED)
  (In thousands)
                                  Three Months Ended   Six Months Ended
                                  ------------------   -----------------
                                   July 4,  June 28,   July 4,  June 28,
                                     2009      2008      2009      2008
                                     ----      ----      ----      ----

  Net (loss) income               $(13,313)   $3,350  $(30,951) $(17,134)
  Adjustments:
    Depreciation and amortization    4,672     5,705     9,275    11,812
    Stock-based compensation           140       297       335       857
    Change in deferred taxes           554    (4,828)      943    (8,608)
    Loss (gain) on disposal of
     fixed assets                       70       (41)     (179)     (139)
    Gain on insurance settlement         -         -    (4,295)        -
    Foreign currency transaction
     (gains) losses                 (1,963)     (576)   (1,321)    1,775
    Non-cash financing expenses      1,400       225     2,637       447
    Fixed asset impairment
     charges                         1,525         -     1,525     7,000
    LCM inventory charge               515         -       515     2,100
    Insurance proceeds                   -         -     3,161     2,500
    Increase/decrease:
      Accounts receivable            3,152    30,310     6,323    (2,653)
      Inventories                    6,945    12,095    15,614     6,611
      Accounts payable              (5,704)   (9,921)  (17,020)    4,376
      Accrued liabilities          (15,223)  (22,050)  (23,289)  (21,587)
      Other assets, net              1,320      (432)    2,310      (899)
                                     -----      ----     -----      ----
  Cash (used for) provided by
   operating activities            (15,910)   14,134   (34,417)  (13,542)
                                   -------    ------   -------   -------

  Additions to property, plant
   and equipment                       (99)   (3,441)     (406)   (5,716)
  Insurance proceeds on PP&E             -         -     4,052         -
  Acquisitions and related
   payments                              -      (177)        -    (2,500)
  Purchase of short-term
   investments                           -         -         -   (10,000)
  Redemption of short-term
   investments                           -     3,025         -     3,050
  Proceeds on disposal of fixed
   assets                              614        53     1,188     2,528
                                       ---        --     -----     -----
  Cash provided by (used for)
   investing activities                515      (540)    4,834   (12,638)
                                       ---      ----     -----   -------

  Payments on debt                  (7,302)  (25,608)   (7,839)  (25,657)
  Proceeds from Revolver debt        1,284         -    11,284         -
  Payments for deferred
   financing costs                     (67)        -      (245)        -
  Common stock issued, net               -       372         -       437
                                         -       ---         -       ---
  Cash (used for) provided by
   financing activities             (6,085)  (25,236)    3,200   (25,220)
                                    ------   -------     -----   -------

  Cash used for discontinued
   operations                          (78)      (65)     (135)      (87)

  Effect of exchange rate
   changes on cash and cash
   equivalents                         188       672       210       449
                                       ---       ---       ---       ---

  Decrease in cash and cash
   equivalents                     (21,370)  (11,035)  (26,308)  (51,038)
  Cash and cash equivalents at
   beginning of period              47,849    95,405    52,787   135,408
                                    ------    ------    ------   -------
  Cash and cash equivalents at
   end of period                   $26,479   $84,370   $26,479   $84,370
                                   =======   =======   =======   =======


  See accompanying Notes to Consolidated Financial Information.



  CHAMPION ENTERPRISES, INC.
  NOTES TO CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)

  (1) The Company evaluates the performance of its manufacturing,
  international and retail segments based on income before amortization
  of intangible assets, interest, income taxes, foreign currency
  transaction gains and losses on intercompany indebtedness, losses on
  debt retirements and general corporate expenses.  A reconciliation of
  (loss) income before income taxes for the three and six months ended
  is as follows (dollars in thousands):

                                           As a % of             As a % of
  Three months ended:             July 4,   Related    June 28,   Related
  ------------------               2009     Sales        2008      Sales
                                   ----     -----        ----      -----
  Manufacturing segment (loss)
   income                         $(3,672)   (3.6)%    $13,595      6.4%
  International segment income      1,061     5.0%       3,889      5.5%
  Retail segment loss                (644)   (8.6)%     (1,043)   (11.1)%
  General corporate expenses       (5,546)              (7,094)
  Amortization of intangible
   assets                          (1,953)              (2,382)
  Intercompany eliminations           300                  100
  Foreign currency transaction
   gains                            1,963                  576
  Interest expense, net            (4,814)              (4,089)
                                   ------               ------

    (Loss) income before income
     taxes                       $(13,305)  (10.3%)     $3,552      1.2%
                                 ========                ======

                                           As a % of             As a % of
  Six months ended:               July 4,   Related    June 28,   Related
  ----------------                 2009      Sales       2008      Sales
                                   ----      -----       ----      -----
  Manufacturing segment (loss)
   income                         $(9,778)   (5.5)%     $4,572      1.2%
  International segment income      1,125     2.6%      12,278      6.8%
  Retail segment loss                (802)   (5.4)%     (3,807)   (20.6)%
  General corporate expenses      (11,353)             (15,702)
  Amortization of intangible
   assets                          (3,812)              (4,851)
  Intercompany eliminations           700                 (100)
  Foreign currency transaction
   gains (losses)                   1,321               (1,775)
  Interest expense, net            (9,333)              (7,962)
                                   ------               ------

    Loss before income taxes     $(31,932)  (13.6%)   $(17,347)    (3.0%)
                                 ========              ========


  (2) For the year-to-date period ended July 4, 2009, the Company
  recognized a $4.3 million gain from the settlement of its property and
  business interruption insurance claims related to the manufacturing
  facility in Tennessee that was destroyed by fire in February 2008.
  This gain was recorded in the manufacturing segment.  The Company
  received insurance proceeds of $7.5 million throughout 2008 and $7.2
  million in the first quarter of 2009.

  (3) For the three and six month periods ended July 4, 2009, the Company
  incurred restructuring and other plant closing charges totaling $2.7
  million and $2.9 million, respectively, primarily for the announced
  closure of two plants and idling of one plant in the U.S. in the second
  quarter.  The second quarter 2009 charges were recorded in the
  manufacturing segment with $0.5 million recorded in cost of sales and
  the balance reported as restructuring charges.

  During the six months ended June 28, 2008, the Company incurred $9.8
  million of restructuring and other plant closing charges in connection
  with the Company's decision to close two manufacturing facilities and
  reduce the number of North American regional offices.  Charges totaling
  $9.3 million were recorded in the manufacturing segment with the
  remaining $0.5 million included in general corporate expenses.  A
  portion of the 2008 charges, totaling $0.3 million, were recorded in
  cost of sales with the balance reported as restructuring charges.

  (4) For the year-to-date period ended June 28, 2008, the Company's
  retail segment recorded a $1.8 million charge to reduce inventory
  values to estimated market value.  This charge was included in cost of
  sales.

  (5) For the quarter and year-to-date periods ended July 4, 2009, the
  Company borrowed $1.3 million and $11.3 million, respectively, under
  its revolving line of credit.

  (6) The outstanding debt under the Company's senior credit facility,
  totaling $129.8 million at July 4, 2009, is classified as short-term
  portion of debt because in light of current market conditions and
  absent further unscheduled reductions of indebtedness under the Credit
  Agreement or further amendment to the Credit Agreement, it is likely
  that the Company will not be in compliance with the financial covenants
  for the third and fourth quarters of 2009 or the more restrictive
  pre-Amendment covenants beginning in 2010.

  (7) During the second quarter of 2009, the Company's Senior Notes due
  2009 totaling $6.7 million matured and were paid in full.

  (8) During the quarter ended June 28, 2008, the Company repaid the
  $24.0 million (CAD) note issued in connection with its acquisition of
  SRI Homes.

  (9) Proceeds on disposal of fixed assets resulted primarily from the
  sale of land and miscellaneous assets for the year-to-date period ended
  July 4, 2009 and from the sale of a closed plant during the same period
  in 2008.



  CHAMPION ENTERPRISES, INC.
  OTHER STATISTICAL INFORMATION (UNAUDITED)


                 Three months ended           Six Months Ended
                 ------------------           -----------------
                 July 4,  June 28,     %     July 4,  June 28,     %
                  2009      2008  Change      2009      2008  Change
                  ----      ----  ------      ----      ----  ------
  MANUFACTURING
   SEGMENT
  Units sold:
  HUD-Code        1,035     1,697   (39.0%)   1,709     3,258   (47.5%)
  Modular           397       652   (39.1%)     699     1,321   (47.1%)
  Canadian          271       733   (63.0%)     473     1,297   (63.5%)
  Other               6        72   (91.7%)      11        99   (88.9%)
                      -        --                --        --
  Total units
   sold           1,709     3,154   (45.8%)   2,892     5,975   (51.6%)
  Less:
   intercompany     (18)      (35)  (48.6%)     (31)      (98)  (68.4%)
                    ---       ---               ---       ---
  Units sold to
   independent
   retailers /
   builders       1,691     3,119   (45.8%)   2,861     5,877   (51.3%)

  Floors sold     3,025     5,649   (46.5%)   5,234    10,637   (50.8%)

  Multi-section
   mix               65%       69%               67%       67%

  Average unit prices, excluding delivery
  Total         $51,800   $57,800   (10.4%) $53,800   $57,200    (5.9%)
  HUD-Code      $41,200   $45,400    (9.3%) $42,800   $45,400    (5.7%)
  Modular       $70,700   $70,800    (0.1%) $75,400   $70,000     7.7%


DATASOURCE: Champion Enterprises, Inc.



CONTACT:  Laurie Van Raemdonck, Vice President, Investor Relations,

[phone], , or Phyllis Knight, Executive

Vice President and CFO, [phone]



Web Site:  http://www.championhomes.com/ 

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