FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
(Mark one)
| [X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF | |
| THE SECURITIES EXCHANGE ACT OF 1934. | ||
| For Quarterly period ended September 27, 2003 | ||
| OR | ||
| [ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF | |
| THE SECURITIES EXCHANGE ACT OF 1934. | ||
For the transition period from to
Commission file number 1-9751
CHAMPION ENTERPRISES, INC.
| Michigan | 38-2743168 | |
|
|
||
| (State or other jurisdiction of
incorporation or organization) |
(I.R.S. Employer Identification No.) |
2701 Cambridge Court, Suite 300
Auburn Hills, MI 48326
Registrant’s telephone number, including area code: (248) 340-9090
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).
Yes [X]
No [ ]
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
58,769,512 shares of the registrant’s $1.00 par value Common Stock were outstanding as of October 17, 2003.
PART I. FINANCIAL INFORMATION
CHAMPION ENTERPRISES, INC.
Consolidated Statements of Operations
(In thousands, except per share amounts)
| Unaudited | Unaudited | ||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| September 27, | September 28, | September 27, | September 28, | ||||||||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||||||||||
Net sales |
$ | 310,934 | $ | 373,590 | $ | 849,384 | $ | 1,041,473 | |||||||||
Cost of sales |
271,117 | 329,342 | 728,044 | 892,510 | |||||||||||||
Gross margin |
39,817 | 44,248 | 121,340 | 148,963 | |||||||||||||
Selling, general and administrative expenses |
50,052 | 57,448 | 141,934 | 181,479 | |||||||||||||
Goodwill impairment charges |
34,183 | — | 34,183 | 97,000 | |||||||||||||
Restructuring charges |
20,100 | 31,600 | 20,100 | 36,500 | |||||||||||||
Gain on debt retirement |
— | — | (13,833 | ) | (5,870 | ) | |||||||||||
Operating loss |
(64,518 | ) | (44,800 | ) | (61,044 | ) | (160,146 | ) | |||||||||
Interest income |
329 | 727 | 1,215 | 1,946 | |||||||||||||
Interest expense |
(6,783 | ) | (7,695 | ) | (20,713 | ) | (20,777 | ) | |||||||||
Loss from continuing operations
before income taxes |
(70,972 | ) | (51,768 | ) | (80,542 | ) | (178,977 | ) | |||||||||
Income tax expense (benefit) |
450 | (14,800 | ) | (1,950 | ) | 67,900 | |||||||||||
Loss from continuing operations |
(71,422 | ) | (36,968 | ) | (78,592 | ) | (246,877 | ) | |||||||||
Loss from discontinued operations, net of taxes |
(9,674 | ) | (1,967 | ) | (20,902 | ) | (3,195 | ) | |||||||||
Net loss |
$ | (81,096 | ) | $ | (38,935 | ) | $ | (99,494 | ) | $ | (250,072 | ) | |||||
Basic and diluted loss per share: |
|||||||||||||||||
Loss from continuing operations |
$ | (1.24 | ) | $ | (0.76 | ) | $ | (1.47 | ) | $ | (5.09 | ) | |||||
Loss from discontinued operations |
(0.17 | ) | (0.04 | ) | (0.37 | ) | (0.06 | ) | |||||||||
Basic and diluted loss per share |
$ | (1.41 | ) | $ | (0.80 | ) | $ | (1.84 | ) | $ | (5.15 | ) | |||||
Weighted shares for basic and diluted EPS |
57,498 | 49,154 | 56,260 | 48,796 | |||||||||||||
See accompanying Notes to Consolidated Financial Statements.
Page 1 of 43
CHAMPION ENTERPRISES, INC.
Consolidated Balance Sheets
(In thousands, except par value)
| Unaudited | ||||||||||||
| September 27, | December 28, | |||||||||||
| 2003 | 2002 | |||||||||||
ASSETS |
||||||||||||
CURRENT ASSETS |
||||||||||||
Cash and cash equivalents |
$ | 144,796 | $ | 77,381 | ||||||||
Restricted cash |
522 | 32,450 | ||||||||||
Accounts receivable, trade |
41,958 | 28,631 | ||||||||||
Inventories |
110,944 | 111,332 | ||||||||||
Current assets of discontinued operations |
1,650 | 2,015 | ||||||||||
Other current assets |
15,072 | 88,959 | ||||||||||
Total current assets |
314,942 | 340,768 | ||||||||||
PROPERTY, PLANT AND EQUIPMENT, at cost |
230,961 | 256,838 | ||||||||||
Less-accumulated depreciation |
131,797 | 129,709 | ||||||||||
| 99,164 | 127,129 | |||||||||||
GOODWILL, net |
126,501 | 161,336 | ||||||||||
OTHER NON-CURRENT ASSETS |
||||||||||||
Restricted cash |
— | 18,443 | ||||||||||
Non-current assets of discontinued operations |
70 | 57,498 | ||||||||||
Other non-current assets |
21,693 | 22,917 | ||||||||||
Total other non-current assets |
21,763 | 98,858 | ||||||||||
Total assets |
$ | 562,370 | $ | 728,091 | ||||||||
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND SHAREHOLDERS’ EQUITY (DEFICIT) |
||||||||||||
CURRENT LIABILITIES |
||||||||||||
Floor plan payable |
$ | 14,842 | $ | 17,147 | ||||||||
Accounts payable |
42,902 | 37,053 | ||||||||||
Accrued warranty obligations |
44,548 | 43,139 | ||||||||||
Accrued volume rebates |
30,590 | 35,010 | ||||||||||
Accrued compensation and payroll taxes |
20,984 | 17,118 | ||||||||||
Accrued self-insurance |
30,139 | 28,772 | ||||||||||
Short-term liabilities of discontinued operations |
4,047 | 36,764 | ||||||||||
Other current liabilities |
55,533 | 48,141 | ||||||||||
Total current liabilities |
243,585 | 263,144 | ||||||||||
LONG-TERM LIABILITIES |
||||||||||||
Long-term debt |
290,510 | 341,612 | ||||||||||
Other long-term liabilities |
51,416 | 56,754 | ||||||||||
| 341,926 | 398,366 | |||||||||||
CONTINGENT LIABILITIES (Note 11) |
||||||||||||
REDEEMABLE CONVERTIBLE PREFERRED STOCK,
no par value, 5,000 shares authorized, 8.75 shares and 30.0 shares issued and outstanding, respectively |
8,629 | 29,256 | ||||||||||
SHAREHOLDERS’ EQUITY (DEFICIT) |
||||||||||||
Common stock, $1 par value, 120,000 shares authorized, 58,400
and 52,658 shares issued and outstanding, respectively |
58,400 | 52,658 | ||||||||||
Capital in excess of par value |
82,248 | 54,666 | ||||||||||
Accumulated deficit |
(171,751 | ) | (68,150 | ) | ||||||||
Accumulated other comprehensive income (loss) |
(667 | ) | (1,849 | ) | ||||||||
Total shareholders’ equity (deficit) |
(31,770 | ) | 37,325 | |||||||||
Total liabilities, preferred stock and shareholders’ equity (deficit) |
$ | 562,370 | $ | 728,091 | ||||||||
See accompanying Notes to Consolidated Financial Statements.
Page 2 of 43
CHAMPION ENTERPRISES, INC.
Consolidated Statements of Cash Flows
(In thousands)
| Unaudited | ||||||||||
| Nine Months Ended | ||||||||||
| September 27, | September 28, | |||||||||
| 2003 | 2002 | |||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||||
Loss from continuing operations |
$ | (78,592 | ) | $ | (246,877 | ) | ||||
Adjustments to reconcile loss from continuing operations
to net cash provided by (used for) operating activities: |
||||||||||
Depreciation and amortization |
12,215 | 16,556 | ||||||||
Gain on debt retirement |
(13,833 | ) | (5,870 | ) | ||||||
Goodwill impairment charges |
34,183 | 97,000 | ||||||||
Deferred income taxes |
— | 94,800 | ||||||||
Fixed asset impairment charges, net of gains |
15,347 | 26,622 | ||||||||
Increase/decrease: |
||||||||||
Accounts receivable, trade |
(13,327 | ) | (20,665 | ) | ||||||
Refundable income taxes |
60,920 | (10,129 | ) | |||||||
Inventories |
388 | 25,890 | ||||||||
Cash collateral deposits |
9,600 | (13,392 | ) | |||||||
Accounts payable |
5,849 | 10,828 | ||||||||
Accrued liabilities |
13,008 | 22,651 | ||||||||
Other, net |
11,088 | 4,034 | ||||||||
Net cash provided by continuing operating activities |
56,846 | 1,448 | ||||||||
CASH FLOWS FROM DISCONTINUED OPERATIONS: |
||||||||||
Loss from discontinued operations |
(20,902 | ) | (3,195 | ) | ||||||
Decrease (increase) in net assets of discontinued operations |
25,076 | (16,222 | ) | |||||||
Net cash provided by (used for) discontinued operations |
4,174 | (19,417 | ) | |||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||||
Acquisitions and deferred purchase price payments |
(3,882 | ) | (3,500 | ) | ||||||
Additions to property, plant and equipment |
(4,368 | ) | (4,347 | ) | ||||||
Investments in and advances to unconsolidated subsidiaries |
(446 | ) | (2,084 | ) | ||||||
Proceeds on disposal of fixed assets |
5,193 | 3,591 | ||||||||
Net cash used for investing activities |
(3,503 | ) | (6,340 | ) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||||
Decrease in floor plan payable, net |
(2,305 | ) | (61,739 | ) | ||||||
Repayment of long-term debt |
(480 | ) | (738 | ) | ||||||
Proceeds from Senior Notes |
— | 145,821 | ||||||||
Purchase of Senior Notes |
(35,830 | ) | (23,750 | ) | ||||||
Increase in deferred financing costs |
(1,985 | ) | (1,494 | ) | ||||||
Decrease (increase) in restricted cash |
50,371 | (35,701 | ) | |||||||
Preferred stock issued, net |
— | 23,810 | ||||||||
Dividends paid on preferred stock |
(937 | ) | — | |||||||
Common stock issued, net |
1,064 | 1,000 | ||||||||
Net cash provided by financing activities |
9,898 | 47,209 | ||||||||
NET INCREASE IN CASH AND CASH EQUIVALENTS |
67,415 | 22,900 | ||||||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
77,381 | 69,456 | ||||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD |
$ | 144,796 | $ | 92,356 | ||||||
See accompanying Notes to Consolidated Financial Statements.
Page 3 of 43
CHAMPION ENTERPRISES, INC.
| Accumulated | ||||||||||||||||||||||||||||
| Common stock | Capital in | other | Total | |||||||||||||||||||||||||
| excess of | Accumulated | comprehensive | comprehensive | |||||||||||||||||||||||||
| Shares | Amount | par value | deficit | income (loss) | Total | income (loss) | ||||||||||||||||||||||
Balance at December 28, 2002 |
52,658 | $ | 52,658 | $ | 54,666 | $ | (68,150 | ) | $ | (1,849 | ) | $ | 37,325 | |||||||||||||||
Net loss |
— | — | — | (99,494 | ) | — | (99,494 | ) | $ | (99,494 | ) | |||||||||||||||||
Preferred stock dividends |
— | — | — | (619 | ) | — | (619 | ) | ||||||||||||||||||||
Stock options and
benefit plans |
551 | 551 | 4,043 | — | — | 4,594 | ||||||||||||||||||||||
Amortization of preferred
stock issuance costs |
— | — | (622 | ) | — | — | (622 | ) | ||||||||||||||||||||
Preferred stock conversions |
3,751 | 3,751 | 17,499 | — | — | 21,250 | ||||||||||||||||||||||
Issuance for acquisition
deferred purchase price
payments |
1,440 | 1,440 | 3,174 | — | — | 4,614 | ||||||||||||||||||||||
Charge for induced conversion
of preferred stock |
— | — | 3,488 | (3,488 | ) | — | — | |||||||||||||||||||||
Foreign currency translation
adjustments |
— | — | — | — | 1,182 | 1,182 | 1,182 | |||||||||||||||||||||
Balance at September 27, 2003 |
58,400 | $ | 58,400 | $ | 82,248 | $ | (171,751 | ) | $ | (667 | ) | $ | (31,770 | ) | $ | (98,312 | ) | |||||||||||
See accompanying Notes to Consolidated Financial Statements.
Page 4 of 43
CHAMPION ENTERPRISES, INC.
Notes to Consolidated Financial Statements
(Unaudited)
| 1. | The Consolidated Financial Statements are unaudited, but in the opinion of management include all adjustments necessary for a fair presentation of the results of the interim period. All such adjustments are of a normal recurring nature except for the restructuring charges discussed in Note 2, the goodwill impairment charges discussed in Note 3 and the charge to retained earnings related to the induced conversion of the Series C Preferred Stock recorded in the first quarter 2003 and discussed in Note 10. Financial results of the interim period are not necessarily indicative of results that may be expected for any other interim period or for the fiscal year. The balance sheet as of December 28, 2002 was derived from audited financial statements. | |