CHAMPION ENTERPRISES INC
10-Q, 1996-05-10
MOBILE HOMES
Previous: SHOWBIZ PIZZA TIME INC, 10-Q, 1996-05-10
Next: CHAMPION ENTERPRISES INC, S-8, 1996-05-10




                              FORM 10-Q


                   SECURITIES AND EXCHANGE COMMISSION
                        Washington, D.C.  20549

(Mark one)

    X  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
  ----          THE SECURITIES EXCHANGE ACT OF 1934.


  For Quarter Ended March 30, 1996

                                 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.              
    (Exact name of registrant as specified in its charter)


          MICHIGAN                            38-2743168 
- --------------------------------------        ----------
(State or other jurisdiction of            (I.R.S. Employer
incorporation or organization)             Identification No.)


2701 University Drive, Suite 320, Auburn Hills, MI     48326
- --------------------------------------------------    ------
(Address of principal executive offices)           (Zip Code)


Registrant's telephone number, including area code: (810)
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 the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.

  15,367,915 shares of the registrant's $1.00 par value Common
  Stock were outstanding as of April 23, 1996.    



                     PART I. FINANCIAL INFORMATION

                       CHAMPION ENTERPRISES, INC.

                     Consolidated Income Statements            
             (In Thousands, Except Per Share Amounts)


                                              13 Weeks Ended   
                                            Mar. 30,      Apr. 1,
                                             1996          1995  
                                            --------     --------
        
Net sales                                  $192,983     $170,323
                                            --------     --------

Cost of sales                               164,030      147,534

Selling, general and
   administrative expenses                   16,209       13,111
                                            --------     --------
                                            180,239      160,645
                                            --------     --------

Operating income                             12,744        9,678

Other income (expense):
   Interest income                              149          258
   Interest expense                            (338)        (372)
                                            --------     --------
Income before income taxes                   12,555        9,564

Income taxes                                  4,800        3,800
                                            --------     --------
                                                      
Net income                                 $  7,755     $  5,764
                                            ========     ========

Net income per share                       $   0.47     $   0.37
                                            ========     ========
  
Weighted average shares outstanding          16,395       15,740
                                            ========     ========

Pro forma per share amounts adjusted
   for stock split effective
   May 31, 1996 (See Note 6)               $   0.24     $   0.18
                                            ========     ========




See accompanying Notes to Consolidated Financial Statements.




                      CHAMPION ENTERPRISES, INC.

                      Consolidated Balance Sheets
                (In Thousands, Except Par Value Amount)


                                 ASSETS                      
                                           Mar. 30,    Dec. 30,
                                             1996        1995  
                                           --------    --------
CURRENT ASSETS
  Cash and cash equivalents                $ 11,002    $ 14,995
  Accounts receivable, trade                 52,333      35,973
  Inventories                                43,988      45,558
  Deferred taxes and other                   12,516      11,947
                                           --------    --------
    Total current assets                    119,839     108,473
                                           --------    --------
PROPERTY AND EQUIPMENT
  Cost                                       68,498      60,134
  Less-accumulated depreciation              21,842      20,744
                                           --------    --------
                                             46,656      39,390
                                           --------    --------
GOODWILL                                           
  Cost                                       92,997      84,709
  Less-accumulated amortization               3,549       2,964
                                           --------    --------
                                             89,448      81,745
                                           --------    --------
OTHER ASSETS                                  6,307       6,331
                                           --------    --------
    Total assets                           $262,250    $235,939
                                           ========    ========


                  LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
  Notes payable to bank                    $ 19,700    $      -
  Accounts payable                           39,017      33,791
  Accrued dealer discounts                   16,256      20,570
  Accrued compensation and payroll taxes     11,296      12,886
  Accrued warranty obligations               13,551      12,589
  Accrued insurance                           6,321       5,032
  Deferred portion of purchase price              -       8,900
  Other liabilities                          14,074      10,719
                                           --------    --------
    Total current liabilities               120,215     104,487 
                                           --------    --------

LONG-TERM LIABILITIES                        21,988      18,349

SHAREHOLDERS' EQUITY
  Preferred stock, no par value, 
    5,000 shares authorized, 
    none issued                                   -           -
  Common stock, $1 par value, 30,000 
    shares authorized, 15,349 and 
    15,302 shares issued and 
    outstanding, respectively                15,349      15,302
  Capital in excess of par value             29,823      30,698
  Retained earnings                          75,834      68,079
  Foreign currency translation adjustments     (959)       (976)
                                           --------    --------
    Total shareholders' equity              120,047     113,103
                                           --------    --------
    Total liabilities and shareholders' 
      equity                               $262,250    $235,939
                                           ========    ========


See accompanying Notes to Consolidated Financial Statements.




                    CHAMPION ENTERPRISES, INC.

              Consolidated Statements of Cash Flows 
                          (In Thousands)
                                               13 Weeks Ended  
                                            Mar. 30,   Apr. 1, 
                                              1996       1995  
                                           --------   --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                 $  7,755   $  5,764
                                           --------   --------
Adjustments to reconcile net income             
  to net cash provided by (used for)
  operating activities:           
  Depreciation and amortization               1,822      1,383
  Increase/decrease, net of acquisitions:       
    Accounts receivable                     (15,660)   (12,478)
    Inventories                               2,095     (5,349)
    Accounts payable                          4,714      6,586
    Accrued liabilities                          75      1,474
    Other, net                                  (51)       391 
                                           --------   --------
    Total adjustments                        (7,005)    (7,993)
                                           --------   --------
Net cash provided by (used for) 
  operating activities                          750     (2,229)
                                           --------   --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions                                 (5,526)   (36,189)
Proceeds on disposal of assets                   60          -
Additions to property and equipment          (7,763)    (2,330)
Deferred purchase price payment              (8,900)    (2,600)
                                           --------   --------
Net cash used for investing activities      (22,129)   (41,119)
                                           --------   --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in notes payable to bank            19,700     28,700
Repayment of long-term debt                  (1,356)       (19)
Common stock issued, net                        163        397
Common stock repurchased                     (1,121)         - 
                                           --------   --------
Net cash provided by financing activities    17,386     29,078 
                                           --------   --------
NET DECREASE IN CASH AND CASH EQUIVALENTS    (3,993)   (14,270)

CASH AND CASH EQUIVALENTS AT BEGINNING
  OF PERIOD                                  14,995     23,027
                                           --------   --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 11,002   $  8,757
                                           ========   ========

ADDITIONAL CASH FLOW INFORMATION:
Cash paid during the period for:
  Interest                                 $    755   $    312
  Income taxes                             $    680   $    186

SCHEDULE OF CASH FLOWS FROM ACQUISITIONS: 
Purchase price                              $  9,500  $ 47,576
Less:  Deferred portion of purchase price     (3,500)  (10,900)
       Cash acquired, net                       (841)     (814)
Plus:  Payoff of mortgage                        367         -
       Acquisition costs                           -       327
                                            --------  --------
                                            $  5,526  $ 36,189
                                            ========  ========

See accompanying Notes to Consolidated Financial Statements.




                      CHAMPION ENTERPRISES, INC.

               Notes to Consolidated Financial Statements
  
1. For each of the dates indicated, inventories consisted of
   the following (in thousands):
                                 Mar. 30,         Dec. 30,
                                     1996             1995 
                                   -------          -------
        Raw materials              $24,856          $27,651
        Work-in-process              5,383            4,836
        Finished goods              13,749           13,071
                                   -------          -------
                                   $43,988          $45,558
                                   =======          =======

2. The difference between income taxes provided for financial
   reporting purposes and expected charges at the U.S. federal
   statutory rate is due to state and foreign tax charges. 

   The components of the income tax provisions for the 13 week
   periods ended March 30, 1996 and April 1, 1995 follows
   (dollars in thousands):


                                    Mar. 30,      Apr. 1,
                                      1996          1995 
                                    -------       -------
   Statutory U.S. tax rate           $4,394        $3,347 
   Increase in rate resulting from:
   Higher rates on earnings of
       foreign operations                41            46 
   State taxes                          365           407 
                                    -------       -------
   Total provision                   $4,800        $3,800 
                                    =======       =======
   Effective tax rates                  38%           40%
                                    =======       =======

3. The per share amounts are calculated using the weighted
   average number of shares outstanding for each of the periods
   presented and includes common stock equivalents.


4. 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.  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.


5. On March 29, 1996 the registrant purchased the assets and
   assumed the liabilities of Grand Manor, Inc., a Georgia-based
   manufactured housing company.  Prior year results are
   immaterial.  The acquisition was accounted for using the
   purchase method and resulted in $8 million of goodwill. 
   Subsequent to quarter end, on April 26, 1996 the registrant
   acquired all the outstanding common stock of Homes of
   Legend, Inc., an Alabama-based manufactured housing company
   and purchased the assets and assumed the liabilities of
   Legend Realty, Inc., a related company.  The cost of the
   above transactions was approximately $33 million of which
   approximately $18.5 will be paid in 1996, and the balance
   over the next three years.  Goodwill resulting from these
   acquisitions will be amortized over 40 years.


6. On April 29, 1996 the shareholders approved a proposal to
   increase the number of authorized shares of common stock to
   75 million from 30 million.  In addition, the Board of
   Directors approved a two-for-one split of the registrant's
   common stock to be distributed on May 31, 1996 to holders of
   record on May 16, 1996.  


7. Certain amounts in the prior period's statements have been
   reclassified to conform to the current period's
   presentation.


                       CHAMPION ENTERPRISES, INC.

                  Management's Discussion and Analysis
                                   of
             Financial Condition and Results of Operations

  13 weeks ended March 30, 1996 versus 13 weeks ended April 1,
1995

Champion Enterprises, Inc. achieved record first quarter sales
and net income in the quarter ended March 30, 1996.  Pretax
income increased 31% to $12.6 million as compared to $9.6 million
in the prior year's first quarter.  The increase in pretax income
was the result of increased sales and margin improvements in both
its manufactured housing and commercial vehicles operations. 
Sales grew 13% to $193 million in the first quarter of 1996
versus $170 million last year.

Net income for the quarter increased 35% to $7.8 million in 1996
from $5.8 million in 1995.  The 35% increase in net income is
greater than the growth in pretax income due to a lower estimated
annual effective tax rate in 1996.

The following is a reconciliation of segment sales and segment
income to operating income:

(In thousands)
                                    13 Weeks Ended   
                                 Mar. 30,     Apr. 1,
                                   1996        1995
                                   --------  --------  
Net sales:
Housing                            $178,842  $156,418
Commercial vehicles                  14,141    13,905
                                   --------  --------
Total net sales                    $192,983  $170,323
                                   ========  ========
Operating income:
Housing segment income             $ 13,622  $ 10,550
Commercial vehicles segment income      732       619
                                   --------  --------
Total segment income                 14,354    11,169

General corporate expenses            1,610     1,491
                                   --------  --------
Operating income                   $ 12,744  $  9,678
                                   ========  ========

Effective March 29, 1996 the Company acquired Grand Manor, Inc.
in Thomasville, Georgia.  Effective April 26, 1996 the registrant
acquired Homes of Legend, Inc. in Boaz, Alabama.  Both companies
are producers of primarily customized manufactured homes.  These
acquisitions strengthen the Company's presence in key growth
Southeastern states.   The results of these acquired companies
will be included with the Company's results commencing in the
second quarter.  The Company also has three new manufactured
housing plants under construction, one each in Alabama, Texas and
Indiana, all of which should start up in mid-1996.  Additionally,
in April 1996 Grand Manor purchased a second facility which will
be renovated to commence operations later in the year.


Manufactured Housing
(Sales and income in millions)
                         13 Weeks Ended
                       Mar. 30,    Apr. 1,          %
                        1996       1995          Change
                         ------    ------        ------
Net sales                $178.8    $156.4         14%
Segment income            $13.6     $10.6         29%
Segment margin %           7.6%      6.7%
Homes sold                7,066     6,265         13%
Average price           $25,300   $25,000          1%

Sales increased over last year despite adverse weather conditions
that caused sporadic disruptions of production and shipping. 
Sales increased 14% due to a 13% increase in unit shipments and a
slight increase in average selling price per home, attributable
to an increase in sales of multi-section homes.  The
multi-section mix in the first quarter was 56% versus 52% in
1995's first quarter.  The first quarter of 1996 included the
results of Chandeleur Homes, Inc. and Crest Ridge Homes, Inc. for
three months versus only two months in 1995, due to the
acquisition of those companies on February 3, 1995.  Chandeleur
and Crest Ridge contributed sales of $8.1 million and unit
shipments of 439 for the month of January 1996.  The registrant's
1996 first quarter U.S. market share based on homes sold was
approximately 8.2%.   

Segment income increased primarily due to higher sales volume and
improved margins.  Improved margins resulted principally from
reduced material costs partially offset by higher segment general
and administrative costs related to sales incentive programs. 
Chandeleur and Crest Ridge added $0.6 million of income to
January 1996 results.

Although dealer orders can be cancelled at anytime without
penalty, and unfilled orders are not necessarily an indication of
future business, the Company's unfilled orders for housing at the
end of the quarter totaled $42 million, which is 24% higher than
a year ago. 


Commercial Vehicles
(Sales and income in millions)

                            13 Weeks Ended
                       Mar. 30,    Apr. 1,       %
                         1996      1995       Change
                         ------     -----     ------
Net sales                 $14.1     $13.9       2% 
Segment income             $0.7      $0.6      18% 
Segment margin %           5.2%      4.5%
Vehicles sold               246       325     (24%)
Average price           $57,500   $42,800      34% 

The commercial vehicles segment produced and sold fewer, but
larger buses in the first quarter of 1996 as compared to the
first quarter of 1995.  As a result, there was a significant
increase in the average selling price per vehicle as well as a
significant improvement in margins.

As of the end of the quarter, the commercial vehicles segment had
unfilled orders of approximately $15 million, 50% higher than
last year and $10 million greater than at the end of January
1996.


Other Expenses and Income Taxes
(Dollars in millions)
                            13 Weeks Ended
                            Mar. 30,    Apr. 1,       %
                             1996       1995        Change
                            -------     ------      ------
General corporate expenses   $1.6       $1.5          8%  
Interest expense, net        $0.2       $0.1        
Income taxes                 $4.8       $3.8         26%  
Effective income tax rate     38%        40%

General corporate expenses increased because of higher
professional fees.  Net interest expense increased in 1996 due to
lower interest income, which  resulted from a reduction in
short-term investments due to greater capital expenditures
associated with the construction of new plants and other plant
expansions. Income tax expense in 1996 increased due to higher
pretax earnings partially offset by a lower effective tax rate
due to reduced state and foreign income taxes. 


               Manufactured Housing Industry Outlook

Industry wholesale unit shipments of manufactured homes increased
7% in the first quarter of 1996 compared to the first quarter of
1995, following annual increases of 12% in 1995 and 20% or more
in 1994, 1993 and 1992 according to the Manufactured Housing
Institute (MHI), an industry trade association.  Management
estimates a 6-8% increase in industry shipments in 1996.

Management believes that moderate changes in interest rates will
not have a significant direct impact on demand for manufactured
housing.  However, to the extent that increased interest rates
reduce job growth, slow the U.S. economy, or cause a loss in
consumer confidence, demand for manufactured housing may be
adversely affected.

Long-term industry growth will be affected by, among other
things, the relative cost of manufactured housing versus other
forms of housing, including rental housing, general economic
trends, changes in demographics including new household
formations and the number of Americans on fixed incomes, and the
availability and cost of financing.  Changes in regional markets
and the U.S. economy as a whole will continue to affect overall
housing industry cycles.

Management is encouraged by the favorable trends in these areas. 
The Company is positioned to take advantage of these trends by
implementing strategies of serving particular market niches with
broad geographic coverage, maintaining a decentralized
organization and making selective acquisitions and expansions.


                 Liquidity and Capital Resources
                                
Cash balances totaled $11 million at March 30, 1996, a reduction
of $4 million from year end.   During the quarter, $0.8 million
of cash was generated from operations, $14.4 million was used for
acquisition related payments, $7.8 million for capital
improvements and $1.1 million for common stock repurchases. 
These common stock repurchases were part of a $10 million program
which began last year and for which $3 million has been expended
through March 30, 1996.  These expenditures were funded by
borrowings on the Company's line of credit.

Accounts receivable and payable increased significantly during
the quarter due to higher sales in March 1996 as compared to
December 1995, and the inclusion of Grand Manor which was
acquired on March 29, 1996.  Accrued dealer discounts decreased
during the quarter due to payments made under annual programs. 

The Company has a $70 million unsecured bank line of credit,
which expires on September 29, 1998, and includes $10 million of
availability to cover letters of credit.  The Company had bank
borrowings of $20 million outstanding at March 30, 1996.  At
quarter end, the Company had $7 million of letters of credit
outstanding, generally to support insurance obligations and
licensing and service bonding required by various states.

In April 1996, $13.5 million was used to acquire Homes of Legend
and to purchase a second plant for Grand Manor.  Additional
borrowings are anticipated during 1996 for the completion of the
three plants that are under construction and other planned plant
expansions and for seasonal working capital needs.  The
registrant plans to spend a total of at least $25 million on
capital expenditures during 1996.  This amount includes the cost
of the recently announced project to acquire land and construct a
seventh plant for Dutch Housing, Inc.   

Consistent with its plan to improve shareholder value through
investments in sound operating businesses, the Company does not
plan to pay cash dividends in the near term.

The Company believes that existing cash balances, cash flow from
operations and additional availability under its line of credit
are adequate to meet its anticipated financing needs, operating
requirements, capital expenditures and common stock repurchases
in the foreseeable future.  However, management  may explore
other opportunities to raise capital to finance the growth of the
Company. 


                       PART II. OTHER INFORMATION


Item 6. Exhibits and Reports on Form 8-K.


  (a)  None.

  (b)  No reports on Form 8-K were filed by the registrant
       during the quarter ended March 30, 1996.
   
  

                               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, thereunto duly authorized.



                              CHAMPION ENTERPRISES, INC.

                              By:/s/A. JACQUELINE DOUT  
                                    A. Jacqueline Dout
                                    Executive Vice President
                                    and Chief Financial Officer
                                    (Principal Financial Officer)




                              And:/s/RICHARD HEVELHORST      
                                     Richard Hevelhorst
                                     Controller (Principal
                                     Accounting Officer)




Dated:  May 9, 1996


<TABLE> <S> <C>

<ARTICLE> 5
<LEGEND>   THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION  
           EXTRACTED FROM THE COMPANY'S UNAUDITED FINANCIAL      
           STATEMENTS AS OF AND FOR THE PERIOD ENDING MARCH 30,
           1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
           SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000

<PERIOD-TYPE>                                    3-MOS
<FISCAL-YEAR-END>                          DEC-28-1996
<PERIOD-START>                             DEC-31-1995
<PERIOD-END>                               MAR-30-1996
<CASH>                                          11,002
<SECURITIES>                                         0
<RECEIVABLES>                                   52,539
<ALLOWANCES>                                       206
<INVENTORY>                                     43,988
<CURRENT-ASSETS>                               119,839
<PP&E>                                          68,498
<DEPRECIATION>                                  21,842
<TOTAL-ASSETS>                                 262,250
<CURRENT-LIABILITIES>                          120,215
<BONDS>                                              0
<COMMON>                                        15,349
                                0
                                          0
<OTHER-SE>                                     104,698
<TOTAL-LIABILITY-AND-EQUITY>                   262,250
<SALES>                                        192,983
<TOTAL-REVENUES>                               192,983
<CGS>                                          164,030
<TOTAL-COSTS>                                  164,030
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                                 338
<INCOME-PRETAX>                                 12,555
<INCOME-TAX>                                     4,800
<INCOME-CONTINUING>                              7,755
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                     7,755
<EPS-PRIMARY>                                     0.47
<EPS-DILUTED>                                     0.47

</TABLE>


© 2022 IncJournal is not affiliated with or endorsed by the U.S. Securities and Exchange Commission