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FOR IMMEDIATE RELEASE
INVESTOR AND MEDIA CONTACTS:
Anthony S. Cleberg Colleen T. Bauman
Chief Financial Officer Investor Relations
(248) 340-9090 (248) 340-7731
CHAMPION ENTERPRISES, INC.
COMMENTS ON OUTLOOK AND
ANNOUNCES IMPAIRMENT CHARGES
CONFERENCE CALL SCHEDULED FOR
11:00 A.M. EASTERN TIME ON FRIDAY, DECEMBER 15, 2000
CALL-IN NUMBER (973) 633-1010
REPLAY NUMBER (877) 790-4181
AUBURN HILLS, MICH., DECEMBER 13, 2000--CHAMPION ENTERPRISES, INC.
(NYSE: CHB), the nation's leading housing manufacturer, today announced that it
expects a net loss in the range of $3.02 to $3.04 per diluted share for the
fourth quarter ending December 30, 2000. The loss consists of an estimated $0.31
to $0.33 per share loss from operations, before non-goodwill asset impairment
charges of $0.08 per share, and goodwill impairment charges of $2.63 per share.
For the three-month period, revenues are expected to be approximately $390
million. In the fourth quarter of 1999, the company had revenues of $568 million
and net income of $0.12 per diluted share.
Champion continues to be affected by lower industry retail sales, which
were off 29.1 percent in the third quarter and 32.7 percent in September alone.
This trend continued in the fourth quarter, with lower consumer traffic
affecting sales at company-owned stores and independent retailers. Consistent
with its strategy to keep capacity and inventories in line with consumer demand,
the company made additional reductions in the number of sales locations and
inventory levels.
Due to low retail traffic and sales volume, in the fourth quarter the
company expects to close or consolidate 25 sales centers. These closings will
bring total retail closures to 54 locations in the last half of the year.
Included in the $0.31 to $0.33 per share loss from operations is approximately
$1.5 million for pretax lease termination costs from retail store closings and
$2.0 million of pretax losses related to the company's efforts to reduce
inventories at company-owned stores. The $0.08 per share for non-cash asset
impairment charges, other than for goodwill, consists of the following pretax
amounts to write down impaired fixed assets: $1.5 million for manufacturing,
$2.5 million for development operations and $2.5 million for retail.
(more)
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CHB/2
Industry conditions have caused Champion to reassess the valuation and
estimated useful life of its goodwill. As a result, in this year's fourth
quarter the company will record a non-cash impairment charge of $190 million
($124.3 million after tax or $2.63 per diluted share) primarily related to
retail goodwill. Champion is also reducing the amortization period for retail
goodwill from 40 years to 20 years. Following the impairment charge the company
will have $274 million of goodwill, net of amortization, on its balance sheet.
Chairman, President, and Chief Executive Officer, Walter R. Young,
commented, "We are disappointed to report losses and impairment charges, but the
closing of additional sales locations and the write down of goodwill is prudent.
Industry conditions of tightened consumer credit standards, repossessions,
excess inventory and higher interest rates continue to affect sales and profits.
We will begin 2001 with manufacturing and retail capacity, as well as inventory
levels, in line with expected demand.
"We remain committed to managing the company for cash," Young
continued. "We generated $82 million of cash flow from operations through this
year's third quarter and expect to be cash flow positive for the fourth quarter.
Currently, the company has more than $35 million in cash and no borrowings under
its bank facility. Year-to-date, debt has been reduced by $53 million. Inventory
levels, working capital needs, and contingent repurchase obligations continue to
be carefully monitored and reduced. We are dedicated to managing the business
for short-term liquidity, while positioning the company for long-term growth.
"We are glad to get this year behind us and pleased with the progress
we made in improving our position in the industry and with our contribution
toward balancing the industry's capacity and inventories to overall demand.
Although substantial progress was made this year, next year could be challenging
if industry conditions and reduced retail traffic levels continue. We are
expecting a loss in the seasonally weak first quarter," Young concluded.
Champion Enterprises, Inc., headquartered in Auburn Hills, Michigan, is
the industry's leading manufacturer and has produced more than 1.5 million homes
since the company was founded. The company operates 53 homebuilding facilities
in 17 states and western Canada and 259 company-owned retail stores in 28 states
following the closings announced today. Champion's homes are also sold by over
1,000 independent retail locations that have joined the Champion Home Center and
Alliance of Champions retail distribution networks. Further information can be
found on the company's website, www.championhomes.net.
This news release contains certain statements, including earnings,
revenues, and cash flow forecasts, projected number of sales centers,
assessments of current industry conditions, company capacities, short-term and
long-term goals, initiatives to implement change, and marketing and expansion
strategies, 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 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. These factors are discussed in the company's most recently filed
Form 10-K, and that discussion regarding risk factors is incorporated herein by
reference.
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