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Article Excerpt
OPERATOR: Good morning and welcome to the Champion Enterprises fourth-quarter and year-end 2008 conference call. (Operator Instructions). This call is being recorded at the request of Champion Enterprises. If you have any objections, you may disconnect at this time. I would now like to turn the conference over to Laurie Van Raemdonck, Vice President, Investor Relations. You may proceed.
LAURIE VAN RAEMDONCK, VP IR, CHAMPION ENTERPRISES INC.: Welcome to Champion's fourth-quarter 2008 conference call. Yesterday, the Company issued a press release with results for the fourth quarter and year ended January 3, 2009. A copy of the release is available on our website at www.ChampionHomes.com. A telephone replay of this call will be available approximately two hours after the conclusion of the call and through Friday, February 27, 2009. Telephone and webcast replay information is available in our press release and will be provided at the end of the call.
This morning, I am joined by Bill Griffiths, Chairman, President, and CEO, and Phyllis Knight, Executive Vice President and CFO. They will make some initial remarks regarding our results and current business trends, then open the call to questions.
Also, as a reminder, comments we make during this conference call may contain forward-looking statements that involve risks and uncertainties. Listeners are cautioned that these statements are only predictions and may differ materially from actual future events or results. Please refer to the documents filed by Champion with -- filed by Champion with the SEC, including without limitation its reports on Forms 10-K and 10-Q, which identify important risk factors that could cause actual results to differ from those contained in the forward-looking statement. All forward-looking statements are based on information available to Champion today and the Company assumes no obligation to update such statements.
With that said, I'd like to turn the call over to Phyllis Knight.
PHYLLIS KNIGHT, EVP, CFO, TREASURER, CHAMPION ENTERPRISES INC.: Clearly, each of Champion's operating segments was negatively affected by poor economic conditions in global markets during the fourth quarter, and unfortunately, this negative environment has shown no sign of easing to date.
Financing remains a serious concern for our wholesale and retail customers, and demand for new homes remains at historic lows.
For the quarter, our consolidated revenues decreased 42% to $187.9 million, compared to $325.6 million in the fourth quarter of 2007. The Company reported a loss before income taxes of $26.6 million, compared to pretax income of $11.2 million in the fourth quarter of 2007.
Champion's net loss for the quarter totaled $20.8 million, or $0.27 per diluted share, compared to a loss of $6 million, or $0.08 per diluted share, in the year-ago quarter.
Champion's results for the fourth quarters of both 2008 and 2007 were negatively impacted by several large, primarily non-cash items. First, the Company incurred non-cash foreign currency transaction losses of $8.7 million on the inter-company loans among its U.S. and foreign subsidiaries, as a result of significant changes in exchange rates during the quarter.
Next, our retail segment in California recorded a non-cash $6.3 million charge to write down the value of its inventory to estimated market value, bringing total inventory write-downs for the year to $14.1 million.
We recorded a $1.2 million cash restructuring charge to provide for severance payments in connection with corporate staff reductions during the quarter. We incurred a $600,000 non-cash loss on debt retirement, consisting of deferred financing costs related to the $33.5 million of term loan prepayments made during the quarter.
And finally, we recorded in our international segment a $600,000 expense related to the earnout provisions of the ModularUK acquisition completed in February 2008.
While the weakening of the British pound relative to the U.S. dollar during the latter part of 2008 had a negative impact on our international segment revenues and income, it had a positive effect on our sterling-denominated term loan, reducing the value of debt expressed in U.S. dollars by approximately $16 million. This change resulted in a non-cash tax benefit of $6.2 million recorded in the quarter as a reduction to our deferred tax asset valuation allowance.
In comparison, the fourth quarter of 2007 included the following pretax items -- $6.4 million of earnout expense, $4.5 million loss on debt retirement, restructuring charges of $3.6 million, partially offset by a two point million dollar gain or income from insurance claims, and $1 million of foreign currency transaction gains.
Before consideration of these items, Champion's fourth quarter 2008 pretax loss was $9.2 million, compared to similarly computed pretax income of $200,000 in the fourth quarter of 2007.
For the full year, revenues declined 19% to $1.03 billion, compared to $1.27 billion in 2007. The loss before income taxes in 2008 was $52 million, compared to pretax income of $4 million in 2007. These results were negatively impacted by special items totaling $37 million and $13 million in 2008 and 2007, respectively.
Champion's 2008 net loss totaled just under $200 million, or $2.57 per diluted share, which included a non-cash tax charge to provide a valuation allowance for U.S.-deferred tax assets of $165 million. 2007 net income totaled $7 million or $0.09 per diluted share.
Turning now to segments, our North American manufacturing segment net sales totaled $139.5 million this quarter, a decrease of 38% as compared to last year's $224 million, after a 35% drop in unit sales.
For the year, segment revenues decreased 23% to $727 million from $942 million in 2007.
We shipped 1,951 units in the U.S. this quarter, down 39% from last year's fourth quarter. Our Canadian unit sales for the quarter totaled 414 homes, a 2% decrease from the prior year, which was prior to the acquisition of SRI Homes at the end of 2007.
Revenues from the sale of modular homes totaled $37 million, as compared to $71 million a year ago.
For the year, our unit shipments totaled 11,406, a decrease of 26% from 2007, and included in this total, modular shipments were down 32% to 2,507 while modular revenues totaled $185 million, a decline of 37% compared to 2007.
The average HUD code unit price for the quarter was $43,200, down from last year's $45,000 and last quarter's $44,500. The average selling price for modular units was $70,500, compared to $73,000 last year and $68,400 last quarter.
The manufacturing segment reported a loss for the fourth quarter of $300,000, compared to segment income in last year's fourth quarter of $3.4 million. The segment results include restructuring charges of $600,000 and $3.6 million in the fourth quarter of 2008 and 2007,...
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