Champion Enterprises Inc. (NYSE: CHB)

Champion Enterprises Inc. (CHB) is a factory-built housing seller in the United States and Canada, as well as the maker of steel-framed modular buildings for the United Kingdom market. As of July, the Company reported 22 homebuilding facilities in 13 states and three Canadian provinces, and has more than 1,400 independent sales centers in the United States and western Canada as well as 15 sales offices in California.

Founded in 1953, the Company is headquartered in Troy, Michigan.

Source: Reuters.com, SEC Filings.

Financial Summary

Analyst Consensus

One analyst polled by Thomson Reuters rates shares of CHB a “Hold.”

Analyst Recommendations and Revisions

Source: Reuters.com

Investment Highlights

The Company operates in an industry in decline. The United States, Canada and UK manufactured homes sales have been dropping for the past 10 years, accelerating severely in decline during the first decisive break in the credit crisis and housing bubble in 2008. The result was a profound effect on the Company’s creditworthiness regarding its covenants in senior credit agreements beginning September 27, 2008.

In October 2008, the Company’s senior credit agreements were agreed to be amended by its creditors for the period between September 27, 2008, and January of 2010. As the credit crisis and economy deteriorated further in the first half, the Company again could not meet its revised covenants. The Company was granted a 30-day waiver for the covenant period between September 27, 2008, and January 2, 2010, and amended covenants.

The Company states in its latest 10-Q that due to the continued economic softness in the U.S., Canada and UK, it is unlikely to be in compliance with its credit agreements with certain creditors for the remainder of the fiscal year. The Company offers no assurance of a successful effort to restructure its outstanding debt or to avoid bankruptcy.

Sales of the Company’s manufactured homes in the latest reported quarter plunged 52% compared with the equivalent quarter last year. Most of the Company’s manufacturing facilities operated with less than one week of unfilled orders. In response, the Company closed three facilities, including one facility each in Florida, Colorado and California.

Net sales at the close of the second quarter ended July 4, 2009, declined $159.6 million, or 55%; for the six months ended July 4, 2009, net sales dropped $351.1 million 60%.

The Company reported a loss of $13.3 million (including a $2.0 million currency conversion gain) for the quarter ended July 4, 2009, compared with a profit of $3.6 million for the equivalent quarter in 2008.

The Company reported a loss of $31.9 million for the first six months ended July 4 of fiscal 2009, including a gain from an insurance claim settlement of $4.3 million; $1.3 million in currency transaction gains; and restructuring charges of $2.9 million relating to plant closings. CHB’s loss of $17.3 million for the period ended June 28, 2008, included charges of $9.8 million for plant closings and currency transaction losses.

Company News

On October 13, the Company announced that its creditors agreed to forgo taking action following the failure of the Company to make certain payments. The Company’s filing with the Securities and Exchange Commission (SEC) reveal that its lenders will not accelerate the maturity of loan agreement outstanding, which called for an installment of $3.4 million comprised of principal, interest and fees that the Company did not pay.

Technical Analysis

Source: http://stockcharts.com/h-sc/ui?s=chb

CHB trades below its 13-day moving average. This bearish sign is significant because the 13-day moving average is trending downwardly.

The MACD for CHB currently indicates a bearish signal. The MACD is below the signal line, a 9-day moving average. The MACD is below the critical level of 0, which implies that the underlying moving averages are trending lower. Overall, the chart is bearish.

Comparative Analysis

Source: Thomson Financial

Insider Trading Activity

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