Southern Energy Homes, Inc. Reports Higher Sales and Net Income for Second Quarter.
"Sales rose 65.9% to $77.3 million in the second quarter of 2006, which positions Southern Energy Homes as the fourth largest HUD manufacturer in the industry," stated Keith O. Holdbrooks, chief executive officer of Southern Energy Homes. "Net income increased 57.0% to $3.4 million, or $0.26 per share, compared with $2.2 million or $0.17 per share for the second quarter of 2005. Operating income in the second quarter of 2006 increased to $5.3 million, compared to $0.6 million for the second quarter of 2005. Our 2006 second quarter results included a $1.9 million income tax expense compared to the 2005 second quarter, which included an income tax benefit of $1.6 million due to the reversal of substantially all of our valuation allowance on deferred tax assets.
"This was our tenth consecutive quarter-over-quarter increase in revenues and the tenth consecutive quarter of profitability. We continue to improve the efficiency of our plants and have benefited from higher unit volume. Operating income totaled almost $10.0 million in the first half of 2006 compared with $10.7 million for the entire year of 2005. We remain focused on providing our customers with a large range of customized options while strengthening our dealer base and the quality of our homes. We believe this strategy remains an important part of building future sales and market share."
Second Quarter Results
Net revenues for the second quarter of 2006 rose to $77.3 million compared with $46.6 million for the second quarter of last year. The second quarter 2006 results included approximately $18.0 million in revenues related to Giles Industries that was acquired effective March 3, 2006. Total wholesale units sold in the second quarter of 2006 were 1,910, up 71.1% from 1,116 sold in the second quarter of 2005. Average wholesale selling prices declined slightly in the second quarter of 2006 as a result of higher sales of single-wide units compared with the second quarter of last year.
"We continued to gain market share in the second quarter based on recent industry statistics," continued Mr. Holdbrooks. "We believe our growth in market share is due to our strong dealer base, continued emphasis on product quality and the addition of Giles Industries. Over the past year, our market share has grown faster than any of the top manufacturers in the industry."
Gross profit increased 118% to $15.3 million in the second quarter of 2006 compared with $7.0 million in the second quarter of 2005. Gross margin percentage increased in the second quarter of 2006 to 19.8% from 15.1% in the second quarter of 2005. The increase in gross margin percentage was due primarily to higher sales, product mix and increased utilization of our existing manufacturing operations.
Operating income rose substantially to $5.3 million compared with $0.6 million in the second quarter of 2005. The growth in operating income benefited from the higher sales volume, the acquisition of Giles Industries and improved leverage of selling, general and administrative expenses in 2006 compared with 2005. The second quarter 2006 results included $1.3 million in operating income related to Giles Industries. Selling, general and administrative expenses declined to 12.9% of revenues in the second quarter of 2006 compared with 13.8% of revenues in the second quarter of 2005.
Net income for the second quarter of 2006 was $3.4 million, or $0.26 per diluted share, compared with net income of $2.2 million, or $0.17 per diluted share, in the second quarter of 2005. Results for 2005 include a non-cash tax benefit of $1.6 million (approximately $0.12 per diluted share) resulting from the reversal of substantially all of the Company's deferred income tax valuation allowance at July 1, 2005, in accordance with Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes.
Commenting on the results, James Stariha, chief financial officer, said, "Southern Energy's financial position remained strong in the second quarter. We had no debt, a strong cash position, and our working capital increased to $22.7 million from $20.5 million at the end of the second quarter of 2005."
Six Months Results
For the six months ended June 30, 2006, total net revenues rose 63.2% to $144.2 million compared with $88.4 million in the same period of 2005. The six months ended June 30, 2006 results included approximately $24.5 million in revenues related to Giles Industries. Net income for the first six months of 2006 was $7.2 million, or $0.55 per diluted share, compared with net income of $2.7 million, or $0.21 per diluted share, for the first six months of 2005. Operating income for the six months ended June 30, 2006 increased to $10.0 million, compared to $1.0 million for the six months ended July 1, 2005. The first six months ended June 30, 2006 results included $1.4 million in operating income related to Giles Industries. Our first six months of results for 2006 included a $2.9 million income tax expense compared to the first six months of 2005 results which included an income tax benefit of $1.6 million due to the reversal of substantially all of our valuation allowance on deferred tax assets.
About Southern Energy Homes, Inc.
Southern Energy Homes, Inc. manufactures homes that are marketed primarily through retailer networks in 24 states. The Company's brands include Southern Energy, Southern Estates, Southern Homes, Southern Energy of Texas and Giles Industries. The SunRay division also manufactures and markets a line of towable trailers under the Smokey brand.
The Company's common stock is not registered with the Securities and Exchange Commission, and the Company is not subject to the reporting requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934.
This news release includes forward-looking statements, including without limitation, statements relating to future operating results, plans and expectations, and the adequacy of the Company's resources to support those plans. Investors are cautioned that such forward-looking statements involve risks and uncertainties, which could cause actual results to differ materially from those in any forward-looking statements, including without limitation: the possibility of problems or unknown factors involving new retailers and suppliers; availability of financing for prospective purchasers of the Company's homes and availability of floor plan financing for retailers; availability and pricing of raw materials; the ultimate financial and operational effects of the recent Giles Industries acquisition and problems and difficulties that may be encountered in integrating new operations into the Company's existing business; the Company's reliance on retailers; ongoing weakness in the manufactured housing market, the cyclical and seasonal nature of housing markets, and overall economic conditions; the highly competitive nature of the industry and pricing pressures at both the wholesale and retail levels; changes in market demand; concentration of the Company's business in certain regional markets; adverse weather conditions that reduce retail sales; the possibility of plant shutdowns from weather or other causes; availability of labor; federal, state and local regulation of the Company's business; the Company's contingent repurchase liabilities with respect to retailer financing; and other risks indicated from time to time in the Company's reports to stockholders and other public statements. Southern Energy Homes is not responsible for updating the information contained in this press release beyond the published date, or for changes made to this document by wire services or Internet services.
A copy of this press release is available at http://www.sehomes.com/. SOUTHERN ENERGY HOMES, INC. Unaudited Balance Sheet Highlights (In thousands) June 30, 2006 July 1, 2005 ASSETS Cash and cash equivalents $7,529 $9,548 Current assets 43,240 33,403 Total assets $80,061 $57,298 LIABILITIES AND STOCKHOLDERS' EQUITY Notes payable $0 $0 Current liabilities 20,536 12,863 Long term debt 0 0 Total liabilities 20,536 12,863 Stockholders' equity $59,525 $44,435 Working capital $22,704 $20,540 SOUTHERN ENERGY HOMES, INC. Unaudited Financial Highlights (In thousands, except share and per share data) Thirteen Weeks Ended June 30, 2006 July 1, 2005 Net revenues $ 77,339 $ 46,615 Gross profit 15,296 7,016 Operating income 5,291 562 Net income 3,449 2,197 Basic earnings per share: 0.27 0.18 Diluted earnings per share: 0.26 0.17 Weighted average shares outstanding: Basic 12,755,276 12,289,324 Diluted 13,298,997 12,794,383 Twenty-six Weeks Ended June 30, 2006 July 1, 2005 Net revenues $144,180 $ 88,370 Gross profit 28,200 13,340 Operating income 9,961 991 Net income 7,154 2,659 Basic earnings per share: 0.57 0.22 Diluted earnings per share: 0.55 0.21 Weighted average shares outstanding: Basic 12,622,658 12,251,553 Diluted 13,067,471 12,716,770 SOUTHERN ENERGY HOMES, INC. Summary Operating Facts Thirteen Weeks Ended June 30, 2006 July 1, 2005 Wholesale units sold: External customers 1,910 1,105 Intercompany -- 11 1,910 1,116 Average sales price - wholesale $36,513 $37,794 Floor sections sold 3,257 2,005 Twenty-six Weeks Ended June 30, 2006 July 1, 2005 Wholesale units sold: External customers 3,591 2,176 Intercompany 1 25 3,592 2,201 Average sales price - wholesale $36,139 $36,297 Floor sections sold 5,906 3,805
CONTACT: James Stariha, Chief Financial Officer, of Southern Energy Homes, Inc., +1-256-747-8589
Web site: http://www.sehomes.com/