Fleetwood Reports Second Quarter Fiscal 2005 Results
Net Income More Than Doubles, Revenues Increase 6%
RIVERSIDE, Calif., Dec. 3 -- Fleetwood Enterprises, Inc. , one of the nation's leading manufacturers of recreational vehicles and a leading producer and retailer of manufactured housing, announced today its financial results for the second quarter and first half of fiscal 2005, ended October 24, 2004. Consolidated revenues for the quarter were $712.7 million, up 6 percent from $674.7 million in last year's second quarter. Net income more than doubled to $8.1 million, or $0.15 per basic share and $0.14 per diluted share, compared with net income of $3.8 million, or $0.10 per basic and diluted share, in last year's second quarter.
"Fleetwood demonstrated both top-line and bottom-line growth in the quarter," said Edward B. Caudill, Fleetwood's president and chief executive officer. "Our motor home division continued to perform well, and the Housing Group's strong performance, led by the wholesale division, is particularly encouraging."
For the first six months of fiscal 2005, revenues increased 9 percent to $1.44 billion from $1.32 billion for the first half of last year. Net income was $14.8 million, or $0.27 per basic share and $0.26 per diluted share, compared with $5.7 million, or $0.16 per basic share and $0.15 per diluted share, in the first six months of fiscal 2004.
Housing Group Results
Quarterly revenues for the Housing Group were $244.1 million, a 14 percent improvement from $214.3 million in last year's second quarter. Revenues included $213.9 million of wholesale factory sales and $64.6 million of retail sales from Company-operated sales centers, before elimination of intercompany sales of $34.4 million. Wholesale division revenues were up 18 percent from last year's $181.0 million, while retail division sales declined 7 percent from $69.7 million, and intercompany sales were down 6 percent from $36.4 million. Operating income for the Group was $4.8 million compared with an operating loss in the prior year of $2.5 million. The wholesale division's operating income grew nearly twofold to $11.7 million from $6.2 million. The Group's results were also aided by a 24 percent improvement in the retail division's results from an $8.4 million loss to a $6.4 million loss. Wholesale unit volume improved 21 percent to 6,680 homes, including intercompany sales of 996 homes, while homes sold at Company-operated stores declined 18 percent to 1,141.
For the first half of the fiscal year, Housing Group revenues increased 14 percent to $470.5 million from $414.6 million in the prior year. Revenues included $409.6 million of wholesale factory sales and $131.3 million of retail sales from Company-operated stores, before elimination of intercompany sales of $70.4 million. Wholesale grew 17 percent and retail increased 3 percent compared with $350.8 million and $127.3 million, respectively, last year, before eliminating intercompany sales of $63.5 million. Operating income for the wholesale division climbed to $17.8 million for the first six months, compared with $8.0 million last year. The retail division's operating loss declined from $16.9 million to $12.4 million. The wholesale division shipped 12,744 homes in the first half of fiscal 2005, including intercompany sales of 1,952, up 17 percent from last year. Company-operated store sales declined by 8 percent to 2,327 units.
"Fleetwood's Housing Group operations are improving significantly, although the manufactured housing industry as a whole has not recovered as participants and analysts had projected," Caudill said. "Our wholesale division benefited from the emergency-related orders for states affected by the hurricanes, although the extreme weather conditions hurt sales at our retail stores, as set-up procedures were delayed. The Housing Group's inherent leverage is becoming apparent, as the wholesale division showed a 90 percent improvement in operating income on 18 percent revenue growth. We are anticipating an improvement in industry shipments in calendar 2005, resulting primarily from lower inventory levels of repossessed houses and increased lending interest."
Caudill also indicated that the Group continued its aggressive investment for growth during the first half of the fiscal year. Two plants were reopened: one in Alma, Georgia, and the other in Waco, Texas. Product investment continued with the successful launch of a low-end product in the Beacon Hill series, and a new loan origination system was developed for HomeOne, the Company's housing finance subsidiary.
RV Group Results
The RV Group earned an operating profit of $8.6 million for the quarter on sales of $450.3 million, compared with $16.4 million in operating profits on revenues of $450.0 million in the prior year. In the first six months of fiscal 2005, revenues climbed 6 percent to $936.0 million from $886.6 million in the comparable period last year. Operating profit for the first half declined to $24.2 million from $32.1 million in fiscal 2004. Results in the towable division hampered the Group's profitability. While the motor home division's operating income improved to $15.1 million, a 3 percent gain year over year, towables incurred a loss of $6.5 million compared with operating income of $1.7 million in the prior year. The loss was primarily due to lower sales, which were down 16 percent to $148.0 million, compounded by higher material costs, lower production efficiencies and higher new product development expenses. Sales were impacted by the division's relatively late introduction of new 2005 models, which began toward the end of the second quarter. The release of additional 2005 products will continue in the third quarter.
"Our new lineup of travel trailers, some of which were introduced as recently as this week at the national RV show in Louisville, Ky., is set to overcome some persistent production challenges," Caudill said, "with innovative designs that incorporate much-improved manufacturability and materials usage. The dealers responded favorably to our new products and recognized our integration of customer and dealer design requests. We have completed the consolidation of travel and folding trailer operations, which is beginning to yield cost savings, and have integrated the financial reporting of the two divisions into the towable division."
Investments in Fleetwood's motor home business continued during the first half of the year, and many of the tangible results were unveiled at the Louisville show. Full-body paint facilities were completed at the Company's manufacturing plants in Paxinos, Penn., and Riverside, Calif., which led to the launch of full-body painted units in the Pace Arrow and Southwind lines, Fleetwood's high-end Class A gasoline models. Pace Arrow was introduced at the show with a unique full-wall, 23-foot-long slide out. In addition, Southwind was totally redesigned, as were Revolution and Revolution LE models in the mid-level diesel line. The Company also introduced revolutionary new Class C Tioga and Jamboree products, which were co-designed with BMW Designworks USA.
"With respect to our lawsuit against The Coleman Company, the Kansas State Court granted us a permanent injunction against Coleman licensing the Coleman name in the recreational vehicle industry to any company besides Fleetwood," Caudill continued. "We are gratified by this decision, and we believe that the absence of this distraction will allow Fleetwood Folding Trailers to begin to regain the market share and profitability that the division has historically enjoyed."
Caudill concluded, "Providing the products and services that our customers and dealers demand has enabled us to generate improving financial results for shareholders. We continue to be encouraged by the long-term demographics in both of our industries. With a gradually improving outlook for manufactured housing and the strong reception dealers gave our RV products at the Louisville show, we are optimistic about the future. We anticipate profitability for fiscal 2005 based on the performance of the motor home and wholesale housing divisions, although operating losses at the towable and retail housing divisions are projected. Even though we expect a net loss in our third quarter due to the seasonal slowdown, we look forward to a year-over-year improvement in those results."
About Fleetwood
Fleetwood Enterprises, Inc., is one of the nation's largest producers of recreational vehicles, from motor homes to travel and folding trailers, and is a leader in the building, retailing and financing of manufactured homes. This Fortune 1000 company, headquartered in Riverside, Calif., is dedicated to providing quality, innovative products that offer exceptional value to its customers. Fleetwood operates facilities strategically located throughout the nation, including recreational vehicle and manufactured housing plants, retail home centers, and supply subsidiary plants. For more information, visit the Company's website at www.fleetwood.com.
FLEETWOOD ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF INCOME (CONDENSED)
(Unaudited)
(Amounts in thousands except per share data)
13 Weeks Ended 26 Weeks Ended
October 24, October 26, October 24, October 26,
2004 2003 2004 2003
Net Sales:
RV Group $450,280 $450,018 $935,983 $886,551
Housing Group 244,109 214,329 470,480 414,637
Supply Group 16,172 9,288 30,232 17,694
Financial
Services 2,121 1,108 3,746 1,992
712,682 674,743 1,440,441 1,320,874
Cost of
products sold 576,159 549,308 1,167,373 1,078,363
Gross profit 136,523 125,435 273,068 242,511
Operating expenses 118,705 108,681 236,910 211,722
Financial services
expenses 2,184 1,479 4,170 2,893
Other, net (2) 29 183 (695)
120,887 110,189 241,263 213,920
Operating income 15,636 15,246 31,805 28,591
Other income
(expense):
Investment income 498 602 1,010 1,390
Interest expense (7,268) (11,069) (14,763) (22,104)
Other, net -- -- (1,608) --
(6,770) (10,467) (15,361) (20,714)
Income before
income taxes 8,866 4,779 16,444 7,877
Provision for
income taxes (731) (1,021) (1,641) (2,203)
Net income $8,135 $3,758 $14,803 $5,674
Basic Diluted Basic Diluted Basic Diluted Basic Diluted
Net
income
per
common
share $0.15 $0.14 $0.10 $0.10 $0.27 $0.26 $0.16 $0.15
Weighted
average
common
shares 55,419 57,154 36,124 37,116 55,044 56,823 36,030 36,868
FLEETWOOD ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS (CONDENSED)
(Unaudited)
(Amounts in thousands)
October 24, July 25, October 26,
2004 2004 2003
ASSETS
Current assets:
Cash $68 $11,551 $16,289
Marketable investments --
available for sale 40,006 48,301 60,350
Receivables 238,610 203,031 177,346
Inventories 327,403 280,080 241,294
Deferred taxes, net 58,065 56,904 58,488
Other current assets 22,511 19,839 16,513
Total current assets 686,663 619,706 570,280
Finance loans
receivable, net 60,248 50,326 29,329
Property, plant and
equipment, net 265,263 262,983 254,723
Deferred taxes, net 17,858 17,859 31,275
Cash value of
Company-owned life
insurance, net 49,341 48,533 56,151
Goodwill 6,316 6,316 6,316
Other assets 48,591 49,998 30,893
Total assets $1,134,280 $1,055,721 $978,967
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $100,731 $90,460 $83,721
Employee compensation &
benefits 80,970 74,142 74,272
Product warranty reserve 58,443 57,059 58,037
Retail flooring liability 28,065 25,567 16,747
Other short-term borrowings 54,920 8,892 26,949
Accrued interest 44,899 39,502 32,617
Other current liabilities 65,841 69,760 74,609
Total current liabilities 433,869 365,382 366,952
Deferred compensation
and retirement benefits 50,798 50,205 58,705
Insurance reserves 32,693 32,614 31,492
Long-term debt 108,688 109,310 2,354
Convertible subordinated
debentures 210,142 210,142 374,993
Total liabilities 836,190 767,653 834,496
Commitments and contingencies
Shareholders' equity:
Common stock 55,464 55,386 38,667
Additional paid-in-capital 421,719 421,202 272,865
Accumulated deficit (180,534) (188,669) (167,402)
Accumulated other
comprehensive income
(loss) 1,441 149 341
Total shareholders'
equity 298,090 288,068 144,471
Total liabilities
and shareholders'
equity $1,134,280 $1,055,721 $978,967
FLEETWOOD ENTERPRISES, INC.
Business Segment and Unit Shipment Information
(Unaudited)
(Amounts in thousands)
13 Weeks Ended 26 Weeks Ended
Oct. 24, Oct. 26, Oct. 24, Oct. 26,
2004 2003 2004 2003
OPERATING REVENUES:
Recreational
vehicles $450,280 $450,018 $935,983 $886,551
Housing 244,109 214,329 470,480 414,637
Supply operations 16,172 9,288 30,232 17,694
Financial services 2,121 1,108 3,746 1,992
$712,682 $674,743 $1,440,441 $1,320,874
OPERATING INCOME (LOSS):
Recreational
vehicles $8,585 $16,430 $24,153 $32,080
Housing 4,823 (2,470) 5,229 (8,470)
Supply operations 1,745 402 2,772
1,142
Financial services (63) (370) (423) (901)
Corporate and Other 546 1,254 74 4,740
$15,636 $15,246 $31,805 $28,591
UNITS SOLD:
Manufactured
housing --
Factory shipments 6,680 5,509 12,744 10,881
Retail sales 1,141 1,389 2,327 2,537
Less intercompany (996) (1,078) (1,952) (1,896)
6,825 5,820 13,119 11,522
Recreational
vehicles --
Motor homes 2,868 2,826 6,113 5,520
Towables 10,739 13,005 22,001 25,787
13,607 15,831 28,114 31,307
