Fleetwood Reports Fiscal 2007 Fourth Quarter and Full Year Financial Results

RIVERSIDE, Calif., July 12 -- Fleetwood Enterprises, Inc. announced today financial results for the fiscal 2007 fourth quarter and full year ended April 29, 2007.

Consolidated Results

Consolidated revenues for the fourth quarter of fiscal 2007 declined 16 percent to $508.4 million from $602.6 million in the same period of the prior year. Fleetwood's consolidated operating loss was $18.6 million versus operating income of $8.3 million in the fourth quarter of the prior year. The Company's net loss, which included results from discontinued operations, was $39.2 million, or $0.61 per share, compared to net income of $1.7 million, or $0.03 per share, in the fourth quarter last year. The current quarter loss included one-time severance costs of $10.2 million, or $0.16 per share, associated with the closure of five travel trailer plants and a non-cash adjustment to the Company's deferred tax asset of $11.1 million, or $0.17 per share. In total, these costs were $21.3 million, or $0.33 per share.

For fiscal year 2007, consolidated revenues fell 17 percent to $2.01 billion from $2.43 billion in the prior year. Fleetwood's consolidated operating loss was $67.0 million versus operating income of $29.5 million in the prior year. The net loss totaled $90.0 million, or $1.41 per share, compared to a net loss of $28.4 million, or $0.48 per share, in fiscal 2006. The fiscal 2007 loss included severance costs of $14.0 million, or $0.22 per share, and adjustments to the Company's deferred tax asset of $14.7 million, or $0.23 per share.

"Despite the significant restructuring costs from plant closures, the fourth quarter operating loss was, as expected, narrower than the third quarter," said Elden L. Smith, president and chief executive officer. "The difficult market environment was particularly evident in our travel trailer division, where poor operating results prompted us to reduce manufacturing capacity by closing five smaller or underperforming travel trailer plants. We have also made significant improvements to our model year 2008 travel trailers and streamlined our product offering. We have been gratified by the reaction to the early shipments of our '08 travel trailer products. We believe that our company-wide efforts to eliminate inefficiencies, curtail costs, and increase revenues through enhanced products will provide a foundation for Fleetwood's consistent operational improvement. These factors combined with more efficient operations are expected to yield considerably better financial results in the next year."

Fourth Quarter Results by Business Segment

Recreational vehicle sales were down 11 percent to $382.0 million from $430.2 million in the fourth quarter of the prior year. The RV Group incurred a quarterly operating loss of $18.4 million compared to the prior-year fourth quarter operating profit of $2.2 million, which was aided by $33 million in sales of emergency living units provided by the travel trailer division in support of FEMA's disaster relief effort. Motor home sales for the quarter increased by 12 percent, and the division generated operating income of $11.5 million, its best performance in more than two years. These results were encouraging, but were overshadowed by losses in the travel and folding trailer divisions, including the restructuring costs.

Revenues for the Housing Group dropped 26 percent to $116.9 million from $157.5 million in the fourth quarter of the prior year. Despite the sharp decline in revenues, the Housing Group generated operating income of $1.7 million, compared with $6.6 million in last year's fourth quarter.

Fiscal Year Results by Business Segment

Recreational vehicle sales for the full fiscal year declined 11 percent to $1.44 billion from $1.61 billion in the prior year. The RV Group's operating loss was $62.4 million, compared to operating income of $0.2 million last year. The travel trailer division's results were responsible for the swing, as the division lost $65.3 million in fiscal 2007 but earned $1.1 million in the previous year.

Fleetwood's Housing Group revenues fell 35 percent to $518.3 million from $795.6 million in the prior year, or by 27 percent excluding FEMA sales of $86.8 million in fiscal 2006. The Group posted a loss of $2.6 million, compared to the prior year's operating income of $38.8 million. In addition to the steep decline in revenues, the comparison was also impacted by higher labor efficiencies associated with FEMA unit production in the prior year.

Balance Sheet Changes

As a result of the net loss for the year and the redemption of $50 million in debt securities, cash and marketable securities on Fleetwood's balance sheet declined by almost $70 million year over year. At the same time, total debt, including the credit facility, dropped by almost $56 million. Despite the reduction in cash, the year-end balance sheet reflects more than $70 million in liquid assets; and liquidity, as defined under the Company's secured credit facility (bank cash balances plus unused borrowing availability), stood at $117.4 million, well in excess of the $50 million benchmark set in the credit agreement for testing financial covenants. Over the course of the year, the Company sold six idle facilities, generating more than $10 million in proceeds and $4 million in gains. Fleetwood will continue to aggressively market idle real estate properties in fiscal 2008 as part of its strategy to deploy capital as effectively as possible.

"The recent three-year renewal of the bank credit agreement on favorable terms, along with the amendment finalized shortly after fiscal year end, affords the Company good financial flexibility and resets covenant requirements that reflect recent restructuring decisions and management's expectations of financial results," Smith said. "We anticipate that current cash balances, borrowing capacity under the credit facility and improved cash flow from operations will provide the resources needed to execute our business strategies as we move forward.

First Quarter Outlook

"A successful turnaround of our travel trailer business will be key to the extent and timing of our financial improvement in fiscal 2008," Smith said. "In all other areas of our business, we believe we are positioned well for the current markets, as evidenced by backlogs that are improved and healthy in motor homes and improving in housing (up 36 percent and 58 percent respectively from the prior year as of the end of the quarter). The strength of the manufactured housing market continues to vary widely by geographic area, but despite the uncertain environment, we are increasingly optimistic about our Housing Group's prospects.

"Although market conditions in all of our businesses remain flat or worse than last year at this time, we expect improved operating results for the first quarter of fiscal 2008 compared to the prior year," Smith concluded. "We have created a more cost-efficient structure and believe that we are gaining market share in some key segments. As a result, operating results (before interest and taxes) for the first quarter of fiscal 2008 should be close to the breakeven level."

About Fleetwood

Fleetwood Enterprises, Inc., through its subsidiaries, is a leading producer of recreational vehicles and 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, manufactured housing and supply subsidiary plants. For more information, visit the Company's website at http://www.fleetwood.com/.