Fleetwood Reports Results for First Quarter of Fiscal 2009
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RIVERSIDE, Calif., Aug. 28, 2008 -- Fleetwood Enterprises, Inc. announced today results for the first quarter of fiscal 2009, ended July 27, 2008.
Consolidated Results
The Company reported consolidated revenues for the fiscal 2009 first quarter of $289.9 million, down 41 percent from $488.3 million in the prior year. Revenues declined 51 percent for the RV Group and 15 percent for the Housing Group.
The steep decline in RV revenues led to an overall operating loss of $23.2 million compared to operating income of $5.7 million in the prior-year first quarter, which included a $5.4 million gain from the sale of an idle RV facility, partially offset by a $0.8 million impairment charge related to another idle RV facility.
The loss from continuing operations for the fiscal 2009 first quarter was $27.8 million, or $0.41 per share, compared with a loss from continuing operations of $2.3 million, or $0.04 per share, for the first quarter of last year.
"We have continued to cut costs and improve the responsiveness of our operations," said Elden L. Smith, president and chief executive officer. "Unfortunately, the rapid and accelerating decline of sales in the motor home industry during the first quarter caused heavy operating losses that were exacerbated by an aggressive discounting environment and downtime at our plants. While the travel trailer division also had a loss quarter, its performance was improved over the prior year. The Housing Group remained profitable despite the challenging environment in that industry."
Results by Business Segment
For the first quarter of fiscal 2009, RV Group revenues were 51 percent lower than the comparable prior-year period, due to sales declines of 56 percent and 37 percent in the motor home and travel trailer divisions, respectively. The RV Group recorded an operating loss of $23.8 million compared to operating income of $1.9 million in the first quarter last year. The operating loss for the motor home division was $16.1 million compared to operating income of $9.0 million in the first quarter of the prior year, and the operating loss for the travel trailer division was $5.6 million versus a $7.4 million loss, which included the net gain noted above of $4.6 million, in the comparable period last year.
"We are experiencing some of the toughest industry conditions that we have seen since the late 1970s and early 1980s," Smith said. "Dealers are reducing their inventories significantly and manufacturers' orders are considerably below the dealers' weak retail sales rates. Considering the current business climate, we are pleased with the turnout indicated for our RV National Dealer Meeting next week. We will be showcasing our newest products with innovative floor plans and exciting decor packages. Although we expect dealers to remain cautious for the foreseeable future, we are eager to demonstrate to them why Fleetwood remains an excellent choice as their business partner going forward."
Operating income for the Housing Group was $2.5 million compared with $5.5 million for the previous year's first quarter. Housing Group revenues for the quarter were down 15 percent to $122.7 million from $144.2 million in the prior year.
"We believe that, once the excess inventory of site-built housing begins to clear, the prospects for manufactured housing should improve," Smith said. "Also, the housing bill recently passed by Congress contains several positives for our industry, which should continue to narrow the gap between site-built and manufactured housing lending practices. We expect the difficult environment to continue for at least a couple more quarters, however, as shipments continue to lag throughout the country, particularly in the retirement states of California, Arizona, and Florida. In the meantime, our Trendsetter modular division has substantially completed two military contracts, at Fort Bliss and Fort Sill, and is in advanced stages of negotiations for additional, similar contracts. We have received positive feedback on our involvement to date, and we expect to continue to participate in the Army's military housing renovation plans."
Outlook and Liquidity
"Business conditions are expected to remain challenging at least through our third fiscal quarter, resulting in losses and negative operating cash flows for Fleetwood through that same period," Smith said. "We continue to aggressively pursue cost reductions and carefully manage production and inventories, while still investing in new and improved products based on customer feedback. In view of recent market deterioration, it is prudent to preserve liquidity to sustain our business through this period and for the longer term. As we have previously reported, the holders of our 5% debentures will almost certainly require us to repurchase the bonds in December 2008 at a par value of $100 million. The bond indenture permits us to meet this obligation either in stock or cash, or a combination of both. We always want to minimize dilution to existing shareholders to the degree possible. Accordingly, we plan to address the December redemption by working with investors to replace the existing debentures with one or more alternative debt or equity-linked securities in advance of the December 2008 due date. Such alternative instruments would likely have terms that are less advantageous to Fleetwood than the existing debentures, including a higher coupon and some additional dilution to common shareholders, but this would allow us to minimize the use of cash in order to maintain as much necessary operating flexibility as possible in the current uncertain environment.
"Despite a modest but unavoidable build up of motor home chassis and finished goods inventories in the first quarter, cash and marketable investments totaled $85.7 million at July 27, 2008, with virtually no borrowings on our revolving credit facility," Smith added. "Since then we have raised an additional $26.5 million from real estate financing. A successful refinancing of the 5% debentures is the next step in our strategy to put Fleetwood in a position of strength relative to current economic conditions and posture the Company for an advantageous future. We believe in the long-term strength and viability of both our industries, and look forward to continuing our participation as a leader in each as the markets recover."
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, factory-built housing and supply subsidiary plants. For more information, visit the Company's website at http://www.fleetwood.com/.
All financial information is unaudited and subject to possible adjustment prior to the finalization of the Company's quarterly report on Form 10-Q.
(tables to follow)
Fleetwood Enterprises, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
(Unaudited)
13 Weeks Ended
July 27, 2008 July 29, 2007
Net sales:
RV Group $167,260 $344,088
Housing Group 122,652 144,234
289,912 488,322
Cost of products sold 253,165 415,934
Gross profit 36,747 72,388
Operating expenses 60,062 71,282
Other operating (income) expenses, net (82) (4,587)
59,980 66,695
Operating income (loss) (23,233) 5,693
Other income (expense):
Investment income 861 1,317
Interest expense (4,992) (5,516)
(4,131) (4,199)
Income (loss) from continuing operations
before income taxes (27,364) 1,494
Provision for income taxes (406) (3,805)
Loss from continuing operations (27,770) (2,311)
Loss from discontinued operations, net (1,308) (35)
Net loss $(29,078) $(2,346)
Basic and diluted loss per common share:
Loss from continuing operations $(0.41) $(0.04)
Loss from discontinued operations (0.01) -
Net loss per common share $(0.42) $(0.04)
Weighted average common shares 68,476 64,160
Fleetwood Enterprises, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
July 27, April 27, July 29,
2008 2008 2007
ASSETS (Unaudited) (Unaudited)
Cash and cash equivalents $60,698 $58,262 $26,535
Restricted cash and investments (A) 24,959 41,877 24,466
Receivables 82,909 102,421 126,468
Inventories 159,598 139,813 171,596
Other current assets 21,843 40,210 51,811
Total current assets 350,007 382,583 400,876
Property, plant and equipment, net 143,945 146,573 180,547
Deferred taxes 46,190 46,348 44,283
Other assets 49,998 50,067 61,425
Total assets $590,140 $625,571 $687,131
LIABILITIES & SHAREHOLDERS' EQUITY
Accounts payable $23,914 $27,701 $44,800
Employee compensation and benefits 30,158 32,253 45,598
Short-term borrowings 4,482 9,568 4,884
5% convertible senior subordinated
debentures 100,000 100,000 -
Other current liabilities 77,215 105,365 136,583
Total current liabilities 235,769 274,887 231,865
5% convertible senior subordinated
debentures - - 100,000
6% convertible subordinated debentures 160,142 160,142 160,142
Other long-term borrowings 11,306 16,145 20,131
Other non-current liabilities 86,840 88,129 89,904
Total non-current liabilities 258,288 264,416 370,177
Total shareholders' equity 96,083 86,268 85,089
Total liabilities and
shareholders' equity $590,140 $625,571 $687,131
(A) As of April 27, 2008, the amount included $16.8 million of restricted
cash proceeds from a real estate sale pledged in connection with the
Company's secured credit facility. The restriction lapsed on May 23,
2008, following the completion of the substitution of alternative
real estate collateral.
Fleetwood Enterprises, Inc.
CONDENSED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
13 Weeks Ended
7/27/2008 7/29/2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Loss from continuing operations $(27,770) $(2,311)
Adjustments to reconcile net income
(loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization expense 4,325 5,241
Stock-based compensation expense 576 452
Gain on sale of property, plant and equipment (374) (5,361)
Other non-cash items - 3,588
Changes in assets and liabilities:
Receivables 19,512 (8,134)
Inventories (19,785) (8,652)
Other assets and liabilities, net (17,947) (15,058)
Net cash used in operating activities (41,463) (30,235)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases and sales of investments, net (30) (363)
Purchases of property, plant and equipment (2,122) (2,083)
Proceeds from sale of property, plant
and equipment 1,039 6,705
Change in restricted cash 16,790 -
Net cash provided by investing activities 15,677 4,259
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock, net 38,471 -
Change in short-term borrowings (3,085) (2,468)
Change in borrowings of long-term debt (6,840) 2,661
Proceeds from exercise of stock options - 793
Net cash provided by financing activities 28,546 986
CASH FLOWS FROM DISCONTINUED OPERATIONS:
Net cash used in discontinued operations (324) (850)
Foreign currency translation adjustment - 248
Net change in cash and cash equivalents 2,436 (25,592)
Cash and cash equivalents at beginning
of period 58,262 52,127
Cash and cash equivalents at end of period $60,698 $26,535
Fleetwood Enterprises, Inc.
BUSINESS SEGMENT AND UNIT SHIPMENT INFORMATION
(Dollar amounts in thousands)
(Unaudited)
13 Weeks Ended
July 27, 2008 July 29, 2007
REVENUES:
Motor homes $121,809 $273,681
Travel trailers 39,831 63,652
RV supply 5,620 6,755
RV Group 167,260 344,088
Housing Group 122,652 144,234
$289,912 $488,322
OPERATING INCOME (LOSS):
Motor homes $(16,068) $9,003
Travel trailers (5,648) (7,425)
RV supply (2,093) 305
RV Group (23,809) 1,883
Housing Group 2,484 5,475
Corporate and other (1,908) (1,665)
$(23,233) $5,693
UNITS SOLD:
Recreational vehicles -
Motor homes 1,044 2,433
Travel trailers 1,917 3,386
2,961 5,819
Housing -
HUD 2,693 3,565
MOD 599 248
3,292 3,813
Total company shipments 6,253 9,632
