The Auto Channel: North America | Europe

Fleetwood Reports Results for First Quarter of Fiscal 2009

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