Fleetwood Reports Third Quarter Fiscal 2007 Results

RIVERSIDE, Calif., March 8 -- Fleetwood Enterprises, Inc. announced today its results for the fiscal 2007 third quarter and first nine months ended January 28, 2007. Consolidated revenues for the quarter were $443.2 million, down 24 percent from $583.9 million in last year's third quarter. The loss from continuing operations totaled $29.7 million, or $0.46 per diluted share, compared to income from continuing operations of $4.7 million, or $0.08 per diluted share, in the third quarter of the prior year. The current year's third quarter operating results included $4.1 million of impairment and severance charges, while last year's third quarter included $0.6 million of impairment charges. The net loss, which included discontinued operations, totaled $29.9 million, or $0.47 per diluted share, compared to net income of $1.4 million, or $0.02 per diluted share, in last year's third quarter.

"The negative results for the quarter reflect normal seasonal weakness, which was intensified by relatively sharp year-over-year declines in manufactured housing and travel trailer industry shipments at the end of the calendar year," said Elden L. Smith, Fleetwood's president and chief executive officer. "Last year's third quarter benefited from $129 million of sales of FEMA-specified homes and trailers, as well as demand for conventional units as post-hurricane living accommodations. Our progress in improving operational efficiencies and reducing costs is masked by this quarter's low level of revenues, which were below any quarter since the third quarter of fiscal 2003."

For the first nine months of fiscal 2007, consolidated revenues were down 18 percent to $1.50 billion from $1.83 billion in the same period last year. The loss from continuing operations for the first nine months of fiscal 2007 was $48.8 million, or $0.76 per diluted share, compared with a loss from continuing operations of $8.9 million, or $0.15 per diluted share, in the same period of fiscal 2006. The net loss in the first nine months of fiscal 2007 was $50.7 million, or $0.79 per diluted share, compared with a net loss of $30.1 million, or $0.52 per diluted share, for the same period last year.

RV Group Results

The RV Group incurred an operating loss of $15.8 million for the third quarter, compared to operating income of $3.8 million in the comparable period of the prior year. Revenues for the Group declined 11 percent to $324.0 million in the quarter compared with $365.3 million in the same period of the prior year. Sales of FEMA-specified emergency living units in the prior year's third quarter were $72 million.

The motor home division earned $5.3 million in the quarter compared to an operating loss of $4.1 million in the third quarter last year, primarily due to a 26 percent increase in revenues. The travel trailer division incurred an operating loss of $17.5 million compared to operating income of $11.2 million in the prior year, with revenues dropping 52 percent to $81.8 million. Travel trailer revenues, excluding those generated by the sale of FEMA units, were down 16 percent. The operating loss for the folding trailer division was slightly higher at $3.5 million compared to $3.3 million last year, on revenues that were down 7 percent.

The RV Group reported an operating loss of $44.0 million for the first nine months of fiscal 2007 on revenues of $1.1 billion, compared with an operating loss of $2.0 million on revenues of $1.18 billion in the comparable period last year.

"Results from our travel trailer operations were disappointing, but we are in a transition period," Smith said. "We have made substantial progress in the realignment of our product mix across manufacturing facilities, resulting in higher labor efficiencies since implementation in early January 2007. The next phase of this improvement process was to evaluate our capacity needs, particularly in light of the recent softening of the travel trailer market, and in early March we began the process of discontinuing production in three travel trailer facilities. There will be some transition costs in connection with these changes, but the longer-term benefits will far outweigh them.

"On the positive side, revenues in our motor home business were up significantly, leading to a profitable quarter," Smith continued. "Our unit shipments increased 13 percent, while industry shipments of Class A and Class C units for approximately the same three-month period were down slightly. In addition, as of the end of the quarter, the motor home division had its highest backlog since April 2004. Nevertheless, our optimism about the near-term future is somewhat tempered, due to recent stock market volatility, which has affected RV sales in the past, as well as mixed attendance and sales results from the retail shows so far in 2007."

Housing Group Results

The Housing Group incurred an operating loss of $7.8 million in the third quarter compared to generating operating income of $13.1 million in the same quarter of the prior year. This year's results included impairment charges of $2.8 million incurred in connection with an idle plant. Quarterly revenues for the Group fell 48 percent to $108.7 million from $208.8 million in last year's third quarter, which included revenues of approximately $57 million from the sale of homes for disaster relief.

For the first nine months of the fiscal year, Housing Group revenues declined 37 percent to $401.3 million from $638.1 million in the prior-year period, resulting in an operating loss of $4.3 million. During the same period last year, the Group generated operating income of $32.2 million.

"The manufactured housing industry experienced a further decline in annual shipment numbers in 2006," Smith said. "To find a lower number, one must look to 1961. While we believe that the case for a manufactured housing rebound remains valid, it has proven to be extremely difficult to estimate the timing of any recovery. That uncertainty has led us to pursue new opportunities, resulting in the recent formation of our modular division, Trendsetter Homes, which will provide us with new channels for the sale of factory-built housing. Although the rate of growth is difficult to predict, the prospects for that business are very good and we are making progress in implementing our strategy for penetrating the Gulf Coast market. We believe that we bring unique strengths to the table and look forward to expanding our reach in this market. Meanwhile, we also continue to pursue military housing projects, where we have met with some success. Both of these modular initiatives involve significantly longer lead times than our traditional manufactured housing business, so several projects in their early stages are not yet reflected in our backlog."

Discontinued Operations

Discontinued operations, which include the manufactured housing retail and financial services businesses, the majority of the assets of which were sold in the second fiscal quarter of 2006, incurred a loss of $0.2 million or $0.01 per diluted share in the third quarter, compared to a loss of $3.3 million or $0.06 per diluted share in the comparable period last year.

Corporate Outlook

"Although it appears that the motor home market will improve this spring, we have reason to believe that this may not be the case for the markets of our other products," Smith said. "Signs seem to indicate that the travel trailer market will be softer than last year for at least the first half of the calendar year, and any potential upturn in lending for manufactured housing that might be developing would not be immediately apparent in our order backlog. In addition, significant results from our modular housing marketing efforts are not expected to materialize until later this calendar year. As a result of these factors and additional restructuring charges incurred this month in connection with the changes in our travel trailer division, we expect to sustain a significant operating loss in the fourth quarter, although we anticipate it will be less than the third quarter loss due to seasonal improvements and the effect of our cost-cutting measures. Despite difficult market conditions that have delayed our return to sustainable profitability, we are confident that the moves we have made position us well for the future."

About Fleetwood

Fleetwood Enterprises, Inc. is a leading producer of recreational vehicles and manufactured homes through its subsidiaries. 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 www.fleetwood.com.