Fleetwood Reports Financial Results for Fiscal 2008 Fourth Quarter, Full Year

RIVERSIDE, Calif., June 26 -- Fleetwood Enterprises, Inc. announced today financial results for its fiscal 2008 fourth quarter and full year ended April 27, 2008.

Consolidated Results

Consolidated revenues for the quarter declined 26 percent to $363.5 million from $488.3 million in last year's fourth quarter. Benefiting from profitable asset dispositions, the Company reported $18.0 million in consolidated operating income compared to a consolidated operating loss of $12.1 million in the fourth quarter of the prior year. Net income from continuing operations for the quarter totaled $21.7 million, or $0.30 per share, compared to a net loss from continuing operations of $32.0 million, or $0.50 per share, for the corresponding quarter of the prior year. Non-recurring asset dispositions during the quarter generated $24.1 million of gains on previously announced real estate sales, while the prior-year quarter included $9.6 million of expenses primarily related to restructuring of the travel trailer division, partially offset by real estate gains.

"Beyond the one-time events, our operating results reflect, in part, the work we've done to reduce overhead expenses in response to a lower revenue base in the face of continued weakness in manufactured housing and an increasingly challenging environment in recreational vehicles," said Elden L. Smith, Fleetwood's president and chief executive officer. "Our cost-containment initiatives yielded a 24 percent reduction in operating expenses for the most recent quarter to $55.4 million from $72.7 million in the prior-year period. Industry-wide sales for the motor home and travel trailer industries are down substantially calendar year to date. This is clearly the result of volatile and rising fuel prices and the crisis in the home mortgage market, which have driven consumer confidence to its lowest mark in 16 years. The drop in volume has been most notable in Class A motor homes, triggering a swing for the motor home division from a substantial operating profit last year to an operating loss this year."

Results for the full fiscal year were increasingly affected by these same issues as the year progressed. Consequently, consolidated revenues for fiscal year 2008 were down 14 percent to $1.66 billion from $1.92 billion in the same period last year. Operating income for the year, however, was $17.8 million, reflecting cost reductions and non-recurring gains, compared to an operating loss of $57.8 million in fiscal 2007. Net income from continuing operations for fiscal 2008 was $2.9 million, or $0.05 per share, compared to a net loss from continuing operations of $78.0 million, or $1.22 per share, for the same period last year.

RV Group Quarterly Results

The RV Group generated operating income of $5.6 million for the fourth quarter compared to a $12.1 million operating loss in the comparable period of the prior year. Current-year results included an $8.8 million gain on the previously announced sale of an RV supply plant.

The motor home division incurred an operating loss of $2.2 million in the quarter compared to operating income of $11.5 million in the same quarter last year, due to a 32 percent drop in revenues and a shift away from higher-margin Class A products. The travel trailer division generated operating income of $0.9 million, which included the benefit from a reduction to warranty reserves of $3.9 million, prompted by better-than-expected warranty experience and reduced volumes. In the prior year, the division incurred an operating loss of $23.4 million, including $10.2 million in restructuring costs, on revenues that were 27 percent higher.

"The travel trailer division has made progress in many of its key metrics," Smith said, "and we will continue to make further adjustments in that division until it achieves consistent profitability. In the motor home division, we have seen an improvement in shipments and market share of both the lower-priced and fuel-efficient Class C categories that we specifically targeted last year, as well as some of our Class A products. While it is our intention to engage in minimal discounting in this highly competitive environment, the outlook for the RV industry remains quite challenging, at least for the balance of this calendar year and into the spring of 2009. Accordingly, we will continue to carefully manage our production and overhead costs going forward, while working to maintain or improve our market share."

Housing Group Quarterly Results

The Housing Group remained profitable for the quarter despite a further reduction in revenues, earning $0.5 million in operating income compared with $2.1 million in the prior year. Quarterly revenues were $106.3 million, off 9 percent compared with the prior year's $117.1 million. The modular division accounted for 8 percent of sales versus none in the prior year.

"The manufactured housing industry shows no immediate sign of a turnaround," Smith said. "We continue to battle stiff competition from foreclosed site-built homes, as well as the turmoil in the mortgage industry and sluggishness in our traditional retiree market. Despite the immediacy of these concerns, we do not believe they fundamentally alter the positive long-term outlook for a business that provides affordable housing in this country. We are operating above breakeven at current depressed sales levels and continue to be opportunistically poised in the regions and markets in which we participate to take advantage of any recovery. Meanwhile, Trendsetter Homes, our modular division, is carefully but successfully growing its business in the military and commercial fields. We are placing greater emphasis on this sector and have begun to allocate incremental resources to more aggressively pursue additional contracts."

Discontinued Operations

On May 12, 2008, the Company completed the sale of Fleetwood Folding Trailers, Inc. The folding trailer division's revenues and results are now accounted for as discontinued operations, and the financial statements for prior years have been restated accordingly.

Balance Sheet Changes

As of fiscal year end, cash and investments were $100 million, up from both the third quarter and the prior year. This includes $33.5 million from the sale of the corporate headquarters complex, a portion of which the Company is now leasing, and the sale of an RV supply plant. The remaining increase came from improved working capital utilization, primarily reductions in inventory levels.

On June 25, 2008, the Company completed a public offering for 12 million shares of its common stock that raised almost $39 million in net proceeds, which will be used to repurchase a portion of the $100 million 5% convertible senior subordinated debentures and for general corporate purposes. The holders of the debentures are expected to exercise their right to require Fleetwood to repurchase them at par on December 15, 2008, and the Company has the flexibility to redeem them with cash, by issuing common stock, or through a combination of both. The Company also plans to pursue additional sales of idle real estate as well as real estate financing on certain unencumbered facilities to provide additional redemption funding as well as liquidity for ongoing operations.

Corporate Outlook

"We expect sales to remain soft in the manufactured housing business and very challenging in recreational vehicles until fuel prices and home values stabilize and consumer confidence begins to recover," Smith said. "However, we continue working to improve our share of available sales through enhanced, more competitive product offerings and better dealer relations.

"We believe that Fleetwood Financial Services, a previously announced strategic RV wholesale and retail financing alliance with Bank of America, the largest lender in the industry, will play an important role in supporting our efforts and differentiating us from our competition in the RV industry," Smith continued.

RV dealers seem likely to conservatively manage their inventories in the coming months, especially for motor homes. Such conservatism has resulted in lower production volumes so far in the first fiscal quarter. This has led to costs related to short work weeks and layoffs that will negatively impact near-term margins. Operating expenses are expected to show continued year-over-year declines, although at a reduced rate compared with recent quarters.

"Overall, despite expectations of a challenging fiscal 2009, we are confident that the changes we continue to make in all sectors of our Company will enable us to weather current conditions and to capitalize on an upturn," Smith concluded.

Conference Call

The Company will host a conference call with interested parties at 10:30 a.m. PDT/1:30 p.m. EDT on Thursday, June 26, 2008. The call will be broadcast live on the Company's website, http://www.fleetwood.com/ under Investor Relations, and over the Internet at http://www.streetevents.com/ and http://www.earnings.com/.