Fleetwood Announces First Quarter Results
30 August 2000
Fleetwood Announces First Quarter Results
RIVERSIDE, Calif., Aug. 30 Fleetwood Enterprises, Inc.
, the nation's leading manufacturer of recreational vehicles and a
leading producer and retailer of manufactured housing, announced today that it
incurred a net loss of $31.1 million or 95 cents per diluted share for the
fiscal 2001 first quarter which ended July 30, 2000. The Company earned a
profit of $26.4 million or 72 cents per share in last year's first quarter.
Fleetwood President Nelson W. Potter said, "Our first quarter results
reflect significantly reduced sales volume in both of our core businesses. In
addition, we incurred unusual costs related to plant closings and
restructuring efforts, including employee severance benefits. Also, a change
in accounting method applicable to revenue recognition negatively impacted
results reported by our retail housing business."
Restructuring and asset impairment charges before taxes totaled
$13.5 million in the quarter, of which $9.4 million was related to the
writedown of carrying values of closed manufactured housing plants. These
charges amounted to about 27 cents per share. In the second fiscal quarter,
the Company expects to incur further restructuring costs, which are currently
estimated to be between $3 million and $5 million before taxes. The Company
recently announced the closing of four housing factories, which brings the
total housing factory closings to eight during the past year. The Company
also announced on August 14, 2000 that it intends to close its Omaha, Nebraska
travel trailer plant.
Consolidated revenues fell 26 percent to $711 million compared to
$957 million in last year's record first quarter. Continuing weakness in the
manufactured housing market and a sharp decline in motor home sales within the
RV sector led to the lower revenues. Also, the change in accounting for
retail sales reduced revenues approximately $18 million.
The Company's recreational vehicle group posted a $13.3 million operating
loss in the July quarter, mainly as a result of a downturn in motor home
sales, along with unusually high operating costs in the motor home division
and non-recurring RV restructuring costs. The spike in motor home
operating costs was mainly attributed to production inefficiencies associated
with lower volume, inventory writedowns on obsolete raw materials and higher
selling costs. Increases in product warranty costs and sales incentives
required to move out model year 2000 products and slow-moving models drove
motor home selling costs to unusually high levels. The Company's travel
trailer and folding trailer divisions were both profitable for the quarter,
but experienced lower earnings on reduced sales volume.
"RV sales declined 34 percent to $319 million compared to $484 million in
last year's record first quarter," Potter said. "A 50 percent drop in motor
home revenues was the major factor causing the decline. Softening retail
demand and high dealer inventories led to a 54 percent falloff in motor home
unit volume for the quarter," Potter said.
Motor home revenues fell to $152 million on sales of 2,059 units.
Fleetwood's towable products fared much better in the quarter. Travel trailer
sales eased six percent to $140 million and folding trailer revenues declined
nine percent to $27 million. First quarter unit shipments for travel trailers
and folding trailers were 10,477 and 4,539, representing decreases of five and
ten percent, respectively.
"Excluding plant closing and restructuring costs, our housing group
performed very well in a tough market," Potter said. "Asset impairment
charges of $9.4 million related to plant closings took a big bite out of
housing manufacturing profits. Without the restructuring and plant closing
costs, the housing group would have achieved a 3.8 percent operating margin
before intercompany profit elimination, despite a 21 percent decline in
manufacturing revenues," Potter said.
Combined housing revenues from manufacturing and retail totaled
$384 million in the first quarter, down 17 percent from last year's
$462 million. The current quarter included net manufacturing revenues of
$227 million and retail sales from Company-owned stores of $157 million.
This compares with $304 million and $158 million, respectively, last year.
An accounting change, which delays revenue recognition until loan funding,
reduced retail sales from previously reported preliminary sales of
$175 million. Gross manufacturing revenues from housing, including
$77 million of sales to Fleetwood-owned sales centers, totaled $304 million,
off 21 percent from last year's comparable quarter. Unit volume from
manufacturing plants declined 25 percent to 11,889 homes. Homes sold at
Company-owned retail stores declined about one percent to 3,711.
"Fleetwood housing sales were below the prior year because of a weak
manufactured housing market, which has been adversely affected by excessive
retail inventories and restrictive retail financing conditions," Potter said.
"We are, however, encouraged by the fact that Fleetwood is gaining market
share in this tough industry environment. Our wholesale share in the first
six months of calendar year 2000 rose to 17.9 percent, up from 16.6 percent
for the similar period last year," Potter said.
The Company's retail housing business posted a first quarter pre-tax loss
of $8.5 million, $5.3 million of which was due to the change in accounting for
credit sales. In addition, the Company recorded a one-time cumulative charge
to earnings of $11.2 million after taxes, or 34 cents per share, which was
also related to the change in accounting. About $6.8 million of the charge
was directly related to the retail business and $4.4 million was for the
elimination of intercompany manufacturing gross profit still in inventory.
Prior to the current quarter, the Company followed the industry practice of
recording credit retail sales when a written contract, down payment and a loan
commitment were secured. Consistent with a recent SEC accounting
pronouncement, such revenues are now recognized upon loan funding.
"In view of weak market conditions, we expected a loss from retail
operations," Potter said. "Consistent with our long-term retail strategy and
distribution needs, we added retail locations over the past year and have
grown to 240 sales centers compared to 184 a year ago. This expansion effort
added costs at a time when market demand and revenues per store were
declining. We now have adequate market coverage and the aggressive expansion
of the past two years has been replaced by very modest opportunistic growth
and operational focus on existing stores," Potter said.
Potter commented on the near-term business outlook saying, "We do not
expect fiscal 2001 second quarter earnings to compare favorably with prior
year results. The second quarter will be adversely affected by continuing
weakness in the manufactured housing market and a lingering slowdown in motor
home sales within our recreational vehicle segment. The combination of
reduced sales volume and some remaining restructuring charges will have a
significant impact on RV profits. In addition, we have been experiencing more
prevalent sales of entry-level RV products, which carry lower margins than our
other RV products. On a positive note, we recently held our annual national
RV dealer meeting in Nashville and the results were very encouraging. Our new
products were well received and we wrote more orders than we expected," Potter
concluded.
FLEETWOOD ENTERPRISES, INC.
Consolidated Summaries of Earnings
(Unaudited)
13 Weeks Ended
(Amounts in thousands except July 30, July 25,
per share data) 2000 1999
Sales $711,193 $956,714
Income (loss) before
provision for income taxes $(30,948) $45,209
Benefit (provision) for income taxes 11,007 (18,849)
Income (loss) before cumulative
effect of accounting change (19,941) 26,360
Cumulative effect of accounting
change, net of tax (11,176) --
Net income (loss) for basic
earnings per share (31,117) 26,360
Effect of dilutive
preferred securities (Note) -- 2,787
Net income (loss) for diluted
earnings per share $(31,117) $29,147
Earnings (loss) per share: Basic Diluted Basic Diluted
Income (loss) before
cumulative effect of
accounting change $(.61) $(.61) $.77 $.72
Cumulative effect of
accounting change,
net of tax (.34) (.34) -- --
Net income (loss) per share $(.95) $(.95) $.77 $.72
Weighted average Common shares:
Basic 32,758 34,383
Diluted (Note) 32,758 40,364
Note:The distribution on preferred securities in fiscal 2001 is
anti-dilutive and is therefore not added back to basic earnings
in computing dilutive earnings (loss) per share.
FLEETWOOD ENTERPRISES, INC.
Business Segment and Unit Shipment Information
(Dollars in thousands)
13 Weeks Ended
July 30, July 25,
2000 1999
OPERATING REVENUES:
Manufactured housing -
Manufacturing $303,740 $385,803
Retail 157,554 157,716
Less intercompany (77,197) (81,598)
384,097 461,921
Recreational vehicles 318,676 483,734
Supply operations 8,420 11,059
$711,193 $956,714
OPERATING INCOME (LOSS):
Manufactured housing* $(2,006) $17,116
Housing - retail** (5,437) 6,702
Recreational vehicles (13,281) 30,967
Supply operations 2,156 4,863
Corporate and other (5,510) (9,692)
$(24,078) $49,956
UNITS SOLD:
Manufactured housing -
Factory shipments 11,889 15,815
Retail sales 3,711 3,741
Less intercompany (2,986) (2,968)
12,614 16,588
Recreational vehicles -
Motor homes 2,059 4,472
Travel trailers 10,477 11,019
Folding trailers 4,539 5,019
17,075 20,510
* After deduction for intercompany profit in inventory of $4,089 in
FY 2001 and $3,555 in FY 2000.
**Operating income before deduction of interest expense on inventory
floor plan financing of $3,036 in FY 2001 and $2,837 in FY 2000.