Fleetwood Reports Fiscal 2005 Fourth Quarter and Full Year
Financial Results - Corporate Restructuring Substantially Completed
- RIVERSIDE, Calif., July 7 /PRNewswire-FirstCall/ -- Fleetwood
Enterprises, Inc. (NYSE:FLE), one of the nation's largest producers
of recreational vehicles and manufactured housing, announced today
its financial results for the fiscal 2005 fourth quarter and full
year ended April 24, 2005. The Company also announced a significant
corporate reorganization, and an addition to its credit line.
Consolidated Results for the Period For the fourth quarter of
fiscal 2005, consolidated revenues from continuing operations
declined 12 percent to $560.2 million from $639.7 million in the
prior year's fourth quarter. The Company's loss from continuing
operations was $55.8 million, or $1.00 per diluted share, compared
to a loss from continuing operations of $5.4 million, or $0.13
cents per diluted share, in the fourth quarter of the prior year.
Last year's results included non-cash charges of $15.0 million
related to the valuation allowance against the Company's deferred
tax asset. In March 2005, the Company announced that its board of
directors authorized management to exit the manufactured housing
retail and finance operations and that it would account for these
businesses as discontinued operations effective in the 2005 fiscal
fourth quarter. The loss from discontinued operations was $64.6
million in the fourth quarter of fiscal 2005, compared with a loss
of $12.4 million in the prior year. The loss in fiscal 2005
included a non-cash charge of $51.1 million to record the
impairment of assets held for sale at their estimated fair market
value less costs to sell. The net loss for the quarter totaled
$120.5 million, or $2.16 per diluted share, compared to a net loss
of $17.8 million in the fourth quarter of the prior year. For
fiscal year 2005, consolidated revenues from continuing operations
were essentially flat at $2.37 billion, up slightly from $2.36
billion in the prior year. The loss from continuing operations was
$72.6 million, or $1.31 per diluted share, compared to income from
continuing operations of $17.4 million, or 44 cents per diluted
share, in fiscal 2004. The loss from discontinued operations was
$88.9 million in fiscal 2005 compared with a loss of $39.6 million
in the prior year. The net loss for fiscal 2005 totaled $161.5
million, or $2.92 per diluted share, compared with a net loss of
$22.3 million in the prior year. Quarterly Results by Business Line
Recreational vehicle sales for the quarter declined 21 percent to
$381.3 million from $482.7 million in the prior year's fourth
quarter. Motor home revenues decreased 18 percent to $245.8 million
and towable sales fell 25 percent to $135.5 million. The negative
comparisons were caused by a combination of a softer RV market in
the current first calendar quarter compared to a record-setting
pace in the prior year, market share declines in towables, and
increased promotional activity, the cost of which is netted against
sales. The RV Group incurred an operating loss of $29.8 million in
the fourth quarter, compared to an operating profit of $16.5
million in the fourth quarter of the prior year. The motor home
division reported an operating loss of $5.2 million, in contrast
with operating income of $16.3 million in the fourth quarter of
fiscal 2004, while the towable division's operating loss of $24.6
million compared with a prior year operating profit of $0.3
million. As a result of overall market share gains and improved
demand in certain parts of the country, Fleetwood's Housing Group
revenues for the fourth quarter rose 18 percent to $192.2 million
from total manufacturing revenues of $163.6 million in the same
period of the prior year. The Housing Group incurred an operating
loss of $7.0 million, compared with operating income of $0.1
million in the prior year. The remainder of the Company's operating
loss of $49.1 million flowed through the corporate segment, and
includes unallocated corporate expenses and severance. Fiscal Year
Results by Business Line Recreational vehicle sales for the full
fiscal year declined 7 percent from the prior year to $1.66 billion
from $1.78 billion. Motor home revenues declined 1 percent to $1.1
billion and towable sales decreased 17 percent to $562.8 million
principally due to declines in towable market share and increased
sales incentives as a percentage of sales. Due to continuing
underperformance in the towable division, the RV Group incurred an
operating loss of $39.2 million for the year, compared to an
operating profit of $58.1 million in the prior year. The loss
consisted of operating income of $27.7 million in motor homes,
which was more than offset by a loss of $66.9 million in the
towable division. Fleetwood's Housing Group revenues for fiscal
2005 rose 20 percent to $785.5 million from the prior year's total
manufacturing revenues of $657.4 million. The Housing Group, which
now comprises only manufacturing operations, generated operating
income of $6.4 million, an improvement from $5.4 million in fiscal
2004. The remaining operating loss of $10.8 million from corporate
and supply operations also compared unfavorably to $15.3 million of
operating income in the prior year. Corporate expenses included
unallocated general and administrative expenses and expenses
related to Fleetwood Vacation Club. Company Reorganization Since
Elden Smith joined Fleetwood on March 9, 2005, as president and
CEO, substantial steps toward flattening and rationalizing the
organization have been taken. "With significant progress toward
focusing the Company on its core competency of manufacturing,
without the distractions of the retail and finance operations and
other costly initiatives, we have begun the process of moving
decision making closer to our customers," Smith said. "We now have
distinct profit centers in manufactured housing, motor homes,
travel trailers, folding trailers and supply subsidiaries. In
addition, the Housing Group has been split into three regions that
each have profit and loss responsibility. Each of these divisions
has its own product planning, development, design and sales teams.
This structure has allowed us to eliminate layers of management,
including 11 corporate vice-president level positions, although
several executives may be retained in other roles. The number of
staff positions at corporate headquarters has also been reduced, as
we have curtailed some ancillary projects and outsourced some
functions." In addition, the Company has consolidated or downsized
several production facilities to match production output to retail
demand. Altogether, Fleetwood's employment level was reduced by
approximately 9 percent, or 1,200 associates, since the end of the
third fiscal quarter. Additional Funding of Credit Facility A $22
million term loan, backed by real estate, was added to the
Company's secured credit facility, and funded on Friday, July 1,
2005. This, plus the addition of a $15 million real estate
sub-facility to the line's revolver, enhances the Company's
liquidity and boosts total loan commitments to $212 million. In a
related action, the Company posted an $18 million letter of credit
from the facility on June 28, 2005, with the 18th Judicial District
Court in Sedgwick County, Kansas, to support an appeal in the
ongoing Coleman litigation. Discontinued Operations Update
Fleetwood announced in late March a plan to exit the manufactured
housing retail and financial services businesses. Subsequently,
discussions were conducted with numerous interested parties and
Fleetwood recently entered into active negotiations concerning the
possible sale of the majority of the assets of both businesses. The
Company has not yet entered into a definitive agreement so will not
comment further at the present time. Additional information will be
provided either when a definitive agreement is executed or if
discussions are terminated. Based upon these discussions and
negotiations, however, the Company has now recorded asset
impairment charges of $51.1 million in the fourth quarter to reduce
the carrying value of assets held for sale to its best estimate of
the fair market value of the businesses. Impact of Changes on First
Quarter "None of our operating divisions performed well this
quarter," Smith said. "We slowed production by rationalizing
facilities and our workforce, which adversely affected efficiencies
in the short term, but enabled us to bring finished unit
inventories in line with current sales volume. A decision to reduce
the role of incentives in the compensation of production associates
during the third quarter also contributed to higher labor costs in
both businesses. The overproduction of recreational vehicles in the
second and third quarters continued to impact results in the
fourth, exacerbated by the industry slowdown in Class A motor home
wholesale shipments and our continued efforts to improve the
competitiveness of our travel trailers. The results in our Housing
Group were hurt by the geographic disparity in demand, which causes
some plants to be running at or near capacity while others are
running short work weeks. In addition to the reduced efficiencies
that this causes, an unsuccessful attempt during the third quarter
to institute a second shift at two of our busiest manufactured
housing plants increased expenses related to recruitment and labor
costs. Ultimately, the problems inherent in the second-shift
"hand-off" resulted in the effort being unwound during the fourth
quarter, all of which gave rise to significant incremental costs at
these two facilities. On the positive side, we have recently leased
a facility in Southern California to add much-needed capacity in
this very strong market. "The changes that we have made at
Fleetwood, eliminating unprofitable initiatives and reorganizing to
improve market responsiveness, increase manufacturing efficiency
and lower overhead costs, will return our focus to our products and
to our customers," Smith concluded. "I expect to see some of the
positive effects of these moves as early as our second quarter.
Organizational change is costly, however, and operating income in
the first quarter will be impacted by these charges, as well as
some of the issues that harmed fourth quarter results, making an
operating loss probable." Conference Call Information On Thursday,
July 7, 2005, the Company will host a conference call beginning at
1:30 p.m. EDT to review the results of operations for the fourth
quarter and the full 2005 fiscal year. The conference call will be
broadcast live over the Internet at http://www.streetevents.com/
and http://www.earnings.com/. It also will be accessible from the
Company's website, http://www.fleetwood.com/, in the Company
Information section. An archive of the call will be available at
all three websites shortly after the call concludes. About
Fleetwood Fleetwood Enterprises, Inc. 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,
manufactured housing and supply subsidiary plants. For more
information, visit the Company's website at
http://www.fleetwood.com/. This press release contains certain
forward-looking statements and information based on the beliefs of
Fleetwood's management as well as assumptions made by, and
information currently available to, Fleetwood's management. Such
statements reflect the current views of Fleetwood with respect to
future events and are subject to certain risks, uncertainties, and
assumptions, including risk factors identified in Fleetwood's 10-K
and other SEC filings. These risks and uncertainties include,
without limitation, the cyclical nature of both the manufactured
housing and recreational vehicle industries; ongoing weakness in
the manufactured housing market; continued acceptance of the
Company's products; the potential impact on demand for Fleetwood's
products as a result of changes in consumer confidence levels; the
effect of global tensions on consumer confidence; expenses and
uncertainties associated with the introduction and manufacturing of
new products; the future availability of manufactured housing
retail financing, as well as housing and RV wholesale financing;
exposure to interest rate and market changes affecting certain of
the Company's assets and liabilities; availability and pricing of
raw materials; changes in retail inventory levels in the
manufactured housing and recreational vehicle industries;
competitive pricing pressures; the ability to attract and retain
quality dealers, executive officers and other personnel; the
Company's ability to successfully meet its obligations with respect
to Section 404 of the Sarbanes-Oxley Act; and the Company's ability
to obtain financing needed in order to execute its business
strategies. (tables to follow) Contact: Lyle Larkin, Vice
President-Treasurer (951) 351-3535 Kathy Munson, Director-Investor
Relations (951) 351-3650 Fleetwood Enterprises, Inc. CONSOLIDATED
STATEMENTS OF OPERATIONS (CONDENSED) Year Ended April 24, 2005
(Amounts in thousands, except per share data) 52 Weeks Ended April
24, 2005 April 25, 2004 April 27, 2003 Net Sales: RV Group
$1,659,882 $1,779,233 $1,482,595 Housing Group 785,547 657,388
667,087 Supply Group 57,020 41,120 37,178 Intercompany sales
(127,737) (117,135) (115,903) 2,374,712 2,360,606 2,070,957 Cost of
products sold 1,979,482 1,943,147 1,696,859 Gross profit 395,230
417,459 374,098 Operating expenses 420,187 343,246 343,942 Other,
net 18,581 (4,656) 4,779 438,768 338,590 348,721 Operating income
(loss) (43,538) 78,869 25,377 Other income (expense): Investment
income 2,385 2,626 3,369 Interest expense (27,349) (43,258)
(41,101) Other, net (2,724) (2,430) (27,688) (43,062) (37,732)
Income (loss) from continuing operations before income taxes
(71,226) 35,807 (12,355) Provision for income taxes (1,351)
(18,449) (4,502) Income (loss) from continuing operations (72,577)
17,358 (16,857) Discontinued operations (88,882) (39,619) (53,882)
Net loss $(161,459) $(22,261) $(70,739) Basic Diluted Basic Diluted
Basic Diluted Net income (loss) per common share: Income (loss)
from continuing operations $(1.31) $(1.31) $0.45 $0.44 $(0.47)
$(0.47) Loss from discontinued operations (1.61) (1.61) (1.03)
(1.01) (1.50) (1.50) $(2.92) $(2.92) $(0.58) $(0.57) $(1.97)
$(1.97) Weighted average common shares 55,332 55,332 38,357 39,342
35,869 35,869 Fleetwood Enterprises, Inc. CONSOLIDATED BALANCE
SHEETS (CONDENSED) As of April 24, 2005 (Amounts in thousands)
April 24, January 23, April 25, 2005 2005 2004 ASSETS (unaudited)
Current assets: Cash $6,761 $1,317 $14,090 Marketable investments
38,715 28,058 109,732 Receivables 164,609 208,680 184,687
Inventories 233,591 281,725 189,962 Deferred taxes 56,904 56,905
56,904 Assets of discontinued operations 145,784 171,837 145,553
Other current assets 23,974 14,510 20,256 Total current assets
670,338 763,032 721,184 Property, plant and equipment, net 232,125
237,065 229,638 Deferred taxes, net 17,859 17,858 17,859 Cash value
of Company-owned life insurance, net 36,946 39,689 48,809 Goodwill
6,316 6,316 6,316 Other assets 46,663 47,901 51,903 Total assets
$1,010,247 $1,111,861 $1,075,709 LIABILITIES & SHAREHOLDERS'
EQUITY Current liabilities: Accounts payable $75,551 $81,332
$98,804 Employee compensation & benefits 77,924 72,638 70,222
Product warranty reserve 65,143 60,641 53,921 Other short-term
borrowings 56,661 60,902 5,738 Accrued interest 52,446 47,732
38,868 Liabilities of discontinued operations 78,357 64,530 26,581
Other current liabilities 88,635 87,414 77,954 Total current
liabilities 494,717 475,189 372,088 Deferred compensation and
retirement benefits 38,771 41,477 49,473 Insurance reserves 32,215
32,628 32,916 Long-term debt 108,946 108,253 102,159 Convertible
subordinated debentures 210,142 210,142 272,791 Total liabilities
884,791 867,689 829,427 Commitments and contingencies Shareholders'
equity: Common stock Additional paid-in-capital 56,043 55,544
52,075 Accumulated deficit 424,782 422,225 390,107 Accumulated
other comprehensive loss (356,796) (235,223) (195,337) Total
shareholders' equity 1,427 1,626 (563) Total liabilities and
shareholders' equity 125,456 244,172 246,282 $1,010,247 $1,111,861
$1,075,709 Fleetwood Enterprises, Inc. BUSINESS SEGMENT AND UNIT
SHIPMENT INFORMATION Year Ended April 24, 2005 (Unaudited) (Amounts
in thousands) 13 Weeks Ended 52 Weeks Ended April 24, April 25,
April 24, April 25, 2005 2004 2005 2004 OPERATING REVENUES: RV
Group $381,308 $482,676 $1,659,882 $1,779,233 Housing Group 192,249
163,562 785,547 657,388 Supply Group 14,077 13,670 57,020 41,120
Intercompany sales (27,445) (20,214) (127,737) (117,135) $560,189
$639,694 $2,374,712 $2,360,606 OPERATING INCOME (LOSS): RV Group
$(29,827) $16,545 $(39,169) $58,146 Housing Group (7,031) 125 6,387
5,440 Supply Group 454 1,989 3,816 6,065 Corporate and other
(12,700) 4,413 (14,572) 9,218 $(49,104) $23,072 $(43,538) $78,869
UNITS SOLD: Manufactured housing - Factory shipments 5,685 5,350
23,962 20,859 Recreational vehicles - Motor homes 2,356 3,020
10,566 11,203 Towables 9,746 12,823 40,180 48,894 12,102 15,843
50,746 60,097 Less intercompany (742) (570) (3,486) (3,414) Total
shipments from continuing operations 17,045 20,623 71,222 77,542
Retail housing sales 946 918 4,157 4,727 Total Company shipments
17,991 21,541 75,379 82,269 DATASOURCE: Fleetwood Enterprises, Inc.
CONTACT: Lyle Larkin, Vice President-Treasurer, +1-951-351-3535, or
Kathy Munson, Director-Investor Relations, +1-951-351-3650, both of
Fleetwood Enterprises, Inc. Web site: http://www.earnings.com/ Web
site: http://www.streetevents.com/ Web site:
http://www.fleetwood.com/
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