FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
X OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 23, 1994
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
______ OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File Number 1-7699
FLEETWOOD ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-1948322
_______________________
________________________________________________
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
3125 Myers Street, Riverside, California 92503-5527
_________________________________________________________________
_____________
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (909)
351-3500
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No _____
Indicate the number of shares outstanding of each of the issuer's
classes of Common stock as of the close of the period covered by
this report.
Class Outstanding at January 23,
1994
_________________________
_________________________________________
Common stock, $1 par value 45,683,542 shares
Preferred share purchase rights --
CONDENSED FINANCIAL STATEMENTS
The following unaudited interim condensed financial
statements have been prepared by the Company pursuant to the
rules and regulations of the Securities and Exchange Commission.
Such financial statements have been reviewed by Arthur Andersen &
Co. in accordance with standards established by the American
Institute of Certified Public Accountants. As indicated in their
report included herein, Arthur Andersen & Co. does not express an
opinion on these statements.
Certain information and note disclosures normally included
in annual financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted pursuant to those rules and regulations, although the
Company believes that the disclosures made are adequate to make
the information presented not misleading. In the Company's
opinion, the statements reflect all adjustments (which include
only normal recurring adjustments) necessary to present fairly
the results of operations for the periods ending January 23, 1994
and January 24, 1993 and the balances as of January 23, 1994 and
April 25, 1993. It is suggested that these condensed financial
statements be read in conjunction with the financial statements
and the notes thereto included in the Company's latest annual
report on Form 10-K.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the board of directors and shareholders of Fleetwood
Enterprises, Inc.:
We have made a review of the accompanying condensed
consolidated balance sheet of FLEETWOOD ENTERPRISES, INC. (a
Delaware Corporation) and subsidiaries as of January 23, 1994,
and the related condensed consolidated statements of income for
the thirteen and thirty-nine week periods ended January 23, 1994
and January 24, 1993, the condensed consolidated statements of
cash flows for the thirty-nine week periods ended January 23,
1994 and January 24, 1993 and the condensed consolidated
statement of changes in shareholders' equity for the thirty-nine
week period ended January 23, 1994, in accordance with standards
established by the American Institute of Certified Public
Accountants.
A review of interim financial information consists
principally of obtaining an understanding of the system for the
preparation of interim financial information, applying analytical
review procedures to the financial data and making inquiries of
persons responsible for financial and accounting matters. It is
substantially less in scope than an audit in accordance with
generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an
opinion.
Based on our review, we are not aware of any material
modifications that should be made to the condensed consolidated
financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally
accepted auditing standards, the consolidated balance sheet of
Fleetwood Enterprises, Inc. and subsidiaries as of April 25,
1993, and the related consolidated statements of income, cash
flows and changes in shareholders' equity for the year then ended
(not presented herein), and, in our report dated June 24, 1993 we
expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of April 25,
1993, is fairly stated, in all material respects, in relation to
the consolidated balance sheet from which it has been derived.
ARTHUR ANDERSEN & CO.
Orange County, California
February 22, 1994
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FLEETWOOD ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (CONDENSED)
(Amounts in thousands except per share data)
(UNAUDITED)
Thirteen Thirteen Thirty-nine
Thirty-nine
Weeks Weeks Weeks
Weeks
Ended Ended Ended
Ended
Jan. 23, Jan. 24, Jan. 23,
Jan. 24,
1994 1993 1994
1993
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OPERATING REVENUES:
Manufacturing sales $538,811 $436,002 $1,625,855
$1,363,106
Finance interest income 9,812 8,950 27,640
25,668
------- ------- -------
- -------
548,623 444,952 1,653,495
1,388,774
COSTS AND EXPENSES:
Cost of products sold 445,074 355,921 1,331,569
1,099,716
Operating expenses 79,815 69,555 242,544
217,948
Finance interest expense 4,133 4,050 11,651
11,441
------- ------- -------
- -------
529,022 429,526 1,585,764
1,329,105
Operating income 19,601 15,426 67,731
59,669
OTHER INCOME (EXPENSE):
Investment income 1,893 2,484 7,373
8,118
Interest expense (698) (582) (1,893)
(1,530)
Other (74) (128) 520
(427)
----- ----- -----
- -----
1,121 1,774 6,000
6,161
Income before provision for
income taxes and cumulative
effect of acounting
change 20,722 17,200 73,731
65,830
Provision for
income taxes (9,091) (6,480) (30,479)
(25,042)
Minority interest in net
loss of subsidiary 481 91 1,061
91
Income before cumulative effect
of accounting change 12,112 10,811 44,313
40,879
Cumulative effect of change in
accounting for income taxes -- -- (1,500)
- --
Net income $12,112 $10,811 $42,813
$40,879
Income per share before cumulative
effect of accounting
change $.26 $.23 $.96
$.89
Cumulative effect of change in
accounting for income taxes -- -- (.03)
- --
Net income per Common
and equivalent share $.26 $.23 $.93
$.89
Dividends declared
per share of Common
stock outstanding $.125 $.115 $.375
$.345
Common and equivalent
shares outstanding 46,245 46,100 46,151
45,914
See accompanying notes to financial
statements.
FLEETWOOD ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONDENSED)
(Amounts in thousands)
ASSETS
January 23, April
25,
1994 1993
(Unaudited)
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Cash $ 21,490 $
34,834
Investments 121,358
123,641
Receivables:
Manufacturing 135,483
136,125
Finance company 333,793
336,776
Inventories:
Raw materials 115,476
91,147
Work in process and finished products 68,944
63,593
Land held for future development 6,767
6,734
Property, plant and equipment 210,648
172,395
Deferred tax benefits 56,530
52,764
Other assets 53,800
43,901
---------- ------
- --
$1,124,289
$1,061,910
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 71,276 $
54,492
Commercial paper borrowings
and long-term debt 307,964
299,549
Employee compensation and benefits 88,074
84,277
Federal and state taxes on income (7,274)
374
Insurance reserves 43,985
40,226
Other liabilities 92,792
79,612
Total liabilities 596,817
558,530
Contingent liabilities
Minority interest (387)
791
Shareholders' equity:
Preferred stock, $1 par value,authorized
10,000,000 shares, none outstanding --
- --
Common stock, $1 par value,authorized
75,000,000 shares, outstanding 45,684,000
at January 23, 1994 and 45,667,000
at April 25, 1993 45,684
45,667
Capital surplus 41,260
40,983
Retained earnings 441,716
416,031
Foreign currency translation
adjustment (801)
(92)
------- -----
- --
527,859
502,589
$1,124,289
$1,061,910
See accompanying notes to financial statements.
FLEETWOOD ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONDENSED)
(Amounts in thousands)
(UNAUDITED)
Thirty-nine
Thirty-nine
Weeks Ended
Weeks Ended
Jan. 23, 1994 Jan.
24, 1993
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $42,813
$40,879
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation expense 13,465
11,433
Amortization of intangibles and goodwill 1,364
1,202
Provision for credit losses 2,479
2,918
(Gain) loss on sales of property,
plant and equipment (520)
427
Changes in assets and liabilities:
(Increase) decrease in manufacturing
receivables 642
(14,113)
Increase in inventories (29,680)
(42,747)
Increase in deferred tax benefits (3,766)
(8,138)
Increase in other assets (11,263)
(16,299)
Increase in accounts payable 16,784
13,174
Increase in employee compensation
and benefits 3,797
5,493
Increase (decrease) in Federal and
state taxes on income (7,648)
1,565
Increase in insurance reserves 3,759
814
Increase in other liabilities 13,180
13,920
Foreign currency translation adjustment (709)
(1,575)
Net cash provided by operating activities 44,697
8,953
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of finance receivables (732,847)
(621,315)
Principal collected on finance receivables 540,330
489,821
Proceeds from sale of retail sales contracts 193,021
120,059
Change in investments 2,283
40,766
Purchases of property, plant
and equipment, net (51,198)
(24,473)
Additions to land held for future development (33)
(67)
Minority interest in subsidiary (1,178)
- --
Net cash provided by (used in)
investing activities (49,622)
4,791
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of commercial paper 1,319,562
1,541,001
Principal payments on commercial paper (1,281,147)
(1,540,284)
Payment of long-term debt (30,000)
- --
Dividends to shareholders (17,128)
(15,747)
Proceeds from exercise of stock options 294
57
Net cash used in
financing activities (8,419)
(14,973)
Decrease in cash (13,344)
(1,229)
Cash at beginning of period 34,834
27,681
Cash at end of period $21,490
$26,452
Supplementary disclosures:
Income taxes paid $42,949
$31,684
Interest paid 15,160
14,269
See accompanying notes to financial statements
FLEETWOOD ENTERPRISES, INC.
CONSOLIDATED STATEMENT OF CHANGES
IN SHAREHOLDERS' EQUITY (CONDENSED)
(Amounts in thousands)
(UNAUDITED)
Foreign
Currency
Trans-
Total
Common Stock
lation Share-
Number of Capital Retained
Adjust- holders'
Shares Amount Surplus Earnings ment
Equity
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Balance
April 25, 1993 45,667 $45,667 $40,983 $416,031 $(92)
$502,589
Add (deduct)-
Net income -- -- -- 42,813 --
42,813
Cash dividends
declared on
Common stock -- -- -- (17,128) --
(17,128)
Stock options
exercised 17 17 277 -- --
294
Foreign currency
translation
adjustment -- -- -- -- (709)
(709)
Balance
January 23, 1994 45,684 $45,684 $41,260 $441,716 $(801)
$527,859
See accompanying notes to financial statements.
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FLEETWOOD ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 23, 1994
1) Reference to Annual Report
Reference is made to the Notes to Consolidated Financial
Statements included in the Company's Form 10-K annual report
for the year ended April 25, 1993. As disclosed in Note 1 of
the Notes to Consolidated Financial Statements, per share
amounts and equivalent shares outstanding have been restated
to reflect a two-for-one split of the Company's Common stock
effected in the form of a stock dividend in the fourth
quarter of fiscal 1993.
2) Change in Accounting for Income Taxes
Effective with the beginning of fiscal year 1994, the Company
adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes." This new standard requires
that deferred tax balances be calculated using tax rates in
effect when the taxes will be paid. The adoption of this
accounting standard results in a slight adverse effect on the
Company's earnings and working capital in the period of the
change because the Company's deferred tax balances exceed its
deferred tax credits. Included in the consolidated statement
of income for the nine months ended January 23, 1994 is a
cumulative charge of $1.5 million or 3 cents per share which
represents a catch-up adjustment to recalculate deferred tax
balances. Prior years' financial statements have not been
restated as a result of this change.
The provision for income taxes is comprised of the following
for the nine months ended January 23, 1994 (dollars in
thousands):
Current:
Federal $29,024
Foreign 194
State 5,027
34,245
Deferred:
Federal (3,296)
State (470)
(3,766)
$30,479
The deferred income tax provision resulted from the following
temporary differences in the recognition of revenues and
expenses for tax and financial reporting purposes for the nine
months ended January 23, 1994 (dollars in thousands):
Dealer volume rebates $(403)
Deferred compensation (1,027)
Insurance reserves (8,252)
Depreciation 517
Other financial accruals 5,399
$(3,766)
The components of the Company's deferred income tax benefit
(liability) as of January 23, 1994 are as follows (dollars in
thousands):
Insurance reserves $24,343
Deferred compensation 11,604
Warranty reserves 11,611
Dealer volume rebates 2,792
Depreciation (4,183)
Other financial accruals 10,363
$56,530
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Current Quarter Compared to Same Quarter Last Year
Net income for the quarter ended January 23, 1994 increased 12
percent to $12,112,000 or 26 cents per share compared to $10,811,000
or 23 cents per share recorded in last year's similar period.
Revenues climbed 23 percent to a third quarter record $548.6 million,
up from $445.0 million a year ago. The improved earnings are
primarily being driven by strong growth in sales of manufactured
housing. The earnings results have been moderated somewhat by lower
profits from the recreational vehicle group which is experiencing
margin pressure despite achieving good sales growth.
Housing group revenues reached an all-time high for the January
quarter and for the nine-month period as well. Sales for the quarter
jumped 32 percent to $251.7 million compared to last year's $190.0
million. Unit volume rose 23 percent in the winter quarter to 13,475
homes. This improvement reflects the continuing recovery in the
manufactured housing market and a rising market share for the
Company. Housing group sales represented 46 percent of total Company
revenues compared to 43 percent last year.
Recreational vehicle revenues were the highest for any third quarter
on record, rising 16 percent to $278.3 million compared to $240.3
million a year ago. The increase largely reflects an upturn in
domestic motor home sales which rose 24 percent to $164.0 million on
a 21 percent rise in unit volume to 3,266 units. In the towables
category, the travel trailer division achieved record sales of $94.6
million, 14 percent ahead of last year's January period. Travel
trailer shipments were up 14 percent to 7,659 units. The folding
trailer division experienced a slight 1 percent sales decline to
$14.4 million on a 6 percent drop in unit volume to 3,603 units.
With the European economy in the midst of a recession, the Company's
RV operation in Germany recorded revenues of $5.3 million in the
third quarter, down from $10.3 million a year ago. Recreational
vehicle sales accounted for 51 percent of total Company revenues,
down from 54 percent last year.
Manufacturing gross profit was 17.4 percent of sales, down from 18.4
percent last year, primarily due to rising lumber costs in housing
and the effect of competitive pricing in the towables segment of the
RV market.
Operating expenses increased 15 percent to $79.8 million, but dropped
as a percentage of revenues from 15.6 percent to 14.5 percent
reflecting the higher sales volume. Selling expenses rose 35 percent
to $32.1 million, primarily due to higher product warranty costs and
sales promotion expenses. General and administrative expenses rose 4
percent to $47.7 million largely due to higher employee compensation
and benefits. Much of this was related to increased staffing
requirements for new housing operations.
Non-operating income in the third quarter included net interest
income of $1.2 million compared to $1.9 million a year ago. The
reduced investment income resulted from lower rates of return and
smaller invested balances.
The combined Federal and state income tax rate was 43.9 percent
compared to last year's 37.7 percent. The higher rate this year
reflects not only the increase in the U.S. Federal corporate tax
rate, but also the effect of no tax benefit for losses from the
Company's European operation.
Current Year-To-Date Compared to Same Period Last Year
Earnings for the nine months were $42,813,000 or 93 cents per
share, after recording a one-time charge of $1,500,000 or 3 cents
per share in the first quarter to reflect a change in accounting
for income taxes under Statement of Financial Accounting Standards
No. 109. This compares to $40,879,000 or 89 cents per share for
the similar period last year. Consolidated revenues increased 19
percent to $1.65 billion, the highest nine-month revenues in the
Company's history. This compares to $1.39 billion for the
corresponding period last year.
Housing revenues for the first nine months of fiscal 1994 surged
31 percent to $739.9 million, the highest nine-month revenues on
record. Unit volume rose 21 percent to 40,233 homes. Housing
group sales represented 45 percent of total Company revenues
compared to 41 percent last year.
The RV group achieved record nine-month revenues of $864.0
million, 10 percent ahead of last year's $783.2 million. Domestic
motor home sales increased 12 percent to $491.7 million on an 8
percent rise in unit volume to 10,615 units. Revenues for the
folding trailer division jumped 23 percent to a record $55.0
million on the strength of sales gains in the first six months.
Folding trailer shipments matched the 23 percent revenue gain with
unit volume of 14,157. The travel trailer division posted a 4
percent increase in revenues to $299.3 million, as shipments rose
3 percent to 24,089 units. European RV sales for the first nine
months of fiscal 1994 were $17.9 million. Recreational vehicle
sales accounted for 52 percent of total Company revenues, down
from 56 percent last year.
Manufacturing gross profit declined to 18.1 percent of sales from
19.3 percent last year, largely for the same reasons discussed in
the comparison of quarterly results.
Operating expenses rose 11 percent to $242.5 million, but
decreased as a percentage of revenues from 15.7 percent to 14.7
percent reflecting the effect of higher volume as discussed
earlier. Selling expenses of $92.4 million were up 21 percent
primarily due to higher product warranty costs and increases in
product financing and sales promotion expenses. General and
administrative expenses increased 6 percent to $150.1 million
largely due to higher employee compensation and benefits as
discussed previously, along with increased costs for product
development activities.
Non-operating income in the first nine months included net
interest income of $5.5 million, down from $6.6 million reported
last year, due to reasons discussed previously.
For basically the same reasons explained in the quarterly
comparison, the combined Federal and state income tax rate rose to
41.3 percent for the current nine-month period, up from 38.0
percent in last year's comparable period.
PART II OTHER INFORMATION
There are no other items to be reported or exhibits to be filed.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
FLEETWOOD ENTERPRISES, INC.
_______________________________
Paul M. Bingham
Financial Vice President
and Chief Financial Officer
March 3, 1994
