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 July 30, 1995
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 (I.R.S. 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 July 30, 1995
_________________________ _________________________________________
Common stock, $1 par value 46,061,542 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 LLP in accordance with standards established by
the American Institute of Certified Public Accountants. As indicated in their
report included herein, Arthur Andersen LLP 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 July 30, 1995 and July 31, 1994, and the balances as of
July 30, 1995 and April 30, 1995. 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 July 30, 1995, and the related condensed consolidated statements of
income for the thirteen-week period ended July 30, 1995 and the fourteen-week
period ended July 31, 1994, the condensed consolidated statements of cash
flows for the thirteen-week period ended July 30, 1995 and the fourteen-week
period ended July 31, 1994 and the condensed consolidated statement of changes
in shareholders' equity for the thirteen-week period ended July 30, 1995, 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 30, 1995, 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 26, 1995
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 30, 1995, is fairly stated,
in all material respects, in relation to the consolidated balance sheet from
which it has been derived.
ARTHUR ANDERSEN LLP
Orange County, California
August 29, 1995
<TABLE>
FLEETWOOD ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands except per share data)
(UNAUDITED)
Thirteen Fourteen
Weeks Ended Weeks Ended
July 30, 1995 July 31, 1994
<S> <C> <C>
OPERATING REVENUES:
Manufacturing sales $704,717 $753,578
Finance interest income 13,849 10,720
718,566 764,298
COSTS AND EXPENSES:
Cost of products sold 573,331 608,536
Operating expenses 102,433 103,889
Finance interest expense 6,567 4,645
682,331 717,070
Operating income 36,235 47,228
OTHER INCOME (EXPENSE):
Investment income 2,909 2,334
Interest expense (894) (818)
Other (112) (11)
1,903 1,505
Income before provision for
income taxes 38,138 48,733
Provision for
income taxes (15,427) (19,646)
Minority interest in net
loss of subsidiary 87 165
Net income $ 22,798 $ 29,252
Net income per Common
and equivalent share $.49 $.63
Dividends declared per share
of Common stock outstanding $.15 $.14
Common and equivalent
shares outstanding 46,518 46,457
See accompanying notes to financial statements.
FLEETWOOD ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONDENSED)
(Amounts in thousands)
ASSETS
July 30, April 30,
1995 1995
(Unaudited)
<S> <C> <C>
Cash $ 44,779 $ 40,560
Investments 199,518 157,685
Receivables:
Manufacturing 157,243 152,210
Finance company 305,543 385,026
Inventories:
Raw materials 111,004 133,379
Work in process and finished products 59,048 81,914
Land held for future development 6,868 6,868
Property, plant and equipment 265,342 263,108
Deferred tax benefits 67,156 66,237
Other assets 74,388 58,073
$1,290,889 $1,345,060
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 87,092 $ 96,428
Commercial paper borrowings
and long-term debt 289,093 385,876
Employee compensation and benefits 103,168 103,516
Federal and state taxes on income 5,773 (11,043)
Insurance reserves 46,133 44,367
Other liabilities 136,462 118,858
Total liabilities 667,721 738,002
Contingent liabilities
Minority interest (1,171) (1,085)
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 46,062,000
at July 30, 1995 and April 30, 1995 46,062 46,062
Capital surplus 41,561 41,561
Retained earnings 535,830 519,941
Foreign currency translation
adjustment 42 229
Investment securities valuation
adjustment 844 350
624,339 608,143
$1,290,889 $1,345,060
See accompanying notes to financial statements.
FLEETWOOD ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONDENSED)
(Amounts in thousands)
(UNAUDITED)
Thirteen Fourteen
Weeks Ended Weeks Ended
July 30, 1995 July 31, 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $22,798 $29,252
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation expense 6,236 5,108
Amortization of intangibles and goodwill 431 497
Provision for credit losses 1,397 1,387
Loss on sales of property,
plant and equipment 112 11
Changes in assets and liabilities:
Increase in manufacturing receivables (5,033) (348)
Decrease in inventories 45,241 16,508
Increase in deferred tax benefits and
other assets (17,665) (8,274)
Increase (decrease) in accounts payable (9,336) 7,242
Increase (decrease) in employee
compensation and benefits (348) 874
Increase in Federal and
state income taxes 16,816 21,149
Increase in other liabilities 19,370 13,523
Foreign currency translation adjustment (187) 317
Net cash provided by operating activities 79,832 87,246
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of finance receivables (274,845) (310,504)
Principal collected on finance receivables 265,214 267,624
Proceeds from sale of retail sales contracts 87,717 125,427
Purchases of investment securities:
Held-to-maturity (2,280,878) (1,684,253)
Available-for-sale (66,683) (213,201)
Proceeds from maturity of investment securities:
Held-to-maturity 2,252,825 1,664,110
Available-for-sale 30,418 135,970
Proceeds from sale of available-for-
sale investment securities 22,979 36,824
Purchases of property, plant
and equipment, net (8,582) (19,912)
Minority interest in subsidiary (86) (184)
Net cash provided by investing activities 28,079 1,901
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of commercial paper 467,117 471,971
Principal payments on commercial paper (588,900) (558,685)
Proceeds from issuance of long-term debt 25,000 --
Dividends to shareholders (6,909) (6,439)
Proceeds from exercise of stock options -- 8
Net cash used in
financing activities (103,692) (93,145)
Increase (decrease) in cash 4,219 (3,998)
Cash at beginning of period 40,560 37,267
Cash at end of period $44,779 $33,269
Supplementary disclosures:
Income taxes paid $ 1,350 $ 2,434
Interest paid 8,409 6,330
See accompanying notes to financial statements.
FLEETWOOD ENTERPRISES, INC.
CONSOLIDATED STATEMENT OF CHANGES
IN SHAREHOLDERS' EQUITY (CONDENSED)
(Amounts in thousands)
(UNAUDITED)
Invest-
ment
Foreign Secu-
Currency rities
Trans- Valu- Total
Common Stock lation ation Share-
Number of Capital Retained Adjust- Adjust- holders'
Shares Amount Surplus Earnings ment ment Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balance
April 30,
1995 46,062 $46,062 $41,561 $519,941 $229 $350 $608,143
Add (deduct)-
Net income -- -- -- 22,798 -- -- 22,798
Cash dividends
declared on
Common stock -- -- -- (6,909) -- -- (6,909)
Foreign currency
translation
adjustment -- -- -- -- (187) -- (187)
Investment securities
valuation
adjustment -- -- -- -- -- 494 494
Balance July 30,
1995 46,062 $46,062 $41,561 $535,830 $ 42 $ 844 $624,339
See accompanying notes to financial statements.
</TABLE>
FLEETWOOD ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY 30, 1995
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 30, 1995.
2) Industry Segment Information
Information with respect to industry segments for the periods ending July
30, 1995 and July 31, 1994 is shown below:
<TABLE>
13 Weeks Ended 14 Weeks Ended
July 30, 1995 July 31, 1994
<S> <C> <C>
OPERATING REVENUES:
Manufactured housing $361,537 $351,886
Recreational vehicles 332,313 389,923
Supply operations 10,867 11,769
Finance operations 13,849 10,720
$718,566 $764,298
OPERATING INCOME:
Manufactured housing $27,947 $25,604
Recreational vehicles 6,081 19,701
Supply operations 56 2,092
Finance operations 4,061 3,505
Corporate and other* (1,910) (3,674)
$36,235 $47,228
* Including adjustments and eliminations.
FLEETWOOD ENTERPRISES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Amounts in thousands)
The following is an analysis of changes in key items included in the
consolidated statements of income for the 13-week period ended July 30, 1995
compared to the 14-week period ended July 31, 1994.
Thirteen Weeks Ended
July 30, 1995
Increase %
(Decrease) Change
<S> <C> <C>
Manufacturing sales $(48,861) (6.5)%
Cost of products sold (35,205) (5.8)
Manufacturing gross profit (13,656) (9.4)
Finance interest income 3,129 29.2
Finance interest expense 1,922 41.4
Net finance revenues 1,207 19.9
Selling expenses 4,714 10.9
General and administrative expenses (6,170) (10.2)
Operating expenses (1,456) (1.4)
Operating income (10,993) (23.3)
Other income (expense) 398 26.4
Income before taxes (10,595) (21.7)
Provision for income taxes (4,219) (21.5)
Net income $(6,454) (22.1)%
</TABLE>
Current Quarter Compared to Same Quarter Last Year
Net income for the 13-week period ending July 30, 1995 declined 22 percent to
$22,798,000 or 49 cents per share compared to $29,252,000 or 63 cents per
share for the corresponding 14-week period a year ago. Revenues in the
current quarter were off six percent to $718.6 million compared to $764.3
million for the one-week longer period in the prior year.
The primary factors leading to the earnings decline were volume related. The
loss of one week's sales in this year's first quarter was compounded by a
weakness in recreational vehicle sales. A solid performance by the Company's
housing group was not enough to offset these factors. In addition to volume,
earnings were affected by reduced RV margins resulting from competitive
pricing pressures and higher marketing and sales promotion costs, as well as
production inefficiencies at several plant locations.
The manufactured housing group generated record first quarter revenues of
$361.5 million, a three percent increase over last year's $351.9 million.
Unit volume of 17,634 homes was off four percent due to the shorter period.
The Company's excellent housing sales reflects a strong market demand for
manufactured housing as indicated by the growth in industry shipments which
were up 12 percent in the first six months of calendar 1995. Housing group
sales represented 50 percent of total Company revenues compared to 46 percent
last year.
The recreational vehicle group registered sales of $332.3 million in the July
quarter, 15 percent below last year's $389.9 million. The RV decline was
largely caused by shrinking demand for motor homes which fell 23 percent to
$168.6 million on a 26 percent drop in shipments to 3,464 units. Travel
trailer revenues were also below the prior year, falling nine percent to
$123.4 million on an 11 percent decline in unit volume to 9,571. The
Company's folding trailer and European divisions both recorded sales
increases. Folding trailer sales of $22.0 million were up two percent on a
two percent rise in shipments to 5,370 units. European RV sales rose 42
percent to $18.3 million. Recreational vehicle sales accounted for 46 percent
of total Company revenues, down from 52 percent last year.
Manufacturing gross profit declined 9 percent or $13.7 million, and also fell
as a percentage of sales from 19.2 percent to 18.6 percent, primarily as a
result of lower RV margins. Gross margins for the manufactured housing
segment were improved over the prior year reflecting higher product selling
prices and lower lumber costs.
The Company's European RV operation continued to operate at a loss in the
first quarter despite significantly higher sales volume. The loss from
operations in the current period was $662,000, up from $396,000 a year ago.
This operation has had persistent operating losses over the past 3 years
reflecting inefficient production and high operating costs.
The Company's finance subsidiary recorded revenues of $13.8 million, 29
percent ahead of the prior year, primarily due to higher interest earned on
wholesale loan volume. Net finance revenues, however, rose just 20 percent or
$1.2 million as borrowing costs increased at a faster rate than finance
revenues due to the competitive rate environment for consumer lending on
recreational vehicles.
Operating expenses declined one percent to $102.4 million, but increased as a
percentage of revenues from 13.6 percent to 14.3 percent on the lower sales
volume. Selling expenses increased 11 percent to $48.1 million, and also rose
as a percentage of sales from 5.7 percent to 6.7 percent. Most of the
increase stemmed from higher product warranty costs in manufactured housing as
a result of higher volume and increased focus on customer service, in addition
to higher marketing and sales promotion costs for recreational vehicles.
General and administrative expenses declined ten percent to $54.3 million, and
also decreased as a percentage of sales from 7.9 percent to 7.6 percent. The
reduction was primarily due to lower employee compensation and benefits,
reflecting reduced management incentive compensation which is based on
profitability.
Non-operating income increased 26 percent and included $2.0 million of net
interest income which was up 33 percent from the prior year. The increase
primarily reflects the effect of higher yields on temporary investments during
the current period.
The combined Federal and state income tax rate was 40.4 percent compared to
40.3 percent for last year's first quarter.
Liquidity and Capital Resources
The Company generally relies upon internally generated cash flows to fund
capital expenditures and to satisfy working capital needs for its
manufacturing operations. Positive cash flows from operations in the first
quarter improved the Company's liquidity as cash and investments rose $46.1
million to $244.3 million.
Cash outflows during the July quarter included capital expenditures of $8.6
million and the quarterly shareholder dividend, which was increased from a per
share rate of 14 cents to 15 cents, of $6.9 million. Cash outflows affecting
operations included $11.9 million expended for the purchase of Company-owned
life insurance (COLI) used to fund non-qualified benefit plans. The increase
in cash surrender value of the COLI, which is included in "other assets" on
the balance sheet, substantially offset the insurance premiums paid.
Fleetwood Credit Corp., the Company's RV finance subsidiary, secured cash for
lending operations primarily through the issuance of commercial paper and the
sale to investors of securities backed by retail sales contracts on Fleetwood
recreational vehicles. On July 31, 1995, Fleetwood Credit pre-sold $150
million of asset-backed securities which will become fully funded in September
1995. As of July 31, 1995, the sale was funded to the extent of $87.7
million.
The finance subsidiary used the commercial paper market and long-term debt to
fund both its wholesale receivables, which are prime rate based, and its fixed-
rate retail installment sales contract receivables prior to their sale in the
asset-backed securities market. To protect the value of the retail
installment sale contract portfolio from unfavorable changes in interest
rates, the finance subsidiary sometimes enters into interest rate exchange
agreements or other interest rate hedging transactions during the period
between origination of the receivables and their sale in the asset-backed
securities market. During the July quarter, a hedging arrangement was in
effect in the form of a forward sale agreement of U.S. Treasury securities.
This agreement was closed out concurrent with the sale of retail receivables
on July 31, 1995, and no other agreements were outstanding at the end of the
quarter. A loss of $4.2 million was incurred on the aforementioned forward
sale agreement, but this was offset by a corresponding increase in the value
of retail receivables.
The finance subsidiary maintains a committed revolving credit facility with a
number of major banks to support the issuance of commercial paper. At July
30, 1995, these facilities totaled $350.0 million, none of which is being
used.
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
September 7, 1995
FLEETWOOD ENTERPRISES, INC.
CONSOLIDATED FINANCIAL INFORMATION
FINANCIAL DATA SCHEDULE
[SROS] NYSE
[SROS] PSE
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-28-1996
<PERIOD-END> JUL-30-1995
<CASH> 44,779
<SECURITIES> 199,518
<RECEIVABLES> 484,809
<ALLOWANCES> 22,023
<INVENTORY> 170,052
<CURRENT-ASSETS> 0
<PP&E> 415,780
<DEPRECIATION> 150,438
<TOTAL-ASSETS> 1,290,889
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 46,062
0
0
<OTHER-SE> 578,277
<TOTAL-LIABILITY-AND-EQUITY> 1,290,889
<SALES> 704,717
<TOTAL-REVENUES> 718,566
<CGS> 573,331
<TOTAL-COSTS> 573,331
<OTHER-EXPENSES> 112
<LOSS-PROVISION> 1,397
<INTEREST-EXPENSE> 7,461
<INCOME-PRETAX> 38,138
<INCOME-TAX> 15,427
<INCOME-CONTINUING> 22,798
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,798
<EPS-PRIMARY> .49
<EPS-DILUTED> .49
<FN> Amounts for current assets and current
liabilities are not shown since balance sheet
is presented in nonclassified format.
</TABLE>
