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 28, 1996
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 28, 1996
_________________________ _______________________________________
Common stock, $1 par value 38,056,659 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 28, 1996 and July 30, 1995, and the balances as
of July 28, 1996 and April 28, 1996. 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 28, 1996, and the related condensed consolidated
statements of income for the thirteen week periods ended July 28, 1996 and
July 30, 1995, the condensed consolidated statements of cash flows for the
thirteen week periods ended July 28, 1996 and July 30, 1995, and the
condensed consolidated statement of changes in shareholders' equity for the
thirteen week period ended July 28, 1996.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical 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 conducted 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 28, 1996, 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 25,
1996, 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 28, 1996, 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 27, 1996
<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 28, 1996 July 30, 1995
<S> <C> <C>
Sales $751,245 $704,717
Cost of products sold 605,341 573,331
-------- --------
Gross profit 145,904 131,386
Operating expenses 101,226 99,212
-------- --------
Operating income 44,678 32,174
Other income (expense):
Investment income 5,394 2,909
Interest expense (1,450) (894)
Other (20) (112)
-------- -------
3,924 1,903
-------- -------
Income from continuing operations
before income taxes and
minority interest 48, 602 34,077
Provision for income taxes (19,270) (13,758)
Minority interest in net
loss of subsidiary -- 87
--------- --------
Income from continuing operations 29,332 20,406
Income from discontinued operations:
Income from operations of finance
subsidiary (less applicable income
taxes of $511,000 in 1996 and
$1,669,000 in 1995) 887 2,392
Gain on sale of finance subsidiary
(net of income taxes of $19,607) 33,891 --
-------- --------
34,778 2,392
-------- --------
Net income $64,110 $22,798
-------- --------
-------- --------
Net income per Common and
equivalent share:
Continuing operations $.64 $.44
Discontinued operations:
Income from operations of
finance subsidiary .02 .05
Gain on sale of finance
subsidiary .74 --
------- -------
Total $1.40 $.49
------- -------
------- -------
Dividends declared per share
of Common stock outstanding $.16 $.15
------- -------
------- -------
Common and equivalent
shares outstanding 45,916 46,518
------- -------
------- -------
See accompanying notes to financial statements.
FLEETWOOD ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONDENSED)
(Amounts in thousands)
ASSETS
July 28, April 28,
1996 1996
(Unaudited)
<S> <C> <C>
Cash $ 20,470 $ 15,792
Investments 191,549 272,138
Receivables 190,729 173,380
Inventories:
Raw materials 105,220 94,302
Work in process and finished products 46,889 43,597
Net assets of discontinued operations -- 97,444
Property, plant and equipment 263,725 266,587
Deferred tax benefits 70,656 65,224
Cash value of Company-owned
life insurance 30,917 30,953
Other assets 36,128 49,515
--------- ----------
$956,283 $1,108,932
-------- ----------
-------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $100,999 $104,850
Employee compensation and benefits 113,577 109,552
Federal and state taxes on income 28,118 (16,850)
Insurance reserves 46,907 47,408
Long-term debt 80,000 80,000
Other liabilities 118,240 134,835
-------- --------
487,841 459,795
-------- --------
Contingent liabilities
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 38,057,000
at July 28, 1996 and 45,640,000
at April 28, 1996 38,057 45,640
Capital surplus 37,688 42,758
Retained earnings 393,148 561,500
Foreign currency translation
adjustment (814) (946)
Investment securities valuation
adjustment 363 185
--------- ---------
468,442 649,137
--------- ---------
$956,283 $1,108,932
--------- ---------
--------- ---------
See accompanying notes to financial statements.
FLEETWOOD ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONDENSED)
(Amounts in thousands)
(UNAUDITED)
13 Weeks Ended 13 Weeks Ended
July 28, 1996 July 30, 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $64,110 $22,798
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation expense 6,161 6,236
Amortization of intangibles and goodwill 180 431
Losses on sales of property,
plant and equipment 20 112
Gain on sale of finance subsidiary (33,891) --
Changes in assets and liabilities:
Increase in receivables (17,349) (4,793)
(Increase) decrease in inventories (14,210) 45,241
Increase in deferred tax benefits (5,432) (6,308)
(Increase) decrease in cash value of
Company-owned life insurance 36 (11,122)
Decrease in other assets 13,207 3,338
Decrease in accounts payable (3,851) (9,336)
Increase in other liabilities 31,897 32,629
Foreign currency translation adjustment 132 (187)
------- --------
Net cash provided by operating activities 41,010 79,039
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investment securities:
Held-to-maturity (1,127,754) (1,071,303)
Available-for-sale (1,268,533) (66,683)
Proceeds from maturity of investment securities:
Held-to-maturity 1,136,450 1,030,219
Available-for-sale 1,228,874 30,418
Proceeds from sale of available-for-sale
investment securities 111,730 22,979
Purchases of property, plant and
equipment, net (3,319) (8,675)
Proceeds from sale of finance subsidiary 132,222 --
Change in net assets of discontinued
operation (887) (2,392)
--------- ---------
Net cash provided by (used in)
investing activities 208,783 (65,437)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends to shareholders (7,305) (6,909)
Proceeds from exercise of stock options 2,731 --
Purchase of Common stock (240,541) --
--------- ---------
Net cash used in
financing activities (245,115) (6,909)
--------- ---------
Increase in cash 4,678 6,693
Cash at beginning of period 15,792 9,410
--------- --------
Cash at end of period $20,470 $16,103
--------- --------
--------- --------
Supplementary disclosures:
Income taxes paid $ 4,176 $ 1,350
Interest paid 1,431 314
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 28,
1996 45,640 $45,640 $42,758 $561,500 $(946) $185 $649,137
Add (deduct)-
Net income -- -- -- 64,110 -- -- 64,110
Cash dividends
declared on
Common stock -- -- -- (7,305) -- -- (7,305)
Stock options
exercised 148 148 2,583 -- -- -- 2,731
Stock repurchased
from tender
offer (7,731) (7,731) (7,653) (225,157) -- -- (240,541)
Foreign currency
translation
adjustment -- -- -- -- 132 -- 132
Investment securities
valuation
adjustment -- -- -- -- -- 178 178
Balance July 28,
1996 38,057 $38,057 $37,688 $393,148 $(814) $ 363 $468,442
See accompanying notes to financial statements.
</TABLE>
FLEETWOOD ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY 28, 1996
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 28, 1996.
2) Industry Segment Information
Information with respect to industry segments for the periods ending
July 28, 1996 and July 30, 1995 is shown below:
<TABLE>
13 Weeks Ended 13 Weeks Ended
July 28, 1996 July 30, 1995
<S> <C> <C>
OPERATING REVENUES:
Manufactured housing $377,145 $361,537
Recreational vehicles 357,854 332,313
Supply operations 16,246 10,867
-------- --------
$751,245 $704,717
-------- --------
-------- --------
OPERATING INCOME:
Manufactured housing $ 29,893 $ 27,947
Recreational vehicles 19,837 6,081
Supply operations 1,464 56
Corporate and other* (6,516) (1,910)
--------- --------
$ 44,678 $ 32,174
--------- ---------
--------- ---------
* 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 28, 1996
compared to the 13-week period ended July 30, 1995. The amounts shown below
apply only to continuing operations.
Thirteen Weeks Ended
July 28, 1996
Increase %
(Decrease) Change
<S> <C> <C>
Sales $46,528 6.6%
Cost of products sold 32,010 5.6
-------- ----
Gross profit 14,518 11.1
Selling expenses (5,047) (10.5)
General and administrative expenses 7,061 13.8
-------- -----
Operating expenses 2,014 2.0
--------- -----
Operating income 12,504 38.9
Other income (expense) 2,021 106.2
Income before taxes 14,525 42.6
Provision for income taxes 5,512 40.1
Net income $ 8,926 43.7%
-------- -----
-------- -----
</TABLE>
Current Quarter Compared to Same Quarter Last Year
Net income for the first quarter of fiscal 1997 jumped to $64,110,000 or
$1.40 per share compared to $22,798,000 or 49 cents per share in the prior
year. Included in current year earnings is an after-tax gain of $33,891,000
or 74 cents per share on the sale of Fleetwood Credit Corp., the Company's RV
finance subsidiary. First quarter earnings also include $887,000 or 2 cents
per share for one month of operations from the discontinued finance
operation.
Income from continuing operations rose 44 percent to a record $29,332,000 or
64 cents per share, up from $20,406,000 and 44 cents per share a year ago.
Sales gains and improved operating margins for both manufactured housing and
recreational vehicles led to the higher operating earnings. Most of the
improvement, however, came from the RV group primarily as a result of sharply
higher motor home sales and profits.
With all business segments producing higher sales, consolidated revenues
increased 7 percent to $751.2 million compared to $704.7 million last year.
Prior year revenues have been restated to remove $13.8 million of finance
revenues because of the sale of Fleetwood Credit Corp. and its treatment as a
discontinued operation.
Manufactured housing sales reached a new first quarter high of $377.1
million, 4 percent ahead of last year's $361.5 million. The company sold
17,453 homes in the quarter compared to 17,350 in last year's similar period.
A higher percentage of sales were represented by multi-section homes which
led to a 4 percent rise in the volume of floors shipped. Despite the
increased sales volume, housing group sales as a percentage of total Company
revenues fell from 51 percent last year to 50 percent in this year's first
quarter.
Recreational vehicle revenues were up 8 percent to $357.9 million on the
strength of sharply higher motor home sales. The motor home division
generated a 33 percent sales increase to $223.9 million on a 20 percent gain
in shipments to 4,174 units. Travel trailer revenues were off 5 percent to
$116.9 million as unit volume slipped 8 percent to 8,837 units. The folding
trailer division experienced a 22 percent sales decline to $17.1 million with
unit shipments sliding 34 percent to 3,524. Last year's first quarter
included sales of $18.3 million from the European RV operation which was sold
in May 1996. Recreational vehicle sales were 48 percent of total Company
revenues, up from 47 percent last year.
Manufacturing gross profit improved as a percentage of sales from 18.6
percent to 19.4 percent, led by improved margins in the RV group. The higher
RV margins primarily reflected increased labor efficiencies and lower
manufacturing overhead costs. Housing group margins as a percentage of sales
were virtually unchanged from the prior year.
Operating expenses of $101.2 million were 2 percent higher than last year's
similar period, but lower as a percentage of sales, falling from 14.1 percent
to 13.5 percent. Selling expenses dropped 10 percent to $43.1 million as
reductions in RV marketing and sales promotion expenses more than offset
higher product warranty costs. As a percentage of sales, selling expenses
declined from 6.8 percent to 5.7 percent. General and administrative
expenses rose 14 percent to $58.1 million and increased as a percentage of
sales from 7.3 percent to 7.7 percent. The increase was primarily due to
higher management incentive compensation stemming from improved profits.
Non-operating income doubled to $3.9 million compared to last year's $1.9
million mainly as a result of higher investment income. Income from
investments of $5.4 million was 85 percent ahead of last year largely due to
a temporary bulge in cash balances available for investment. The large
increase in invested funds mainly resulted from the sale of Fleetwood Credit
Corp. and the assumption of $80 million in long-term debt from the finance
subsidiary. In late July, the Company completed a tender offer for 7.7
million shares of its outstanding Common stock which used up all of the
proceeds from the finance company transactions. The Company expects
investment income to return to more normal levels in future quarters.
The effective income tax rate declined to 39.6 percent from 40.4 percent a
year ago largely due to the elimination of the German RV operation which last
year was generating operating losses with no tax benefits.
Liquidity and Capital Resources
The Company generally relies upon internally generated cash flows to satisfy
working capital needs and to fund capital expenditures. Cash generated from
operations in the first quarter was $41.0 million compared to $79.0 million
in the prior year. Increased investments in receivables and inventories in
the current year led to the decline in cash flow relative to the prior year.
Cash and investments fell $75.9 million to $212.0 million primarily due to
the purchase of the Company's Common stock as explained below.
Cash received during the quarter included the proceeds from the sale of
Fleetwood Credit Corp., which totaled $132.2 million, net of income taxes.
This, combined with proceeds from the sale of investment securities, resulted
in net cash of $208.8 million provided by investing activities.
During the quarter, the Company completed a Dutch Auction tender offer
resulting in the purchase of 7.7 million shares or approximately 17 percent
of its outstanding Common stock at a cost of $240.5 million. The Company may
from time to time make further share repurchases. There remains outstanding
a previous authorization by the Board of Directors to purchase up to 1.7
million shares of the Company's Common stock. Other cash outflows during the
quarter included $3.3 million for capital expenditures and $7.3 million for
quarterly dividends paid to shareholders.
On August 14, 1996, shortly after quarter end, the Company made a scheduled
debt repayment of $25 million which reduced long-term debt outstanding to $55
million.
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 5, 1996
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-27-1997
<PERIOD-END> JUL-28-1996
<CASH> 20,470
<SECURITIES> 191,549
<RECEIVABLES> 190,729
<ALLOWANCES> 0
<INVENTORY> 152,109
<CURRENT-ASSETS> 0
<PP&E> 422,849
<DEPRECIATION> 159,124
<TOTAL-ASSETS> 956,283
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 38,057
0
0
<OTHER-SE> 430,385
<TOTAL-LIABILITY-AND-EQUITY> 956,283
<SALES> 751,245
<TOTAL-REVENUES> 751,245
<CGS> 605,341
<TOTAL-COSTS> 706,567
<OTHER-EXPENSES> 20
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,450
<INCOME-PRETAX> 48,602
<INCOME-TAX> 19,270
<INCOME-CONTINUING> 29,332
<DISCONTINUED> 887
<EXTRAORDINARY> 33,891
<CHANGES> 0
<NET-INCOME> 64,110
<EPS-PRIMARY> 1.40
<EPS-DILUTED> 1.40
<FN> Amounts for current assets and current
liabilities are not shown since balance sheet
is presented in nonclassified format.
</TABLE>
