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 27, 1997
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 Identification Number)
incorporation or organization)
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 27, 1997
_________________________ ___________________________________
Common stock, $1 par value 35,940,799 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 27, 1997 and July 28, 1996,
and
the balances as of July 27, 1997 and April 27, 1997. 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 27, 1997, and the related condensed consolidated
statements of income and cash flows for the thirteen-week periods ended
July 27, 1997 and July 28, 1996, and the condensed consolidated
statement
of changes in shareholders' equity for the thirteen-week period ended
July
27, 1997. These financial statements are the responsibility of the
company's management.
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 27, 1997, 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 23, 1997, 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
27, 1997, 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 26, 1997
<TABLE>
FLEETWOOD ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands except per share data)
(UNAUDITED)
13 Weeks Ended 13 Weeks Ended
July 27, 1997 July 28, 1996
<S> <C> <C>
Sales $728,454 $751,245
Cost of products sold 594,785 605,341
-------- --------
Gross profit 133,669 145,904
Operating expenses 100,775 101,226
-------- --------
Operating income 32,894 44,678
Other income (expense):
Investment income 2,293 5,394
Interest expense (879) (1,450)
Other 16,036 (20)
-------- -------
17,450 3,924
-------- -------
Income from continuing operations
before income taxes 50,344 48,602
Provision for income taxes (19,402) (19,270)
--------- --------
Income from continuing operations 30,942 29,332
Income from discontinued operations:
Income from operations of finance
subsidiary (net of income taxes
of $511) -- 887
Gain on sale of finance subsidiary
(net of income taxes of $19,607) -- 33,891
-------- --------
-- 34,778
-------- --------
Net income $30,942 $64,110
======== =======
Net income per Common and
equivalent share:
Continuing operations $.84 $.64
Discontinued operations:
Income from operations of
finance subsidiary -- .02
Gain on sale of finance
subsidiary -- .74
------- -------
Total $.84 $1.40
======= =======
Dividends declared per share
of Common stock outstanding $.17 $.16
======= =======
Common and equivalent
shares outstanding 36,668 45,916
======= =======
See accompanying notes to financial statements.
FLEETWOOD ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONDENSED)
(Amounts in thousands)
ASSETS
July 27, April 27,
1997 1997
(Unaudited)
<S> <C> <C>
Cash $ 16,032 $ 37,890
Investments 116,191 72,544
Receivables 184,637 181,085
Inventories:
Raw materials 117,700 101,794
Work in process and finished products 43,252 43,719
Property, plant and equipment 279,829 278,331
Deferred tax benefits 68,338 71,285
Cash value of Company-owned
life insurance 46,977 46,834
Other assets 41,962 38,065
--------- ----------
$914,918 $871,547
======== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $109,107 $106,749
Employee compensation and benefits 116,875 114,983
Federal and state taxes on income 16,343 4,046
Insurance reserves 24,368 44,381
Long-term debt 55,000 55,000
Other liabilities 117,899 103,293
-------- --------
439,592 428,452
-------- --------
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 35,941,000
at July 27, 1997 and 35,747,000
at April 27, 1997 35,941 35,747
Capital surplus 44,024 37,684
Retained earnings 395,494 370,653
Foreign currency translation
adjustment (757) (1,163)
Investment securities valuation
adjustment 624 174
--------- ---------
475,326 443,095
--------- ---------
$914,918 $871,547
========= =========
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 27, 1997 July 28,
1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $30,942 $64,110
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation expense 6,761 6,161
Amortization of intangibles and goodwill 65 180
Losses on sales of property,
plant and equipment 144 20
Gain on reinsurance transaction (16,180) --
Gain on sale of finance subsidiary -- (33,891)
Changes in assets and liabilities:
Increase in receivables (3,552) (17,349)
Increase in inventories (15,439) (14,210)
(Increase) decrease in deferred
tax benefits 2,947 (5,432)
(Increase) decrease in cash value of
Company-owned life insurance (143) 36
(Increase) decrease in other assets (3,962) 13,207
Increase (decrease) in accounts payable 2,358 (3,851)
Increase in other liabilities 24,962 31,897
Foreign currency translation adjustment 406 132
------- --------
Net cash provided by operating activities 29,309 41,010
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investment securities:
Held-to-maturity (1,550,024) (1,127,754)
Available-for-sale (3,839) (1,268,533)
Proceeds from maturity of investment securities:
Held-to-maturity 1,507,950 1,136,450
Available-for-sale -- 1,228,874
Proceeds from sale of available-for-sale
investment securities 2,716 111,730
Purchases of property, plant and
equipment, net (8,403) (3,319)
Proceeds from sale of finance subsidiary -- 132,222
Change in net assets of discontinued
operation -- (887)
--------- ---------
Net cash provided by (used in)
investing activities (51,600) 208,783
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends to shareholders (6,101) (7,305)
Proceeds from exercise of stock options 6,534 2,731
Purchase of Common stock -- (240,541)
--------- ---------
Net cash provided by (used in)
financing activities 433 (245,115)
--------- ---------
Increase (decrease) in cash (21,858) 4,678
Cash at beginning of period 37,890 15,792
--------- --------
Cash at end of period $16,032 $20,470
========= =======
Supplementary disclosures:
Income taxes paid $ 1,094 $ 4,176
Interest paid 884 1,431
======= ======
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 27,
1997 35,747 $35,747 $37,684 $370,653 $(1,163) $174
$443,095
Add (deduct)-
Net income -- -- -- 30,942 -- --
30,942
Cash dividends
declared on
Common stock -- -- -- (6,101) -- --
(6,101)
Stock options
exercised
(net of tax
benefit) 194 194 6,340 -- -- --
6,534
Foreign currency
translation
adjustment -- -- -- -- 406 --
406
Investment securities
valuation
adjustment -- -- -- -- -- 450
450
------ ---- ----- ----- ---- ---- -
- -----
Balance July 27,
1997 35,941 $35,941 $44,024 $395,494 $(757) $ 624
$475,326
====== ======= ======= ======== ===== ====
========
See accompanying notes to financial statements.
</TABLE>
FLEETWOOD ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY 27, 1997
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 27, 1997.
2) Industry Segment Information
Information with respect to industry segments for the periods
ending
July 27, 1997 and July 28, 1996 is shown below:
13 Weeks Ended 13 Weeks Ended
July 27, 1997 July 28, 1996
<TABLE>
<S> <C> <C>
OPERATING REVENUES:
Manufactured housing $366,649 $377,145
Recreational vehicles 350,693 357,854
Supply operations 11,112 16,246
-------- --------
$728,454 $751,245
======== ========
OPERATING INCOME:
Manufactured housing $ 15,830 $ 29,893
Recreational vehicles 16,113 19,837
Supply operations 3,392 1,464
Corporate and other* (2,441) (6,516)
-------- --------
$ 32,894 $ 44,678
======== ========
* Including adjustments and eliminations.
</TABLE>
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 27,
1997
compared to the 13-week period ended July 28, 1996. The amounts shown
below
apply only to continuing operations.
Thirteen Weeks Ended
July 27, 1997
Increase %
(Decrease) Change
<TABLE>
<S> <C> <C>
Sales $(22,791) (3.0)%
Cost of products sold (10,556) (1.7)
------- ----
Gross profit (12,235) (8.4)
Selling expenses 3,891 9.0
General and administrative expenses (4,342) (7.5)
------- ----
Operating expenses (451) (.4)
-------- ----
Operating income (11,784) (26.4)
Other income (expense) 13,526 344.7
Income before taxes 1,742 3.6
Provision for income taxes 132 .7
Net income $1,610 5.5%
====== ====
</TABLE>
Current Quarter Compared to Same Quarter Last Year
Income from continuing operations in the first quarter of fiscal 1998
was
$30,942,000 or 84 cents per share, and included $10,400,000 or 28 cents
per
share from a non-recurring insurance transaction. This compares to
$29,332,000 or 64 cents per share a year ago. Per share earnings from
continuing operations were up 31 percent in fiscal 1998 due to fewer
outstanding shares stemming from large share repurchases last year.
Current quarter earnings were favorably impacted by a significant
reinsurance transaction involving the Company's captive insurance
operation. In this transaction, a portion of the Company's products
liability risk underwritten by the wholly owned captive was reinsured in
the commercial insurance market, freeing up insurance reserves
previously
accrued by the Company. The net effect of this transaction was an
addition
to earnings before taxes of $16.2 million which was classified as a non-
operating item because of its unusual nature.
Last year's first quarter included income from discontinued operations
of
$34.8 million or 76 cents per share which, when added to income from
continuing operations, resulted in total earnings of $64.1 million or
$1.40
per share in the year ago period. The income from discontinued
operations
reflected an after-tax gain of $33.9 million or 74 cents per share on
the
sale of Fleetwood Credit Corp., the Company's RV finance subsidiary, and
two cents per share for the final month of finance company operations.
First quarter operating income was 26 percent behind last year's record
quarter primarily due to lower gross margins and higher operating costs
in
the manufactured housing segment. In the past year, the Company has
added
five new housing factories which has increased fixed operating costs,
and
this has been accompanied by lower operating rates and reduced housing
revenues. In addition, the Company incurred a loss of approximately
$2.2
million before taxes due to flood damage at its Mississippi manufactured
housing operation, and was also saddled with plant startup and plant
shutdown costs totaling about $3.0 million. Recreational vehicle
profits
were also off from last year's strong first quarter because of slower
motor
home sales and non-recurring costs related to a realignment of motor
home
plant production.
Slower sales of both manufactured housing and recreational vehicles led
to
a three percent decline in consolidated revenues from $751.2 million to
$728.5 million.
Manufactured housing revenues slipped three percent to $366.6 million on
a
six percent decline in unit sales to 16,359 homes. A higher mix of
multi-
section homes, which rose from 47 percent to 55 percent, resulted in a
moderate one percent decline in floor shipments. Housing group sales
represented 50 percent of total Company revenues, which was virtually
identical to last year's percentage.
Recreational vehicle revenues in the first quarter totaled $350.7
million
compared to $357.9 million in last year's strong first period. A seven
percent decline in motor home sales was partially offset by higher sales
of
towable RV products. Motor home revenues eased to $207.5 million on a
21
percent decline in shipments to 3,317 units. In the towable category,
travel trailer sales rose two percent to $119.3 million on a three
percent
decline in unit sales to 8,554, while folding trailer revenues jumped 40
percent to $23.9 million on a 34 percent unit volume increase to 4,720
units. As in the prior year, recreational vehicle sales accounted for
48
percent of total Company revenues.
The Company's supply group recorded sales of $11.1 million in the July
quarter compared to $16.2 million in last year's similar period.
Manufacturing gross profit declined as a percentage of sales from 19.4
percent to 18.3 percent primarily due to lower manufactured housing
margins
stemming from more competitive pricing. Recreational vehicle margins
were
also off from last year's strong first quarter, largely as a result of
less
efficient motor home operations and slimmer travel trailer margins
caused
by West Coast pricing adjustments.
Operating expenses of $100.8 million were down less than one percent
from
last year's similar period, but increased as a percentage of sales from
13.5 percent to 13.8 percent on the reduced sales volume. Selling
expenses
were up nine percent to $47.0 million, primarily reflecting higher
housing
marketing expenses as well as increased product warranty and service
costs.
As a percentage of sales, selling expenses rose from 5.7 percent to 6.5
percent. General and administrative expenses declined seven percent to
$53.8 million, and decreased as a percentage of sales from 7.7 percent
to
7.4 percent. This reduction was primarily related to lower management
incentive compensation which resulted from the decline in profits. Also
included in general and administrative costs was the $2.2 million flood
loss mentioned previously.
Non-operating income of $17.5 million included the one-time insurance
transaction mentioned earlier. Income from investments of $2.3 million
was
57 percent below last year's first quarter, largely due to significantly
higher cash balances that were available for investment last year, most
of
which arose from the sale of Fleetwood Credit Corp.
The effective income tax rate declined to 38.5 percent in the first
quarter
from 39.6 percent a year ago, primarily as a result of lower state
income
tax accruals. The lower tax rate added about 1.5 cents per share to
earnings.
Liquidity and Capital Resources
The Company generally relies upon internally generated cash flows to
satisfy working capital needs and to fund capital expenditures. The
Company's cash equivalents (cash plus investments) totaled $132.2
million
at the end of July compared to $110.4 million at the end of April. Cash
flow from operations decreased to $29.3 million in the first quarter
compared to $41.0 million in the prior year, primarily as a result of
the
decline in profitability.
Cash received during last year's first quarter included the proceeds
from
the sale of Fleetwood Credit Corp., which totaled $132.2 million net of
income taxes.
During last year's first 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.
Cash outflows during the current quarter included $6.1 million for
quarterly dividends to shareholders and $8.4 million in capital
expenditures.
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
Senior Vice President-Finance
and Chief Financial Officer
August 28, 1997
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-26-1998
<PERIOD-END> JUL-27-1997
<CASH> 16,032
<SECURITIES> 116,191
<RECEIVABLES> 184,637
<ALLOWANCES> 0
<INVENTORY> 160,952
<CURRENT-ASSETS> 0
<PP&E> 455,082
<DEPRECIATION> 175,253
<TOTAL-ASSETS> 914,918
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 35,941
0
0
<OTHER-SE> 439,385
<TOTAL-LIABILITY-AND-EQUITY> 914,918
<SALES> 728,454
<TOTAL-REVENUES> 728,454
<CGS> 594,785
<TOTAL-COSTS> 695,560
<OTHER-EXPENSES> 144
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 879
<INCOME-PRETAX> 50,344
<INCOME-TAX> 19,402
<INCOME-CONTINUING> 30,942
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30,942
<EPS-PRIMARY> .84
<EPS-DILUTED> .84
<FN> Amounts for current assets and current
liabilities are not shown since balance sheet
is presented in nonclassified format.
</TABLE>
