FORM 10-Q/A
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 --
<TABLE>
FLEETWOOD ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands except per share data)
(UNAUDITED)
Thirteen Thirteen
Weeks Ended 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 84,595 101,226
-------- --------
Operating income 49,074 44,678
Other income (expense):
Investment income 2,293 5,394
Interest expense (879) (1,450)
Other (144) (20)
-------- -------
1,270 3,924
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Income from continuing operations
before income taxes 50,344 48,602
Provision for income taxes (19,402) (19,270)
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Income from continuing operations 30,942 29,332
Income from discontinued operations:
Income from operations of finance
subsidiary (less applicable 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
======= ======
</TABLE>
See accompanying notes to financial statements.
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:
<TABLE>
13 Weeks Ended 13 Weeks Ended
July 27, 1997 July 28, 1996
<S> <C> <C>
OPERATING REVENUES:
Manufactured housing $366,649 $377,145
Recreational vehicles 350,693 357,854
Supply operations 11,112 6,246
-------- ---------
$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* 13,739 (6,516)
-------- -------
$49,074 $44,678
======= =======
</TABLE>
* Including adjustments and eliminations.
3) Change in Estimate of Insurance Reserves
In July 1997, the Company recorded a $19.3 million change in estimate
in its products liability reserves and concurrently paid a $3.1
million premium to an outside insurance company to lower its self-
insured retention (i.e., deductible) on its products liability insurance.
The net effect of these transactions was an addition to operating income
of $16.2 million ($10.4 million after tax or 28 cents per share).
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.
<TABLE>
Thirteen Weeks Ended
July 27, 1997
Increase %
(Decrease) Change
<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 (20,522) (35.3)
-------- ----
Operating expenses (16,631) (16.4)
Operating income 4,396 9.8
Other income (expense) (2,654) (67.6)
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.
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.
Consolidated operating income was ten percent ahead of last year's
first quarter due to a change in estimate of insurance reserves
discussed below (see Change in Estimate of Insurance Reserves).
Operating income from manufacturing operations was 26 percent behind
the prior year reflecting 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 $84.6 million, which included the effect of the
change in estimate of insurance reserves, were down 16 percent from
last year's similar period, while declining as a percentage of sales
from 13.5 percent to 11.6 percent. 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
35 percent to $37.6 million, and decreased as a percentage of sales
from 7.7 percent to 5.2 percent. This reduction was primarily
related to the aforementioned change in estimate of insurance
reserves, but also included lower management incentive compensation
resulting 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 $1.3 million was off 68 percent from the
prior year due to a decline in investment income. 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.
Change in Estimate of Insurance Reserves
The Company self insures its primary layer of products liability
risk. Products liability reserves are based upon claims projections
from an independent actuarial study. There can be significant
variability in claims experience from year to year, and there is
typically a long loss development period for products cases.
Accordingly, actuarial projections are updated annually to reflect
current loss development trends, which results in frequent
adjustments to reserves for prior years' cases. Because of the
variability and long loss development of products liability claims,
the Company actuary has consistently followed conservative reserving
practices. In July 1997, after several years of favorable claims
experience, the Company was able to lower its self-insured retention
(i.e., deductible) from $47.5 million to $18.7 million (of which
losses of $9.3 million have been paid) for a five-year underwriting
period between 1991 and 1995 by entering into a commercial insurance
contract. Prior to entering into the insurance contract, the Company
carefully reviewed the economics of the transaction and its
implications as to current reserve levels. The Company concluded
that, based upon recent favorable loss development trends (a factor
that was clearly confirmed by the proposed insurance arrangement), a
change in estimate of reserves was appropriate. The outcome was a
$19.3 million adjustment to estimated reserves, offset by a $3.1
million premium for the outside insurance. This resulted in an
addition to operating income of $16.2 million before taxes, and an
increase to after-tax earnings of $10.4 million or 28 cents per
share.
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.
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
June 24, 1998
