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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(MARK ONE) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
/X/ OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended April 25, 1999
OR
/ / 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 NO.)
3125 MYERS STREET, RIVERSIDE, CALIFORNIA 92503-5527
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (909) 351-3500
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
-------------------------------- ---------------------------------
COMMON STOCK, $1 PAR VALUE NEW YORK STOCK EXCHANGE, INC.
PACIFIC EXCHANGE, INC.
PREFERRED SHARE PURCHASE RIGHTS NEW YORK STOCK EXCHANGE, INC.
PACIFIC EXCHANGE, INC.
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
(TITLE OF CLASS)
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 BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION 8-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. /X/
AGGREGATE MARKET VALUE OF COMMON STOCK HELD BY NON-AFFILIATES ON JUNE 21,
1999: $850,421,000 (33,349,859 SHARES AT CLOSING PRICE ON NEW YORK STOCK
EXCHANGE OF $25.50). FOR THIS PURPOSE ALL SHARES HELD BY OFFICERS AND DIRECTORS
ARE CONSIDERED TO BE HELD BY AFFILIATES, BUT NEITHER THE REGISTRANT NOR SUCH
PERSONS CONCEDE THAT THEY ARE AFFILIATES OF THE REGISTRANT.
COMMON STOCK OUTSTANDING ON JUNE 21, 1999: 33,390,775 SHARES
DOCUMENTS INCORPORATED BY REFERENCE:
INFORMATION REQUIRED BY PART III IS INCORPORATED BY REFERENCE TO PORTIONS OF
THE REGISTRANT'S PROXY STATEMENT WITH RESPECT TO ITS 1999 ANNUAL MEETING, WHICH
WILL BE FILED NO LATER THAN 120 DAYS AFTER THE CLOSE OF THE REGISTRANT'S FISCAL
YEAR ENDED APRIL 25, 1999.
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FLEETWOOD ENTERPRISES, INC.
PART I
ITEM 1. BUSINESS
GENERAL
Fleetwood Enterprises, Inc. is the nation's largest manufacturer of
recreational vehicles (motor homes, travel trailers, folding trailers and
slide-in truck campers) and one of the nation's largest producers and retailers
of manufactured housing. Fleetwood had a 4.0 percent share of the single-family
housing market in 1998 and a 17.7 percent share of the manufactured housing
market. In its fiscal year ended April 1999, Fleetwood sold 65,877 manufactured
homes and was the second largest producer of HUD-Code homes in the United States
in terms of units sold. In 1998, Fleetwood had a 26.1 percent share of the
overall recreational vehicle market, a 26.3 percent share of the motor home
market, a 21.6 percent share of the travel trailer market and a 37.0 percent
share of the folding trailer market. In its fiscal year ended April 1999,
Fleetwood sold 74,722 recreational vehicles and held the leading market share in
each of these three product categories.
The Company's principal manufacturing activities are primarily conducted in
18 states within the U.S., and to a much lesser extent in Canada. In addition,
the Company operates four supply companies which supply components for its
primary manufacturing operations, while also generating outside sales.
During fiscal 1999, the Company entered the manufactured housing retail
business through a combination of key acquisitions and internal development of
new retail sales centers. At the end of fiscal 1999, the Company was operating
167 retail sales locations in 24 states, and was the fourth largest retailer of
manufactured homes in the U.S.
Fleetwood's business began in 1950 through the formation of a California
corporation. The present company was incorporated in Delaware in September 1977,
and succeeded by merger to all the assets and liabilities of the predecessor
company. The Company's principal executive offices are located in Riverside,
California. As used herein, the terms "Fleetwood" or "Company" mean Fleetwood
Enterprises, Inc. and its subsidiaries, unless otherwise indicated by the
context.
The following table sets forth revenues by business segment and the relative
contribution of such revenues to total revenues for the past three fiscal years.
Information with respect to operating profit (loss) and identifiable assets by
industry segment is shown in the Notes to Consolidated Financial Statements in
Part II of this Form 10-K.
<TABLE>
<CAPTION>
YEARS ENDED APRIL
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<S> <C> <C> <C> <C> <C> <C>
1999 % 1998 % 1997 %
<CAPTION>
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(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Manufactured housing:
Manufacturing.................................. $ 1,563,966 45% $ 1,487,650 49% $ 1,426,940 50%
Retail......................................... 332,309 9 -- -- -- --
Less intercompany.............................. (178,764) (5) -- -- -- --
------------ --- ------------ --- ------------ ---
1,717,511 49 1,487,650 49 1,426,940 50
Recreational vehicles:
Motor homes.................................... 1,064,465 31 904,574 30 855,214 30
Travel trailers................................ 548,910 16 503,762 16 453,274 16
Folding trailers............................... 115,659 3 109,827 4 86,675 3
------------ --- ------------ --- ------------ ---
1,729,034 50 1,518,163 50 1,395,163 49
------------ --- ------------ --- ------------ ---
Supply operations.............................. 43,618 1 44,754 1 52,323 1
------------ --- ------------ --- ------------ ---
$ 3,490,163 100% $ 3,050,567 100% $ 2,874,426 100%
------------ --- ------------ --- ------------ ---
------------ --- ------------ --- ------------ ---
</TABLE>
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MANUFACTURED HOUSING
Fleetwood is the second largest producer of HUD-Code manufactured housing in
the United States, and distributes its products through a network of
approximately 1,470 retailers in 48 states. Approximately 1,300 of the Company's
retailers are independent and 167 at fiscal year end were Company-owned stores.
Fleetwood's share of the manufactured housing market, based upon shipments to
retailers, was 17.7 percent in calendar year 1998. A manufactured home is a
single-family house constructed entirely in a factory environment rather than at
the home site, and is constructed in accordance with HUD construction and safety
standards. There are two basic categories of manufactured
housing--single-section and multi-section--and Fleetwood is a leading producer
of both types. Fleetwood produces manufactured housing using efficient,
assembly-line techniques and generally the same materials as are found in
site-built homes.
About 67 percent of the manufactured homes produced in the United States are
placed on individually owned lots; the balance are located on leased sites in
manufactured housing communities. Most manufactured housing is sold in rural
regions and towns outside of major urban areas.
Today's manufactured homes offer customers similar quality to many
site-built homes at a much more affordable price. Manufactured homes are
constructed in a factory environment utilizing assembly line techniques, which
allows for volume purchases of materials and components and more efficient use
of labor. The quality of manufactured homes has increased significantly over the
past 20 years, as manufactured home producers offer most of the amenities of
site-built housing and generally build homes with the same materials as
site-built homes. Many features associated with new site-built homes are
included in manufactured homes, such as central heating, name brand appliances,
carpeting, cabinets, walk-in closets, vaulted ceilings, wall coverings and
porches. In addition, optional features include such amenities as fireplaces,
wet bars, spa tubs and garages, as well as retailer-installed options such as
central air conditioning and furniture packages.
The manufactured housing industry has grown significantly since 1991.
According to the Manufactured Housing Institute, domestic shipments increased
from 170,713 homes in 1991 to 373,143 homes in 1998, while total retail sales
increased from approximately $4.7 billion to more than $14.0 billion over the
same period. In addition, the manufactured housing industry's share of new
single-family housing has increased significantly in recent years, from about 17
percent in 1991 to 23 percent in 1998. The Company believes that these increases
have resulted from increasing consumer acceptance of and preference for
manufactured housing, which has been driven by the following: (i) improved
product quality and design and enhanced features; (ii) the significant disparity
in the average price per square foot between site-built housing and manufactured
housing; (iii) favorable demographic and regional economic trends; (iv)
improving business practices in the manufactured home retail industry; and (v)
increased attractiveness of financing terms available to manufactured housing
retailers and consumers. As acceptance of manufactured housing has increased
among higher income buyers, demand has shifted toward larger, multi-section
homes, which accounted for 61 percent of industry shipments in 1998, up from 47
percent in 1991.
Fleetwood held a 20.0 percent share of the single-section manufactured
housing market in calendar 1998, as measured by shipments to retailers.
Fleetwood's single-section homes range in size from 550 square feet to 1,290
square feet. Fleetwood's average single-section home retailed for approximately
$23,000 (excluding land costs) in fiscal 1999. Single-section homes represented
approximately 42 percent of Fleetwood's manufactured housing unit shipments and
approximately 30 percent of manufactured housing sales in its fiscal year ended
April 1999. Fleetwood's single-section homes are designed for the affordable
housing market which includes first-time, retiree and value-oriented buyers.
Fleetwood held a 16.3 percent share of the multi-section manufactured
housing market in calendar 1998, as measured by shipments to retailers.
Fleetwood's multi-section homes range in size from 930 square feet to 2,340
square feet, and sold for an average retail price of approximately $43,000
(excluding land costs) in fiscal 1999. Multi-section homes represented
approximately 58 percent of
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Fleetwood's manufactured housing unit shipments and approximately 70 percent of
manufactured housing sales in fiscal 1999.
MANUFACTURED HOUSING--RETAIL
With the exception of several vertically integrated entities, most companies
in the manufactured housing industry, including Fleetwood, have traditionally
marketed their homes through independent retailers. Recently, however, certain
manufactured housing producers have begun to acquire retailers. These
acquisitions have occurred for a variety of reasons, including manufacturers'
desire to (i) control retail distribution; (ii) upgrade marketing and
merchandising efforts, including brand name development; and (iii) provide an
exit vehicle for family-owned retail businesses. Additionally, a number of
financial consolidators and residential developers have entered the manufactured
housing industry by acquiring retailers. In the first half of calendar 1998,
certain competing manufacturers announced acquisitions of several important
Fleetwood retailers, which collectively accounted for approximately $277 million
in purchases from Fleetwood. These developments created a risk that independent
distribution channels for Fleetwood homes may not be as readily available as
they have been in the past, which prompted the Company to modify the way it
markets its homes.
In order to protect its distribution channels and to take advantage of the
business opportunities in the manufactured housing retail industry, Fleetwood
acquired HomeUSA, Inc. ("HomeUSA"), the nation's largest independent retailer of
manufactured homes. This entity had 65 retail locations and calendar 1997
pro-forma sales of $205 million. The HomeUSA acquisition was completed on August
10, 1998. Concurrent with the announcement of the HomeUSA acquisition, Fleetwood
acquired the remaining interest in Expression Homes, Inc. ("Expression Homes")
that it did not already own. Expression Homes was jointly formed with Pulte
Corporation in 1997 for the purpose of entering the manufactured housing retail
business, initially through selected acquisitions and later through new startup
operations. Fleetwood continued with these acquisition efforts, and completed
several key acquisitions of independent retailers during fiscal 1999. Also in
fiscal 1999, Fleetwood expanded its Company-owned retail network through the
development of new "greenfield" locations. This latter strategy will be
Fleetwood's primary focus in future years.
RECREATIONAL VEHICLES
Fleetwood has been the leading producer of recreational vehicles in the
United States since 1973 and distributes its products through a network of
approximately 1,200 independent retailers in 49 states. Recreational vehicles
are either driven or towed and are primarily used for vacations, camping trips
and other leisure activities. The general categories of recreational vehicles
are motor homes, travel trailers and folding trailers.
Fleetwood manufactures motor homes under the brand names Bounder, Southwind,
Southwind Storm, Pace Arrow, Pace Arrow Vision, Flair, Discovery, American
Eagle, American Dream, American Tradition, American Heritage, Tioga and
Jamboree. A motor home consists of a truck or bus chassis with a living unit
built onto it. The interior typically includes a driver area and kitchen,
bathroom, dining and sleeping areas. Fleetwood's conventional ("Class A") motor
homes are fully self-contained, having sleeping accommodations for four to eight
people and such optional features as air conditioning, an auxiliary power
generator and home electronics such as a stereo, television and VCR. Fleetwood's
Class A motor homes are available in a variety of models ranging in length from
27 to 45 feet and retail for an average price of approximately $85,000.
Fleetwood also manufactures more compact ("Class C") motor homes built on a
cut-away van chassis with basically the same features and options as Class A
products. These units are available in various models ranging in length from 19
to 31 feet and retail for an average price of approximately $50,000. Six of the
industry's ten top-selling Class A motor homes are manufactured by Fleetwood, as
well as two of the top five Class C motor homes.
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Fleetwood manufactures a variety of travel trailers under the Prowler,
Terry, Wilderness, Mallard, Savanna, Avion and Westport brand names. Fleetwood's
travel trailers are designed to be towed by pickup trucks, vans or other tow
vehicles, and are similar to motor homes in use and features. All of Fleetwood's
travel trailers include sleeping, eating and bathroom facilities and are
self-contained units with their own lighting, heating, refrigeration, fresh
water storage tanks and sewage holding tanks so that they can be used for short
periods without being attached to utilities. Most of Fleetwood's travel trailers
are 8 feet wide, vary in length from 15 to 39 feet (including trailer hitch) and
retail for an average price of approximately $18,000. Four of the industry's ten
top-selling travel trailers are manufactured by Fleetwood.
Fleetwood is the largest manufacturer of folding trailers under the
industry-leading Coleman-Registered Trademark- brand. Folding trailers are a
lower cost alternative to travel trailers and are lighter and easier to tow.
Fleetwood's folding trailers have eating and sleeping facilities, range in
length from 17 to 25 feet and retail for an average price of approximately
$6,800.
SUPPLY OPERATIONS AND OTHER BUSINESSES
Fleetwood's supply operations include two fiberglass manufacturing
companies, a drapery operation and a lumber milling operation. These operations
provide a reliable source of quality components for Fleetwood's principal
manufacturing businesses, while also generating outside sales. In the fiscal
year ended April 1999, approximately 51 percent of the product volume of these
manufacturing operations was used by Fleetwood internally, and the remaining 49
percent was sold to third parties. The supply operations also include a lumber
brokerage and a component import business, each of which provides Fleetwood's
manufactured housing and recreational vehicle businesses with reliable sources
of quality raw materials and components.
DISCONTINUED OPERATIONS
In May 1996, the Company completed the sale of its wholly owned RV finance
subsidiary, Fleetwood Credit Corp., to Associates First Capital Corporation. The
sale was a cash transaction for $156.6 million, resulting in an after-tax gain
of $33.9 million, which was recognized in the first quarter of fiscal 1997. In
addition, net income of $887,000 from FCC's operations in fiscal 1997 until the
date of sale was recorded in the first quarter as income from discontinued
operations.
SALES AND DISTRIBUTION
Fleetwood distributes its manufactured homes primarily through a network of
approximately 1,300 independent retailers located in 48 states and 167
Company-owned stores in 24 states. In 1998, approximately 87 percent of
Fleetwood's manufactured homes were shipped to retailers in the 20 states with
the highest retail sales, including Texas, North Carolina, Georgia and Florida.
Fleetwood sells its recreational vehicles through a network of approximately
1,200 independent retailers located in 49 states and Canada. In the calendar
year ended 1998, approximately 80 percent of Fleetwood's recreational vehicles
were shipped to retailers in the 25 states with the highest retail sales,
including California, Texas, Michigan, Florida and Ohio. In the same period,
Fleetwood was the market share leader in terms of units sold in all but one of
the top 25 recreational vehicle states.
Consistent with industry practice, Fleetwood has historically marketed its
products through many independent retailers, none of which individually
accounted for a material part of Fleetwood's total sales. Fleetwood expects this
industry practice to continue with respect to recreational vehicles; however,
the recent acquisition activity in the retail sector of the manufactured housing
industry has prompted Fleetwood to modify its manufactured housing sales and
distribution strategies. The Company has responded to this industry trend by
upgrading its manufactured home retail distribution network, developing
alternatives to replace retailers purchased by competitors, and promoting and
expanding Fleetwood brand name recognition through exclusive "Fleetwood Home
Centers" and through its own retail strategies, including the acquisition of
HomeUSA, the Expression Homes initiative and the opening of
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Company-owned stores. The Company's entry into the manufactured housing retail
business in fiscal 1999 now requires that the Company maintain an inventory of
finished homes for purposes of display and immediate sale to retail homebuyers.
This is a distinct departure from the Company's manufacturing policy of building
homes to order and not maintaining factory inventories of completed homes. As a
result, inventories increased sharply during fiscal 1999, rising from $153.7
million in April 1998 to $257.0 million in April 1999.
As part of the sales process, Fleetwood offers most purchasers of its
manufactured homes and recreational vehicles comprehensive one-year warranties
against defects in materials and workmanship, excluding only certain components
separately warranted by a supplier. With respect to manufactured homes,
Fleetwood's warranty is extended to five years for structural, plumbing, heating
and electrical system failures. The warranty period for motor homes is one year
or until the unit has been driven 15,000 miles, whichever occurs first, except
for structural items, which are covered for three years. Annual expenses under
such warranties were approximately $137.8 million in fiscal year 1999 and $109.4
million in fiscal year 1998. Approximately 55 percent of the increase in such
costs in fiscal 1999 was the result of a change in accounting classification for
RV service costs. Fleetwood believes that its warranty program is an investment
that enhances its reputation for quality.
As part of its overall business strategy, Fleetwood has emphasized and
focused on the following items.
COMMITMENT TO QUALITY AND CUSTOMER SATISFACTION. In its fiscal year ended
April 1992, Fleetwood formalized its quality improvement program, focusing on
increasing customer satisfaction by improving the quality and design of
Fleetwood's products and enhancing the customer's shopping experience. In
implementing its quality program, Fleetwood has developed a number of ongoing
processes, including (i) designing its products with materials that frequently
exceed government requirements and industry standards, (ii) training both its
employees and its retailers' employees in customer satisfaction techniques and
quality improvement procedures, (iii) providing additional services, such as
comprehensive training of its retailers' employees and contractors regarding
proper installation techniques for manufactured homes, (iv) offering some of the
most extensive warranties in the manufactured housing and recreational vehicle
industries and (v) responding quickly and effectively to customer inquiries and
concerns.
Fleetwood's quality improvement process is facilitated by the use of
independent consumer surveys to determine whether retail customers are satisfied
with the quality of their Fleetwood product and the level of service provided by
Fleetwood and the retailer. An independent consumer research firm conducts
telephone surveys and communicates customer responses to Fleetwood's
manufacturing entities and retailers to reinforce quality performance and
eliminate customer problems. Each year, specific customer satisfaction goals are
established for Fleetwood's manufacturing operations and independent retailers.
Retailers who meet these performance standards are recognized with Fleetwood's
Circle of Excellence Award, and Fleetwood manufacturing centers are similarly
honored for meeting targeted levels of customer satisfaction. Fleetwood believes
that these efforts have resulted in increased awareness by Fleetwood employees
and retailers of the importance of product quality and service, which in turn
has significantly improved Fleetwood's customer satisfaction ratings.
PROVIDE THE BEST PRODUCT VALUE TO THE CUSTOMER. Fleetwood is committed to
offering the best product value in each of its market segments. Fleetwood
intends to achieve this by competitively pricing its products and by supplying
products superior to those of its competitors by maintaining high quality
control and product performance standards. Fleetwood is also committed to being
the low-cost producer in each market segment. To accomplish this, Fleetwood (i)
continuously improves its manufacturing processes, (ii) generates economies of
scale through high volume levels that reduce the impact of fixed costs and (iii)
purchases materials and components in large quantities to obtain volume
discounts.
UPGRADE AND EXPAND FLEETWOOD'S RETAIL DISTRIBUTION NETWORKS. Since 1991,
Fleetwood reduced the number of independent retail distribution centers approved
to sell Fleetwood manufactured housing products from approximately 1,800 to
approximately 1,300. Fleetwood believes that this action allowed it
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to focus its efforts on larger retailers that share Fleetwood's approach to
merchandising homes and customer satisfaction. Historically, Fleetwood had not
focused on exclusive retailer arrangements and most retailers sold competitive
lines; however, in recent years, Fleetwood has developed exclusive retailer
arrangements. Currently, approximately 40 percent of Fleetwood's manufactured
housing retailers are exclusive, up from approximately 30 percent three years
ago. Fleetwood has increased its efforts to develop and implement retail "best
practices" for its retailers through Fleetwood sponsored training programs and
manuals. Topics of recent training seminars have included professional selling
techniques and proper home installation procedures. Fleetwood actively seeks to
expand its manufactured housing retail network by adding retailers that meet
Fleetwood's criteria.
With respect to recreational vehicles, Fleetwood is actively implementing
"best practices" across its retail network and developing programs to increase
the proportion of Fleetwood products sold by its independent retailers. This
last initiative also includes increasing the number of exclusive Fleetwood
recreational vehicle retailers. In addition, Fleetwood has developed private
label recreational vehicle programs to expand retail sales through distribution
channels that traditionally have not sold recreational vehicles.
PROMOTE AND EXPAND "FLEETWOOD" BRAND NAME RECOGNITION. Fleetwood seeks to
expand consumer awareness of the "Fleetwood" name in both its manufactured
housing and recreational vehicle operations. Beginning in its fiscal year ended
April 1997, Fleetwood began working with selected manufactured housing retailers
to develop "Fleetwood Home Centers," which exclusively carry Fleetwood products,
have consistent signage identifying the location as a Fleetwood Home Center and
meet Fleetwood's highest standards for home presentation and customer
satisfaction. Fleetwood facilitated the opening of 130 Fleetwood Home Centers,
including 40 which are Company-owned, through the end of fiscal 1999. Current
plans call for the opening of additional centers in fiscal 2000, some of which
will be independent and some Company-owned. In addition, the Company initiated
in April 1998 a $20 million national advertising campaign for manufactured
homes. The Fleetwood Homes "Quality for Life" theme is being promoted through
television, radio, direct marketing, print advertising and billboards/outdoor
advertising. In the recreational vehicle group, Fleetwood has leading brand
names in each segment; however, Fleetwood seeks to promote each individual brand
as a part of the Fleetwood family of recreational vehicles. As an example,
Fleetwood is sponsoring a NASCAR driver and team, Dale Jarrett and the Robert
Yates Racing Team. As part of the sponsorship arrangement, Fleetwood has its
logo on Dale Jarrett's race car and equipment. Fleetwood believes that the
NASCAR racing circuit has a large audience, estimated at 90 million, that aligns
with Fleetwood's targeted customer categories for recreational vehicles.
PRODUCT FINANCING
Sales of recreational vehicles and manufactured housing are generally made
to retailers under commitments by financial institutions which have agreed to
finance retailer purchases. Product financing is currently readily available
from a variety of sources including commercial banks, savings and loan
institutions, credit unions and consumer finance companies. With respect to
manufactured housing, Associates First Capital Corporation ("Associates"), Green
Tree Financial Corp. ("Green Tree") and GreenPoint Financial Corp. provide a
substantial portion of the financing available for wholesale and retail
purchases of manufactured homes.
Since 1991, Fleetwood has had an alliance with Associates, which has
provided special wholesale and retail finance programs for Fleetwood
manufactured housing retailers under the name "Fleetwood Finance by the
Associates." From time to time, when necessary to enhance sales or financing
terms, Fleetwood has subsidized the offering of below-market interest rates by
Associates and other lenders. Fleetwood currently has cooperative relationships
with Associates and Green Tree, but no such subsidies are being paid by
Fleetwood to either organization.
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Until May 1996, Fleetwood owned Fleetwood Credit Corp., which provided a
substantial portion of the wholesale and retail financing for sales of
Fleetwood's recreational vehicles. Fleetwood sold Fleetwood Credit Corp. to
Associates in May 1996. In connection with the sale, an agreement was signed to
assure continuing cooperation between Fleetwood and Associates and to facilitate
wholesale and retail financing for Fleetwood retailers and customers. In early
1999, Fleetwood Credit Corp. was sold by Associates to NationsBank/Bank of
America. Fleetwood agreed to an assignment of the operating agreement to the new
owner. Under the agreement, Fleetwood agreed not to promote any other finance
company's recreational vehicle financing programs so long as Fleetwood Credit
Corp. remains competitive. Fleetwood also agreed to continue subsidizing
Fleetwood Credit Corp.'s wholesale financing for Fleetwood's recreational
vehicle retailers until the end of fiscal 1998, although at gradually reduced
rates. The aggregate cost of wholesale finance subsidies was $1.5 million in
fiscal 1998 and $3.8 million in fiscal 1997.
ENGINEERING AND PRODUCT DEVELOPMENT
Fleetwood develops new products and product enhancements through an
integrated product development process that involves cross-functional teams
including engineering, manufacturing and marketing personnel. Fleetwood also
integrates feedback received through its customer surveys into its product
development process. As a result, Fleetwood believes that it is able to
proactively design and manufacture products that address both industry trends
and specific customer requirements in an efficient cost-effective and timely
manner. Product development with respect to recreational vehicles is done on a
national basis while manufactured housing is done on a regional basis in order
to reflect regional preferences and trends. Amounts spent on engineering and
product development totaled $19.2 million in fiscal year 1999 and $16.8 million
in fiscal year 1998.
REGULATORY MATTERS
The Company's manufactured housing operations are subject to provisions of
the Housing and Community Development Act of 1974, under which the U.S.
Department of Housing and Urban Development establishes construction and safety
standards for manufactured homes, and also may require manufactured housing
producers to send notifications to customers of noncompliances with standards or
to repair or replace manufactured homes that contain certain hazards or defects.
The Company's recreational vehicle manufacturing operations are subject to a
variety of Federal, state and local regulations, including the National Traffic
and Motor Vehicle Safety Act, under which the National Highway Traffic Safety
Administration may require manufacturers to recall recreational vehicles that
contain safety-related defects, and numerous state consumer protection laws and
regulations relating to the operation of motor vehicles, including so-called
"Lemon Laws." Amendments to any of these regulations and the implementation of
new regulations could significantly increase the costs of manufacturing,
purchasing, operating or selling the Company's products and could have a
material adverse effect on the Company's results of operations.
The failure of the Company to comply with present or future regulations
could result in fines being imposed on the Company, potential civil and criminal
liability, suspension of sales or production, or cessation of operations. In
addition, a major product recall could have a material adverse effect on the
Company's results of operations.
Certain U.S. tax laws currently afford favorable tax treatment for the
purchase and sale of recreational vehicles that are financed through mortgage
borrowings. These laws and regulations have historically been amended
frequently, and it is likely that further amendments and additional regulations
will be applicable to the Company and its products in the future. Amendments to
these laws and regulations and the implementation of new regulations could have
a material adverse effect on the Company's results of operations.
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The Company's operations are subject to a variety of Federal and state
environmental regulations relating to the use, generation, storage, treatment,
emission and disposal of hazardous materials and wastes and noise pollution.
Although the Company believes that it is currently in material compliance with
applicable environmental regulations, the failure of the Company to comply with
present or future regulations could result in fines being imposed on the
Company, potential civil and criminal liability, suspension of production or
operations, alterations to the manufacturing process, or costly cleanup or
capital expenditures.
EMPLOYEE RELATIONS
As of April 25, 1999, the Company and its subsidiaries had approximately
21,000 employees. Most full-time employees are provided with paid annual
vacations, group life insurance, medical and hospitalization benefits, a
retirement plan and other fringe benefits. Approximately 600 of these employees
hold management or supervisory positions and work pursuant to written contracts.
Pursuant to these contracts, such employees may receive incentive compensation
depending on the financial performance of the employer entity, which can
represent a substantial part of their total compensation.
As of April 25, 1999, collective bargaining agreements were in effect at two
of Fleetwood's manufacturing locations covering a total of approximately 900
employees. Expiration dates for these agreements are in November 1999 and
September 2000. Except for employees at these plants, no other Company employees
are represented by a certified labor organization. During fiscal 1999, the
Company experienced labor union organizing activity at two other manufacturing
locations, but employees at both locations voted against union representation.
COMPETITION AND BUSINESS RISKS
CYCLICALITY OF THE COMPANY'S BUSINESSES; FLUCTUATIONS IN OPERATING
RESULTS. The industries in which the Company operates are highly cyclical.
Companies within both the manufactured housing and recreational vehicle
industries are subject to volatility in operating results due to external
factors such as economic, demographic and political changes. Factors affecting
the manufactured housing industry include availability of financing, interest
rates, availability of manufactured home sites, employment trends, consumer
confidence and general economic conditions. Factors affecting the recreational
vehicle industry include general economic conditions, overall consumer
confidence, the level of discretionary consumer spending, interest rates,
employment trends, fuel availability and fuel prices. In addition to the
preceding factors, the movement of manufactured housing and recreational vehicle
retail inventories, either up or down, can have a significant impact on
manufacturing operating results. Because of these and other factors, there can
be substantial fluctuations in the Company's operating results and the results
for any prior period may not be indicative of results for any future period.
COMPETITION IN THE COMPANY'S BUSINESSES. The manufactured housing industry
is highly competitive. As of December 31, 1998, there were approximately 90
manufacturers and approximately 8,000 retail sales centers. The ten largest
manufacturers accounted for approximately 78 percent of the wholesale
manufactured housing market in 1998, including the Company's sales, which
represented 17.7 percent of the market. The manufactured housing retail market
is much more fragmented, with the six largest companies accounting for only 29
percent of the retail market in 1998. Manufactured homes compete with new and
existing site-built homes, apartments, townhouses and condominiums. The supply
of such housing has increased in recent years with the increased availability of
construction financing. Competition exists on both the manufacturing and retail
levels and is based primarily on price, product features, reputation for service
and quality, retail inventory, sales promotions, merchandising and terms and
availability of wholesale and retail customer financing. Recent growth in
manufacturing capacity in the southern United States has increased competition
at both the manufacturing and retail levels and has resulted in both
8
<PAGE>
regional and national competitors increasing their presence in the region.
Overproduction of manufactured housing in this region could lead to greater
competition and result in decreased margins, which could have a material adverse
effect on the Company's results of operations.
The market for recreational vehicles is also highly competitive, and the
Company has numerous competitors and potential competitors in this industry. The
five largest manufacturers represented approximately 70 percent of the market in
1998, including the Company's sales, which represented 26.1 percent of the
market. There can be no assurance that either existing or new competitors will
not develop products that are superior to the Company's recreational vehicles or
achieve better consumer acceptance.
FACTORS AFFECTING THE COMPANY'S MANUFACTURED HOUSING MARKET SHARE. The
Company's market share in the manufactured housing market, based on unit
shipments, declined from 21.6 percent in 1994 to 17.7 percent in 1998, in part
because the Company reduced its retail distribution points from approximately
1,800 to 1,470 during the period from January 1994 through December 1998, in
order to concentrate on larger dealers that share the Company's approach to
merchandising and customer satisfaction. However, the Company has also, from
time to time in the past, lost certain significant retailers to competitors. In
addition, the recent acquisitions of manufactured housing retailers by the
Company's competitors may reduce the Company's retail distribution network and
market share, as these retail outlets may choose not to sell the Company's
products. There can be no assurance that the Company will be able to adequately
replace retailers purchased by competitors if they cease selling the Company's
manufactured homes or that the Company will be able to maintain its sales volume
or market share in these competitive markets.
RISKS RELATED TO ENTRY INTO RETAIL DISTRIBUTION. The Company responded to
the consolidation in the manufactured housing sector, beginning in early fiscal
1999, by forming its own retail business and establishing a network of
Company-owned stores to replace distribution points lost to competitors. The
Company has made 16 acquisitions, the first closing in June 1998, and has also
opened internally developed greenfield locations. See the discussion in the
BUSINESS: MANUFACTURED HOUSING--RETAIL section on page three. The Company had no
prior direct experience in running retail operations before entering into this
business. The management of the Company's retail business consists of a mixture
of managers from the Company's housing manufacturing business and acquired
retail organizations and newly hired individuals from outside the Company. The
Company has also utilized the assistance of consultants who are experienced in
the retail business in integrating the retail organizations into a cohesive
entity. There can be no assurance that the Company's retail management team will
be able to successfully integrate its retail network into a successful and
profitable business. During the start-up phase, this new business operated at a
loss as acquisitions were completed and integrated into the system, the business
infrastructure was being established, and new stores were opened. Many of the
initial start-up costs are expected to continue as expansion continues in fiscal
year 2000.
CHANGES IN INDUSTRY RETAIL INVENTORIES. Changes in the level of retail
inventories in the manufactured housing and recreational vehicle industries,
either up or down, can have a significant impact on the Company's operating
results. For example, due to the recent rapid expansion of the retail
distribution network in the manufactured housing industry, there appears to be
an imbalance between industry retail inventories and consumer demand for
manufactured homes. Considering current retail demand, it is estimated that
there may be a five to six month supply of manufactured homes in retailer
inventories industry-wide. If these trends were to continue or if retail demand
were to significantly weaken, the inventory overhang could result in intense
price competition and pressure on profit margins within the industry. The
Company believes that inventories of Fleetwood homes at Company-owned retail
stores and at independent retail locations are at appropriate levels relative to
retail demand, due in part to the Company's emphasis on reasonable stocking
levels, high inventory turn rates and retail sell-through. In
9
<PAGE>
spite of these efforts, significant unfavorable developments within the industry
would undoubtedly have an adverse impact on Company operating results.
MANUFACTURED HOUSING GEOGRAPHIC MARKET CONCENTRATION. The market for the
Company's manufactured homes is geographically concentrated, with the top 15
states accounting for approximately 69 percent of the industry's total shipments
in 1998. The southern United States accounts for a significant portion of the
Company's manufactured housing sales. A downturn in this region's economic
conditions could have a material adverse effect on the Company's results of
operations. There can be no assurance that the demand for manufactured homes
will not decline in the southern United States or other areas in which the
Company experiences high product sales and any such decline could have a
material adverse effect on the Company's results of operations.
SEASONALITY OF THE COMPANY'S BUSINESSES. The Company has experienced and
expects to continue to experience significant variability in sales, production
and net income as a result of seasonality in the Company's businesses. Demand in
both the manufactured housing and recreational vehicle industries generally
declines during the winter season, while sales and profits are generally highest
during the spring and summer months. In addition, unusually severe weather
conditions in certain markets may delay the timing of purchases and shipments
from one quarter to another.
POTENTIAL CHANGES IN CONSUMER PREFERENCES; NEW PRODUCT INTRODUCTIONS. There
can be no assurance that historical consumer preferences for the Company's
products in general, and recreational vehicles in particular, will remain
unchanged. The Company believes that, with respect to its recreational vehicle
operations, the introduction of new features and new models will be critical to
its future success. Delays in the introduction of new models or product
features, or a lack of market acceptance of new models or features, could have a
material adverse effect on the Company's business. There also can be no
assurance that new product introductions will not reduce revenues from existing
models and adversely affect results of operations.
WARRANTY CLAIMS AND PRODUCTS LIABILITY. The Company is subject to warranty
claims in the ordinary course of its business. Although the Company maintains
reserves for such claims, which to date have been adequate, there can be no
assurance that warranty expense levels will remain at current levels or that
such reserves will continue to be adequate. A large number of warranty claims
exceeding the Company's current warranty expense levels could have a material
adverse effect on the Company's results of operations.
The Company partially self-insures its products liability claims and
purchases excess products liability insurance in the commercial insurance
market. Although the Company believes that its products liability insurance
coverage is adequate, there can be no assurance that such coverage will be
sufficient to cover all future products liability claims. Successful assertion
against the Company of one or a series of claims exceeding the Company's
insurance could have a material adverse effect on the Company's results of
operations.
CONTINGENT REPURCHASE OBLIGATIONS. In accordance with customary practice in
the manufactured housing and recreational vehicle industries, the Company enters
into repurchase agreements with various financial institutions pursuant to which
the Company agrees, under certain circumstances, to repurchase manufactured
homes and recreational vehicles sold to independent retailers in the event of a
default by an independent retailer in its obligation to such credit sources.
Under the terms of such repurchase agreements, the Company agrees to repurchase
manufactured homes and recreational vehicles at declining prices over the period
of the agreements (which generally range from 12 to 15 months). Although losses
with respect to these contingent repurchase obligations have not been
significant, if the Company were obligated to repurchase a substantial number of
manufactured homes or recreational vehicles in the future, this could have a
material adverse effect on the Company's results of operations.
10
<PAGE>
AVAILABILITY OF WHOLESALE AND RETAIL FINANCING. The Company's retailers, as
well as retail buyers of the Company's products, generally secure financing from
third party lenders. Reduced availability of such financing, or increased
interest rates and other costs, could have an adverse impact on the Company's
sales. These factors are dependent on the lending practices of financial
institutions, governmental policies and economic conditions, all of which are
beyond the control of the Company. With respect to the Company's housing
business, most states classify manufactured homes as personal property rather
than real property for purposes of taxation, lien perfection and length of loan
terms. Interest rates for manufactured homes are generally higher and the terms
of the loans shorter than for site-built homes. At times, financing for the
purchase of manufactured homes is more difficult to obtain than conventional
home mortgages. There can be no assurance that affordable wholesale or retail
financing for either manufactured homes or recreational vehicles will continue
to be available on a widespread basis. If such financing were to become
unavailable, this could have a material adverse effect on the Company's results
of operations.
AVAILABILITY AND PRICING OF MANUFACTURING COMPONENTS AND LABOR. The
Company's results of operations may be significantly affected by the
availability and pricing of manufacturing components and labor. Although the
Company attempts to offset the effect of any escalation in components and labor
costs by increasing the sales prices of its products, there can be no assurance
that the Company will be able to do so without adversely impacting demand for
its products. Even if the Company were able to offset higher manufacturing costs
by increasing the sales prices of its products, the realization of any such
increases often lags the rise in manufacturing costs--especially in its
manufactured housing operations--due in part to the Company's commitment to
price-protect its retailers with respect to previously placed customer orders.
The inability of the Company to successfully offset increases in manufacturing
costs could have a material adverse effect on the Company's results of
operations.
IMPORTANCE OF CERTAIN SUPPLIERS. Most recreational vehicle and manufactured
home components are readily available from a variety of sources. However,
certain components are produced by only a small group of quality suppliers which
have the capacity to supply large quantities on a national basis. This is
especially true in the case of motor home chassis, where Ford Motor Company is
the dominant supplier. Shortages, production delays or work stoppages by the
employees of such suppliers could have a material adverse effect on Fleetwood's
businesses. The inability of the Company to obtain an adequate chassis supply
could have a material adverse effect on the Company's results of operations.
ZONING; PLACEMENT AND AVAILABILITY OF MANUFACTURED HOUSING SITES. Any
limitation on the growth of the number of sites available for manufactured homes
or on the operation of manufactured housing communities could adversely affect
the Company's manufactured housing business. Manufactured housing communities
and individual home placements are subject to local zoning ordinances and other
local regulations relating to utility service and construction of roadways. In
the past, there has been resistance by property owners to the adoption of zoning
ordinances permitting the location of manufactured homes in residential areas,
which resistance the Company believes has adversely affected the growth of the
industry. There can be no assurance that manufactured homes will receive
widespread acceptance or that localities will adopt zoning ordinances permitting
the location of manufactured home areas. The inability of the manufactured home
industry to gain such acceptance and zoning ordinances could have a material
adverse effect on the Company's results of operations.
AVAILABILITY AND PRICE OF GASOLINE AND DIESEL FUEL. Gasoline or diesel fuel
is required for the operation of motor homes and most vehicles used to tow
travel trailers and folding trailers. There can be no assurance that the supply
of these petroleum products will continue uninterrupted, that rationing will not
be imposed or that the price of or tax on these petroleum products will not
significantly increase in the future.
11
<PAGE>
ITEM 2. PROPERTIES
The Company owns its executive offices which are located at 3125 Myers
Street in Riverside, California. The corporate administrative offices, which
occupy 173,500 square feet, are situated on Company-owned parcels of land
totaling approximately 18.1 acres. The manufactured housing regional offices are
located in California, Florida and Texas and occupy a total of 16,400 square
feet of leased office space. The following table describes additional property
and buildings utilized for manufacturing, research and development and
administrative purposes as of April 25, 1999. For the most part, these
properties and buildings are owned by the Company except as noted below.
<TABLE>
<CAPTION>
APPROXIMATE APPROXIMATE
FACILITY AND LOCATION ACREAGE SQUARE FOOTAGE
- ------------------------------------------------------------------------------------ --------------- --------------
<S> <C> <C>
Plants Producing Manufactured Housing:
Glendale, Arizona........................................................... 41.5 120,900
Riverside, California....................................................... 18.8 97,600
Woodland, California........................................................ 15.8 143,500
Auburndale, Florida......................................................... 13.7 102,700
Alma, Georgia............................................................... 43.6 230,000
Broxton, Georgia............................................................ 20.0 132,600
Douglas, Georgia............................................................ 21.9 245,600
Douglas, Georgia............................................................ 20.7 134,100
Fitzgerald, Georgia......................................................... 18.6 120,900
Pearson, Georgia............................................................ 13.3 133,200
Pearson, Georgia............................................................ 16.2 141,700
Willacoochee, Georgia....................................................... 33.2 131,500
Nampa, Idaho................................................................ 19.8 156,600
Nampa, Idaho................................................................ 11.4 75,700
Garrett, Indiana............................................................ 22.1 120,800
Garrett, Indiana............................................................ 20.4 104,900
Benton, Kentucky(1)......................................................... 22.4 105,300
Lexington, Mississippi...................................................... 51.6 270,000
Lumberton, North Carolina................................................... 52.0 115,100
Mooresville, North Carolina................................................. 21.8 119,300
Pembroke, North Carolina.................................................... 32.4 208,900
Roxboro, North Carolina..................................................... 20.0 94,700
Woodburn, Oregon............................................................ 22.4 197,300
Woodburn, Oregon............................................................ 29.2 56,500
Elizabethtown, Pennsylvania................................................. 19.7 116,800
Gallatin, Tennessee......................................................... 18.2 194,100
Lafayette, Tennessee........................................................ 43.3 133,000
Westmoreland, Tennessee..................................................... 38.6 146,900
Westmoreland, Tennessee..................................................... 20.6 114,800
Belton, Texas............................................................... 53.1 283,600
Waco, Texas................................................................. 18.1 120,000
Waco, Texas................................................................. 8.6 78,700
Waco, Texas................................................................. 19.4 97,200
Waco, Texas................................................................. 13.0 120,600
Wichita Falls, Texas........................................................ 31.5 126,800
Rocky Mount, Virginia....................................................... 13.8 83,400
Rocky Mount, Virginia....................................................... 26.3 135,000
Woodland, Washington........................................................ 18.0 156,500
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE APPROXIMATE
FACILITY AND LOCATION ACREAGE SQUARE FOOTAGE
- ------------------------------------------------------------------------------------ --------------- --------------
<S> <C> <C>
Plants Producing Recreational Vehicles:
Motor Homes:
Chico, California........................................................... 28.6 153,300
Riverside, California....................................................... 24.5 163,800
Decatur, Indiana............................................................ 90.0 345,500
Decatur, Indiana............................................................ 25.3 184,700
Paxinos, Pennsylvania....................................................... 71.6 206,200
Motor Home Service Facilities:
Riverside, California....................................................... 9.5 66,000
Decatur, Indiana............................................................ 34.8 176,600
Travel Trailers:
Rialto, California(2)....................................................... 18.8 115,700
Riverside, California....................................................... 18.5 68,400
Crawfordsville, Indiana..................................................... 15.0 131,500
Hancock, Maryland........................................................... 20.5 107,400
Williamsport, Maryland...................................................... 45.1 82,500
Omaha, Nebraska............................................................. 22.3 112,100
Edgerton, Ohio.............................................................. 16.6 92,700
LaGrande, Oregon............................................................ 32.0 98,000
Pendleton, Oregon........................................................... 20.8 198,700
Longview, Texas............................................................. 46.7 313,100
Winchester, Virginia........................................................ 20.6 122,700
Lindsay, Ontario, Canada.................................................... 9.2 140,800
Lindsay, Ontario, Canada(3)................................................. 20.0 73,200
Folding Trailers:
Somerset, Pennsylvania...................................................... 42.6 392,500
Plants Producing Components:
Fontana, California......................................................... 11.9 83,000
Riverside, California....................................................... 10.0 111,000
Douglas, Georgia............................................................ 3.8 28,000
Hauser Lake, Idaho.......................................................... 28.0 81,000
Decatur, Indiana............................................................ 32.1 216,500
Division Offices and Research and Development Facilities:
Riverside, California....................................................... 21.9 234,300
</TABLE>
RETAIL PROPERTIES
At the end of fiscal 1999, the Company had 167 retail sales locations in 24
states, of which ten are owned and 157 are leased from third parties. The
current annual lease expense related to these properties is approximately
$5,700,000.
IDLE FACILITIES
There were seven idle manufacturing facilities at the end of fiscal 1999 and
six at the end of fiscal 1998. During fiscal 1999, the idle travel trailer
facility in Lindsay, Ontario, Canada was activated due to the need for
additional capacity. The manufactured housing facility in Plant City, Florida
and one of the manufactured housing facilities in Lexington, Mississippi were
closed.
13
<PAGE>
The following Company-owned manufacturing facilities (and one service
facility) were not in operation as of April 25, 1999.
<TABLE>
<CAPTION>
APPROXIMATE APPROXIMATE
FACILITY AND LOCATION ACREAGE SQUARE FOOTAGE
- ------------------------------------------------------------------------------------ --------------- --------------
<S> <C> <C>
Hamilton, Alabama................................................................... 10.2 128,500
Riverside, California............................................................... 12.3 162,100
Plant City, Florida(4).............................................................. 11.5 85,800
Lexington, Mississippi(4)........................................................... 30.5 109,000
Roxboro, North Carolina............................................................. 31.8 114,500
Elizabethtown, Pennsylvania......................................................... 17.5 101,000
Paxinos, Pennsylvania(5)............................................................ 7.1 39,600
Longview, Texas..................................................................... 42.8 157,700
</TABLE>
- ---------
(1) New manufacturing facility opened in fiscal 1999.
(2) Includes 4.0 acres and 27,100 square foot building leased from unaffiliated
outside party.
(3) Manufacturing facility activated in fiscal 1999.
(4) Manufacturing facility deactivated in fiscal 1999.
(5) Deactivated service facility.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various legal proceedings, most of which are
routine litigation incident to its business, and some of which are covered in
whole or in part by insurance. In the opinion of management, none of the
uninsured cases involve realistic claims which are material in amount.
On April 21, 1999, the Company was served with a class action complaint in
the case of McManus v. Fleetwood Enterprises, Inc. and General Motors
Corporation, which was filed in the District Court of Bexar County, Texas. The
Company removed the case to the U.S. District Court for the Western District of
Texas, San Antonio Division. The complaint purports to establish a class of
purchasers of Fleetwood Class A motor homes with General Motors chassis, and
makes claims with respect to the alleged breach of express and implied
warranties, negligent misrepresentation and breach of the Texas Deceptive Trade
Practices Act and similar statutes from other jurisdictions, and alleges that
the Company misrepresented the motor homes' ability to tow an automobile or
other vehicle or cargo. No class has been certified, no discovery has been
completed as yet and it is not possible at this time to properly assess the risk
of an adverse verdict or the magnitude of possible exposure. The case is
related, however, to a case in Bexar County District Court, Legnon v. Fleetwood
Motor Homes of Pennsylvania, Inc. et al, brought by one of the law firms
representing the plaintiffs in McManus, which involves the death of the
owner-operator of a 1993 Bounder motor home that was towing a Saturn automobile
produced by General Motors. The Company's exposure in the Legnon case, which
requests multi-million dollar actual and punitive damages, is covered by
insurance.
The Company is also subject to other litigation from time to time in the
ordinary course of business, certain of which is covered in whole or in part by
insurance. Although the amount of any liability with respect to any of the above
litigation cannot presently be determined, in the opinion of management such
liability is not expected to have a material adverse effect on the Company's
financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the shareholders of the Company
during the fourth quarter of fiscal year 1999.
14
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are set forth below:
<TABLE>
<CAPTION>
NAME TITLE AGE
- -------------------------------------------------------------------------- ---
<S> <C> <C>
Glenn F. Chairman of the Board and Chief Executive Officer 65
Kummer.........
Nelson W. President, Chief Operating Officer and Director 56
Potter.........
Paul M. Senior Vice President--Finance and Chief Financial 57
Bingham........ Officer
Mallory S. Senior Vice President--Housing Group 57
Smith..........
Richard E. Senior Vice President--Recreational Vehicle Group 52
Parks..........
William H. Senior Vice President--General Counsel and Secretary 59
Lear...........
John G. Pollis... Senior Vice President--Retail Housing Division 59
Carl D. Vice President--Travel Trailers 52
Betcher........
John R. Weiss.... Vice President--Motor Homes 47
Larry L. Mace.... Vice President--Administration and Supply Subsidiaries 56
Lyle N. Larkin... Vice President--Treasurer and Assistant Secretary 54
</TABLE>
GLENN F. KUMMER has been with the Company since 1965. He was appointed to
his current position on January 12, 1998 and served as the Company's President
and Chief Operating Officer since 1982.
NELSON W. POTTER was appointed to his current position on January 12, 1998.
Previously, he served as the Company's Executive Vice President--Operations
since February 1997 and Vice President--Planning and Corporate Development since
1992. He has been employed by the Company since 1978.
PAUL M. BINGHAM has been employed by the Company since 1970 and was
appointed Chief Financial Officer in 1987. He was appointed to his current
position as Senior Vice President in February 1997. Previously, he served as
Financial Vice President.
MALLORY S. SMITH has been with the Company since 1967 and was appointed to
his current position in May 1997. Previously, he served as Vice
President--Housing Group Operations from February 1988 until January 1996 when
he was appointed Vice President--Housing Group Eastern Region.
RICHARD E. PARKS has been with the Company since 1983 and was appointed to
his current position in April 1997. Previously, he was General Manager of a
Company motor home manufacturing plant until he was promoted to the position of
Vice President--Motor Homes in April 1995.
WILLIAM H. LEAR joined the Company in 1971 as Secretary and General Counsel.
He became a Vice President in 1978 and was appointed to his current position in
March 1998.
JOHN G. POLLIS joined the Company in 1981 as Director--Marketing in the
Company's Housing Group. In May 1996 he was appointed Vice President--Marketing
and he received his current assignment in February 1998.
15
<PAGE>
CARL D. BETCHER has been with the Company since 1973 and was appointed to
his current position in August 1997. Previously, he served as General Manager of
two different Company manufacturing centers from 1992 until 1997.
JOHN R. WEISS was appointed to his current position in April 1997. He has
been employed by the Company since 1975. He previously served as General Manager
of a motor home manufacturing operation from 1993 to 1995 when he became
Director--Product Planning and Sales in the motor home division.
LARRY L. MACE joined the Company in 1973 and was appointed to his current
position in January 1998. Previously he served as Vice President--Supply
Subsidiaries from 1989.
LYLE N. LARKIN joined the Company in 1979 and has served as Treasurer since
1990. He was promoted to Vice President in July 1998.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
The following table lists the high and low sales prices for Fleetwood's
Common stock during the past two fiscal years as reported on the New York Stock
Exchange Composite Tape, along with information on dividends paid per share
during the same periods. The Company's Common stock is listed on the New York
and the Pacific stock exchanges and traded on various regional exchanges (Ticker
Symbol: FLE). Call options are traded on the American Stock Exchange.
<TABLE>
<CAPTION>
DIVIDENDS
QUARTER HIGH LOW PAID
- --------------------------------------------- ------- ------- --------
<S> <C> <C> <C>
Fiscal 1999
First.................................... $46 7/16 $35 7/8 $.17
Second................................... 37 25 .18
Third.................................... 39 13/16 30 7/8 .18
Fourth................................... 37 7/16 25 .18
Fiscal 1998
First.................................... $31 $25 1/8 $.16
Second................................... 35 1/8 29 5/8 .17
Third.................................... 42 13/16 28 1/8 .17
Fourth................................... 48 39 3/8 .17
</TABLE>
On April 25, 1999, there were approximately 1,500 shareholders of record of
the Company's Common stock.
The declaration and payment of dividends on Fleetwood Common stock is at the
discretion of the Fleetwood Board and depends on Fleetwood's results of
operations, financial condition, capital requirements and such other factors as
the Fleetwood Board deems relevant. On June 8, 1999, the Fleetwood Board
declared a dividend of $.19 per share to stockholders of record on July 2, 1999,
payable to stockholders on August 11, 1999.
16
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED APRIL
---------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Sales.................................... $ 3,490,163 $ 3,050,567 $ 2,874,426 $ 2,809,277 $ 2,807,862
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Income from continuing operations before
income taxes........................... $ 178,892 $ 174,949 $ 147,050 $ 110,993 $ 127,447
Provision for income taxes............... (71,771) (66,404) (56,998) (41,543) (52,254)
Minority interest in net loss of
subsidiary............................. -- -- -- 451 805
----------- ----------- ----------- ----------- -----------
Income from continuing operations........ 107,121 108,545 90,052 69,901 75,998
Income from discontinued operations:
Income from operations of finance
subsidiary........................... -- -- 887 9,708 8,635
Gain on sale of finance subsidiary..... -- -- 33,891 -- --
----------- ----------- ----------- ----------- -----------
-- -- 34,778 9,708 8,635
----------- ----------- ----------- ----------- -----------
Net income for basic earnings per
share.................................. 107,121 108,545 124,830 79,609 84,633
----------- ----------- ----------- ----------- -----------
Distributions on convertible preferred
stock, net of income taxes............. 11,148 2,499 -- -- --
----------- ----------- ----------- ----------- -----------
Net income for diluted earnings per
share.................................. $ 118,269 $ 111,044 $ 124,830 $ 79,609 $ 84,633
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Earnings per share--diluted:
Continuing operations.................. $ 2.94 $ 3.01 $ 2.30 $ 1.50 $ 1.63
Discontinued operations:
Income from operations of finance
subsidiary......................... -- -- .02 .21 .19
Gain on sale of finance subsidiary... -- -- .87 -- --
----------- ----------- ----------- ----------- -----------
$ 2.94 $ 3.01 $ 3.19 $ 1.71 $ 1.82
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Weighted average Common shares--
diluted................................ 40,171 36,933 39,162 46,469 46,531
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
BALANCE SHEET DATA:
Cash and investments..................... $ 267,133 $ 305,722 $ 110,434 $ 287,930 $ 102,866
Property, plant and equipment, net....... 303,934 277,211 278,331 266,587 262,640
Total assets............................. 1,531,184 1,129,480 871,547 1,108,932 940,374
Long-term debt........................... 55,000 55,000 55,000 80,000 --
Capital Trust preferred securities....... 287,500 287,500 -- -- --
Shareholders' equity..................... 586,703 376,026 443,095 649,137 608,143
OTHER DATA:
Gross profit margin...................... 21.6% 19.5% 18.8% 19.0% 18.5%
Operating income margin.................. 5.5 5.6 4.9 4.7 4.4
Depreciation and amortization............ $ 31,841 $ 27,799 $ 27,579 $ 27,084 $ 23,797
Capital expenditures..................... 49,757 37,809 56,184 32,916 67,864
EBITDA*.................................. 222,152 197,994 167,138 158,616 146,026
</TABLE>
- ----------
* EBITDA is defined as operating income plus depreciation and amortization
expense. While EBITDA should not be considered as a substitute for net
income, cash flows from operating activities, or other income statement data
or cash flow statement data prepared in accordance with GAAP, or as a
measure of profitability or liquidity, management understands that EBITDA is
customarily used as a measurement in evaluating companies.
17
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
SELECTED SEGMENT DATA
(Dollars in thousands)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED APRIL
--------------------------------------------------------------------
1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Manufactured housing--
Manufacturing............................ $ 1,563,966 $ 1,487,650 $ 1,426,940 $ 1,443,016 $ 1,370,293
Retail................................... 332,309 -- -- -- --
Less intercompany........................ (178,764) -- -- -- --
------------ ------------ ------------ ------------ ------------
1,717,511 1,487,650 1,426,940 1,443,016 1,370,293
Recreational vehicles...................... 1,729,034 1,518,163 1,395,163 1,317,494 1,387,919
Supply operations.......................... 43,618 44,754 52,323 48,767 49,650
------------ ------------ ------------ ------------ ------------
$ 3,490,163 $ 3,050,567 $ 2,874,426 $ 2,809,277 $ 2,807,862
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
OPERATING INCOME:
Manufactured housing....................... $ 83,933 $ 75,896 $ 72,980 $ 106,433 $ 81,204
Housing retail............................. 1,159 -- -- -- --
Recreational vehicles...................... 109,667 76,809 77,641 34,086 45,542
Supply operations.......................... 16,255 15,437 2,170 2,971 5,855
Corporate and other........................ (20,703) 2,053 (13,232) (11,958) (10,372)
------------ ------------ ------------ ------------ ------------
$ 190,311 $ 170,195 $ 139,559 $ 131,532 $ 122,229
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
UNITS SHIPPED:
Manufactured housing--
Factory shipments........................ 65,877 65,544 65,354 68,990 68,847
Retail sales............................. 8,255 -- -- -- --
Less intercompany........................ (7,674) -- -- -- --
------------ ------------ ------------ ------------ ------------
66,458 65,544 65,354 68,990 68,847
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Recreational vehicles--
Motor homes.............................. 14,923 13,525 14,345 13,412 15,370
Travel trailers.......................... 37,208 33,758 31,190 32,387 35,804
Folding trailers......................... 21,171 20,960 18,524 20,407 19,571
Slide-in truck campers................... 1,420 1,251 1,184 1,928 1,645
European shipments....................... -- -- -- 557 626
------------ ------------ ------------ ------------ ------------
74,722 69,494 65,243 68,691 73,016
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>
18
<PAGE>
1999 COMPARED TO 1998
CONSOLIDATED RESULTS:
Net income for fiscal year 1999 was $107.1 million or $2.94 per diluted
share compared to $108.5 million and $3.01 per share for the prior year. Last
year's earnings included a non-recurring after-tax insurance gain of $10.4
million or 28 cents per share attributable to a change in estimate of products
liability insurance reserves. Without this gain, earnings for fiscal 1998 would
have been $98.1 million or $2.73 per share.
Higher profits from the Company's core manufacturing businesses led to an
eight percent improvement in comparable earnings per share, after excluding last
year's insurance gain. The strong manufacturing performance, however, was
largely offset by several factors: 1) a $5.2 million pre-tax operating loss from
the Company's new and rapidly expanding manufactured housing retail business; 2)
the elimination of $16.0 million of intercompany profit on homes sold to
Fleetwood-owned retail stores that were in retail inventory at the end of the
year; and, 3) a higher effective income tax rate which reduced net earnings
approximately $3.9 million or 10 cents per share. Additionally, earnings per
share in fiscal 1999 were reduced by a higher number of shares outstanding as a
result of retailer acquisitions made during the year.
Sales for fiscal 1999 rose 14 percent to an all-time high of $ 3.49 billion
compared to $3.05 billion for the prior year. This revenue increase resulted
from higher manufacturing sales for both housing and recreational vehicles, as
well as the addition of $332 million of retail sales.
Gross profit margin for fiscal 1999 rose to 21.6 percent from 19.5 percent
last year, reflecting more efficient recreational vehicle operations and, with
respect to manufactured housing, more favorable pricing and lower material
costs.
Operating expenses rose 33 percent to $563.5 million, and also increased as
a percentage of sales from 13.9 percent to 16.1 percent. Last year's operating
costs were reduced by the non-recurring insurance gain of $16.2 million before
taxes. Excluding this unusual item from the comparison, operating costs in 1999
actually increased $123.2 million or 28 percent. The new housing retail business
accounted for about $68 million of the increase in operating costs in fiscal
1999. Selling expenses rose 32 percent to $278.0 million, with the housing
retail operation accounting for 40 percent of the increase. Higher selling costs
were incurred in manufacturing operations for advertising, sales compensation
and product warranty and service. General and administrative expenses of $285.5
million, including the effect of the aforementioned insurance gain, were up 33
percent, primarily due to the addition of $43 million in retail costs, which
represented over half of the increase. The increase attributable to
manufacturing was primarily due to higher management incentive compensation as a
result of higher manufacturing profits. As a percentage of sales, selling
expenses increased from 6.9 percent to 8.0 percent and general and
administrative expenses rose from 7.0 percent to 8.2 percent.
Non-operating items totaled a net expense of $11.4 million compared to
income of $4.8 million a year ago. This $16.2 million change was mainly caused
by a $17.5 million distribution on convertible preferred securities and $6.3
million of interest expense on retail inventory floor plan financing. The
convertible preferred securities were issued during the fourth quarter of the
prior fiscal year, and since the retail business is new, there was no retail
inventory financing expense last year. These items were partially offset by a
$4.0 million increase in investment income that originated from higher invested
balances.
The effective tax rate rose to 40.1 percent compared to 38.0 percent last
year. The increase primarily reflects the impact of the amortization of goodwill
recorded in conjunction with retail acquisitions, which is not deductible for
tax purposes.
19
<PAGE>
MANUFACTURED HOUSING:
Factory sales of manufactured housing increased five percent to a record
$1.56 billion in fiscal 1999. This included intercompany sales of $179 million
to the Company's retail housing division. Shipments for the year were up less
than one percent to 65,877 homes.
Operating income for the housing group rose 11 percent in fiscal 1999 to
$83.9 million due to higher gross margins and the rise in sales volume. The
margin improvement mainly resulted from raw material cost reductions and
increases in product selling prices. Operating income in the current year is net
of $16.0 million of intercompany profit eliminated in consolidation, as
discussed previously. As a percentage of sales, operating income in fiscal 1999
was 5.4 percent compared to 5.1 percent in the prior year.
RECREATIONAL VEHICLES:
RV revenues for fiscal 1999 were up 14 percent to $1.73 billion, with all
three RV divisions posting record sales. Motor home sales surpassed the billion
dollar mark for the first time, climbing 18 percent to a new high of $1.06
billion, as shipments rose 10 percent to 14,923 units. Both towable segments
reached record levels in fiscal 1999, with travel trailer sales rising nine
percent to $549 million and folding trailer sales increasing five percent to
nearly $116 million. Travel trailer shipments were up 10 percent to 38,628
units, while folding trailer unit volume increased one percent to 21,171.
Fiscal 1999 operating income for the RV group surged 43 percent over the
prior year to $109.7 million as a result of higher sales volume and improved
gross margins. The margin improvement primarily stems from a turnaround in motor
home operations which were not producing at efficient levels last year. RV
operating margin in fiscal 1999 rose to 6.3 percent of sales from 5.1 percent in
the prior year.
SUPPLY OPERATIONS:
Revenue for the Company's supply group was $44 million in fiscal 1999, down
from $45 million in fiscal 1998, mostly due to a slightly reduced emphasis on
outside lumber sales. Operating income of $16.3 million in fiscal 1999 was up
five percent from the prior year as a result of higher sales of imported parts
and components.
RETAIL HOUSING OPERATIONS:
Fleetwood's housing retail division recorded revenues of $332 million in
fiscal 1999 on the sale of 8,255 homes. Operating income, before $6.3 million of
interest expense on inventory floor plan financing, was $1.2 million or less
than one percent of sales.
1998 COMPARED TO 1997
CONSOLIDATED RESULTS:
Earnings from continuing operations reached an all-time high in fiscal 1998,
rising 21 percent to $108.5 million compared to $90.1 million last year. Diluted
earnings per share from continuing operations improved an even greater 31
percent to $3.01 compared to $2.30 in the prior year, due to significant share
repurchases over the past two years. The fiscal 1998 per share amount gives
effect to the dilutive impact of convertible preferred stock issued by the
Company in February 1998.
Fiscal 1998 earnings included a non-recurring after-tax gain of $10.4
million or 28 cents per share recognized in the first quarter from a significant
insurance transaction as explained below (see Change in Estimate of Insurance
Reserves). Earnings in fiscal 1997 totaled $124.8 million or $3.19 per share on
a diluted basis, and included a gain of $33.9 million or 87 cents per share on
the sale of the Company's RV finance subsidiary.
20
<PAGE>
Sales for fiscal 1998 reached a record $3.05 billion, a six percent gain
over last year's $2.87 billion, due to a four percent rise in manufactured
housing sales and a nine percent increase in recreational vehicle volume.
Gross profit margin for fiscal 1998 rose to 19.5 percent from 18.8 percent
in fiscal 1997. Improved housing margins in fiscal 1998 more than offset the
effect of lower RV margins, which were impacted by higher motor home production
costs.
Operating expenses in fiscal 1998, which included the effect of the change
in estimate of insurance reserves, rose six percent to $424.1 million, but
remained the same as a percentage of sales at 13.9 percent. As a percentage of
sales, selling expenses were up from 6.3 percent in fiscal 1997 to 6.9 percent
in fiscal 1998, while general and administrative expenses fell from 7.6 percent
to 7.0 percent in fiscal 1998. Selling expenses increased 16 percent to $210.2
million, primarily reflecting higher advertising expenses as well as increases
for sales promotion and product warranty costs. General and administrative
expenses were down two percent to $213.9 million largely due to the change in
estimate of insurance reserves, which more than offset the effect of higher
management incentive compensation stemming from improved profits.
Non-operating income of $4.8 million in fiscal 1998 was off 37 percent from
the prior year due to the accrual of the quarterly distribution on convertible
preferred securities, payable on May 15, 1998. Investment income totaled $12.5
million in fiscal 1998, two percent ahead of the prior year, primarily
reflecting higher invested balances in the second half of the year.
MANUFACTURED HOUSING:
Manufactured housing revenues reached an all-time high of $1.49 billion in
fiscal 1998, up four percent from the prior year. Although unit shipments of
65,544 were up less than one percent from the prior year, the number of sections
increased four percent to 103,369, reflecting the continuing shift toward
greater sales of multi-section homes. Consistent with industry trends, Company
sales of multi-section homes rose from 50 percent of home sales in 1997 to 56
percent in 1998.
Housing group operating income increased four percent to $75.9 million in
fiscal 1998, primarily due to higher sales volume and lower raw material costs
as a percentage of sales. Operating margin in 1998 was unchanged from the prior
year at 5.1 percent of sales. Selling price increases, part of which were
implemented to cover a national advertising program, and more efficient use of
raw materials led to higher gross margins. Housing group operating profits in
fiscal 1998 would have been approximately $5.4 million higher were it not for a
change in the method of allocating intercompany supply group profits as
explained below.
RECREATIONAL VEHICLES:
Total RV sales for fiscal 1998 rose nine percent to a new high of $1.52
billion, up from $1.40 billion in fiscal 1997. The Company's motor home division
generated a six percent sales increase to a record $905 million on the strength
of healthy demand for Fleetwood's popular Class A products. The shift in product
mix toward higher-priced and more fully-featured Class A motor homes more than
offset the effect of lower unit volume, which fell six percent to 13,525 units.
Towable products fared well in fiscal 1998 as both travel trailer and folding
trailer divisions achieved record sales. Travel trailer revenues increased 11
percent to nearly $504 million as shipments rose eight percent to 35,009 units.
Folding trailer sales jumped 27 percent to $110 million on a 13 percent rise in
unit shipments to 20,960. The average selling price of folding trailer units
rose 12 percent, reflecting a move toward larger, more fully-featured models.
RV operating income was $76.8 million in fiscal 1998, off one percent from
the prior year. As a percentage of sales, operating income fell from 5.6 percent
to 5.1 percent in fiscal 1998. Despite the rise in RV sales volume, margins
decreased because of a decline in profitability of the Company's motor home
division. Motor home profits in fiscal 1998 were impacted by higher production
costs due to a major
21
<PAGE>
initiative designed to realign factory production and increase capacity for the
manufacture of popular upscale Class A models. RV group operating income was
reduced approximately $3.9 million in fiscal 1998 by a change in the method of
allocating intercompany supply group profits as explained below.
SUPPLY OPERATIONS:
The Company's supply group contributed revenues of nearly $45 million for
fiscal 1998 compared to $52 million last year. Operating income, however,
increased over seven-fold to $15.4 million. Approximately 70 percent of this
increase was due to a change in the method of allocating intercompany profits
from the supply group to the housing and RV businesses. Prior to fiscal 1998,
income from lumber brokerage and import operations was allocated back to the
Company's core businesses that use these supply group services. Beginning in
fiscal 1998, the lumber and import operations were set up as separate profit
centers. Prior year profits by segment were not restated to reflect this change.
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 fiscal 1998
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. Positive internal cash
flows were generated in fiscal years 1999 and 1998 to support manufacturing
operations and to fund capital expenditures and shareholder dividends. Cash
generated from operations in fiscal 1999 improved to $146.4 million compared to
$118.2 million last year, mainly as a result of a reduction in working capital
used in manufacturing operations. The Company maintained a strong cash position
in both years, with cash and investments totaling $267.1 million in 1999 and
$305.7 million in 1998. Cash received a boost late in fiscal 1998 from the
proceeds of a $287.5 million convertible preferred securities offering.
Cash outflows in fiscal 1999 included $118.0 million disbursed for the
acquisition of retail housing companies, the largest of which was HomeUSA. This
was in addition to $131.4 million in Common stock issued as part of the
consideration for the acquisitions. The acquisition of retail businesses during
the year resulted in several significant changes in the composition of assets
and liabilities as reflected in fiscal 1999 year-end balances. Major balance
sheet changes in fiscal 1999 included increases of $126.2 million for retail
inventories, $233.9 million for goodwill and $125.3 million for inventory floor
plan financing liability. Cash outflows in 1999 also included capital
expenditures of $49.8 million, Common stock repurchases of $24.9 million and
dividends to Common shareholders of $24.7 million.
22
<PAGE>
Cash outflows in fiscal 1998 included $177.2 million for the purchase of 5.2
million shares of Common stock from the Company's founder and former Chairman of
the Board. Other cash uses included capital expenditures of $37.8 million and
dividends to Common shareholders of $23.7 million.
Capital expenditures in fiscal 1999 and 1998 included additions to
manufacturing and retail capacity and the normal replacement of machinery and
equipment. The Company added one new manufactured housing plant in fiscal 1999
that became operational in the second fiscal quarter, and a new travel trailer
factory was added in fiscal 1998 to replace an older existing facility. With
respect to retail operations, the Company built 30 new sales centers and
acquired 137 locations during fiscal 1999.
Capital expenditures for manufacturing capacity in fiscal 2000 are expected
to be on a par with the relatively modest levels of the past two years,
reflecting the Company's belief that, with few exceptions, current capacity is
ample to satisfy expected near-term levels of consumer demand for its products.
The Company's housing retail strategy during fiscal 2000 will primarily involve
the development of Company-owned sales centers. Including retail store
development, total capital expenditures for the year are expected to range from
$60 million to $70 million. This includes the normal replacement of existing
machinery and equipment, but excludes any expenditures for potential
acquisitions. Management anticipates that capital expenditures will be funded
with a combination of existing resources and expected cash flows.
During the seasonally slow winter months (typically November through
February), the Company has historically built inventories of RV's in order to
meet peak demand for these products in the spring. This is usually accomplished
without the use of debt financing; however, there have been occasions when the
Company has required the short-term use of uncommitted bank credit lines. No
such borrowings were necessary in fiscal 1998 or 1999. The Company has
uncommitted credit lines with its principal bank and another bank which are used
only to support standby letters of credit. With respect to the Company's retail
operation, the Company has arrangements with several financial institutions to
provide retail inventory floor plan financing, which totaled $125.3 million at
the end of fiscal 1999. It is expected that as new retail stores are added in
fiscal 2000, additional borrowings will be necessary to fund higher levels of
retail inventories.
The Company anticipates that a combination of cash flow from operating
activities and existing financial resources, along with available lines of
credit for retail inventory financing, will be adequate to satisfy its currently
foreseeable liquidity needs, including capital expenditure requirements.
YEAR 2000
Fleetwood is dependent on a cluster of centralized computers to provide data
in support of vital company-wide operational and accounting functions. Many of
the computer processes used to generate this data were programmed in-house
following the common practice of using only two digits to designate a year.
Other software purchased by the Company was written using the same convention.
As the year 2000 approaches, programs with such date-related logic will not be
able to distinguish between the years 1900 and 2000, potentially causing
software and hardware to fail, generate erroneous calculations or present
information in an unusable form. In recognition of this potential, the Company
launched a year 2000 project in February 1996 to identify and correct all
offending computer code that was written internally and to upgrade or replace
any purchased software that was non-compliant. At this date, the project,
including thorough testing and certification, is substantially complete. A few
tasks remaining relate to the implementation of vendor upgrades and replacements
of purchased software and are expected to be completed by the third quarter of
calendar 1999.
The Company's dependence on non-information technology which utilizes
embedded chip controllers is minimal. Nevertheless, as part of the year 2000
project, an inventory of all such equipment has been conducted, disclosing that
most is not calendar-date sensitive. In isolated cases where remediation is
required, repair or replacement will be completed by the end of the third
calendar quarter.
23
<PAGE>
The Company has relationships with various third parties on whom it relies
to provide goods and services necessary for the manufacture and distribution of
its products. These include vendors, suppliers and financial institutions. As
part of its determination of year 2000 readiness, the Company has identified
material relationships with third party vendors and suppliers and has completed
a survey intended to assess the status of their year 2000 compliance. Responses
from the survey indicate that key suppliers to the Company, including financial
institutions, plan to be compliant by year end.
The Company sells its products mostly through numerous independent
retailers, none of which account for a material part of the Company's total
sales. Due to the broad diversification of these retailers, the risk associated
with potential business interruptions as a result of year 2000 non-compliance is
not considered significant.
The Company believes that the worst case scenario relative to year 2000
issues would be a significant disruption of production due to wide-spread
failures of vendors and suppliers to provide critical materials and services,
including utilities. Because of the broad geographical disbursement of the
Company's manufacturing facilities and the diversification of vendors for most
materials and components, the Company believes that such a disruption is
unlikely. Where the Company is dependent on a few or sole source suppliers to
provide a crucial product or component, measures have been taken, where
possible, to identify alternate vendors who can supply the required material and
provide assurance of year 2000 readiness. The Company's most significant
exposure in this area is with a few manufacturers which supply most of the
chassis used in the production of motor homes. All such suppliers have provided
the Company with specific assurances of year 2000 compliance.
It is anticipated that the Company's year 2000 project will substantially
reduce the risk of significant business interruptions, but there is no assurance
that all material risks can be eliminated. Failure to detect and correct all
internal instances of non-compliance or the inability of third parties to
achieve timely compliance could result in the interruption of normal business
operations which could, depending on its duration, have a material adverse
effect on the Company's financial statements. The Company has begun the process
of assessing potential year 2000 failures and designing contingency plans to
mitigate the effect of such occurrences. This effort is expected to be completed
during the third calendar quarter of 1999.
The total cost of the Company's year 2000 efforts, including hardware,
software, related consulting costs and assessment of third party compliance is
estimated to be about $1.2 million, which is not material to the Company's
financial statements.
MARKET RISK
The Company is exposed to market risks related to fluctuations in interest
rates on its marketable investments and variable rate debt, which consists of
notes payable to an insurance company and the liability for flooring of
manufactured housing retail inventories. The Company does not use interest rate
swaps, futures contracts or options on futures, or other types of derivative
financial instruments.
The vast majority of the Company's marketable investments are in fixed rate
securities with average original maturity dates of approximately two weeks,
minimizing the effect of interest rate fluctuations on their fair value.
For fixed rate debt, changes in interest rates generally affect the fair
market value, but not earnings or cash flows. Conversely, for variable rate
debt, changes in interest rates generally do not influence fair market value,
but do affect future earnings and cash flows. The Company does not have an
obligation to prepay fixed rate debt prior to maturity, and as a result,
interest rate risk and changes in fair market value should not have a
significant impact on such debt until the Company would be required to refinance
it. Holding the variable rate debt balance constant, each one percentage point
increase in interest rates occurring on the first day of the year would result
in an increase in interest expense for the coming year of approximately $1.8
million.
24
<PAGE>
The Company does not believe that future market interest rate risks related
to its marketable investments or debt obligations will have a material impact on
the Company or the results of its future operations.
OTHER
In 1998, the American Institute of Certified Public Accountants (AICPA)
issued Statement of Position (SOP) No. 98-1 "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." This Statement
provides guidance on accounting for the costs of computer software developed or
obtained for internal use and provides guidance for determining whether computer
software is for internal use. Also in 1998, the AICPA issued SOP No. 98-5
"Reporting on the Costs of Start-Up Activities." This Statement provides
guidance on the accounting for start-up costs and organization costs. Management
plans to adopt these Statements in fiscal 2000 and believes that their adoption
will not have a material impact on the Company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Fleetwood Enterprises, Inc.
We have audited the accompanying consolidated balance sheets of FLEETWOOD
ENTERPRISES, INC. (a Delaware Corporation) and subsidiaries as of April 25, 1999
and April 26, 1998, and the related consolidated statements of income, changes
in shareholders' equity, and cash flows for each of the three years in the
period ended April 25, 1999. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Fleetwood
Enterprises, Inc. and subsidiaries as of April 25, 1999 and April 26, 1998, and
the results of their operations and their cash flows for each of the three years
in the period ended April 25, 1999 in conformity with generally accepted
accounting principles.
Orange County, California
June 21, 1999
25
<PAGE>
FLEETWOOD ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED APRIL
----------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Net sales:
Manufacturing................................................... $3,336,618 $3,050,567 $2,874,426
Retail.......................................................... 332,309 -- --
Less intercompany............................................... (178,764) -- --
---------- ---------- ----------
3,490,163 3,050,567 2,874,426
Cost of products sold............................................. 2,736,324 2,456,288 2,334,840
---------- ---------- ----------
Gross profit.................................................... 753,839 594,279 539,586
Operating expenses................................................ 563,528 424,084 400,027
---------- ---------- ----------
Operating income................................................ 190,311 170,195 139,559
Other income (expense):
Investment income............................................... 16,590 12,542 12,298
Interest on long-term debt...................................... (3,523) (3,567) (4,035)
Interest on inventory floor plan financing...................... (6,314) -- --
Distribution on preferred securities of Fleetwood
Capital Trust................................................. (17,523) (3,936) --
Other........................................................... (649) (285) (772)
---------- ---------- ----------
(11,419) 4,754 7,491
---------- ---------- ----------
Income from continuing operations before provision for income
taxes........................................................... 178,892 174,949 147,050
Provision for income taxes........................................ (71,771) (66,404) (56,998)
---------- ---------- ----------
Income from continuing operations................................. 107,121 108,545 90,052
Income from discontinued operations, net of income taxes:
Income from operations of finance subsidiary.................... -- -- 887
Gain on sale of finance subsidiary.............................. -- -- 33,891
---------- ---------- ----------
Net income........................................................ $ 107,121 $ 108,545 $ 124,830
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
Earnings per share: BASIC DILUTED BASIC DILUTED BASIC DILUTED
----- ------- ----- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C>
Continuing operations........................................... $3.16 $2.94 $3.09 $3.01 $2.36 $2.30
Discontinued operations:
Income from operations of finance subsidiary.................. -- -- -- -- .02 .02
Gain on sale of finance subsidiary............................ -- -- -- -- .88 .87
-------------- -------------- --------------
Total........................................................... $3.16 $2.94 $3.09 $3.01 $3.26 $3.19
-------------- -------------- --------------
-------------- -------------- --------------
Weighted average Common shares--basic............................. 33,880 35,090 38,238
-------------- -------------- --------------
-------------- -------------- --------------
Weighted average Common shares--diluted........................... 40,171 36,933 39,162
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
The accompanying notes are an integral part of these statements.
26
<PAGE>
FLEETWOOD ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
APRIL 25, APRIL 26,
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
Cash................................................................................... $ 25,602 $ 28,143
Marketable investments................................................................. 231,672 255,919
Receivables............................................................................ 245,847 195,388
Inventories............................................................................ 257,034 153,746
Deferred tax benefits--current......................................................... 33,637 30,212
Other current assets................................................................... 26,397 19,443
----------- -----------
Total current assets............................................................... 820,189 682,851
Property, plant and equipment.......................................................... 303,934 277,211
Marketable investments maturing after one year......................................... 9,859 21,660
Deferred tax benefits--non-current..................................................... 47,932 45,042
Cash value of Company-owned life insurance............................................. 64,880 63,355
Goodwill............................................................................... 247,681 13,745
Other assets........................................................................... 36,709 25,616
----------- -----------
$ 1,531,184 $ 1,129,480
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable....................................................................... $ 138,261 $ 118,481
Employee compensation and benefits..................................................... 90,266 74,435
Federal and state income taxes......................................................... 4,759 8,800
Retail flooring liability.............................................................. 125,275 --
Other current liabilities.............................................................. 156,159 124,086
----------- -----------
Total current liabilities.......................................................... 514,720 325,802
Deferred compensation and retirement benefits.......................................... 60,832 58,272
Insurance reserves..................................................................... 26,429 26,880
Long-term debt......................................................................... 55,000 55,000
----------- -----------
Total liabilities.................................................................. 656,981 465,954
----------- -----------
Contingent liabilities
Company-obligated manditorily redeemable convertible preferred securities of Fleetwood
Capital Trust holding solely 6% convertible subordinated debentures of the Company... 287,500 287,500
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 35,198,000 at
April 25, 1999 and 31,451,000 at April 26, 1998.................................... 35,198 31,451
Capital surplus...................................................................... 202,244 54,340
Retained earnings.................................................................... 351,769 291,696
Accumulated other comprehensive income (loss)........................................ (2,508) (1,461)
----------- -----------
586,703 376,026
----------- -----------
$ 1,531,184 $ 1,129,480
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these balance sheets.
27
<PAGE>
FLEETWOOD ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED APRIL
---------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................ $ 107,121 $ 108,545 $ 124,830
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation expense................ 27,615 27,538 25,581
Amortization of intangibles and
goodwill.......................... 4,226 261 1,998
Losses on sales of property, plant
and equipment..................... 649 284 772
Gain on sale of finance
subsidiary........................ -- -- (33,891)
Changes in assets and liabilities--
Increase in receivables........... (32,794) (14,303) (7,705)
Increase in inventories........... (3,124) (8,233) (7,614)
Increase in deferred tax
benefits........................ (7,638) (3,969) (6,061)
Increase in cash value of
Company-owned life insurance.... (1,525) (16,521) (15,881)
(Increase) decrease in other
assets.......................... (17,195) (12,952) 9,452
Increase in accounts payable...... 694 11,732 1,899
Increase in retail flooring
liability....................... 31,889 -- --
Increase (decrease) in other
liabilities..................... 36,493 25,770 (8,242)
----------- ----------- -----------
Net cash provided by operating
activities.......................... 146,411 118,152 85,138
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investment securities:
Held-to-maturity.................... (5,217,764) (6,785,086) (4,666,426)
Available-for-sale.................. (75,902) (68,384) (1,540,292)
Proceeds from maturity of investment
securities:
Held-to-maturity.................... 5,237,570 6,578,453 4,681,526
Available-for-sale.................. 50,459 15,480 1,461,573
Proceeds from sale of
available-for-sale investment
securities.......................... 41,044 54,626 263,202
Purchases of property, plant and
equipment........................... (49,757) (37,809) (56,184)
Proceeds from sales of property, plant
and equipment....................... 10,558 11,107 18,087
Acquisition of retail companies net of
$10,141 cash acquired............... (117,975) -- --
Change in net assets of discontinued
operation........................... -- -- (887)
Proceeds from sale of finance
subsidiary.......................... -- -- 132,222
----------- ----------- -----------
Net cash provided by (used in)
investing activities................ (121,767) (231,613) 292,821
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of Trust
preferred securities................ -- 287,500 --
Cost of issuance of Trust preferred
securities.......................... -- (8,048) --
Repayment of long-term debt........... -- -- (25,000)
Dividends to Common shareholders...... (24,672) (23,744) (24,408)
Proceeds from exercise of stock
options............................. 22,826 25,770 5,502
Purchase of Common stock.............. (24,933) (177,168) (311,738)
----------- ----------- -----------
Net cash provided by (used in)
financing activities................ (26,779) 104,310 (355,644)
----------- ----------- -----------
Foreign currency translation
adjustment............................ (406) (596) (217)
----------- ----------- -----------
Increase (decrease) in cash............. (2,541) (9,747) 22,098
Cash at beginning of year............... 28,143 37,890 15,792
----------- ----------- -----------
Cash at end of year..................... $ 25,602 $ 28,143 $ 37,890
----------- ----------- -----------
----------- ----------- -----------
Supplementary disclosures:
Interest paid......................... $ 9,749 $ 3,084 $ 4,039
Income taxes paid..................... 84,456 56,813 67,330
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these statements.
28
<PAGE>
FLEETWOOD ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ACCUMULATED
---------------------- OTHER TOTAL
NUMBER CAPITAL RETAINED COMPREHENSIVE SHAREHOLDERS'
OF SHARES AMOUNT SURPLUS EARNINGS INCOME (LOSS) EQUITY
----------- --------- --------- ---------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE APRIL 28, 1996...................... 45,640 $ 45,640 $ 42,758 $ 561,500 $ (761) $ 649,137
----------- --------- --------- ---------- ------- -------------
Comprehensive income:
Net income................................ -- -- -- 124,830 -- 124,830
Other comprehensive income:
Foreign currency translation, net of
taxes of $145......................... -- -- -- -- (217) (217)
Investment securities, net of taxes of
$7.................................... -- -- -- -- (11) (11)
-------------
Comprehensive income........................ -- -- -- -- -- 124,602
Cash dividends declared on Common stock..... -- -- -- (24,408) -- (24,408)
Stock options exercised (including related
tax benefits)............................. 393 393 5,109 -- -- 5,502
Purchase of Common stock.................... (10,286) (10,286) (10,183) (291,269) -- (311,738)
----------- --------- --------- ---------- ------- -------------
BALANCE APRIL 27, 1997...................... 35,747 35,747 37,684 370,653 (989) 443,095
----------- --------- --------- ---------- ------- -------------
Comprehensive income:
Net income................................ -- -- -- 108,545 -- 108,545
Other comprehensive income:
Foreign currency translation, net of
taxes of $459......................... -- -- -- -- (596) (596)
Investment securities, net of taxes of
$71................................... -- -- -- -- 124 124
-------------
Comprehensive income........................ -- -- -- -- -- 108,073
Cash dividends declared on Common stock..... -- -- -- (23,744) -- (23,744)
Stock options exercised (including related
tax benefits)............................. 907 907 24,863 -- -- 25,770
Purchase of Common stock.................... (5,203) (5,203) (8,207) (163,758) -- (177,168)
----------- --------- --------- ---------- ------- -------------
BALANCE APRIL 26, 1998...................... 31,451 31,451 54,340 291,696 (1,461) 376,026
----------- --------- --------- ---------- ------- -------------
Comprehensive income:
Net income................................ -- -- -- 107,121 -- 107,121
Other comprehensive income:
Foreign currency translation, net of
taxes of $312......................... -- -- -- -- (406) (406)
Investment securities, net of taxes of
$375.................................. -- -- -- -- (641) (641)
-------------
Comprehensive income........................ -- -- -- -- -- 106,074
Cash dividends declared on Common stock..... -- -- -- (24,672) -- (24,672)
Stock options exercised (including related
tax benefits)............................. 952 952 21,874 -- -- 22,826
Purchase of Common stock.................... (765) (765) (1,792) (22,376) -- (24,933)
Stock issued for acquisitions............... 3,560 3,560 127,822 -- -- 131,382
----------- --------- --------- ---------- ------- -------------
BALANCE APRIL 25, 1999...................... 35,198 $ 35,198 $ 202,244 $ 351,769 $ (2,508) $ 586,703
----------- --------- --------- ---------- ------- -------------
----------- --------- --------- ---------- ------- -------------
</TABLE>
The accompanying notes are an integral part of these statements.
29
<PAGE>
FLEETWOOD ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of Fleetwood
Enterprises, Inc. and its wholly owned subsidiaries. The term "Company" used
herein means Fleetwood Enterprises, Inc. and its subsidiaries, unless otherwise
indicated by the context. All material intercompany accounts and transactions
have been eliminated.
The financial statements for fiscal 1997 have been restated to show the
operations of Fleetwood Credit Corp., the Company's wholly owned finance
subsidiary, as a discontinued operation. The subsidiary was sold in May 1996 as
explained in Note 4.
(B) REVENUE RECOGNITION:
For manufacturing operations, sales are recorded when products are shipped
from factories to the Company's dealers. Sales to Company-owned retail
operations are eliminated in consolidation. The vast majority of manufacturing
sales are made for cash, with most dealers financing their purchases under
flooring arrangements with banks or finance companies. Products are not sold on
consignment and dealers do not have the right to return products.
Retail home sales consist of new and pre-owned manufactured homes as well as
retailer-installed options and set-up and delivery. Retail home sales are
recognized upon passage of title and, in the case of credit sales (which
represent the majority of the Company's retail sales), upon the execution of the
loan agreement and other required documentation and receipt of a designated
minimum down payment. The Company also sells pre-owned manufactured homes on
consignment from third parties for which the Company records a sales commission
when sold to customers. Home sales exclude any sales and use taxes collected.
The Company receives agent's commissions on insurance policies issued by
unrelated insurance companies. Insurance commissions are recognized as part of
retail revenues at the time the policies are written.
The Company arranges financing for retail home buyers through various
lending institutions for which the Company receives certain financing fees,
which are recognized in retail revenues along with the sale of the related home.
(C) FOREIGN CURRENCY TRANSLATION:
Exchange adjustments resulting from foreign currency transactions are
recognized currently in income, whereas adjustments resulting from the
translation of financial statements are reflected in other comprehensive income
as a separate component of shareholders' equity. The assets and liabilities of
the Canadian operation (which are not material) are translated to U.S. dollars
at current exchange rates. Revenues and expenses are translated at the average
exchange rates for the year. Gains or losses on foreign currency transactions in
fiscal years 1999, 1998 and 1997 were not material.
30
<PAGE>
FLEETWOOD ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(D) INVENTORY VALUATION:
Inventories are valued at the lower of cost (first-in, first-out) or market.
Manufacturing cost includes materials, labor and manufacturing overhead. Retail
finished goods are valued at cost less intercompany manufacturing profit.
Inventories consist of the following:
<TABLE>
<CAPTION>
APRIL 25, APRIL 26,
1999 1998
---------- ----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Manufacturing inventory--
Raw materials....................................................... $ 108,813 $ 111,875
Work in process..................................................... 28,015 27,327
Finished goods...................................................... 9,973 14,544
---------- ----------
146,801 153,746
---------- ----------
Retail inventory--
Finished goods...................................................... 126,239 --
Less manufacturing profit........................................... (16,006) --
---------- ----------
110,233 --
---------- ----------
$ 257,034 $ 153,746
---------- ----------
---------- ----------
</TABLE>
(E) LONG-LIVED ASSETS:
The Company assesses the recoverability of its long-lived assets by
determining whether the net book value can be recovered through projected cash
flows over the remaining life. If projections indicate that long-lived assets
will not be recovered, an adjustment is made to reduce the net asset to an
amount consistent with future cash flows discounted at the Company's incremental
borrowing rate. Cash flow projections, although subject to a degree of
uncertainty, are based on trends of historical performance and management's
estimate of future performance, giving consideration to existing and anticipated
competitive and economic conditions.
(F) DEPRECIATION:
Depreciation is provided using straight-line or accelerated methods based on
the following estimated useful lives:
- Buildings and improvements--10-40 years
- Machinery and equipment--3-15 years
(G) GOODWILL:
Goodwill represents the excess of cost over the fair value of assets
acquired and is amortized using the straight-line method over 40 years.
(H) WARRANTY COSTS AND DEALER VOLUME REBATES:
Estimated costs related to product warranties and dealer volume rebates are
accrued at the time products are sold.
(I) RESEARCH AND DEVELOPMENT COSTS AND ADVERTISING EXPENSE:
The Company follows the policy of charging research and development costs
against income in the periods incurred. Expenditures for product research and
development activities were $19.2 million in 1999, $16.8 million in 1998 and
$17.2 million in 1997. Advertising expenditures, which were also charged against
31
<PAGE>
FLEETWOOD ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
income in the periods incurred, totaled $19.5 million in 1999 and $7.4 million
in 1998. Advertising expenditures were not material in 1997.
(J) EARNINGS PER SHARE:
The Company adopted Statement of Financial Accounting Standard (SFAS) No.
128, "Earnings Per Share," in fiscal year 1998. The Consolidated Statements of
Income reflect both basic and diluted earnings per share as required by SFAS
128. See additional information in Note 16.
(K) ACCOUNTING PERIOD:
The Company's fiscal year ends on the last Sunday in April. The year-ending
dates for the past three fiscal years were April 25, 1999, April 26, 1998 and
April 27, 1997, respectively. Included in the consolidated financial statements
are the results of Fleetwood Retail Corp. (FRC), the Company's wholly owned
housing retail subsidiary, for the 12 months ended March 31, 1999. As is
customary in the housing retail business, FRC follows a calendar year accounting
period.
(L) CASH FLOW STATEMENTS:
For purposes of these statements, cash includes cash on hand and cash in
banks in demand deposit accounts.
(M) INSURANCE RESERVES:
Insurance reserves primarily represent estimated liabilities for products
liability and workers' compensation claims. Workers' compensation reserves
mainly consist of estimated case reserves on known claims, as well as a factor
for incurred, but not reported claims. Products liability reserves include both
case reserves on known claims as well as estimated liabilities for claims which
have not been reported. Products reserves include estimated amounts for unpaid
claims and claim adjustment expenses, which are based on historical experience
and independent actuarial calculations.
(N) USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(2) SUPPLEMENTAL INFORMATION ON INSURANCE AND REAL ESTATE SUBSIDIARIES
The insurance subsidiary was formed primarily for the purpose of insuring
products liability risks of the parent company and its subsidiaries. The real
estate subsidiary was formed for the purpose of participating in site-built
housing construction. As of April 25, 1999, the investment in real estate
consisted
32
<PAGE>
FLEETWOOD ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
of raw land, and there were no real estate development activities in process.
Condensed financial information for these subsidiaries, excluding intercompany
eliminations, is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Insurance subsidiary:
Investments.................................................................... $ 44,132 $ 51,482 $ 53,620
Other assets................................................................... 13,936 10,197 3,429
Reserves for losses............................................................ 26,073 26,339 43,332
Other liabilities.............................................................. 5,758 12,919 9,137
Net premiums................................................................... 4,327 2,524 8,384
Underwriting income............................................................ 4,569 23,780 8,603
Investment income.............................................................. 3,069 3,610 5,458
Net income..................................................................... 4,834 17,468 9,929
Real estate subsidiary:
Land........................................................................... $ 2,800 $ 2,800 $ 2,800
Other assets................................................................... 1,056 1,078 1,082
Net loss....................................................................... (22) (5) (22)
</TABLE>
(3) INVESTMENTS
The Company has a cash management program which provides for the investment
of excess cash balances primarily in short-term money market instruments and
intermediate-term debt instruments. Investments consist of time deposits, U.S.
Treasury obligations, tax-exempt instruments and other non-equity type
investments stated at cost, which approximates market.
Statement of Financial Accounting Standard No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," requires that all applicable
investments be classified as trading securities, available-for-sale securities
or held-to-maturity securities. The Company did not have any investments
classified as trading securities during the periods presented. The statement
further requires that held-to-maturity securities be reported at amortized cost
and available-for-sale securities be reported at fair value, with unrealized
gains and losses excluded from earnings but reported in other comprehensive
income as a separate component of shareholders' equity (net of the effect of
income taxes) until they are sold. At the time of sale, any gains or losses,
calculated by the specific identification method, will be recognized as a
component of operating results.
33
<PAGE>
FLEETWOOD ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following is a summary of investment securities as of April 25, 1999 and
April 26, 1998:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
----------- ------------- ------------- -----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
APRIL 25, 1999
AVAILABLE-FOR-SALE SECURITIES:
U.S. Treasury securities and obligations of U.S. government
agencies........................................................ $ 8,907 $ 129 $ 24 $ 9,012
U.S. corporate securities......................................... 17,631 21 444 17,208
Foreign government obligations.................................... 2,322 16 -- 2,338
Foreign corporate securities...................................... 15,445 67 188 15,324
Other debt securities............................................. 366 80 -- 446
----------- ----- ----- -----------
$ 44,671 $ 313 $ 656 $ 44,328
----------- ----- ----- -----------
----------- ----- ----- -----------
APRIL 26, 1998
AVAILABLE-FOR-SALE SECURITIES:
U.S. Treasury securities and obligations of U.S. government
agencies........................................................ $ 13,671 $ 82 $ 5 $ 13,748
U.S. corporate securities......................................... 41,244 229 71 41,402
Foreign government obligations.................................... 3,136 10 1 3,145
Other debt securities............................................. 2,221 54 -- 2,275
----------- ----- ----- -----------
$ 60,272 $ 375 $ 77 $ 60,570
----------- ----- ----- -----------
----------- ----- ----- -----------
</TABLE>
The amortized cost and estimated fair value of the securities at April 25,
1999, by contractual maturity, are shown below. Expected maturities will differ
from contractual maturities because the issuers of the securities may have the
right to prepay obligations without prepayment penalties.
<TABLE>
<CAPTION>
COST FAIR VALUE
---------- ----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
APRIL 25, 1999
AVAILABLE-FOR-SALE:
Due in one year or less............................................. $ 34,937 $ 34,469
Due after one year through five years............................... 5,556 5,672
Due after five years through ten years.............................. 4,178 4,187
---------- ----------
$ 44,671 $ 44,328
---------- ----------
---------- ----------
HELD-TO-MATURITY:
All due in one year or less......................................... $ 197,203 $ 197,203
---------- ----------
---------- ----------
</TABLE>
34
<PAGE>
FLEETWOOD ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Investment income for fiscal years 1999, 1998 and 1997 consisted of the
following (amounts in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Interest income.............................................. $ 16,787 $ 12,407 $ 11,939
Gross realized gains......................................... 1 284 1,077
Gross realized losses........................................ (43) (4) (461)
Investment management fees................................... (155) (145) (257)
--------- --------- ---------
$ 16,590 $ 12,542 $ 12,298
--------- --------- ---------
--------- --------- ---------
</TABLE>
(4) DISCONTINUED OPERATIONS
In May 1996, the Company completed the sale of Fleetwood Credit Corp., a
wholly owned RV finance subsidiary, to Associates First Capital Corporation.
Under the terms of the agreement, Associates acquired all of the outstanding
stock of Fleetwood Credit Corp. for $156.6 million (before income taxes) in
cash.
Income from the discontinued operation of the finance company was $887,000
in 1997, net of income taxes of $511,000. The gain on the sale of the finance
subsidiary recorded in 1997 was $33,891,000, which is net of $19,607,000 for
income taxes.
(5) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost and consists of the
following:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Land.................................................................. $ 18,687 $ 17,304
Buildings and improvements............................................ 322,730 291,075
Machinery and equipment............................................... 148,651 132,428
Idle facilities, net of accumulated depreciation...................... 23,529 20,784
---------- ----------
513,597 461,591
Less accumulated depreciation......................................... (209,663) (184,380)
---------- ----------
$ 303,934 $ 277,211
---------- ----------
---------- ----------
</TABLE>
Idle facilities include closed plants and certain other properties which are
not in current use by the Company. There were seven idle plant facilities at the
end of 1999 and six idle plant facilities at the end of 1998. During the year,
one idle facility was activated and two existing facilities were deactivated.
The carrying value of idle facilities was $23,529,000 at April 25, 1999 and
$20,784,000 at April 26, 1998, net of accumulated depreciation of $9,951,000 and
$8,881,000, respectively. In the opinion of management, the carrying values of
idle facilities are not in excess of net realizable value.
(6) RETAIL ACQUISITIONS AND GOODWILL
The goodwill amount presented on the financial statements primarily resulted
from the acquisition of housing retail operations during fiscal year 1999. The
acquisitions were accounted for as purchases and were valued based on the
estimated fair value of the assets acquired and liabilities assumed with respect
to each acquisition at the dates of acquisition. Preliminary purchase price
allocations were made pending subsequent settlements and earnouts based on
performance in periods subsequent to acquisition.
35
<PAGE>
FLEETWOOD ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
As of April 25, 1999, accumulated amortization totaled $5.4 million. Net
goodwill from sources other than acquisitions of retail operations was $5.3
million, and almost entirely originated from the previous acquisition of a
folding trailer operation.
The Company periodically evaluates the recoverability of goodwill resulting
from business acquisitions and measures the amount of impairment, if any, by
assessing current and future levels of income and cash flows as well as other
factors, such as business trends and prospects and market and economic
conditions. In the opinion of management, there is no material impairment in the
value of goodwill.
Below is a summary of the details of housing retail acquisitions during
fiscal 1999 (amounts in thousands).
<TABLE>
<CAPTION>
<S> <C>
DETAILS OF ACQUISITIONS:
Fair value of assets acquired................................................... $ 381,449
Liabilities assumed............................................................. 121,951
----------
Acquisition price............................................................... 259,498
Less cash acquired.............................................................. (10,141)
Less Common stock issued for acquisitions....................................... (131,382)
----------
Net cash paid for acquisitions.................................................. $ 117,975
----------
----------
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued for acquisitions............................................ $ 131,382
----------
----------
</TABLE>
Had the acquisitions occurred at the beginning of the prior fiscal year, the
unaudited and pro forma net sales, net income, diluted earnings per share and
diluted weighted average number of Common shares outstanding would be as
follows:
<TABLE>
<CAPTION>
1999 1998
------------ ------------
(AMOUNTS IN THOUSANDS
EXCEPT PER SHARE DATA)
<S> <C> <C>
Net sales......................................................... $ 3,583,971 $ 3,262,918
Net income........................................................ 117,472 108,049
Diluted earnings per share........................................ $ 2.83 $ 2.64
Diluted weighted average shares outstanding....................... 41,501 40,950
</TABLE>
(7) LONG-TERM DEBT
On April 22, 1996, the Company assumed from the discontinued finance
subsidiary $80,000,000 in notes payable to The Prudential Insurance Company of
America. The debt is subject to certain financial covenants as defined in the
loan agreement. One $25,000,000 note matured and was paid off on schedule in
August 1996. The other two notes have floating interest rates and mature in
November 2001 and June 2005. The floating rates are based on the three-month
LIBOR rate. Interest expense on these notes totaled $3.5 million for fiscal
1999, $3.6 million in fiscal 1998 and $4.0 million in fiscal 1997.
<TABLE>
<CAPTION>
CURRENT
MATURITY INTEREST RATE
- ---------------------------------------------------------------- AMOUNTS ---------------
--------------
(IN THOUSANDS)
<S> <C> <C>
Due in 2001..................................................... $ 30,000 5.59%
Due in 2005..................................................... 25,000 5.57
-------
$ 55,000
-------
-------
</TABLE>
36
<PAGE>
FLEETWOOD ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(8) CONVERTIBLE TRUST PREFERRED SECURITIES
On February 10, 1998, Fleetwood Capital Trust, a Delaware business trust
wholly owned by the Company (the Trust), completed a $287.5 million private
placement of 5,750,000 shares of 6% Convertible Trust Preferred Securities (the
Securities) with a liquidation value of $50 per security. The combined proceeds
from the issuance of the Securities and the purchase by the Company of the
common securities of the Trust were invested by the Trust in 6% convertible
subordinated debentures in the aggregate principal amount of $296.4 million, due
February 15, 2028 (the Debentures), issued by the Company. The Debentures are
the sole assets of the Trust and eliminate in consolidation.
Distributions on the Securities are cumulative and will be paid quarterly in
arrears at an annual rate of 6%. The Company has the option to defer payment of
the distributions for an extended period of up to 20 consecutive quarters, so
long as the Company is not in default in the payment of interest on the
Debentures. Considered together, the undertakings under the Trust, the related
Indentures and Guarantees and the convertible subordinated Debentures constitute
a full and unconditional guarantee by the Company of the Trust's obligations
under the Securities.
The Securities are convertible, at the option of the holder, at any time at
the rate of 1.02627 shares of Fleetwood Common stock (i.e., a conversion price
of $48.72 per Common share), subject to adjustment in certain circumstances. The
Debentures will be redeemable in whole or in part, at the option of the Company,
on or after February 15, 2001, at a price equal to 103.75 percent of the
principal amount plus accrued and unpaid interest, declining annually to par if
redeemed on or after February 15, 2006. The Securities are subject to mandatory
redemption to the extent of any early redemption of the Debentures and upon
maturity of the Debentures on February 15, 2028.
(9) RETIREMENT AND DEFERRED COMPENSATION PLANS
The Company has qualified defined contribution retirement plans covering
substantially all employees. There are no prior service costs associated with
these plans. The Company follows the policy of funding qualified retirement plan
contributions as accrued. The Company also maintains non-qualified plans to
accrue retirement benefits subject to Internal Revenue Code limitations. The
costs associated with these retirement plans are summarized as follows:
<TABLE>
<CAPTION>
QUALIFIED NON-QUALIFIED
PLANS PLANS TOTAL
--------- ------------- ---------
<S> <C> <C> <C>
(AMOUNTS IN THOUSANDS)
1999..................................................... $ 22,944 $ 3,828 $ 26,772
1998..................................................... 20,400 3,045 23,445
1997..................................................... 21,244 2,081 23,325
</TABLE>
In addition to non-qualified retirement plans, the Company has a deferred
compensation plan that allows for the voluntary deferral of a portion of
managers' compensation. Participant balances in the various non-qualified plans
are credited with interest at a rate set at the discretion of the Company which,
for the three years ended April 1999, was the prime rate as published by a major
U.S. bank. To enhance security for the benefits payable under these plans, the
Company has established a "Rabbi Trust," funded with Company-owned life
insurance (COLI) policies on the lives of participants. The assets of the trust
are not generally available to the Company or its creditors except in the event
of the Company's insolvency. COLI premium payments to the trust were $15.8
million in both 1998 and 1997. In March 1999, the Company effected an exchange
under section 1035 of the Internal Revenue Code, in which most of the policies
from the original insurance carrier were exchanged for policies with a new
carrier. As a result, no premium payments were made in 1999. The total liability
for benefits accrued under the non-qualified plans at the end of 1999 and 1998
totaled $60.8 million and $58.3 million, respectively. The cash values of the
related trust assets reflected in the accompanying balance sheets were $64.9
million and $63.4 million, respectively, at those same dates.
37
<PAGE>
FLEETWOOD ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(10) INCOME TAXES
The provision for income taxes for each of the three years in the period
ended April 25, 1999 is summarized below:
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
(AMOUNTS IN THOUSANDS)
Current:
U.S. Federal................................................................... $ 64,455 $ 55,982 $ 51,729
Foreign........................................................................ 1,545 1,888 1,020
State.......................................................................... 12,086 12,503 10,310
--------- --------- ---------
78,086 70,373 63,059
--------- --------- ---------
Deferred, principally Federal:
Insurance reserves............................................................. (1,768) (7,182) 3,053
Other.......................................................................... (4,547) 3,213 (9,114)
--------- --------- ---------
(6,315) (3,969) (6,061)
--------- --------- ---------
$ 71,771 $ 66,404 $ 56,998
--------- --------- ---------
--------- --------- ---------
</TABLE>
The provisions for income taxes computed by applying the Federal statutory
rate to income before taxes are reconciled to the actual provisions for fiscal
years 1999, 1998 and 1997 as follows:
<TABLE>
<CAPTION>
1999 1998 1997
--------------------- --------------------- ---------------------
AMOUNT % AMOUNT % AMOUNT %
---------- --------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
(AMOUNTS IN THOUSANDS)
Income before provision for income taxes:
U.S. Federal................................ $ 173,895 97.2% $ 171,938 98.3% $ 144,813 98.5%
Foreign..................................... 4,997 2.8 3,011 1.7 2,237 1.5
---------- --------- ---------- --------- ---------- ---------
$ 178,892 100.0% $ 174,949 100.0% $ 147,050 100.0%
---------- --------- ---------- --------- ---------- ---------
---------- --------- ---------- --------- ---------- ---------
Computed statutory tax.......................... $ 62,612 35.0% $ 61,232 35.0% $ 51,468 35.0%
State income taxes, net......................... 8,554 4.8 7,468 4.3 6,209 4.2
Tax-exempt income............................... -- -- -- -- (240) (.1)
Other items, net................................ 605 .3 (2,296) (1.3) (439) (.3)
---------- --------- ---------- --------- ---------- ---------
$ 71,771 40.1% $ 66,404 38.0% $ 56,998 38.8%
---------- --------- ---------- --------- ---------- ---------
---------- --------- ---------- --------- ---------- ---------
</TABLE>
The components of the Company's deferred income tax benefits (liabilities)
as of April 25, 1999 and April 26, 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
(AMOUNTS IN
THOUSANDS)
Insurance reserves................................................... $ 17,831 $ 16,063
Deferred compensation................................................ 23,666 22,437
Product warranty reserves............................................ 23,061 20,237
Dealer volume rebates................................................ 7,014 5,741
Depreciation......................................................... (117) (2,336)
Other financial accruals............................................. 10,114 13,112
--------- ---------
$ 81,569 $ 75,254
--------- ---------
--------- ---------
</TABLE>
38
<PAGE>
FLEETWOOD ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The net deferred tax asset summarized above is considered realizable;
however, the amount could be reduced if tax rates are reduced in the future.
(11) RETAIL FLOORING LIABILITY
Retail flooring liability represents amounts borrowed by Company-owned
retail sales centers to finance inventory purchases of manufactured homes. All
but a minor portion of the amount outstanding at April 25, 1999 was financed
under agreements with two national floor plan lenders that provide for a
security interest in the units financed and repayment at the time the units are
sold. Substantially all amounts outstanding bear interest at the prime rate less
one percent (approximately 6.75 percent at year end) or prime rate less one
quarter percent (approximately 7.50 percent at year end).
(12) OTHER CURRENT LIABILITIES
Other current liabilities consist of the following:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
(AMOUNTS IN THOUSANDS)
Dividends payable to shareholders................................... $ 6,344 $ 5,335
Dealer volume rebates............................................... 23,639 25,630
Product warranty reserves........................................... 59,631 52,232
Other............................................................... 66,545 40,889
---------- ----------
$ 156,159 $ 124,086
---------- ----------
---------- ----------
</TABLE>
(13) FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company has estimated the fair value of its financial instruments in
compliance with Statement of Financial Accounting Standard No. 107, "Disclosure
About Fair Value of Financial Instruments." The estimates were made as of April
25, 1999 based on relevant market information. Financial instruments include
cash, investments, retail flooring liability, debt and convertible preferred
securities. See Note 3 regarding discussion on investments. The estimated fair
value of financial instruments and the valuation techniques used to estimate the
fair value were as follows (amounts in thousands):
<TABLE>
<CAPTION>
APRIL 25, 1999
-----------------------
ESTIMATED
BOOK VALUE FAIR VALUE
----------- ----------
<S> <C> <C>
Cash................................................................. $ 25,602 $ 25,602
Retail flooring liability............................................ 125,275 125,275
Long-term debt....................................................... 55,000 55,000
Convertible preferred securities..................................... 287,500 287,500
</TABLE>
CASH: The fair value approximates book value.
RETAIL FLOORING, TERM DEBT AND CONVERTIBLE PREFERRED SECURITIES: The fair
values of retail flooring liability, term debt and convertible preferred
securities were estimated based on a present value discounted cash flow analysis
using rates the Company would have to pay currently to acquire similar financing
for similar remaining terms.
39
<PAGE>
FLEETWOOD ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(14) CONTINGENT LIABILITIES
As is customary in the manufactured housing and recreational vehicle
industries, the Company is contingently liable at April 25, 1999 under the terms
of repurchase agreements with many financial institutions providing inventory
financing for retailers of the Company's products. The contingent liability
under these agreements approximates the amount financed, reduced by the resale
value of any products which may be repurchased, and the risk of loss is spread
over numerous retailers and financial institutions. Losses under these
agreements have not been significant in the past.
(15) RESULTS BY QUARTER (UNAUDITED)
The unaudited results by quarter for fiscal years 1999 and 1998 are shown
below:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
FISCAL YEAR ENDED APRIL 1999: QUARTER QUARTER QUARTER QUARTER
- ----------------------------------------------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
Revenues......................................................... $ 840,155 $ 897,840 $ 804,411 $ 947,757
Operating income................................................. 50,251 54,861 39,533 45,666
Income before taxes.............................................. 49,973 51,949 35,913 41,057
Net income for basic earnings per share.......................... 30,225 31,111 21,261 24,524
Net income for diluted earnings per share........................ 33,006 33,891 24,042 27,330
Earnings per share:
Basic.......................................................... $ .96 $ .92 $ .61 $ .70
Diluted........................................................ .86 .84 .59 .66
Weighted average Common shares:
Basic.......................................................... 31,621 33,896 34,806 35,196
Diluted........................................................ 38,242 40,257 41,019 41,302
<CAPTION>
FIRST SECOND THIRD FOURTH
FISCAL YEAR ENDED APRIL 1998: QUARTER QUARTER QUARTER QUARTER
- ----------------------------------------------------------------- ---------- ---------- ---------- ----------
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues......................................................... $ 728,454 $ 769,089 $ 710,620 $ 842,404
Operating income................................................. 49,074 44,450 32,073 44,598
Income before taxes.............................................. 50,344 45,862 34,664 44,079
Net income for basic earnings per share.......................... 30,942 28,124 21,149 28,330
Net income for diluted earnings per share........................ 30,942 28,124 21,149 30,829
Earnings per share:
Basic.......................................................... $ .86 $ .78 $ .58 $ .88
Diluted........................................................ .84 .77 .57 .81
Weighted average Common shares:
Basic.......................................................... 35,843 35,948 36,256 32,313
Diluted........................................................ 36,668 36,514 36,884 37,859
</TABLE>
(16) EARNINGS PER SHARE
Basic earnings per share is computed by dividing income available to Common
stockholders by the weighted average number of Common shares outstanding.
Diluted earnings per share includes the effect of potential shares outstanding
from dilutive stock options and dilutive preferred securities. After-tax
distributions on preferred securities are added to net income to arrive at
earnings used in the diluted
40
<PAGE>
FLEETWOOD ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
earnings per share calculation. The table below shows the calculation components
of earnings per share from continuing operations for both basic and diluted
earnings per share.
<TABLE>
<CAPTION>
1999 1998 1997
--------------------- --------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
INCOME SHARES INCOME SHARES INCOME SHARES
---------- --------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
(AMOUNTS IN THOUSANDS)
Earnings used for basic EPS.................. $ 107,121 33,880 $ 108,545 35,090 $ 90,052 38,238
Effect of dilutive securities:
Stock options.............................. -- 390 -- 627 -- 924
Preferred securities....................... 11,148 5,901 2,499 1,216 -- --
---------- --------- ---------- --------- --------- ---------
Earnings used for diluted EPS................ $ 118,269 40,171 $ 111,044 36,933 $ 90,052 39,162
---------- --------- ---------- --------- --------- ---------
---------- --------- ---------- --------- --------- ---------
</TABLE>
(17) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) BALANCES
The Company has adopted Statement of Financial Accounting Standard No. 130,
"Reporting Comprehensive Income," which establishes standards for reporting and
displaying comprehensive income and its components in a full set of general
purpose financial statements. The following reflects the balances and activity,
net of tax, for the components of accumulated other comprehensive income (loss)
for the period:
<TABLE>
<CAPTION>
ACCUMULATED
FOREIGN UNREALIZED OTHER
CURRENCY GAINS (LOSSES) COMPREHENSIVE
ITEMS ON SECURITIES INCOME (LOSS)
----------- --------------- --------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Balance April 26, 1998................................................. $ (1,759) $ 298 $ (1,461)
----------- ----- -------
Foreign currency translation adjustment.............................. (406) -- (406)
Unrealized losses.................................................... -- (683) (683)
Reclassification adjustment for losses included in net income, net of
taxes of $27....................................................... -- 42 42
----------- ----- -------
Net.................................................................. (406) (641) (1,047)
----------- ----- -------
Balance April 25, 1999................................................. $ (2,165) $ (343) $ (2,508)
----------- ----- -------
----------- ----- -------
</TABLE>
(18) STOCK-BASED INCENTIVE COMPENSATION PLANS
Under the Company's 1992 Stock-Based Incentive Compensation Plan, stock
options may be granted to officers and other key employees of the Company for
the purchase of up to 4,900,000 shares of the Company's Common stock. Expiration
dates for the options may not exceed ten years from the date of grant. Under a
separate plan for non-employee directors adopted during fiscal 1993, up to
100,000 shares have been authorized for distribution of options. Automatic
grants are made annually under this plan. The Company accounts for these plans
under the provisions of APB Opinion 25, under which no compensation cost is
recognized for stock option grants as the options are granted at fair market
value at date of grant.
41
<PAGE>
FLEETWOOD ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Had compensation costs for these plans been determined consistent with
Statement of Financial Accounting Standard No. 123, "Accounting for Stock-Based
Compensation," the Company's net income and earnings per share would have been
reduced to the following pro forma amounts:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C> <C>
(AMOUNTS IN THOUSANDS
EXCEPT PER SHARE DATA)
Net income: As reported........................ $ 107,121 $ 108,545 $ 124,830
Pro forma.......................... 101,347 106,014 122,241
Diluted earnings per share: As reported........................ $ 2.94 $ 3.01 $ 3.19
Pro forma.......................... 2.52 2.87 3.12
</TABLE>
Because the SFAS No. 123 method of accounting has not been applied to
options granted prior to May 1, 1995, the resulting pro forma compensation cost
may not be representative of that to be expected in future years.
The following is a summary of the stock option activity (including those
from the expired plan) for employees and non-employee directors for fiscal years
1999, 1998 and 1997.
<TABLE>
<CAPTION>
1999 1998 1997
----------------------- ----------------------- -----------------------
WTD. AVG. WTD. AVG. WTD. AVG.
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
---------- ----------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year......... 2,163,424 $ 22.19 2,606,524 $ 19.95 2,531,224 $ 17.47
Granted.................................. 1,452,452 32.03 481,300 28.10 476,400 28.27
Exercised................................ (951,851) 20.06 (907,400) 18.72 (392,600) 14.45
Forfeited................................ (53,232) 30.66 (17,000) 27.46 (8,500) 28.38
---------- ----------- ---------- ----------- ---------- -----------
Outstanding at end of year............... 2,610,793 $ 28.29 2,163,424 $ 22.19 2,606,524 $ 19.95
---------- ----------- ---------- ----------- ---------- -----------
---------- ----------- ---------- ----------- ---------- -----------
Exercisable at end of year............... 1,663,316 $ 27.32 1,976,224 $ 21.62 2,523,624 $ 19.65
---------- ----------- ---------- ----------- ---------- -----------
---------- ----------- ---------- ----------- ---------- -----------
Weighted average fair value of options
granted................................ $ 11.78 $ 9.01 $ 9.30
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The 2,610,793 options outstanding at April 25, 1999 have exercise prices
ranging from $16.81 to $39.38 and a weighted average remaining contractual life
of 8.1 years.
The fair value of each option granted is estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in fiscal years 1999, 1998 and 1997, respectively:
risk-free interest rates of 6.0 percent; expected dividend yields of 3.0
percent, 3.0 percent and 2.5 percent; expected lives of six, six and seven
years; and, expected volatility of 35 percent, 34 percent and 35 percent.
(19) STOCKHOLDER RIGHTS PLAN
On September 15, 1998, the Company's Board of Directors adopted a new
stockholder rights agreement to replace the previous plan which expired on
November 9, 1998, granting certain new rights to holders of the Company's Common
stock. Under the new plan, which was effective November 10, 1998, one right was
granted for each share of Common stock held as of November 9, 1998, and one
right will be granted for each share subsequently issued. Each right entitles
the holder, in an unfriendly takeover
42
<PAGE>
FLEETWOOD ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
situation, and after paying the exercise price (currently $160), to purchase
Fleetwood Common stock having a market value equal to two times the exercise
price. Also, if the Company is merged into another corporation, or if 50 percent
or more of the Company's assets are sold, then rightholders are entitled, upon
payment of the exercise price, to buy common shares of the acquiring corporation
at a 50 percent discount from their then-current market value. In either
situation, these rights are not available to the acquiring party. However, these
exercise features will not be activated if the acquiring party makes an offer to
acquire all of the Company's outstanding shares at a price which is judged by
the Board of Directors to be fair to all Fleetwood stockholders. The rights may
be redeemed by the Company under certain circumstances at the rate of $.02 per
right. The rights will expire on November 9, 2008.
(20) CHANGE IN ESTIMATE OF INSURANCE RESERVES
In July 1997, the Company recorded a $19.3 million change in estimate in its
products liability insurance 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).
(21) INDUSTRY SEGMENT INFORMATION
The Company conducts manufacturing operations principally in two industries,
manufactured housing and recreational vehicles, as well as retail operations in
the manufactured housing business. On a smaller scale, the Company operates
supply companies which provide fiberglass parts, lumber and other wood
components to its primary businesses, while also generating outside sales.
Manufacturing operations are conducted in the United States and to a much lesser
extent in Canada. Retail operations are conducted exclusively in the U.S. The
operations of the Company's wholly owned insurance and real estate subsidiaries
have been included in the "Corporate and Other" category because the impact on
consolidated operating income is not material. Operating profit is total revenue
less cost of sales and operating expenses. None of the following items have been
included in the computation of operating profit for the individual operating
segments: corporate expenses, non-operating income and expenses and income
taxes. Identifiable assets are those assets used in the operation of each
industry segment. Corporate assets primarily consist of cash, investments,
deferred tax benefits, cash value of Company-owned life insurance, other assets
and idle facilities. Information with respect to industry segments as of April
25, 1999, April 26, 1998 and April 27, 1997, and for each of the years then
ended is set forth as follows:
<TABLE>
<CAPTION>
ADJUSTMENTS
MANUFACTURED RECREATIONAL SUPPLY CORPORATE AND
HOUSING VEHICLES OPERATIONS RETAIL AND OTHER ELIMINATIONS TOTAL
------------- ------------ ----------- ---------- ---------- ------------ ------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
1999
Operating revenues............ $ 1,563,966 $ 1,729,034 $ 43,618 $ 332,309 $ 4,327 $ (183,091) $ 3,490,163
Operating profit (loss)....... 83,933 109,667 16,255 1,159 (20,703) -- 190,311
Identifiable assets........... 282,896 300,821 41,344 420,512 485,611 -- 1,531,184
Depreciation.................. 13,487 8,088 2,148 1,552 2,340 -- 27,615
Amortization.................. -- 248 -- 3,692 286 -- 4,226
Capital expenditures.......... 13,014 10,421 1,171 19,375 5,776 -- 49,757
</TABLE>
43
<PAGE>
FLEETWOOD ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
ADJUSTMENTS
MANUFACTURED RECREATIONAL SUPPLY CORPORATE AND
HOUSING VEHICLES OPERATIONS RETAIL AND OTHER ELIMINATIONS TOTAL
------------- ------------ ----------- ---------- ---------- ------------ ------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
1998
Operating revenues............ $ 1,487,650 $ 1,518,163 $ 44,754 -- $ 2,524 $ (2,524) $ 3,050,567
Operating profit (loss)....... 75,896 76,809 15,437 -- 2,053 -- 170,195
Identifiable assets........... 286,308 308,420 35,985 -- 498,767 -- 1,129,480
Depreciation.................. 14,195 9,029 2,134 -- 2,180 -- 27,538
Amortization.................. -- 261 -- -- -- -- 261
Capital expenditures.......... 12,127 18,968 1,338 -- 5,376 -- 37,809
1997
Operating revenues............ $ 1,426,940 $ 1,395,163 $ 52,323 -- $ 8,384 $ (8,384) $ 2,874,426
Operating profit (loss)....... 72,980 77,641 2,170 -- (13,232) -- 139,559
Identifiable assets........... 286,081 280,345 39,551 -- 265,570 -- 871,547
Depreciation.................. 12,628 8,774 2,070 -- 2,109 -- 25,581
Amortization.................. -- 1,998 -- -- -- -- 1,998
Capital expenditures.......... 40,444 8,868 2,156 -- 4,716 -- 56,184
</TABLE>
ITEM 9. DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
MATTERS
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information regarding directors and executive officers as required by
Item 401 of Regulation S-K is set forth in Part I of this report under the
caption "Executive Officers of the Company" and on pages two through four of the
Company's proxy statement which will be filed with the Securities and Exchange
Commission not later than 120 days after April 25, 1999, and by this reference
is incorporated herein.
ITEM 11. MANAGEMENT REMUNERATION AND TRANSACTIONS
The information required by Item 402 of Regulation S-K is set forth on pages
eight through ten of the Company's proxy statement which will be filed with the
Securities and Exchange Commission not later than 120 days after April 25, 1999,
and by this reference is incorporated herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 403 of Regulation S-K is set forth on pages
six and seven of the Company's proxy statement which will be filed with the
Securities and Exchange Commission not later than 120 days after April 25, 1999,
and by this reference is incorporated herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information regarding certain relationships and related transactions as
required by Item 404 of Regulation S-K, if any, is set forth in the Company's
proxy statement which will be filed with the Securities and Exchange Commission
not later than 120 days after April 25, 1999, and by this reference is
incorporated herein.
44
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
<C> <C> <C> <S> <C>
(a) Financial Statements
(1) Financial Statements included in Part II of this report:
Report of Independent Public Accountants
Consolidated Statements of Income for each of the three years in the period ended April 25, 1999
Consolidated Balance Sheets at April 25, 1999 and April 26, 1998
Consolidated Statements of Cash Flows for each of the three years in the period ended April 25,
1999
Consolidated Statements of Changes in Shareholders' Equity for each of the three years in the
period ended April 25, 1999
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules
Financial statement schedules not filed have been omitted for the reason that the required
information is shown in the financial statements or notes thereto, the amounts involved are not
significant, or the required matter is not present.
(3) Exhibits and Index to Exhibits*:
3. (a) Restated Certificate of Incorporation.
(b) Amendment to Restated Certificate of Incorporation.
(c) Restated Bylaws of the Company.
4. (a) Rights Agreement dated November 10, 1998, between the Company and the First
National Bank of Boston used in connection with a stockholder rights plan.
(b) Amended Certificate of Designation, Preferences and Rights of Series A Junior
Participating Preferred Stock filed September 17, 1998.
9. Not applicable.
10. Material Contracts.
(a) Form of employment agreement between the Company and each of its officers.
(b) Amended and Restated Deferred Compensation Plan.
(c) Amended and Restated Supplemental Benefit Plan.
(d) Amended and Restated Long-Term Incentive Compensation Plan.
(e) 1982 Stock Option Plan.
(f) Amended and Restated Benefit Restoration Plan.
(g) Dividend Equivalent Plan.
(h) Amended and Restated 1992 Stock-Based Incentive Compensation Plan.
(i) The 1992 Non-Employee Director Stock Option Plan.
(j) Senior Executive Incentive Compensation Plan.
(k) Operating Agreement between Fleetwood Enterprises, Inc. and Fleetwood Credit
Corp.
<CAPTION>
PAGE
REFERENCE
-------------
<C> <C>
(a)
25
26
27
28
29
30
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
11. Not applicable.
<C> <C> <C> <S> <C>
12. Not applicable.
13. Not applicable.
18. Not applicable.
19. Not applicable.
21. Subsidiaries of the Registrant.
22. Not applicable.
23. Consent of independent public accountants.
24. Not applicable.
27. Not applicable.
(b) Reports on Form 8-K
On February 2, 1999, the Company filed a report on Form 8-K regarding updated information on legal proceedings
and announcements of acquisitions of manufactured housing retailers.
<CAPTION>
PAGE
REFERENCE
-------------
<C> <C>
(b)
</TABLE>
- ---------
*These documents were included with previous filings as shown below and are
hereby incorporated by reference:
<TABLE>
<S> <C>
Item 3(a): Filed with the Company's 10-K Annual Report for the year ended April 28,
1985.
Items 3(b)
and 3(c): Filed with the Company's 10-K Annual Report for the year ended April 26,
1987.
Items 4(a)
and 4(b): Filed with the Company's report on Form 8-K on September 24, 1998.
Item 10(a): Filed with the Company's 10-K Annual Report for the year ended April 26,
1992.
Items 10(b),
10(c),
10(d),
10(f) and
10(h): Filed with the Company's 10-K Annual Report for the year ended April 28,
1996.
Item 10(e): Filed with the Company's 10-K Annual Report for the year ended April 26,
1987.
Item 10(g): Filed with the Company's 10-K Annual Report for the year ended April 29,
1990.
Item 10(i): Filed with the Company's 10-K Annual Report for the year ended April 26,
1992.
Item 10(j): Filed with the Company's 10-K Annual Report for the year ended April 24,
1994.
Item 10(k): Filed with the Company's report on Form 8-K on June 7, 1996.
</TABLE>
46
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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.
REGISTRANT
BY /S/ PAUL M. BINGHAM
--------------------------------------
PAUL M. BINGHAM
SENIOR VICE PRESIDENT--FINANCE
Date: July 8, 1999
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
- ------------------------------ ------------------------------ ----------------
/s/ GLENN F. KUMMER Chairman of the Board and July 8, 1999
- ------------------------------ Chief Executive Officer
GLENN F. KUMMER
/s/ NELSON W. POTTER President, Chief Operating July 8, 1999
- ------------------------------ Officer and Director
NELSON W. POTTER
/s/ PAUL M. BINGHAM Chief Financial Officer and July 8, 1999
- ------------------------------ Principal Accounting Officer
PAUL M. BINGHAM
/s/ DOUGLAS M. LAWSON Director July 8, 1999
- ------------------------------
DOUGLAS M. LAWSON
/s/ WALTER F. BERAN Director July 8, 1999
- ------------------------------
WALTER F. BERAN
/s/ THOMAS B. PITCHER Director July 8, 1999
- ------------------------------
THOMAS B. PITCHER
/s/ LOREN K. CARROLL Director July 8, 1999
- ------------------------------
LOREN K. CARROLL
/s/ DAVID S. ENGELMAN Director July 8, 1999
- ------------------------------
DAVID S. ENGELMAN
47
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
At April 25, 1999, the Registrant had the following subsidiary companies,
all of which are wholly owned unless otherwise indicated in the footnotes:
<TABLE>
<CAPTION>
JURISDICTION OF
COMPANY INCORPORATION
- ------------------------------------------------------------------------------------------- ---------------------
<S> <C>
Subsidiaries producing manufactured housing:
Fleetwood Homes of Alabama, Inc.(1).................................................... Alabama
Fleetwood Homes of Arizona, Inc........................................................ Arizona
Fleetwood Homes of California, Inc..................................................... California
Fleetwood Homes of Florida, Inc........................................................ Florida
Fleetwood Homes of Georgia, Inc........................................................ Georgia
Fleetwood Homes of Idaho, Inc.......................................................... Idaho
Fleetwood Homes of Indiana, Inc........................................................ Indiana
Fleetwood Homes of Kentucky, Inc....................................................... Kentucky
Fleetwood Homes of Mississippi, Inc.................................................... Mississippi
Fleetwood Homes of North Carolina, Inc................................................. North Carolina
Fleetwood Homes of Oklahoma, Inc.(1)................................................... Oklahoma
Fleetwood Homes of Oregon, Inc......................................................... Oregon
Fleetwood Homes of Pennsylvania, Inc................................................... Pennsylvania
Fleetwood Homes of Tennessee, Inc...................................................... Tennessee
Fleetwood Homes of Texas, Inc.......................................................... Texas
Fleetwood Homes of Virginia, Inc....................................................... Virginia
Fleetwood Homes of Washington, Inc..................................................... Washington
North River Homes, Inc.(1)(2).......................................................... Alabama
Subsidiaries producing motor homes:
Fleetwood Motor Homes of California, Inc............................................... California
Fleetwood Motor Homes of Indiana, Inc.................................................. Indiana
Fleetwood Motor Homes of Pennsylvania, Inc............................................. Pennsylvania
Subsidiaries producing travel trailers:
Fleetwood Travel Trailers of California, Inc........................................... California
Fleetwood Travel Trailers of Indiana, Inc.............................................. Indiana
Fleetwood Travel Trailers of Maryland, Inc............................................. Maryland
Fleetwood Travel Trailers of Nebraska, Inc............................................. Nebraska
Fleetwood Travel Trailers of Ohio, Inc................................................. Ohio
Fleetwood Travel Trailers of Oregon, Inc............................................... Oregon
Fleetwood Travel Trailers of Texas, Inc................................................ Texas
Fleetwood Travel Trailers of Virginia, Inc............................................. Virginia
Fleetwood Canada Ltd.(3)............................................................... Ontario, Canada
Subsidiary producing folding trailers:
Fleetwood Folding Trailers, Inc........................................................ Delaware
Supply subsidiaries:
Gold Shield, Inc....................................................................... California
Gold Shield of Indiana, Inc............................................................ Indiana
Hauser Lake Lumber Operation, Inc...................................................... Idaho
Subsidiaries involved in manufactured housing retail business:
Expression Homes Corporation(4)........................................................ Delaware
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
JURISDICTION OF
COMPANY INCORPORATION
- ------------------------------------------------------------------------------------------- ---------------------
<S> <C>
Fleetwood Retail Corp.................................................................. Delaware
Fleetwood Retail Investment Corp....................................................... California
Fleetwood Retail Corp. of Alabama...................................................... Delaware
Fleetwood Retail Corp. of Arizona...................................................... Arizona
Fleetwood Retail Corp. of Arkansas..................................................... Arkansas
Fleetwood Retail Corp. of California................................................... California
Fleetwood Retail Corp. of Colorado..................................................... Colorado
Fleetwood Retail Corp. of Florida...................................................... Florida
Fleetwood Retail Corp. of Georgia...................................................... Delaware
Fleetwood Retail Corp. of Idaho........................................................ Idaho
Fleetwood Retail Corp. of Illinois..................................................... Illinois
Fleetwood Retail Corp. of Kansas....................................................... Delaware
Fleetwood Retail Corp. of Louisiana.................................................... Louisiana
Fleetwood Retail Corp. of Missouri..................................................... Missouri
Fleetwood Retail Corp. of Mississippi.................................................. Mississippi
Fleetwood Home Centers of Nevada, Inc.................................................. Nevada
Fleetwood Retail Corp. of New Mexico................................................... New Mexico
Fleetwood Retail Corp. of North Carolina............................................... North Carolina
Fleetwood Retail Corp. of Oklahoma..................................................... Oklahoma
Fleetwood Retail Corp. of Oregon....................................................... Oregon
Fleetwood Retail Corp. of South Carolina............................................... Delaware
Fleetwood Retail Corp. of Tennessee.................................................... Tennessee
Fleetwood Home Centers of Texas, Inc................................................... Texas
Fleetwood Retail Corp. of Washington................................................... Delaware
Fleetwood Retail Corp. of Virginia..................................................... Virginia
Fleetwood Retail Corp. of West Virginia................................................ West Virginia
Other subsidiaries:
Buckingham Development Co.............................................................. California
C.V. Aluminum, Inc.(1)................................................................. California
Continental Lumber Products, Inc....................................................... California
Fleetwood Foreign Sales Corp........................................................... U.S. Virgin Islands
Fleetwood Holidays, Inc................................................................ Florida
Fleetwood International, Inc........................................................... California
Fleetwood Recreational Vehicles of Michigan, Inc.(1)................................... Michigan
Gibraltar Insurance Company, Ltd....................................................... Bermuda
GSF Installation Co.(1)................................................................ California
</TABLE>
- ---------
(1) Wholly owned subsidiary inactive at April 25, 1999.
(2) Wholly owned subsidiary of Fleetwood Homes of Alabama, Inc.
(3) Wholly owned subsidiary of Fleetwood International, Inc.
(4) Wholly owned subsidiary of Fleetwood Retail Investment Corp.
49
<PAGE>
EXHIBIT 4b
AMENDED CERTIFICATE OF DESIGNATION,
PREFERENCES AND RIGHTS OF
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
OF
FLEETWOOD ENTERPRISES, INC.
The undersigned, GLENN F. KUMMER, the Chairman of the Board and Chief
Executive Officer of FLEETWOOD ENTERPRISES, INC., a Delaware corporation (the
"COMPANY"), does hereby certify that:
1. The original Certificate of Designation, Preferences and Rights of
Series A Preferred Stock of the Company (the "ORIGINAL SERIES A CERTIFICATE")
was filed with the Delaware Secretary of State on November 23, 1988.
2. No shares of Series A Preferred Stock of the Company have been
issued.
3. Pursuant to the authority conferred upon the Board of Directors by
the Restated Articles of Incorporation of the Company, as amended, and Section
151(g) of the Delaware General Corporation Law, on September 15, 1998, the Board
of Directors adopted the following resolutions amending and restating the
Original Series A Certificate in its entirety, as follows:
RESOLVED, that pursuant to Section 151(g) of the Delaware
General Corporation Law, the Board of Directors hereby
acknowledges that no shares of Series A Preferred Stock of the
Company have been issued or are outstanding; and
RESOLVED, that pursuant to the authority vested in the
Board of Directors of the Company by the Restated Certificate of
Incorporation, as amended, the Board of Directors does hereby
amends and restates the Certificate of Designation, Preferences
and Rights of Series A Preferred Stock of the Company, filed with
the Delaware Secretary of State on November 23, 1988, as follows:
1. DESIGNATION AND AMOUNT. The shares of such series
shall be designated as "SERIES A JUNIOR PARTICIPATING PREFERRED
STOCK" and the number of shares constituting such series shall be
50,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors; PROVIDED, that no decrease
shall reduce the number of shares of Series A Junior Participating
Preferred Stock to a number less than the number of shares then
outstanding plus the number of shares reserved for issuance upon
the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities issued by the Company
convertible into Series A Junior Participating Preferred Stock.
<PAGE>
2. DIVIDENDS AND DISTRIBUTIONS.
(a) Subject to the prior and superior rights of the
holders of any shares of any series of Preferred Stock ranking
prior and superior to the shares of Series A Preferred Stock with
respect to dividends, the holders of shares of Series A Preferred
Stock shall be entitled to receive, when, as and if declared by
the Board of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the 15th day of
January, April, July and October of each year (each a "QUARTERLY
DIVIDEND PAYMENT DATE"), commencing on the first Quarterly
Dividend Payment Date after the first issuance of a share or
fraction of a share of Series A Preferred Stock, in an amount per
share (rounded to the nearest cent) equal to, subject to the
provision for adjustment hereinafter set forth, 1,000 times the
aggregate per share amount of all cash dividends, and 1,000 times
the aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares
of Common Stock (by reclassification or otherwise), declared on
the common stock, par value $1.00 per share, of the Company (the
"COMMON STOCK") since the immediately preceding Quarterly Dividend
Payment Date, or, with respect to the first Quarterly Dividend
Payment Date, since the first issuance of any share or fraction of
a share of Series A Preferred Stock. In the event the Company
shall at any time after September 15, 1998 (the "RIGHTS
DECLARATION DATE") (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the amount to
which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event under the preceding sentence shall
be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(b) The Company shall declare a dividend or distribution
on the Series A Preferred Stock as provided in paragraph (a) above
concurrently with any declaration of a dividend or distribution on
the Common Stock (other than a dividend payable in shares of
Common Stock).
(c) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such
shares of Series A Preferred Stock, unless the date of issue of
such shares is prior to the record date for the first Quarterly
Dividend Payment Date, in which case dividends on such shares
shall begin to accrue from the date of issue of such shares, or
unless the date of issue is a Quarterly Dividend Payment Date or
is a date after the record date for the determination of holders
of shares of Series A Preferred Stock entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment
Date, in either of
2
<PAGE>
which events such dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the shares of
Series A Preferred Stock in an amount less than the total amount of
such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at
the time outstanding. The Board of Directors may fix a record date
for the determination of holders of shares of Series A Preferred Stock
entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be no more than 30 days prior to the
date fixed for the payment thereof.
3. VOTING RIGHTS. The holders of shares of Series A
Preferred Stock shall have the following voting rights:
(a) Subject to the provision for adjustment hereinafter
set forth, each share of Series A Preferred Stock shall entitle
the holder thereof to 1,000 votes on all matters submitted to a
vote of the shareholders of the Company. In the event the Company
shall at any time after the Rights Declaration Date (i) declare
any dividend on Common Stock payable in shares of Common Stock,
(ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in
each case the number of votes per share to which holders of shares
of Series A Preferred Stock were entitled immediately prior to
such event shall be adjusted by multiplying such number by a
fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(b) Except as otherwise provided herein or by law, the
holders of shares of Series A Preferred Stock and the holders of
shares of Common Stock shall vote together as one class on all
matters submitted to a vote of stockholders of the Company.
(c) Except as set forth herein, holders of Series A
Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are
entitled to vote with holders of Common Stock as set forth herein)
for taking any corporate action.
4. CERTAIN RESTRICTIONS.
(a) The Company shall not declare any dividend on, make
any distribution on, or redeem or purchase or otherwise acquire
for consideration any shares of Common Stock after the first
issuance of a share or fraction of a share of Series A
Participating Preferred Stock unless concurrently therewith it
shall declare a dividend on the Series A Participating Preferred
Stock as required by SECTION 2 hereof.
3
<PAGE>
(b) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock as provided
in SECTION 2 have been declared but not paid, thereafter and until
all accrued and unpaid dividends and distributions, whether or not
declared, on shares of Series A Preferred Stock outstanding shall
have been paid in full, the Company shall not
(i) declare or pay dividends on, make any other
distribution on, or redeem or purchase or otherwise acquire for
consideration any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either
as to dividends or upon liquidation, dissolution or winding up)
with the Series A Preferred Stock, except dividends paid ratably
on the Series A Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to the total
amounts to which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or winding up) with
the Series A Preferred Stock, provided that the Company may at any
time redeem, purchase or otherwise acquire shares of any such
parity stock in exchange for shares of any stock of the Company
ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Series A Preferred Stock;
(iv) purchase or otherwise acquire for
consideration any shares of Series A Preferred Stock, or any
shares of stock ranking on a parity with the Series A Preferred
Stock, except in accordance with a purchase offer made in writing
or by publication (as determined by the Board of Directors) to all
holders of such shares upon such terms as the Board of Directors,
after consideration of the respective annual dividend rates and
other relative rights and preferences of the respective Series And
classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(c) The Company shall not permit any subsidiary of the
Company to purchase or otherwise acquire for consideration any
shares of stock of the Company unless the Company could, under
paragraph (a) of this SECTION 4, purchase or otherwise acquire
such shares at such time and in such manner.
5. REACQUIRED SHARES. Any shares of Series A Preferred
Stock purchased or otherwise acquired by the Company in any manner
whatsoever shall be retired and canceled promptly after the
acquisition thereof. All such shares shall upon their
cancellation become authorized but unissued shares of Preferred
Stock and may be reissued as part of a new series of Preferred
Stock to be created
4
<PAGE>
by resolution or resolutions of the Board of Directors, subject to
the conditions and restrictions on issuance set forth herein.
6. LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) Upon any liquidation (voluntary or otherwise),
dissolution or winding up of the Company, no distribution shall be
made to the holders of shares of stock ranking junior (either as
to dividends or upon liquidation, dissolution or winding up) to
the Series A Preferred Stock unless, prior thereto, the holders of
shares of Series A Preferred Stock shall have received $1,000 per
share, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of
such payment (the "SERIES A LIQUIDATION PREFERENCE"). Following
the payment of the full amount of the Series A Liquidation
Preference, no additional distributions shall be made to the
holders of shares of Series A Preferred Stock unless, prior
thereto, the holders of shares of Common Stock shall have received
an amount per share (the "COMMON ADJUSTMENT") equal to the
quotient obtained by dividing (i) the Series A Liquidation
Preference by (ii) 1,000 (as appropriately adjusted as set forth
in subparagraph (c) below to reflect such events as stock splits,
stock dividends and recapitalizations with respect to the Common
Stock) (such number in clause (ii), the "ADJUSTMENT NUMBER").
Following the payment of the full amount of the Series A
Liquidation Preference and the Common Adjustment in respect of all
outstanding shares of Series A Preferred Stock and Common Stock,
respectively, holders of Series A Preferred Stock and holders of
shares of Common Stock shall receive their ratable and
proportionate share of remaining assets to be distributed in the
ratio of the Adjustment Number to one (1) with respect to such
Preferred Stock and Common Stock, on a per share basis,
respectively.
(b) In the event, however, that there are not sufficient
assets available to permit payment in full of the Series A
Liquidation Preference and the liquidation preferences of all
other series of Preferred Stock, if any, which rank on a parity
with the Series A Preferred Stock, then such remaining assets
shall be distributed ratably to the holders of such parity shares
in proportion to their respective liquidation preferences. In the
event, however, that there are not sufficient assets available to
permit payment in full of the Common Adjustment, then such
remaining assets shall be distributed ratably to the holders of
Common Stock.
(c) In the event the Company shall at any time after the
Rights Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the Adjustment
Number in effect immediately prior to such event shall be adjusted
by multiplying such Adjustment Number by a fraction the numerator
of which is the number of shares of Common Stock outstanding
immediately after
5
<PAGE>
such event and the denominator of which is the number of shares of
Common Stock that were outstanding immediately prior to such event.
7. CONSOLIDATION, MERGER, ETC. In case the Company
shall enter into any consolidation, merger, combination or other
transaction in which the shares of Common Stock are exchanged for
or changed into other stock or securities, cash and/or any other
property, then in any such case the shares of Series A Preferred
Stock shall at the same time be similarly exchanged or changed in
an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 1,000 times the aggregate amount
of stock, securities, cash and/or any other property (payable in
kind), as the case may be, into which or for which each share of
Common Stock is changed or exchanged. In the event the Company
shall at any time after the Rights Declaration Date (i) declare
any dividend on Common Stock payable in shares of Common Stock,
(ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in
each such case the amount set forth in the preceding sentence with
respect to the exchange or change of shares of Series A Preferred
Stock shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
8. NO REDEMPTION. The shares of Series A Preferred
Stock shall not be redeemable.
9. RANKING. The Series A Preferred Stock shall rank
junior to all other series of the Company's preferred stock, if
any, as to the payment of dividends and the distribution of
assets, unless the terms of any such series shall provide
otherwise.
10. AMENDMENT. The Restated Certificate of
Incorporation of the Company shall not be further amended in any
manner which would materially alter or change the powers,
preferences or special rights of the Series A Preferred Stock so
as to affect them adversely without the affirmative vote of the
holders of a majority or more of the outstanding shares of Series
A Preferred Stock, voting separately as a class.
11. FRACTIONAL SHARES. Series A Preferred Stock may be
issued in fractions of a share, which shall entitle the holder, in
proportion to such holder's fractional shares, to exercise voting
rights, receive dividends, participate in distributions and to
have the benefit of all other rights of holders of Series A
Preferred Stock.
RESOLVED FURTHER, that the Chief Executive Officer, the
President or any Vice President and the Secretary or any Assistant
Secretary of the Company be, and they hereby are, authorized and
directed to prepare and file an
6
<PAGE>
Amended Certificate of Designation, Preferences and Rights in
accordance with the foregoing resolution and the provisions of Delaware
law and to take such actions as they may deem necessary or appropriate
to carry out the intent of the foregoing resolution."
IN WITNESS WHEREOF, this Amended Certificate of Designation is executed
on September 15, 1998.
FLEETWOOD ENTERPRISES, INC.,
a Delaware corporation
By:_______________________________
Glenn F. Kummer
Chairman of the Board and
Chief Executive Officer
7
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
At April 25, 1999, the Registrant had the following subsidiary companies,
all of which are wholly owned unless otherwise indicated in the footnotes:
<TABLE>
<CAPTION>
JURISDICTION OF
COMPANY INCORPORATION
- ------------------------------------------------------------------------------------------- ---------------------
<S> <C>
Subsidiaries producing manufactured housing:
Fleetwood Homes of Alabama, Inc.(1).................................................... Alabama
Fleetwood Homes of Arizona, Inc........................................................ Arizona
Fleetwood Homes of California, Inc..................................................... California
Fleetwood Homes of Florida, Inc........................................................ Florida
Fleetwood Homes of Georgia, Inc........................................................ Georgia
Fleetwood Homes of Idaho, Inc.......................................................... Idaho
Fleetwood Homes of Indiana, Inc........................................................ Indiana
Fleetwood Homes of Kentucky, Inc....................................................... Kentucky
Fleetwood Homes of Mississippi, Inc.................................................... Mississippi
Fleetwood Homes of North Carolina, Inc................................................. North Carolina
Fleetwood Homes of Oklahoma, Inc.(1)................................................... Oklahoma
Fleetwood Homes of Oregon, Inc......................................................... Oregon
Fleetwood Homes of Pennsylvania, Inc................................................... Pennsylvania
Fleetwood Homes of Tennessee, Inc...................................................... Tennessee
Fleetwood Homes of Texas, Inc.......................................................... Texas
Fleetwood Homes of Virginia, Inc....................................................... Virginia
Fleetwood Homes of Washington, Inc..................................................... Washington
North River Homes, Inc.(1)(2).......................................................... Alabama
Subsidiaries producing motor homes:
Fleetwood Motor Homes of California, Inc............................................... California
Fleetwood Motor Homes of Indiana, Inc.................................................. Indiana
Fleetwood Motor Homes of Pennsylvania, Inc............................................. Pennsylvania
Subsidiaries producing travel trailers:
Fleetwood Travel Trailers of California, Inc........................................... California
Fleetwood Travel Trailers of Indiana, Inc.............................................. Indiana
Fleetwood Travel Trailers of Maryland, Inc............................................. Maryland
Fleetwood Travel Trailers of Nebraska, Inc............................................. Nebraska
Fleetwood Travel Trailers of Ohio, Inc................................................. Ohio
Fleetwood Travel Trailers of Oregon, Inc............................................... Oregon
Fleetwood Travel Trailers of Texas, Inc................................................ Texas
Fleetwood Travel Trailers of Virginia, Inc............................................. Virginia
Fleetwood Canada Ltd.(3)............................................................... Ontario, Canada
Subsidiary producing folding trailers:
Fleetwood Folding Trailers, Inc........................................................ Delaware
Supply subsidiaries:
Gold Shield, Inc....................................................................... California
Gold Shield of Indiana, Inc............................................................ Indiana
Hauser Lake Lumber Operation, Inc...................................................... Idaho
Subsidiaries involved in manufactured housing retail business:
Expression Homes Corporation(4)........................................................ Delaware
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
JURISDICTION OF
COMPANY INCORPORATION
- ------------------------------------------------------------------------------------------- ---------------------
<S> <C>
Fleetwood Retail Corp.................................................................. Delaware
Fleetwood Retail Investment Corp....................................................... California
Fleetwood Retail Corp. of Alabama...................................................... Delaware
Fleetwood Retail Corp. of Arizona...................................................... Arizona
Fleetwood Retail Corp. of Arkansas..................................................... Arkansas
Fleetwood Retail Corp. of California................................................... California
Fleetwood Retail Corp. of Colorado..................................................... Colorado
Fleetwood Retail Corp. of Florida...................................................... Florida
Fleetwood Retail Corp. of Georgia...................................................... Delaware
Fleetwood Retail Corp. of Idaho........................................................ Idaho
Fleetwood Retail Corp. of Illinois..................................................... Illinois
Fleetwood Retail Corp. of Kansas....................................................... Delaware
Fleetwood Retail Corp. of Louisiana.................................................... Louisiana
Fleetwood Retail Corp. of Missouri..................................................... Missouri
Fleetwood Retail Corp. of Mississippi.................................................. Mississippi
Fleetwood Home Centers of Nevada, Inc.................................................. Nevada
Fleetwood Retail Corp. of New Mexico................................................... New Mexico
Fleetwood Retail Corp. of North Carolina............................................... North Carolina
Fleetwood Retail Corp. of Oklahoma..................................................... Oklahoma
Fleetwood Retail Corp. of Oregon....................................................... Oregon
Fleetwood Retail Corp. of South Carolina............................................... Delaware
Fleetwood Retail Corp. of Tennessee.................................................... Tennessee
Fleetwood Home Centers of Texas, Inc................................................... Texas
Fleetwood Retail Corp. of Washington................................................... Delaware
Fleetwood Retail Corp. of Virginia..................................................... Virginia
Fleetwood Retail Corp. of West Virginia................................................ West Virginia
Other subsidiaries:
Buckingham Development Co.............................................................. California
C.V. Aluminum, Inc.(1)................................................................. California
Continental Lumber Products, Inc....................................................... California
Fleetwood Foreign Sales Corp........................................................... U.S. Virgin Islands
Fleetwood Holidays, Inc................................................................ Florida
Fleetwood International, Inc........................................................... California
Fleetwood Recreational Vehicles of Michigan, Inc.(1)................................... Michigan
Gibraltar Insurance Company, Ltd....................................................... Bermuda
GSF Installation Co.(1)................................................................ California
</TABLE>
- ---------
(1) Wholly owned subsidiary inactive at April 25, 1999.
(2) Wholly owned subsidiary of Fleetwood Homes of Alabama, Inc.
(3) Wholly owned subsidiary of Fleetwood International, Inc.
(4) Wholly owned subsidiary of Fleetwood Retail Investment Corp.
49
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference of our report dated June 21, 1999, included in
Fleetwood Enterprises, Inc.'s Form 10-K for the year ended April 25, 1999, into
the Company's previously filed Registration Statements No. 2-79232, 333-49775
and 333-51873.
ARTHUR ANDERSEN LLP
Orange County, California
June 21, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-25-1999
<PERIOD-END> APR-25-1999
<CASH> 25,602
<SECURITIES> 241,531
<RECEIVABLES> 245,847
<ALLOWANCES> 0
<INVENTORY> 257,034
<CURRENT-ASSETS> 820,189
<PP&E> 513,597
<DEPRECIATION> 209,663
<TOTAL-ASSETS> 1,531,184
<CURRENT-LIABILITIES> 514,720
<BONDS> 0
287,500
0
<COMMON> 35,198
<OTHER-SE> 551,505
<TOTAL-LIABILITY-AND-EQUITY> 1,531,184
<SALES> 3,490,163
<TOTAL-REVENUES> 3,490,163
<CGS> 2,736,324
<TOTAL-COSTS> 3,299,852
<OTHER-EXPENSES> 649
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27,360
<INCOME-PRETAX> 178,892
<INCOME-TAX> 71,771
<INCOME-CONTINUING> 107,121
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 107,121
<EPS-BASIC> 3.16
<EPS-DILUTED> 2.94
</TABLE>
