-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GPFoDdO+j0xkpkqcy1gh+RUKrus7JBHdyltqctgXeOTy5RHfPifVt/Zvj3rrHPDv tuqTUaB/hYiikTG3BG0+XA== 0000314132-98-000019.txt : 19980625 0000314132-98-000019.hdr.sgml : 19980625 ACCESSION NUMBER: 0000314132-98-000019 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970727 FILED AS OF DATE: 19980624 SROS: NYSE SROS: PCX FILER: COMPANY DATA: COMPANY CONFORMED NAME: FLEETWOOD ENTERPRISES INC/DE/ CENTRAL INDEX KEY: 0000314132 STANDARD INDUSTRIAL CLASSIFICATION: MOBILE HOMES [2451] IRS NUMBER: 951948322 STATE OF INCORPORATION: DE FISCAL YEAR END: 0428 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 001-07699 FILM NUMBER: 98653158 BUSINESS ADDRESS: STREET 1: 3125 MYERS ST STREET 2: P O BOX 7638 CITY: RIVERSIDE STATE: CA ZIP: 92523 BUSINESS PHONE: 9093513500 10-Q/A 1 FORM 10-Q/A SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) X OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 27, 1997 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) ______ OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to __________ Commission File Number 1-7699 FLEETWOOD ENTERPRISES, INC. (Exact name of registrant as specified in its charter) Delaware 95-1948322 _______________________ _______________________________ (State or other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) 3125 Myers Street, Riverside, California 92503-5527 ________________________________________________________________________ (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code (909) 351-3500 -------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------- ----- Indicate the number of shares outstanding of each of the issuer's classes of Common stock as of the close of the period covered by this report. Class Outstanding at July 27, 1997 - ------------------------- --------------------------- Common stock, $1 par value 35,940,799 shares Preferred share purchase rights -- FLEETWOOD ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Amounts in thousands except per share data) (UNAUDITED) Thirteen Thirteen Weeks Ended Weeks Ended July 27, 1997 July 28, 1996 Sales $728,454 $751,245 Cost of products sold 594,785 605,341 -------- -------- Gross profit 133,669 145,904 Operating expenses 84,595 101,226 -------- -------- Operating income 49,074 44,678 Other income (expense): Investment income 2,293 5,394 Interest expense (879) (1,450) Other (144) (20) -------- ------- 1,270 3,924 -------- ------- Income from continuing operations before income taxes 50,344 48,602 Provision for income taxes (19,402) (19,270) ------- ------ Income from continuing operations 30,942 29,332 Income from discontinued operations: Income from operations of finance subsidiary (less applicable income taxes of $511) -- 887 Gain on sale of finance subsidiary (net of income taxes of $19,607) -- 33,891 -------- ------- -- 34,778 -------- ------- Net income $30,942 $64,110 ======= ======= Net income per Common and equivalent share: Continuing operations $.84 $.64 Discontinued operations: Income from operations of finance subsidiary -- .02 Gain on sale of finance subsidiary -- .74 ------- ------- Total $.84 $1.40 ==== ===== Dividends declared per share of Common stock outstanding $.17 $.16 ==== ==== Common and equivalent shares outstanding 36,668 45,916 ======= ======
See accompanying notes to financial statements. FLEETWOOD ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JULY 27, 1997 1) Reference to Annual Report Reference is made to the Notes to Consolidated Financial Statements included in the Company's Form 10-K annual report for the year ended April 27, 1997. 2) Industry Segment Information Information with respect to industry segments for the periods ending July 27, 1997 and July 28, 1996 is shown below: 13 Weeks Ended 13 Weeks Ended July 27, 1997 July 28, 1996 OPERATING REVENUES: Manufactured housing $366,649 $377,145 Recreational vehicles 350,693 357,854 Supply operations 11,112 6,246 -------- --------- $728,454 $751,245 ======== ======== OPERATING INCOME: Manufactured housing $15,830 $29,893 Recreational vehicles 16,113 19,837 Supply operations 3,392 1,464 Corporate and other* 13,739 (6,516) -------- ------- $49,074 $44,678 ======= =======
* Including adjustments and eliminations. 3) Change in Estimate of Insurance Reserves In July 1997, the Company recorded a $19.3 million change in estimate in its products liability reserves and concurrently paid a $3.1 million premium to an outside insurance company to lower its self- insured retention (i.e., deductible) on its products liability insurance. The net effect of these transactions was an addition to operating income of $16.2 million ($10.4 million after tax or 28 cents per share). FLEETWOOD ENTERPRISES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Amounts in thousands) The following is an analysis of changes in key items included in the consolidated statements of income for the 13-week period ended July 27, 1997 compared to the 13-week period ended July 28, 1996. The amounts shown below apply only to continuing operations. Thirteen Weeks Ended July 27, 1997 Increase % (Decrease) Change Sales $(22,791) (3.0)% Cost of products sold (10,556) (1.7) --------- ---- Gross profit (12,235) (8.4) Selling expenses 3,891 9.0 General and administrative expenses (20,522) (35.3) -------- ---- Operating expenses (16,631) (16.4) Operating income 4,396 9.8 Other income (expense) (2,654) (67.6) Income before taxes 1,742 3.6 Provision for income taxes 132 .7 Net income $1,610 5.5% ====== ====
Current Quarter Compared to Same Quarter Last Year Income from continuing operations in the first quarter of fiscal 1998 was $30,942,000 or 84 cents per share, and included $10,400,000 or 28 cents per share from a non-recurring insurance transaction. This compares to $29,332,000 or 64 cents per share a year ago. Per share earnings from continuing operations were up 31 percent in fiscal 1998 due to fewer outstanding shares stemming from large share repurchases last year. Last year's first quarter included income from discontinued operations of $34.8 million or 76 cents per share which, when added to income from continuing operations, resulted in total earnings of $64.1 million or $1.40 per share in the year ago period. The income from discontinued operations reflected an after-tax gain of $33.9 million or 74 cents per share on the sale of Fleetwood Credit Corp., the Company's RV finance subsidiary, and two cents per share for the final month of finance company operations. Consolidated operating income was ten percent ahead of last year's first quarter due to a change in estimate of insurance reserves discussed below (see Change in Estimate of Insurance Reserves). Operating income from manufacturing operations was 26 percent behind the prior year reflecting lower gross margins and higher operating costs in the manufactured housing segment. In the past year, the Company has added five new housing factories which has increased fixed operating costs, and this has been accompanied by lower operating rates and reduced housing revenues. In addition, the Company incurred a loss of approximately $2.2 million before taxes due to flood damage at its Mississippi manufactured housing operation, and was also saddled with plant startup and plant shutdown costs totaling about $3.0 million. Recreational vehicle profits were also off from last year's strong first quarter because of slower motor home sales and non-recurring costs related to a realignment of motor home plant production. Slower sales of both manufactured housing and recreational vehicles led to a three percent decline in consolidated revenues from $751.2 million to $728.5 million. Manufactured housing revenues slipped three percent to $366.6 million on a six percent decline in unit sales to 16,359 homes. A higher mix of multi-section homes, which rose from 47 percent to 55 percent, resulted in a moderate one percent decline in floor shipments. Housing group sales represented 50 percent of total Company revenues, which was virtually identical to last year's percentage. Recreational vehicle revenues in the first quarter totaled $350.7 million compared to $357.9 million in last year's strong first period. A seven percent decline in motor home sales was partially offset by higher sales of towable RV products. Motor home revenues eased to $207.5 million on a 21 percent decline in shipments to 3,317 units. In the towable category, travel trailer sales rose two percent to $119.3 million on a three percent decline in unit sales to 8,554, while folding trailer revenues jumped 40 percent to $23.9 million on a 34 percent unit volume increase to 4,720 units. As in the prior year, recreational vehicle sales accounted for 48 percent of total Company revenues. The Company's supply group recorded sales of $11.1 million in the July quarter compared to $16.2 million in last year's similar period. Manufacturing gross profit declined as a percentage of sales from 19.4 percent to 18.3 percent primarily due to lower manufactured housing margins stemming from more competitive pricing. Recreational vehicle margins were also off from last year's strong first quarter, largely as a result of less efficient motor home operations and slimmer travel trailer margins caused by West Coast pricing adjustments. Operating expenses of $84.6 million, which included the effect of the change in estimate of insurance reserves, were down 16 percent from last year's similar period, while declining as a percentage of sales from 13.5 percent to 11.6 percent. Selling expenses were up nine percent to $47.0 million, primarily reflecting higher housing marketing expenses as well as increased product warranty and service costs. As a percentage of sales, selling expenses rose from 5.7 percent to 6.5 percent. General and administrative expenses declined 35 percent to $37.6 million, and decreased as a percentage of sales from 7.7 percent to 5.2 percent. This reduction was primarily related to the aforementioned change in estimate of insurance reserves, but also included lower management incentive compensation resulting from the decline in profits. Also included in general and administrative costs was the $2.2 million flood loss mentioned previously. Non-operating income of $1.3 million was off 68 percent from the prior year due to a decline in investment income. Income from investments of $2.3 million was 57 percent below last year's first quarter, largely due to significantly higher cash balances that were available for investment last year, most of which arose from the sale of Fleetwood Credit Corp. The effective income tax rate declined to 38.5 percent in the first quarter from 39.6 percent a year ago, primarily as a result of lower state income tax accruals. The lower tax rate added about 1.5 cents per share to earnings. Change in Estimate of Insurance Reserves The Company self insures its primary layer of products liability risk. Products liability reserves are based upon claims projections from an independent actuarial study. There can be significant variability in claims experience from year to year, and there is typically a long loss development period for products cases. Accordingly, actuarial projections are updated annually to reflect current loss development trends, which results in frequent adjustments to reserves for prior years' cases. Because of the variability and long loss development of products liability claims, the Company actuary has consistently followed conservative reserving practices. In July 1997, after several years of favorable claims experience, the Company was able to lower its self-insured retention (i.e., deductible) from $47.5 million to $18.7 million (of which losses of $9.3 million have been paid) for a five-year underwriting period between 1991 and 1995 by entering into a commercial insurance contract. Prior to entering into the insurance contract, the Company carefully reviewed the economics of the transaction and its implications as to current reserve levels. The Company concluded that, based upon recent favorable loss development trends (a factor that was clearly confirmed by the proposed insurance arrangement), a change in estimate of reserves was appropriate. The outcome was a $19.3 million adjustment to estimated reserves, offset by a $3.1 million premium for the outside insurance. This resulted in an addition to operating income of $16.2 million before taxes, and an increase to after-tax earnings of $10.4 million or 28 cents per share. Liquidity and Capital Resources The Company generally relies upon internally generated cash flows to satisfy working capital needs and to fund capital expenditures. The Company's cash equivalents (cash plus investments) totaled $132.2 million at the end of July compared to $110.4 million at the end of April. Cash flow from operations decreased to $29.3 million in the first quarter compared to $41.0 million in the prior year, primarily as a result of the decline in profitability. Cash received during last year's first quarter included the proceeds from the sale of Fleetwood Credit Corp., which totaled $132.2 million net of income taxes. During last year's first quarter, the Company completed a Dutch Auction tender offer resulting in the purchase of 7.7 million shares, or approximately 17 percent of its outstanding Common stock, at a cost of $240.5 million. Cash outflows during the current quarter included $6.1 million for quarterly dividends to shareholders and $8.4 million in capital expenditures. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FLEETWOOD ENTERPRISES, INC. ____________________________ Paul M. Bingham Senior Vice President - Finance and Chief Financial Officer June 24, 1998 -----END PRIVACY-ENHANCED MESSAGE-----