-----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, UkrkW/o3zrp5NjKkAL8uKPQOLR63ZOTbvZ0sMFLY0VI+xH+X9Sb4916SJs9/Ndy1 iwwb7bG5yBO7YXPBWSx2VQ== 0000314132-99-000004.txt : 19990225 0000314132-99-000004.hdr.sgml : 19990225 ACCESSION NUMBER: 0000314132-99-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990124 FILED AS OF DATE: 19990224 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 SEC ACT: SEC FILE NUMBER: 001-07699 FILM NUMBER: 99548640 BUSINESS ADDRESS: STREET 1: 3125 MYERS ST STREET 2: P O BOX 7638 CITY: RIVERSIDE STATE: CA ZIP: 92523 BUSINESS PHONE: 9093513500 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) X OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended January 24, 1999 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 January 24, 1999 _________________________ ______________________________________ Common stock, $1 par value 34,867,392 shares Preferred share purchase rights -- CONDENSED FINANCIAL STATEMENTS The following unaudited interim condensed financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Such financial statements have been reviewed by Arthur Andersen LLP in accordance with standards established by the American Institute of Certified Public Accountants. As indicated in their report included herein, Arthur Andersen LLP does not express an opinion on these statements. Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information presented not misleading. In the Company's opinion, the statements reflect all adjustments (which include only normal recurring adjustments) necessary to present fairly the results of operations for the periods ending January 24, 1999 and January 25, 1998 and the balances as of January 24, 1999 and April 26, 1998. It is suggested that these condensed financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's latest annual report on Form 10-K. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the board of directors and shareholders of Fleetwood Enterprises, Inc.: We have reviewed the accompanying condensed consolidated balance sheet of FLEETWOOD ENTERPRISES, INC. (a Delaware Corporation) and subsidiaries as of January 24, 1999, and the related condensed consolidated statements of income and comprehensive income for the thirteen and thirty-nine week periods ended January 24, 1999 and January 25, 1998, respectively, the condensed consolidated statements of cash flows for the thirty-nine week periods ended January 24, 1999 and January 25, 1998, and the condensed consolidated statement of changes in shareholders' equity for the thirty-nine week period ended January 24, 1999. These financial statements are the responsibility of the company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to the financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Fleetwood Enterprises, Inc. and subsidiaries as of April 26, 1998, and the related consolidated statements of income, cash flows and changes in shareholders' equity for the year then ended (not presented herein), and, in our report dated June 22, 1998, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of April 26, 1998, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. ARTHUR ANDERSEN LLP Orange County, California February 23, 1999 FLEETWOOD ENTERPRISES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (CONDENSED) (Amounts in thousands except per share data) (UNAUDITED) 13 Weeks 13 Weeks 39 Weeks 39 Weeks Ended Ended Ended Ended Jan. 24, Jan. 25, Jan. 24, Jan. 25, 1999 1998 1999 1998 Net sales: Manufacturing $749,953 $710,620 $2,443,195 $2,208,163 Retail 116,384 -- 205,263 -- Less: intercompany (61,926) -- (106,052) -- -------- -------- ---------- ---------- 804,411 710,620 2,542,406 2,208,163 Cost of products sold 625,849 571,940 1,995,156 1,784,634 -------- ------- --------- --------- Gross profit 178,562 138,680 547,250 423,529 Operating expenses 139,029 106,607 402,605 297,932 ------- -------- -------- --------- Operating income 39,533 32,073 144,645 125,597 Other income (expense): Investment income 3,940 3,425 13,146 8,298 Interest on long-term debt (837) (903) (2,629) (2,677) Interest on inventory floor plan financing (2,247) -- (3,889) -- Distribution on preferred securities (4,382) -- (13,142) -- Other (94) 69 (296) (348) ------- ------- ------- ------- (3,620) 2,591 (6,810) 5,273 ------- ------- ------- ------- Income before provision for income taxes 35,913 34,664 137,835 130,870 Provision for income taxes (14,652) (13,515) 55,238 50,655 ------- -------- -------- -------- Net income $21,261 $21,149 $82,597 $80,215 ======= ======= ======= ======= Net income per Common share: Basic $.61 $.58 $2.47 $2.23 Diluted .59 .57 2.29 2.19 ======= ======= ======= ======= Weighted average Common shares: Basic 34,806 36,256 33,441 36,016 Diluted 41,019 36,884 39,796 36,587 ======= ======= ======= ======= Dividends declared per share of Common stock outstanding $.18 $.17 $.54 $.51 ======= ======= ======= =======
See accompanying notes to financial statements. FLEETWOOD ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED) (Amounts in thousands) 13 Weeks 13 Weeks 39 Weeks 39 Weeks Ended Ended Ended Ended Jan. 24, Jan. 25, Jan. 24, Jan. 25, 1999 1998 1999 1998 Net income $21,261 $21,149 $82,597 $80,215 ------- ------- ------- ------- Other comprehensive income (loss): Foreign currency translation adjustment- Amount before income taxes 535 (2,145) (1,822) (1,595) Income taxes (233) 935 792 694 ------- ------ ------ ------- Net of income taxes 302 (1,210) (1,030) (901) ------- ------ ------ -------- Unrealized loss on securities- Amount before income taxes (47) (474) (1,545) 181 Income taxes 17 173 570 (66) ------- ------ ------ ------- Net of income taxes (30) (301) (975) 115 ------- ------- ------ ------- 272 (1,511) (2,005) (786) ------- ------- ------ ------- Comprehensive income $21,533 $19,638 $80,592 $79,429 ======= ======= ======= =======
See accompanying notes to financial statements. FLEETWOOD ENTERPRISES INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (CONDENSED) (Unaudited) ASSETS (Amounts in thousands) January 24, April 26, 1999 1998 Current assets: Cash $ 31,592 $ 28,143 Marketable investments 184,691 255,919 Receivables 226,658 195,388 Inventories 261,141 153,746 Deferred tax benefits - current 32,773 30,212 Other current assets 35,297 19,443 -------- --------- Total current assets 772,152 682,851 Property, plant and equipment 298,690 277,211 Marketable investments maturing after one year 21,123 21,660 Deferred tax benefits 54,415 45,042 Cash value of Company-owned life insurance 64,771 63,355 Goodwill and intangible assets 238,197 13,745 Other assets 31,803 25,616 ------- --------- $1,481,151 $1,129,480 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 119,909 $ 118,481 Employee compensation and benefits 81,073 74,435 Federal and state taxes on income 10,964 8,800 Retail flooring liability 109,333 -- Other current liabilities 178,210 124,086 ---------- ---------- Total current liabilities 499,489 325,802 Deferred compensation and retirement benefits 58,149 58,272 Insurance reserves 25,148 26,880 Long-term debt 55,000 55,000 Company-obligated mandatorily redeemable convertible preferred securities of Fleetwood Capital Trust holding solely 6% convertible subordinated debentures of the Company 287,500 287,500 Contingent liabilities Shareholders' equity: Preferred stock, $1 par value, authorized 10,000,000 shares, none outstanding -- -- Common stock, $1 par value, authorized 75,000,000 shares, outstanding 34,867,000 at January 24, 1999 and 31,451,000 at April 26, 1998 34,867 31,451 Capital surplus 189,942 54,340 Retained earnings 334,522 291,696 Accumulated other comprehensive income (loss) (3,466) (1,461) -------- -------- 555,865 376,026 -------- -------- $1,481,151 $1,129,480 ========== ========== See accompanying notes to financial statements.
FLEETWOOD ENTERPRISES INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (CONDENSED) (UNAUDITED) (Amounts in thousands) 39 Weeks 39 Weeks Ended Ended January 24, January 25, 1999 1998 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $82,597 $80,215 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense 20,666 20,586 Amortization of intangibles and goodwill 2,396 197 Losses on sales of property, plant and equipment 296 348 Changes in assets and liabilities: Increase in receivables (13,848) (9,007) Increase in inventories (9,567) (16,999) (Increase) decrease in deferred tax benefits (13,257) 1,195 Increase in cash value of Company-owned life insurance (1,416) (429) Increase in other assets (20,019) (3,744) Decrease in accounts payable (17,658) (3,056) Increase in other liabilities 70,038 6,247 ------- -------- Net cash provided by operating activities 100,228 75,553 ------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of investment securities: Held-to-maturity (4,239,394) (5,130,353) Available-for-sale (54,513) (41,996) Proceeds from maturity of investment securities: Held-to-maturity 4,303,390 5,053,096 Available-for-sale 38,728 15,480 Proceeds from sale of available-for-sale investment securities 22,579 30,312 Acquisition of retail companies, net of $9,514 cash acquired (120,129) -- Purchases of property, plant and equipment, net (26,905) (19,449) ------- ------- Net cash used in investing activities (76,244) (92,910) ------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Dividends to shareholders (18,328) (18,410) Proceeds from exercise of stock options 22,511 20,583 Repurchase of Common stock (23,688) -- ------- -------- Net cash provided by (used in) financing activities (19,505) 2,173 ------- -------- Foreign currency translation adjustment (1,030) (901) ------- -------- Increase (decrease) in cash 3,449 (16,085) Cash at beginning of period 28,143 37,890 ------ ------- Cash at end of period $31,592 $21,805 ======= ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for - Interest $22,378 $2,829 Income taxes 64,233 42,069 ======== ====== DETAILS OF ACQUISITIONS: Fair value of assets acquired $367,847 -- Liabilities assumed 119,452 -- -------- ------ Acquisitions price 248,395 -- Less cash acquired (9,514) -- Less Common stock issued for acquisitions (118,752) -- ------- ------ Net cash paid for acquisitions $120,129 -- ======= ====== NON-CASH FINANCING ACTIVITIES: Common stock issued for acquisitions $118,752 -- ======= ======= See accompanying notes to financial statements.
FLEETWOOD ENTERPRISES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (CONDENSED) (UNAUDITED) (Amounts in thousands) Accumulated Other Compre- Common Stock hensive Total Number Capital Retained Income Shareholders' of Shares Amount Surplus Earnings (Loss) Equity Balance April 26, 1998 31,451 $31,451 $54,340 $291,696 $(1,461) $376,026 Add (deduct) - Net income -- -- -- 82,597 -- 82,597 Other comprehensive income (loss) -- -- -- -- (2,005) (2,005) Cash dividends declared on Common stock -- -- -- (18,328) -- (18,328) Stock options exercised (including related tax benefits) 941 941 21,570 -- -- 22,511 Stock repurchased (718) (718) (1,527) (21,443) -- (23,688) Stock issued for acquisitions 3,193 3,193 115,559 -- -- 118,752 ------ ----- ------- ------ ----- ------- Balance January 24, 1999 34,867 $34,867 $189,942 $334,522 $(3,466) $555,865 ====== ======= ======= ======== ======= ========
See accompanying notes to financial statements FLEETWOOD ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JANUARY 24, 1999 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 26, 1998. 2) Industry Segment Information Information with respect to industry segments for the periods ending January 24, 1999 and January 25, 1998 is shown below (amounts in thousands): 13 Weeks 13 Weeks 39 Weeks 39 Weeks Ended Ended Ended Ended Jan. 24, Jan. 25, Jan. 24, Jan. 25, 1999 1998 1999 1998 -------- --------- --------- -------- OPERATING REVENUES: Manufactured housing - Manufacturing $372,371 $354,872 $1,182,391 $1,112,173 Retail 116,384 -- 205,263 -- Less: intercompany (61,926) -- (106,052) -- -------- -------- --------- -------- 426,829 354,872 1,281,602 1,112,173 -------- -------- -------- -------- Recreational vehicles 367,638 345,293 1,229,113 1,062,640 Supply operations 9,944 10,455 31,691 33,350 -------- -------- -------- --------- $804,411 $710,620 $2,542,406 $2,208,163 ======== ======== ========== ========== OPERATING INCOME: Manufactured housing $22,216* $18,159 $68,546* $59,298 Housing - retail 809** -- 2,675** -- Recreational vehicles 18,292 13,519 75,182 47,576 Supply operations 3,688 4,037 11,384 11,289 Corporate and other (5,472) (3,642) (13,142) 7,434*** ------- ------- ------- ------- $39,533 $32,073 $144,645 $125,597 ======= ======= ======== =======
* After deduction for intercompany profit in inventory of $4,951 for the quarter and $10,124 year-to-date. ** Operating income before deduction of interest expense on inventory floor plan financing totaling $2,247 for the quarter and $3,889 year-to-date. *** Includes non-recurring insurance gain of $16.2 million. 3) 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 earnings per share calculation. The table below shows the calculation components of earnings per share for both basic and diluted earnings per share (amounts in thousands): 13 Weeks Ended 13 Weeks Ended January 24, 1999 Janaury 25, 1998 Weighted Weighted Average Average Income Shares Income Shares Basic earnings per share $21,261 34,806 $21,149 36,256 Effect of dilutive securities: Stock options -- 312 -- 628 Preferred securities 2,781 5,901 -- -- ------- ------ ------- ------ Diluted earnings per share $24,042 41,019 $21,149 36,884 ======= ====== ======= ======
39 Weeks Ended 39 Weeks Ended January 24, 1999 January 25, 1998 Weighted Weighted Average Average Income Shares Income Shares Basic earnings per share $82,597 33,441 $80,215 36,016 Effect of dilutive securities: Stock options -- 454 -- 571 Preferred securities 8,342 5,901 -- -- ------- ------ ------- ------ Diluted earnings per share $90,939 39,796 $80,215 36,587 ======= ====== ======= ======
4) Accumulated Other Comprehensive Income Balances The Company has adopted SFAS 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 activity in the accumulated other comprehensive income balance for the period (amounts in thousands): Foreign Unrealized Accumulated Other Currency Gains on Comprehensive Items Securities Income (loss) Beginning balance $(1,759) $ 298 $(1,461) Current period change (1,030) (975) (2,005) ------- ----- ------- Ending balance $(2,789) $(677) $(3,466) ======= ===== =======
5) Accounting Period The Company's fiscal quarters end in July, October, January and April. Although the third fiscal quarter ended on January 24, 1999, the Company has included in its consolidated financial statements the results of Fleetwood Retail Corp. (FRC), its wholly owned housing retail subsidiary, through December 31, 1998. FCR follows a calendar quarter accounting period. 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 and 39-week periods ended January 24, 1999. 13 Weeks Ended 39 Weeks Ended January 24, 1999 January 24, 1999* Increase % Increase % (Decrease) Change (Decrease) Change Sales $ 93,791 13.2% $334,243 15.1% Cost of products sold 53,909 9.4 210,522 11.8 -------- ---- -------- ---- Gross profit 39,882 28.8 123,721 29.2 Selling expenses 15,119 29.6 52,167 35.2 General and administrative expenses 17,303 31.2 52,506 35.0 -------- ---- -------- ---- Operating expenses 32,422 30.4 104,673 35.1 -------- ---- -------- ---- Operating income 7,460 23.3 19,048 15.2 Other income (expense) (6,211) (239.7) (12,083) (229.1) Income before taxes 1,249 3.6 6,965 5.3 Provision for income taxes 1,137 8.4 4,583 9.0 Net income $112 0.5% $2,382 3.0% ======== ==== ======= ===
* Prior year's nine-month period included $16.2 million non-recurring insurance gain which reduced operating costs and increased operating income. Excluding the insurance gain from prior year results, percentage increases would have been 21.9% for general and administrative expenses, 28.2% for operating expenses and 32.2% for operating income. Current Quarter Compared to Same Quarter Last Year Consolidated Results: Net income for the third quarter reached a new high of $21.3 million or 59 cents per diluted share compared to $21.1 million and 57 cents per share a year ago. The earnings gain resulted from sharply higher profits from both of the Company's core manufacturing businesses. Operating margins rose sharply for both manufactured housing and recreational vehicle segments, but manufacturing gains were substantially offset by the quarterly distribution on convertible preferred securities and a $1.4 million operating loss from the Company's newly formed housing retail business. Neither of these offsetting factors existed a year ago. Record third quarter revenues for both manufactured housing and recreational vehicles, along with the addition of retail housing sales, led to a 13% increase in revenues to $804.4 million from $710.6 million last year. The combination of higher manufacturing revenues and improved gross profit margins led to a 23% gain in operating income to $39.5 million. Operating expenses climbed 30% to $139.0 million, and also increased as a percentage of sales from 15.0% to 17.3%. About 75% of the increase stems from the addition of the new housing retail business. Selling expenses rose 30% to $66.2 million with retail accounting for about two-thirds of the increase. Within the manufacturing sector, higher costs were incurred for advertising, sales compensation and product warranty and service. As a percentage of sales, selling costs rose from 7.2% to 8.2%. General and administrative expenses were up 31% to $72.8 million primarily due to the addition of $14 million in retail costs. Manufacturing costs were moderately higher as a result of additional management incentive compensation related to higher profits. General and administrative expenses rose as a percentage of sales from 7.8% to 9.1%. Non-operating items amounted to a loss of $3.6 million compared to income of $2.6 million last year. The $6.2 million swing primarily resulted from the introduction of two factors that did not exist a year ago: $4.4 million for the distribution on convertible preferred securities and $2.2 million of interest expense on retail inventory floor plan financing. Investment income rose from $3.4 million to $3.9 million due to higher invested balances. The Company's effective tax rate moved from 39.0% last year to 40.8% in the current quarter primarily due to the effect of goodwill amortization, which is not deductible for tax purposes. The higher tax rate had the effect of reducing earnings per share by about two cents. Manufactured Housing Factory sales of manufactured homes increased 5% in the third quarter to $372.4 million compared to $354.9 million a year ago. Current quarter revenues included $62 million in intercompany sales to the Company's housing retail business. Factory shipments rose 1% to 15,536 homes, which included sales of 2,905 homes to Company-owned retail stores. The housing group recorded operating income of $22.2 million compared to $18.2 million in last year's third quarter. Current year profit reflects a $5.0 million reduction for intercompany profit on homes sold to Fleetwood retail operations that were still in retail inventory at the end of the quarter. Operating income was 6.0% of sales compared to 5.1% in the prior year. The primary drivers of the profit gain were higher sales volume and better gross margins achieved through lower raw material costs and improved pricing. Recreational Vehicles: Recreational vehicle sales increased 6% in the third quarter to a record $367.6 million. Motor home revenues rose 7% to $225.7 million, an all-time high for the third quarter, as unit volume rose 1% to 3,075 units. The higher sales revenue realization reflects a shift in product mix in favor of larger, more fully-featured Class A models. The Company also posted record travel trailer sales of $117.3 million, 9% ahead of last year's third quarter, on a 10% rise in unit volume to 8,096. Folding trailer sales of $24.6 million were off 5% from last year's record pace as unit shipments fell 5% to 4,756. Operating income for the recreational vehicle group rose 35% to $18.3 million, primarily as a result of the increase in volume and improved gross profit margins. As a percentage of sales, operating income was up from 3.9% to 5.0%. The margin improvement mainly reflects lower raw material costs and more efficient motor home operations. Last year, the motor home division was not operating at peak efficiency due to difficulties encountered with a plant production realignment initiative. Supply Operations: The Company's supply group generated third quarter revenues of $10.0 million compared to $10.5 million in the similar period last year. Operating income totaled $3.7 million compared to last year's $4.0 million. Retail Housing Operations Fleetwood's new retail housing division, which was not in operation a year ago, contributed $116.4 million to consolidated sales in the third quarter. Operating income, before $2.2 million of interest expense on inventory floor plan financing, was $809,000. Current Year-To-Date Compared To Same Period Last Year Consolidated Results Earnings for the first nine months of fiscal 1999 increased to $82.6 million or $2.29 per diluted share compared to $80.2 million and $2.19 per share last year. Last year's earnings included a non-recurring 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 per share would have been $69.8 million or $1.91 per share for last year's comparable period. Both manufacturing segments produced higher profits in the first nine months, which led to a 20% improvement in comparable earnings per share after excluding last year's insurance gain. Despite the strong manufacturing performance, the ramping up of the manufactured housing retail operations restrained the overall operating margin and earnings per share. In addition, the nine month operating income for the manufactured housing group was reduced $10.1 million due to the elimination of intercompany profit on homes sold to Fleetwood retail stores that were in retail inventory at the end of the period. Sales for the first nine months of fiscal 1999 rose 15% to an all-time high of $2.54 billion compared to $2.21 billion for last year's similar period. This revenue increase resulted from higher manufacturing sales for both housing and recreational vehicles, as well as the addition of retail sales. Operating expenses rose 35% to $402.6 million, and also increased as a percentage of sales from 13.5% to 15.8%. The new housing retail business accounted for about 41% of the increase. Selling expenses also rose 35% to $200.2 million with the housing retail operation accounting for a third of the increase. Higher costs were incurred in the manufacturing operations for advertising, sales compensation and product warranty and service. General and administrative expenses of $202.4 million were up 35%, primarily due to the addition of $25 million in retail costs which represented nearly half of the increase. The increase for manufacturing was primarily due to higher management incentive compensation as a result of higher profits. As a percentage of sales, selling expenses increased from 6.7% to 7.9% and general and administrative expenses rose from 6.8% to 8.0%. Non-operating items totaled a net expense of $6.8 million compared to income of $5.3 million a year ago. This $12.1 million change was caused by expenses which did not exist a year ago: a $13.1 million distribution on convertible preferred securities and $3.9 million of interest expense on retail inventory floor plan financing. These items were partially offset by a $4.8 million increase in investment income. The effective tax rate rose to 40.1% compared to 38.7% last year. The increase primarily reflects the impact of goodwill amortization which is not deductible for tax purposes. Manufactured Housing For the nine months, factory sales of manufactured housing were up 6% to $1.18 billion. This included intercompany sales of $106.1 million to the Company's retail housing division. Shipments were up 2% to 49,969 units. Operating income for the housing group rose 16% to $68.5 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 profit in the current year is net of $10.1 million of intercompany profit eliminated in consolidation as discussed previously. As a percentage of sales, operating income was 5.8% compared to 5.3% a year ago. Recreational Vehicles: RV revenues for the first nine months of fiscal 1999 were up 16% to $1.23 billion with all three RV divisions posting record sales. Motor home sales increased 18% to a new nine-month high of $750.9 million as shipments were up 10% to 10,472 units. Both towable segments reached record levels with travel trailer sales rising 12% to $391.9 million and folding trailer sales increasing 10% to $86.3 million. Travel trailer shipments were up 14% to 27,677 units while folding trailer unit volume increased 5% to 15,979. Operating income for the RV group surged 58% over the prior year to $75.2 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 operating at efficient levels last year. RV operating margin rose from 4.5% to 6.1% of sales. Supply Revenue for the Company's supply group was $31.7 million, down from $33.4 million for the similar period a year ago. Operating income of $11.4 million in fiscal 1999 was virtually unchanged from the prior year. Retail Housing Operations Fleetwood's new retail housing division recorded $205.3 million in sales in the first nine months of fiscal 1999. Operating income, before $3.9 million of interest expense on inventory floor plan financing, was $2.7 million or 1.3% of sales. Liquidity and Capital Resources The Company generally relies upon internally generated cash flows to satisfy working capital needs and to fund capital expenditures. Cash generated from operations improved to $100.2 million compared to $75.6 million last year as a result of profitable operations and a reduction in working capital investment. Cash totaling $120.1 million was used for the acquisition of retail housing companies, the largest of which was Home USA. This was in addition to $118.8 million in Common stock issued as part of the consideration for the acquisitions. The acquisition of retail businesses resulted in several significant changes in assets and liabilities as of January 24, 1999 when compared to balances at the end of the prior fiscal year. These changes included $111.8 million for retail inventories, $232.2 million for goodwill and $109.3 million for inventory floor plan financing liability. Cash outlays in the current year included $18.3 million in dividends to shareholders, $26.9 million for capital expenditures and $23.7 million for repurchase of the Company's Common stock. Dividends last year totaled $18.4 million and capital expenditures were $19.4 million. There was no repurchase of Common stock in last year's similar period. Year 2000 Compliance 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. The tasks remaining relate to the implementation of vendor upgrades and replacements of purchased software and are expected to be completed by mid-1999. 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 suppliers, vendors and financial institutions. As part of its determination of year 2000 readiness, the Company has identified material relationships with third party vendors and is in the process of assessing the status of their compliance through the use of questionnaires. We expect this process will be complete by the end of the first quarter of calendar 1999. 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 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. Senior management has been active in the oversight of the year 2000 project, with the objective of minimizing the potential impact on the Company's operations. As part of this effort 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 complete by mid-1999. It is anticipated that the Company's year 2000 project will reduce the risk of significant business interruptions, but there is no assurance that this outcome will be achieved. 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, depending on its duration, could have a material adverse effect on the Company's financial statements. Other The Financial Accounting Standards Board ("FASB") Statement No. 130, "Reporting Comprehensive Income," was adopted by the Company in fiscal 1999. This statement establishes standards for the reporting and display of comprehensive income and its components (revenues, expenses, gains and losses) in a full set of general-purpose financial statements. FASB Statement No. 131, "Disclosures About Segments of an Enterprise and Related Information," was also adopted in fiscal 1999. This statement establishes standards for the way that companies report information about operating segments in annual financial statements, and requires that companies report selected information about operating segments in interim financial reports issues to shareholders. 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 February 23, 1999 FLEETWOOD ENTERPRISES, INC. CONSOLIDATED FINANCIAL INFORMATION FINANCIAL DATA SCHEDULE [SROS] NYSE [SROS] PCX EX-27 2 ART. 5 FDS FOR 3RD QUARTER 10-Q
5 1,000 9-MOS APR-25-1999 JAN-24-1999 31,592 205,814 226,658 0 261,141 772,152 505,558 206,868 1,481,151 499,489 0 287,500 0 34,867 520,998 1,481,151 2,542,406 2,542,406 1,995,156 2,397,761 296 0 19,660 137,835 55,238 82,597 0 0 0 82,597 2.47 2.29
-----END PRIVACY-ENHANCED MESSAGE-----