- Company provides updated details on major restructuring plan -
RIVERSIDE, Calif., Nov. 25 /PRNewswire-FirstCall/ -- Fleetwood
Enterprises, Inc. (NYSE:FLE) announced today its results for the
second quarter and first half of fiscal 2009 ended October 26,
2008, along with additional details on its major restructuring
program intended to stem losses and reduce annualized fixed costs
by at least $40 million. Consolidated Results Consolidated revenues
for the quarter were $216.4 million, down 54 percent from $468.5
million in last year's second quarter. RV Group sales declined 63
percent, and Housing Group sales were off 33 percent. The Company
incurred an operating loss of $51.8 million in the fiscal 2009
second quarter, which included restructuring charges, mostly
severance, and asset write-downs of $11.5 million, or $0.15 per
share. This compares to operating income of $4.1 million in the
same period of the prior year, which was negatively impacted by
$3.1 million, or $0.05 per share, of impairment and restructuring
charges, partially offset by gains from asset sales. The net loss
for the quarter totaled $56.7 million, or $0.74 per share, compared
with a net loss of $1.2 million, or $0.02 per share, in the second
quarter of fiscal 2008. "The steep drop in revenues and increased
losses are directly attributable to an unprecedented decline in our
markets due to the current economic environment, especially the
tight credit conditions that are suppressing dealer and consumer
purchases of our products," said Elden L. Smith, Fleetwood's
president and chief executive officer. "Consumers are hesitant to
spend given current economic circumstances, and at the same time
those that wish to buy are having extraordinary difficulty
obtaining loans to finance our products. In view of the magnitude
of the revenue declines and the current business outlook, we have
implemented new cost-saving measures and announced significant
additional changes to our manufacturing footprint. We will also
take other company-wide cost-cutting actions in the current
quarter." For the first six months of fiscal 2009, consolidated
revenues declined 47 percent to $506.3 million from $956.8 million
for the first half of fiscal 2008. RV Group sales were down 57
percent, and Housing Group sales were off 24 percent. The operating
loss for the first six months of fiscal 2009 was $75.1 million,
compared to operating income of $9.8 million in last year's
corresponding period. The net loss for the first half of fiscal
2009 was $85.8 million, or $1.19 per share, compared with a net
loss of $3.6 million, or $0.06 per share, last year. RV Group
Results The RV Group posted an operating loss of $42.0 million on
revenues of $116.6 million for the quarter, versus operating income
of $0.6 million on revenues of $318.7 million for the same quarter
of the prior year. The fiscal 2009 second quarter loss included
restructuring charges of $7.5 million, including a $4.6 million
write-down of inventory associated with a closed supply business
and $2.9 million in severance. In the first six months of fiscal
2009, the Group reported an operating loss of $65.8 million on
revenues of $283.9 million, versus operating income of $2.5 million
on revenues of $662.8 million in the comparable period last year.
"Although we believe our motor home division management and
products are second to none, the acceleration of the decline in
industry sales during the second quarter presented a tremendous
challenge," Smith said. "Motor home revenues were one-third of what
they were just last year, and aggressive pricing across the
industry led to a much higher level of discounting in the division
than in last year's second quarter. Travel trailer revenues and
operating income also fell as a result of these factors. In
addition, dealers continue to significantly lower their
inventories. During the seasonally strong summer months of June
through September, the industry retail market fell 52 percent and
25 percent for motor homes and travel trailers, respectively, while
industry wholesale shipments for the same period fell 61 percent
for motor homes and 34 percent for travel trailers. As a result of
all of these factors, we have announced significant capacity
reductions since the end of the first quarter." As announced in
October, Fleetwood is consolidating its Pennsylvania motor home
operations into its Indiana plant and, as announced yesterday, the
Company is further consolidating production in its travel trailer
division. After the transition, which is currently expected to be
completed by the beginning of the fourth fiscal quarter, Fleetwood
will service all of its U.S. and Canadian travel trailer dealers
from existing plants in Oregon and Ohio. Housing Group Results The
Housing Group recorded an operating loss of $6.2 million on
revenues of $99.8 million for the second quarter, compared to
operating income of $5.1 million on revenues of $149.8 million for
the same quarter of the prior year. The loss in the second quarter
of fiscal 2009 included $3.2 million of Housing Group restructuring
charges, consisting of severance costs incurred in connection with
a portion of the plant consolidations and impairment charges for a
facility that will be closed. For the first half of the fiscal
year, the operating loss for the Housing Group totaled $3.8 million
on revenues of $222.4 million, versus operating income of $10.6
million on $294.0 million in revenues for the first six months of
last year. "Our Housing Group has done a remarkable job of
remaining profitable during this, the industry's most trying
decade," Smith said. "The continued decline in two of the
industry's most important states -- California and Florida -- has
been particularly challenging because Fleetwood has had the leading
market share in both states. Wholesale shipments for the industry
in California and Florida declined 39 percent and 26 percent,
respectively, in the first nine months of this calendar year
compared with last year, whereas national industry shipments for
the same period were down only 10 percent. Pricing has been under
pressure due to regional competition, and margins have been
squeezed by increases in material costs. At the same time, we are
facing increased pressure from the oversupply of new and foreclosed
site-built homes. Also, while we have successfully completed
several contracts for the construction of modular military barracks
and have similar efforts underway for Fort Sam Houston, other
multi-family modular business in the Gulf Coast area has not
materialized as we had initially expected. Accordingly, we have
announced that we will be consolidating production from two modular
plants into one. In addition, we are moving from 17 manufactured
housing plants to 12, to reflect the markedly slower business in
the Southeast and California. There is no doubt that consumers need
affordable housing now more than ever, but it has become clear that
the financing environment must improve before growth resumes in
this vital industry." Corporate Restructuring As outlined above,
the Company is consolidating its manufacturing operations. The
Company expects to realize lower fixed costs throughout the
organization as a result of these changes, and improved labor and
material costs over the longer term. Fleetwood will now manufacture
products in two motor home plants, three travel trailer plants, and
13 housing plants. The Company's capacity utilization is expected
to improve as a result, and fixed expenses are estimated to be
reduced by at least $40 million on an annualized basis. "The
changes being implemented should not affect the availability of
Fleetwood's current products to dealers or consumers in the
geographic markets we serve," Smith said. "After the transitions
are complete, Fleetwood should be able to operate effectively in
the current environment, while retaining the flexibility to take
immediate advantage of any upturn." In addition to the plant
consolidations, Fleetwood said it will take the actions necessary
to ensure that the corporate resources in support of its reduced
manufacturing operations are appropriately sized. To further reduce
expenses, Fleetwood is suspending the company match of participant
contributions to its 401(k) retirement plan and similar subsidies
to the related Deferred Compensation Alternative Plan for
management. Update on 5% Debentures As previously disclosed,
holders of the Company's 5% convertible senior subordinated
debentures have the right to require Fleetwood to repurchase the
debentures at par on December 15, 2008. Holders of the debentures
may elect to participate in Fleetwood's previously announced
exchange offer, whereby it has offered holders of the debentures a
combination of new senior secured notes due 2011 that are partially
secured and guaranteed by certain Fleetwood subsidiaries, along
with up to 14 million shares of common stock in exchange for their
debentures. The exchange offer is not expected to be finalized
until early December. Provided that the exchange is completed on or
before December 12, 2008, the largest individual debenture holder,
which accounts for approximately 34 percent of the existing
debentures, has indicated an intention to exchange for the new
notes. This would be sufficient to meet the minimum acceptance
threshold for the exchange. For those debenture holders who do not
accept the exchange offer, the Company has announced that it will
fulfill any repurchase requests with common stock. "We remain
optimistic that the debenture holders will accept the exchange
offer, which we believe is in their best interests as well as the
Company's," Smith said. "Resolution of this matter in combination
with our aggressive restructuring plan will benefit everyone who
has a vested interest in Fleetwood, including dealers, retail
customers, suppliers, and shareholders, as well as our debt
holders." Outlook and Liquidity "The year-to-date losses have, as
might be expected, reduced our cash levels, yet we still ended the
quarter with cash, cash equivalents, and marketable investments of
more than $70 million," Smith said. "We paid off the term loan in
our bank facility during the quarter, and we have virtually no
borrowings on our revolver, which reflected $30 million of unused
borrowing capacity at quarter end. During the quarter, our average
daily liquidity by calendar month ranged from $111 million to $129
million. With a successful exchange for the debentures, we
anticipate that we will have ample liquidity to support operations
going forward. "We do not expect market conditions to improve in
the near future and we are planning accordingly," Smith concluded.
"Although operating losses will likely be sustained through the
remainder of the fiscal year, capacity reductions and increased
utilization, along with reduced working capital needs, should
permit a near breakeven cash flow from operations during that same
period. Further, it is our objective to manage operating results
close to breakeven levels beginning with the first quarter of our
new fiscal year." The Company will host a conference call at 10:30
a.m. PST/1:30 p.m. EST on Tuesday, November 25, 2008. The call will
be broadcast live over the Internet at the Company's website,
http://www.fleetwood.com/ under Investor Relations, and at
http://www.streetevents.com/ and http://www.earnings.com/. About
Fleetwood Fleetwood Enterprises, Inc., through its subsidiaries, is
a leading producer of recreational vehicles and manufactured homes.
This Fortune 1000 company, headquartered in Riverside, Calif., is
dedicated to providing quality, innovative products that offer
exceptional value to its customers. Fleetwood operates facilities
strategically located throughout the nation, including recreational
vehicle, manufactured housing and supply subsidiary plants. For
more information, visit the Company's website at
http://www.fleetwood.com/. This press release contains certain
forward-looking statements and information based on the beliefs of
Fleetwood's management as well as assumptions made by, and
information currently available to, Fleetwood's management. Such
statements, including those regarding potential annualized savings,
the production level needed for breakeven operations, and the
outlook for coming quarters reflect the current views of Fleetwood
with respect to future events and are subject to certain risks,
uncertainties, and assumptions, including risk factors identified
in Fleetwood's 10-K and other SEC filings. These risks and
uncertainties include, without limitation, the significant demands
on our liquidity while current economic and credit conditions are
severely affecting our operations, including the potential
repurchase of $100 million 5% debentures in December 2008 if we do
not have sufficient shares of common stock to meet a repurchase
obligation; the lack of assurance that we will regain sustainable
profitability in the foreseeable future; our potential inability to
decrease our operating losses and negative cash flow; the effect of
ongoing weakness in both the manufactured housing and recreational
vehicle markets, especially the recreational vehicle market which
has deteriorated sharply in recent months; the volatility of our
stock price and the risk of potential delisting from the NYSE; the
effect of a decline in home equity values, volatile fuel prices and
interest rates, global tensions, employment trends, stock market
performance, credit crisis, availability of financing generally,
and other factors that can and have had a negative impact on
consumer confidence, and which may continue to reduce demand for
our products, particularly recreational vehicles; the availability
and cost of wholesale and retail financing for both manufactured
housing and recreational vehicles; our ability to comply with
financial tests and covenants on existing and future debt
obligations; our ability to obtain, on reasonable terms if at all,
the financing we will need in the future to execute our business
strategies; potential dilution associated with future equity or
equity-linked financings we may undertake to raise additional
capital and the risk that the equity pricing may not be favorable;
the cyclical and seasonal nature of both the manufactured housing
and recreational vehicle industries; the increasing costs of
component parts and commodities that we may be unable to recoup in
our product prices; repurchase agreements with floorplan lenders,
which we currently expect could result in increased costs due to
the deteriorated market conditions; expenses and uncertainties
associated with the entry into new business segments or the
manufacturing, development, and introduction of new products; the
potential for excessive retail inventory levels and dealers' desire
to reduce inventory levels in the manufactured housing and
recreational vehicle industries; the effect on our sales, margins
and market share from aggressive discounting by competitors;
potential increases in the frequency and size of product liability,
wrongful death, class action, and other legal actions; and the
highly competitive nature of our industries and changes in our
competitive landscape. Contact: Lyle Larkin, Vice President --
Treasurer (951) 351-3535 Kathy A. Munson, Director -- Investor
Relations (951) 351-3650 (tables to follow) Fleetwood Enterprises,
Inc. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in
thousands, except per share data) (Unaudited) 13 Weeks Ended 26
Weeks Ended October October October October 26, 28, 26, 28, 2008
2007 2008 2007 Net sales: RV Group $116,609 $318,729 $283,869
$662,817 Housing Group 99,796 149,774 222,448 294,008 216,405
468,503 506,317 956,825 Cost of products sold 199,501 387,997
452,666 803,930 Gross profit 16,904 80,506 53,651 152,895 Operating
expenses 61,835 73,267 121,897 144,549 Other operating (income)
expenses, net 6,908 3,110 6,826 (1,476) 68,743 76,377 128,723
143,073 Operating income (loss) (51,839) 4,129 (75,072) 9,822 Other
income (expense): Investment income 828 1,222 1,689 2,539 Interest
expense (5,581) (6,669) (10,573) (12,185) (4,753) (5,447) (8,884)
(9,646) Income (loss) from continuing operations before income
taxes (56,592) (1,318) (83,956) 176 Provision for income taxes
(196) (96) (602) (3,901) Loss from continuing operations (56,788)
(1,414) (84,558) (3,725) Income (loss) from discontinued
operations, net 63 201 (1,245) 166 Net loss $(56,725) $(1,213)
$(85,803) $(3,559) Basic and diluted loss per common share: Loss
from continuing operations $(0.74) $(0.02) $(1.17) $(0.06) Loss
from discontinued operations -- -- (0.02) -- Net loss per common
share $(0.74) $(0.02) $(1.19) $(0.06) Weighted average common
shares 76,286 64,243 72,381 64,201 Fleetwood Enterprises, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in thousands)
(unaudited) October 26, July 27, October 28, 2008 2008 2007 ASSETS
Cash and cash equivalents $45,613 $60,698 $47,476 Marketable
investments 25,022 24,959 24,754 Receivables 91,226 82,909 115,639
Inventories 130,413 159,598 171,989 Other current assets 29,796
21,843 46,978 Total current assets 322,070 350,007 406,836
Property, plant and equipment, net 139,765 143,945 169,676 Deferred
taxes 46,072 46,190 44,283 Other assets 50,369 49,998 60,455 Total
assets $558,276 $590,140 $681,250 LIABILITIES & SHAREHOLDERS'
EQUITY Accounts payable $22,458 $23,914 $37,375 Employee
compensation and benefits 30,959 30,158 42,610 Short-term
borrowings 955 4,482 10,056 5% convertible senior subordinated
debentures 100,000 100,000 -- Other current liabilities 93,944
77,215 139,210 Total current liabilities 248,316 235,769 229,251 5%
convertible senior subordinated debentures -- -- 100,000 6%
convertible subordinated debentures 160,142 160,142 160,142 Other
long-term borrowings 27,857 11,306 18,811 Other non-current
liabilities 81,674 86,840 87,347 Total non-current liabilities
269,673 258,288 366,300 Total shareholders' equity 40,287 96,083
85,699 Total liabilities and shareholders' equity $558,276 $590,140
$681,250 Fleetwood Enterprises, Inc. CONDENSED STATEMENTS OF CASH
FLOWS (Amounts in thousands) (Unaudited) 13 Weeks Ended 26 Weeks
Ended 10/26/2008 10/28/2007 10/26/2008 10/28/2007 CASH FLOWS FROM
OPERATING ACTIVITIES: Loss from continuing operations $(56,788)
$(1,414) $(84,558) $(3,725) Adjustments to reconcile net income
(loss) to net cash provided by (used in) operating activities:
Depreciation and amortization expense 4,427 5,023 8,752 10,264
Stock-based compensation expense 1,098 1,431 1,674 1,883 Gain on
sale of property, plant and equipment 415 (1,075) 41 (6,436) Other
non-cash items 1,400 3,100 1,400 6,688 Changes in assets and
liabilities: Receivables (8,992) 10,829 10,520 2,695 Inventories
29,185 (393) 9,400 (9,045) Other assets and liabilities, net 3,036
(6,196) (14,911) (21,254) Net cash provided by (used in) operating
activities (26,219) 11,305 (67,682) (18,930) CASH FLOWS FROM
INVESTING ACTIVITIES: Purchases and sales of investments, net (243)
(255) (273) (618) Purchases of property, plant and equipment
(1,069) (1,672) (3,191) (3,755) Proceeds from sale of property,
plant and equipment 68 5,871 1,107 12,576 Change in restricted cash
-- -- 16,790 -- Net cash provided by (used in) investing activities
(1,244) 3,944 14,433 8,203 CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock, net 38,471 -- Change in short-term
borrowings (597) 5,132 (3,682) 2,664 Change in borrowings of
long-term debt 12,912 (1,280) 6,072 1,381 Proceeds from exercise of
stock options -- 43 -- 836 Net cash provided by (used in) financing
activities 12,315 3,895 40,861 4,881 CASH FLOWS FROM DISCONTINUED
OPERATIONS: Net cash provided by (used in) discontinued operations
63 1,467 (261) 617 Foreign currency translation adjustment -- 330
-- 578 Net change in cash and cash equivalents (15,085) 20,941
(12,649) (4,651) Cash and cash equivalents at beginning of period
60,698 26,535 58,262 52,127 Cash and cash equivalents at end of
period $45,613 $47,476 $45,613 $47,476 Fleetwood Enterprises, Inc.
BUSINESS SEGMENT AND UNIT SHIPMENT INFORMATION (Dollar amounts in
thousands) (Unaudited) 13 Weeks Ended 26 Weeks Ended October
October October October 26, 2008 28, 2007 26, 2008 28, 2007
REVENUES: Motor homes $87,581 $263,776 $209,390 $537,457 Travel
trailers 24,075 47,972 63,906 111,624 RV supply 4,953 6,981 10,573
13,736 RV Group 116,609 318,729 283,869 662,817 Housing Group
99,796 149,774 222,448 294,008 $216,405 $468,503 $506,317 $956,825
OPERATING INCOME (LOSS): Motor homes $(27,018) $9,104 $(43,086)
$18,107 Travel trailers (9,080) (8,334) (14,728) (15,759) RV supply
(5,871) (178) (7,964) 127 RV Group (41,969) 592 (65,778) 2,475
Manufactured Housing (4,061) 5,912 (2,082) 10,632 Modular (2,153)
(1,226) (1,841) (918) Lumber (33) 446 160 893 Housing Group (6,247)
5,132 (3,763) 10,607 Corporate and other (3,623) (1,595) (5,531)
(3,260) $(51,839) $4,129 $(75,072) $9,822 UNITS SOLD: Recreational
vehicles - Motor homes 769 2,125 1,813 4,558 Travel trailers 1,223
2,225 3,140 5,611 1,992 4,350 4,953 10,169 Housing - HUD 2,469
3,619 5,162 7,184 MOD 234 307 833 555 2,703 3,926 5,995 7,739 Total
Company shipments 4,695 8,276 10,948 17,908 DATASOURCE: Fleetwood
Enterprises, Inc. CONTACT: Lyle Larkin, Vice President, Treasurer,
+1-951-351-3535, or Kathy A. Munson, Director, Investor Relations,
+1-951-351-3650, both of Fleetwood Enterprises, Inc. Web site:
http://www.fleetwood.com/
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