Fleetwood Enterprises Inc. announced Tuesday (Jan. 18) that the previously reported $5.2 million judgment in the case between Fleetwood Folding Trailers Inc. and The Coleman Company Inc., combined with slower-than-anticipated RV sales, have caused the Riverside, Calif.-based company to revise its prior expectations for its third quarter ending Jan. 23.
Management now expects the net loss for the quarter will significantly exceed last year’s loss. Previously, Fleetwood had said the third-quarter loss would likely be less than in fiscal 2004.
Fleetwood also indicated that it expects to be solidly profitable in the fourth quarter, but the results for the third quarter now make it uncertain whether the company will attain profitability for the full fiscal year. The builder said it would be initiating production adjustments early in the fourth quarter to stabilize inventory.
In Tuesday’s trading, Fleetwood shares registered a 52-week low a t $9.90, down $2.56.
In the Coleman matter, Fleetwood reported a delay in the final ruling and that it intends to pursue an appeal.
Despite the uncertainty of the ultimate outcome of the legal process, Fleetwood expects that any additional damages that may be levied by the court will likely be required to be reflected, along with the amount of the original judgment, in the third quarter.
“The Coleman judgment was obviously a disappointment, but it is evident that the net loss would have significantly exceeded last year’s even before accounting for the judgment,” said Edward B. Caudill, president and CEO. “The primary reason is slower RV shipments. A portion of our dealer network has delayed orders in the belief that we will discount our products at or near the end of our quarter.
“We want to bring an end to this cycle, and so we have largely been holding the line, particularly on the motorhome side. We believe over the longer term this will have a positive impact on operations and provide for an improved partnership with our entire dealer network.
“The impact was particularly pronounced in the middle part of the country where we are in the process of restructuring and strengthening our dealer network,” Caudill said. “Exacerbating the issue was a sharp decline in industry-wide motorhome shipments in November, which further contributed to an unplanned inventory buildup that we expect will still be evident at quarter-end, along with a corresponding decline in liquidity from an already seasonally low level. As a result, we intend to adjust production early in the fourth quarter in order to right-size our finished goods inventory and bolster our liquidity.”
Caudill continued: “We have commenced discussions with our lenders since these results will require us to obtain a waiver or modify the existing covenant. Despite our current lower level of liquidity, we believe we have a sufficient combination of cash and borrowing capacity, together with access to other sources of external funding, to continue to meet our foreseeable cash flow requirements.”