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Fleetwood Enterprises Inc. reported a total net loss of $120.5 million for its fiscal 2005 fourth quarter while also announcing a corporate-wide reorganization, including a 9% reduction in the company’s work force.
“None of our operating divisions performed well this quarter,” said President and CEO Elden Smith, who rejoined the Riverside, Calif., recreational vehicle and manufactured housing builder on March 9. “We slowed production by rationalizing facilities and our work force, which adversely affected efficiencies in the short term, but enabled us to bring finished unit inventories in line with current sales volume.”
For the fourth quarter of fiscal 2005, consolidated revenues from continuing operations declined 12% to $560.2 million from $639.7 million in the prior year’s fourth quarter. The company’s loss from continuing operations was $55.8 million compared to a loss from continuing operations of $5.4 million in the previous year. Last year’s results included non-cash charges of $15 million related to the valuation allowance against the company’s deferred tax asset.
In March 2005, Fleetwood announced that its board of directors authorized management to exit the manufactured housing retail and finance operations and that it would account for these businesses as discontinued operations effective in the 2005 fiscal fourth quarter. The loss from discontinued operations was $64.6 million in the fourth quarter of fiscal 2005, compared with a loss of $12.4 million in the prior year. The loss in fiscal 2005 included a non-cash charge of $51.1 million to record the impairment of assets held for sale at their estimated fair market value less costs to sell.
The total net loss for the quarter totaled $120.5 million compared to a net loss of $17.8 million in the fourth quarter of the prior year.
For fiscal year 2005, consolidated revenues from continuing operations were essentially flat at $2.37 billion, up slightly from $2.36 billion in the prior year. The loss from continuing operations was $72.6 million compared to income from continuing operations of $17.4 million in fiscal 2004. The loss from discontinued operations was $88.9 million in fiscal 2005 compared with a loss of $39.6 million in the prior year. The net loss for fiscal 2005 totaled $161.5 million compared with a net loss of $22.3 million in the prior year.
Revenues from RV operations for the quarter declined 21% to $381.3 million from $482.7 million in the prior year’s fourth quarter. Motorhome revenues decreased 18% to $245.8 million and towable sales fell 25% to $135.5 million.
Fleetwood said declines were caused by a combination of a softer RV market in the current first calendar quarter compared to a record-setting pace in the prior year, market share declines in towables, and increased promotional activity, the cost of which is netted against sales.
The RV Group incurred an operating loss of $29.8 million in the fourth quarter, compared to an operating profit of $16.5 million in the fourth quarter of the prior year. The motorhome division reported an operating loss of $5.2 million, in contrast with operating income of $16.3 million in the fourth quarter of fiscal 2004, while the towable division’s operating loss of $24.6 million compared with a prior year operating profit of $0.3 million.
Recreational vehicle sales for the full fiscal year declined 7% from the prior year to $1.66 billion from $1.78 billion. Motorhome revenues declined 1% to $1.1 billion and towable sales decreased 17% to $562.8 million principally due to declines in towable market share and increased sales incentives as a percentage of sales.
Due to continuing underperformance in the towable division, the RV Group incurred an operating loss of $39.2 million for the year, compared to an operating profit of $58.1 million in the prior year. The loss consisted of operating income of $27.7 million in motor homes, which was more than offset by a loss of $66.9 million in the towable division.
“With significant progress toward focusing the company on its core competency of manufacturing, without the distractions of the retail and finance operations and other costly initiatives, we have begun the process of moving decision making closer to our customers,” Smith said of the reorganization. “We now have distinct profit centers in manufactured housing, motor homes, travel trailers, folding trailers and supply subsidiaries.
“In addition, the Housing Group has been split into three regions that each have profit and loss responsibility. Each of these divisions has its own product planning, development, design and sales teams. This structure has allowed us to eliminate layers of management, including 11 corporate vice-president level positions, although several executives may be retained in other roles. The number of staff positions at corporate headquarters has also been reduced, as we have curtailed some ancillary projects and outsourced some functions.”
Fleetwood consolidated or downsized several production facilities to match production output to retail demand. Altogether, Fleetwood’s employment level was reduced by approximately 9%, or 1,200 workers, since the end of the third fiscal quarter.
“The changes that we have made at Fleetwood, eliminating unprofitable initiatives and reorganizing to improve market responsiveness, increase manufacturing efficiency and lower overhead costs, will return our focus to our products and to our customers,” Smith said. “I expect to see some of the positive effects of these moves as early as our second quarter. Organizational change is costly, however, and operating income in the first quarter will be impacted by these charges, as well as some of the issues that harmed fourth quarter results, making an operating loss probable.”