Fleetwood RV Reports Third Quarter Fiscal 2006 Earnings

The RV Group earned $3.8 million in operating income for the third quarter, compared to an operating loss of $33.5 million in the comparable period of the prior year. Revenues for the Group increased 7 percent to $365.3 million in the quarter compared with $342.6 million in the same period of the prior year. Sales of FEMA trailers in the third quarter of fiscal 2006 and 2005 were $72 million and $9 million, respectively.

The third quarter's positive results were driven by a surge in operating income in the travel trailer division, partially offset by losses in the motor home and folding trailer divisions. The travel trailer division earned $11.2 million in the quarter on sharply higher revenues, compared to an operating loss of $16.2 million in the third quarter last year. Operating losses for the folding trailer division narrowed to $3.3 million from $18.2 million last year, which included a charge related to the $14.6 million adverse judgment in the Coleman litigation. The motor home division incurred an operating loss of $4.1 million compared to operating income of $0.9 million in the prior year, primarily due to a 22 percent drop in revenues.

The Group reported an operating loss of $2.0 million for the first nine months of fiscal 2006 on revenues of $1.18 billion, compared with an operating loss of $9.3 million on revenues of $1.28 billion in the comparable period last year.

"Travel trailer operations benefited significantly from producing a large number of nearly identical units for FEMA," Smith said. "Efficiencies associated with the increased volume and consistency of production provided the improvement in overall margins. We had begun to see the positive impact during the second quarter, but realized the full advantage in the third quarter. We will build approximately 2,500 more FEMA trailers during the fourth quarter. With lower volume anticipated in the fourth quarter, we expect that gross margins in the travel trailer division will more closely approximate those of the second quarter rather than the third quarter. We are enjoying strong backlogs for our conventional travel trailers, which we attribute partly to production deferred from the third quarter due to the FEMA contract, and partly to the acceptance of new products that have been introduced over the last several months.

"The past month has not changed our 'cautiously optimistic' view on the spring selling season," Smith continued. "We continue to see relatively soft motor home sales, but good traffic at most of the early RV shows. Travel trailers are moving at a faster clip, which leads us to believe that the primary concern among potential RV buyers continues to be fuel prices. If history is any indication, we anticipate that as fuel prices stabilize, we will see a rebound in motor home sales."