of Financial Condition and Results of Operations
Consolidated Results:
The following table presents net loss and diluted loss per share for fiscal 2006 and 2005 (amounts in thousands, except per share data):
| Fiscal Years Ended April | |||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2006 | 2005 | ||||||||||||||||||||||
| Amount | % of Net Sales |
Amount | % of Net Sales |
Change | % Change | ||||||||||||||||||
| Net loss from continuing operations |
$ | (6,065 | ) | (.2 | )% | $ | (72,577 | ) | (3.1 | )% | $ | 66,512 | 91.6 | % | |||||||||
| Net loss | (28,437 | ) | (1.2 | ) | (161,459 | ) | (6.8 | ) | 133,022 | 82.4 | |||||||||||||
| Diluted loss per share | $ | (.48 | ) | $ | (2.92 | ) | |||||||||||||||||
The substantial decrease to the net loss from continuing operations during fiscal 2006 stems primarily from improved operating results further enhanced by lower net interest expense and partially offset by an increase in non-cash tax expenses. The decrease in our net loss for this fiscal year was even more pronounced due to the sizable reduction to losses from discontinued operations following the sale of our retail and financial services business in August 2005.
Net Sales
The following table presents consolidated net sales by group for fiscal 2006 and 2005 (amounts in thousands):
| 2006 | 2005 | ||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Amount | % of Net Sales |
Amount | % of Net Sales |
Change | % Change | ||||||||||||||||||
| RV Group | $ | 1,612,217 | 66.3 | % | $ | 1,659,882 | 69.9 | % | $ | (47,665 | ) | (2.9 | )% | ||||||||||
| Housing Group | 795,596 | 32.7 | 785,547 | 33.1 | 10,049 | 1.3 | |||||||||||||||||
| Supply Group | 50,214 | 2.1 | 57,020 | 2.4 | (6,806 | ) | (11.9 | ) | |||||||||||||||
| Intercompany sales | (25,627 | ) | (1.1 | ) | (127,737 | ) | (5.4 | ) | 102,110 | 79.9 | |||||||||||||
| Net sales | $ | 2,432,400 | 100.0 | % | $ | 2,374,712 | 100.0 | % | $ | 57,688 | 2.4 | % | |||||||||||
Consolidated net sales increased by 2.4 percent or $57.7 million. RV sales were generally weak throughout the year, although sales of travel trailers for use as emergency shelter in the Gulf Coast region provided a boost to revenues and reduced the year-over-year decline to 2.9 percent. Manufactured housing revenues increased by 1.3 percent, also assisted by the sale of units intended for use as emergency shelter, partially offset by lower sales to former Company-owned retail stores, a number of which were closed following their sale. Intercompany sales to the retail housing business, prior to its sale in August 2005, are excluded from consolidated revenues. Revenues from both the retail and financial services businesses are presented separately as part of discontinued operations.
Consolidated Net Sales, Cost of Sales and Gross Profit
The following table presents consolidated net sales, cost of sales and gross profit for fiscal 2006 and 2005 (amounts in thousands):
| 2006 | 2005 | ||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Amount | % of Net Sales |
Amount | % of Net Sales |
Change | % Change | ||||||||||||||||||
| Net sales | $ | 2,432,400 | 100.0 | % | $ | 2,374,712 | 100.0 | % | $ | 57,688 | 2.4 | % | |||||||||||
| Cost of sales | 2,009,708 | 82.6 | 1,979,482 | 83.4 | 30,226 | 1.5 | |||||||||||||||||
| Gross profit | $ | 422,692 | 17.4 | % | $ | 395,230 | 16.6 | % | $ | 27,462 | 6.9 | % | |||||||||||
Gross profit margin increased to 17.4 percent of sales compared to 16.6 percent last year. A significant focus was placed on more effectively managing production schedules and improving plant efficiencies. The additional unit volume from the production of emergency shelter units also enabled plants to operate with higher capacity utilization, particularly those in the travel trailer business, where margins had previously been negatively impacted from producing lower volumes of a wide variety of unique products. Also, the prior year margins were impacted by inefficiencies associated with vacillating RV production rates during the second half of fiscal
2005 in order to align inventories and supply with weakening demand. Certain areas of our business continued to experience rising raw material costs as prices for oil, aluminum, copper and other commodities increased. Higher fuel prices also contributed to an increase in shipping costs.
Operating Expenses
The following table presents operating expenses for fiscal 2006 and 2005 (amounts in thousands):
| Fiscal Years Ended April | |||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2006 | 2005 | ||||||||||||||||||||||
| Amount | % of Net Sales |
Amount | % of Net Sales |
Change | % Change | ||||||||||||||||||
| Selling | $ | 62,092 | 2.5 | % | $ | 76,642 | 3.2 | % | $ | (14,550 | ) | (19.0 | )% | ||||||||||
| Warranty and service | 120,593 | 5.0 | 131,290 | 5.5 | (10,697 | ) | (8.1 | ) | |||||||||||||||
| General and administrative | 204,448 | 8.4 | 212,255 | 9.0 | (7,807 | ) | (3.7 | ) | |||||||||||||||
| Operating expenses | $ | 387,133 | 15.9 | % | $ | 420,187 | 17.7 | % | $ | (33,054 | ) | (7.9 | )% | ||||||||||
A restructuring of the housing sales organization contributed to a reduction in selling costs combined with lower overall expenditures on strategic ventures and marketing initiatives. Warranty expenses for both groups declined due to lower incurred warranty costs combined with lower reserves. Responsibility for service and warranty work was transitioned back to the manufactured housing and travel trailer plants during the year and this, combined with initiatives to manage quality issues, had a positive impact on costs in this area. General and administrative expenses decreased due to lower workers’ compensation costs, consulting costs and headcount reductions, partially offset by higher variable compensation costs.
Other Operating Expenses, net
Other operating expenses, net in fiscal 2006 consisted of impairment charges of $1.6 million and severance costs of $5.0 million, partially offset by net gains on sale of fixed assets of $0.5 million. Other operating expenses, net in fiscal 2005 consisted of litigation charges of $16.3 million, including charges related to a $14.6 million judgment in the dispute with Coleman, as well as impairment charges of $1.9 million and severance costs of $2.9 million, partially offset by net gains on sale of fixed assets of $2.5 million.
Other Income (Expense)
Other income (expense) improved by $3.5 million to $(24.2) million in fiscal 2006 when compared to the previous year. The change was attributable to costs of $2.7 million in the prior year related to transactions involving our trust preferred securities, as well as lower borrowings and higher invested balances at higher interest rates in the current year versus the prior year.