FORM 10-Q/A 	SECURITIES AND EXCHANGE COMMISSION 	WASHINGTON, DC 20549 	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) X 	OF THE SECURITIES EXCHANGE ACT OF 1934 	For the quarterly period ended January 25, 1998 	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) ______	OF THE SECURITIES EXCHANGE ACT OF 1934 	 	For the transition period from ___________ to ______ 	Commission File Number 1-7699 	FLEETWOOD ENTERPRISES, INC. 	(Exact name of registrant as specified in its charter) 	Delaware			 95-1948322 _______________________	__________________________ (State or other jurisdiction of 	(I.R.S. Employer incorporation or organization) Identification Number)	 3125 Myers Street, Riverside, California	92503-5527 ______________________________________________________________ (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code (909) 351-3500 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 	Yes	 X 	No _____ Indicate the number of shares outstanding of each of the issuer's classes of Common stock as of the close of the period covered by this report. Class				 Outstanding at January 25, 1998 _________________________	 __________________________________ Common stock, $1 par value		36,475,399 shares Preferred share purchase rights			-- 	 FLEEEWOOD ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (CONDENSED) (Amounts in thousands except per share data) (UNAUDITED) 13 13 39 39 Weeks Weeks Weeks Weeks Ended Ended Ended Ended Jan. 25, Jan. 26, Jan. 25, Jan. 26, 1998 1997 1998 1997 Sales $710,620 $627,961 $2,208,163 $2,127,986 Cost of products sold 571,940 516,137 1,784,634 1,728,746 -------- -------- ---------- --------- Gross profit 138,680 111,824 423,529 399,240 Operating expenses 106,607 90,559 297,932 292,370 -------- -------- ---------- --------- Operating income 32,073 21,265 125,597 106,870 Other income (expense): Investment income 3,425 2,151 8,298 10,205 Interest expense (903) (703) (2,677) (3,177) Other 69 (32) (348) (239) --------- --------- -------- ---------- 2,591 1,416 5,273 6,789 --------- --------- -------- ---------- Income from continuing operations before income taxes 34,664 22,681 130,870 113,659 Provision for income taxes (13,515) (8,902) (50,655) (44,776) -------- ------- -------- -------- Income from continuing operations 21,149 13,779 80,215 68,883 Income from discontinued operations: Income from operations of finance subsidiary (net of $511 for income taxes) -- -- -- 887 Gain on sale of finance subsidiary (net of $19,607 for income taxes) -- -- -- 33,891 ------- ------- -------- ------ -- -- -- 34,778 ------- ------- -------- ------ Net income $21,149 $13,779 $80,215 $103,661 ======= ======= ======== ======== Basic Diluted Basic Diluted Basic Diluted Basic Diluted Net income per Common share: Continuing operations $.58 $.57 $.39 $.38 $2.23 $2.19 $1.76 $1.72 Discontinued operations: Income from operations of finance subsidiary -- -- -- -- -- -- .02 .02 Gain on sale of finance subsidiary -- -- -- -- -- -- .87 .84 ----- ---- ----- ---- ----- ----- ----- ---- Total $.58 $.57 $.39 $.38 $2.23 $2.19 $2.65 $2.58 ==== ==== ==== ==== ==== ==== ===== ==== Dividends declared per share of Common stock outstanding $.17 $.16 $.51 $.48 ==== ===== ==== ==== Weighted average Common shares - basic 36,256 35,562 36,016 39,092 ====== ====== ====== ====== Weighted average Common shares - diluted 36,884 36,556 36,587 40,103 ====== ====== ====== ====== See accompanying notes to financial statements. 	FLEETWOOD ENTERPRISES, INC. AND SUBSIDIARIES 	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 	JANUARY 25, 1998 1)	Reference to Annual Report Reference is made to the Notes to Consolidated Financial Statements included in the Company's Form 10-K annual report for the year ended April 27, 1997. 2)	Industry Segment Information 	Information with respect to industry segments for the periods ending January 25, 1998 and January 26, 1997 is shown below (amounts in thousands): 13 Weeks 13 Weeks 39 Weeks 39 Weeks Ended Ended Ended Ended Jan. 25, Jan. 26, Jan. 25, Jan. 26, 1998 1997 1998 1997 OPERATING REVENUES: Manufactured housing $354,872 $324,449 $1,112,173 $1,087,091 Recreational vehicles 345,293	 293,721 1,062,640 1,000,410 Supply operations 10,455 9,791 33,350 40,485 --------- -------- ---------- --------- $710,620 $627,961 $2,208,163 $2,127,986 ========= ======== ========== ========== OPERATING INCOME: Manufactured housing $18,159	 $8,355 $59,298 $62,363 Recreational vehicle 13,519	 14,142 47,576 52,955 Supply operations 4,037 (390)	 11,289 1,081 Corporate and other* (3,642) (842) 7,434 (9,529) -------- ------ -------- ------- $32,073 $21,265 $125,597 $106,870 ======== ======== ======== ======== * Including adjustments and eliminations. 	 3)	Basic and Diluted Earnings Per Share The reconciliations for income (numerator) and shares (denominator) between Basic EPS and Diluted EPS are shown below (amounts and shares in thousands): Quarter Ended January 25, 1998 Year to Date January 25, 1998 Per- Per- Income Shares Share Income Shares Share (Numerator)(Denominator)Amount (Numerator)(Denominator)Amount Basic EPS Income from continuing operations available to Common stock- holders $21,149	 36,256 $0.58 $80,215	 36,016 $2.23 Effect of Dilutive Securities Stock options --	 628	 -- 571 Diluted EPS Income available to Common stockholders plus assumed con- versions $21,149 36,884 $0.57	$80,215	 36,587 $2.19 ============================= =========================== Quarter Ended January 25, 1998 Year to Date January 25, 1998 Per- Per- Income Shares Share Income Shares Share (Numerator)(Denominator)Amount (Numerator)(Denominator)Amount Basic EPS Income from continuing operations available to Common stock- holders $13,779 35,562 $0.39 $68,883 39,092 $1.76 Effect of Dilutive Securities Stock options --	 994 -- 1,011 Diluted EPS Income available to Common stockholders plus assumed con- versions $13,779 36,556	 $0.38 $68,883 40,103 $1.72 ============================= ============================ All stock options outstanding are dilutive as of January 25, 1998; therefore, there is no anti-dilutive effect. 4) Change in Estimate of Insurance Reserves In July 1997, the Company recorded a $19.3 million change in estimate in its products liability reserves and concurrently paid a $3.1 million premium to an outside insurance company to lower its self-insured retention (i.e., deductible) on its products liability insurance. The net effect of these transactions was an addition to operating income of $16.2 million ($10.4 million after tax or 28 cents per share). FLEETWOOD ENTERPRISES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Amounts in thousands) The following is an analysis of changes in key items included in the consolidated statements of income for the 13-week and 39-week periods ended January 25, 1998. The amounts shown below apply only to continuing operations. 13 Weeks Ended 39 Weeks Ended January 25, 1998 January 25, 1998 ---------------- ---------------- Increase % Increase % 	 (Decrease) Change (Decrease) Change -------- ------ -------- ----- Sales $82,659 13.2% $80,177 3.8% Cost of products sold 55,803 10.8 55,888 3.2 --------- ----- ------- ---- Gross profit 26,856 24.0 24,289 6.1 Selling expenses 8,742 20.4 18,149 13.9 General and administrative expenses 7,306 15.3 (12,587) (7.8) ------- ---- -------- ----- Operating expenses 16,048 17.7 5,562 1.9 ------- ---- ------- ---- Operating income 10,808 50.8 18,727 17.5 Other income (expense) 1,175 83.0 (1,516) (22.3) Income before taxes 11,983 52.8 17,211 15.1 Provision for income taxes 4,613 51.8 5,879 13.1 Net income $7,370 53.5% $11,332 16.5% ====== ==== ======= ==== Current Quarter Compared to Same Quarter Last Year Net income for the third quarter ended January 25, 1998 increased 53 percent to a record $21.1 million or 57 cents per share on a diluted basis. This compares with $13.8 million or 38 cents per share for the similar period last year. The improved results were mainly driven by a rebound in manufactured housing profits. Consolidated sales for the third quarter rose 13 percent to a record $710.6 million versus $628.0 million for last year's comparable period. Sales gains were recorded for both manufactured housing and recreational vehicles. Manufactured housing sales reached a new high for the third quarter, increasing nine percent to $354.9 million on a five percent rise in volume to 15,368 units. The continuing growth in sales of multi- section homes resulted in an eight percent gain in manufactured housing sections. Multi-section homes represented nearly 58 percent of homes sold in the third quarter, up from 54 percent a year ago. Housing group sales represented 50 percent of Company revenues compared to 52 percent for the similar period a year ago. Recreational vehicle sales were up 18 percent to $345.3 million, an all-time high for the January quarter, compared to last year's $293.7 million, as all RV segments posted record third quarter sales. Motor home revenues of $211.7 million were up 20 percent on an 11 percent increase in volume to 3,055 units, primarily due to higher sales of upscale Class A products. Travel trailer sales rose 13 percent to $107.8 million, while unit shipments increased 14 percent to 7,388. Third quarter folding trailer sales increased 18 percent to $25.8 million on a three percent rise in unit volume to 5,018. Recreational vehicle sales accounted for 49 percent of total Company revenues, up from 47 percent last year. The Company's supply group contributed third quarter revenues of $10.4 million compared to $9.8 million a year ago. Gross profit increased as a percentage of sales from 17.8 percent to 19.5 percent, largely as a result of improved manufactured housing margins. Housing margins benefited from raw material cost reductions and selective increases in product selling prices. Operating expenses increased 18 percent to $106.6 million, and rose as a percentage of sales from 14.4 percent to 15.0 percent. Selling expenses rose 20 percent to $51.7 million mainly due to higher advertising and product warranty costs. As a percentage of sales, selling expenses rose from 6.8 percent to 7.3 percent. General and administrative expenses were up 15 percent to $54.9 million, and rose as a percentage of sales from 7.6 percent to 7.7 percent. The increase was largely the result of higher compensation and benefit costs, most of which was related to management incentive compensation stemming from improved profits. Non-operating income of $2.6 million was 83 percent ahead of last year's $1.4 million, mainly due to a $1.3 million increase in investment income earned on higher invested balances. Current Year-to-Date Compared to Same Period Last Year Earnings from continuing operations for the nine-month period ending January 25, 1998 rose 16 percent to $80.2 million or $2.19 per share on a diluted basis. This compares to $68.9 million and $1.72 per share for the first nine months of fiscal 1997. As explained in a following paragraph (see Change in Estimate of Insurance Reserves), current year earnings for nine months included a non-recurring gain of $10.4 million or 28 cents per share recognized in the first quarter from a significant insurance transaction. Last year's nine- month period included income from discontinued operations of $34.8 million or 86 cents per share which, when added to income from continuing operations, resulted in total earnings of $103.7 million or $2.58 per share on a diluted basis. Income from discontinued operations included a gain of $33.9 million or 84 cents per share on the sale of the Company's RV finance subsidiary. For the first nine months of fiscal 1998, sales rose four percent to $2.21 billion compared to $2.13 billion for the similar period last year, with both manufactured housing and recreational vehicles recording revenue increases. Nine-month housing sales were up two percent to a record $1.11 billion, despite a two percent unit volume decline to 48,975 homes sold. A heavier mix of multi-section homes, which rose from 49 percent to 56 percent of sales for the nine months, resulted in a three percent gain in housing sections. Housing revenues represented 50 percent of total Company sales compared to 51 percent last year. RV sales for the first nine months of fiscal 1998 rose six percent to $1.06 billion compared to $1.0 billion a year ago. Motor home sales increased three percent to a record $634.4 million, despite a nine percent decline in unit shipments to 9,516, reflecting the continuing shift to higher-priced Class A products. Travel trailer sales were up eight percent to $349.8 million on a five percent rise in unit volume to 24,261 units. Folding trailers rose a strong 29 percent to a record $78.5 million, as unit shipments rose 16 percent to 15,210. RV revenues increased from 47 percent of total Company revenues a year ago to 48 percent in the current year. Nine-month revenues from supply operations were $33.4 million versus $40.5 million for the comparable period last year. Gross profit margin for the first nine months of fiscal 1998 rose to 19.2 percent from 18.8 percent last year. Improved housing margins more than offset the effect of lower RV margins, which were impacted by higher motor home production costs. Operating expenses, which include the effect of the change in estimate of insurance reserves, rose two percent to $297.9 million, but declined as a percentage of sales from 13.7 percent to 13.5 percent. As a percentage of sales, selling expenses were up from 6.1 percent a year ago to 6.7 percent, while general and administrative expenses fell from 7.6 percent to 6.8 percent this year. Selling expenses increased 14 percent to $148.6 million, primarily due to increased sales promotion and advertising efforts and higher costs for product warranties and service. General and administrative expenses were down eight percent to $149.3 million. Higher management incentive compensation which is directly related to the rise in profits, was more than offset by the effect of the change in estimate of insurance reserves mentioned previously. Non-operating income of $5.3 million was off 22 percent from last year's similar period. Investment income for the nine months was down 19 percent to $8.3 million, primarily reflecting higher cash balances available for investment in the early part of the prior year, largely as a result of the sale of Fleetwood Credit Corp. The effective tax rate for the first nine months of fiscal 1998 was 38.7 percent, down from 39.4 percent last year. Change in Estimate of Insurance Reserves The Company self insures its primary layer of products liability risk. Products liability reserves are based upon claims projections from an independent actuarial study. There can be significant variability in claims experience from year to year, and there is typically a long loss development period for products cases. Accordingly, actuarial projections are updated annually to reflect current loss development trends, which results in frequent adjustments to reserves for prior years' cases. Because of the variability and long loss development of products liability claims, the Company actuary has consistently followed conservative reserving practices. In July 1997, after several years of favorable claims experience, the Company was able to lower its self-insured retention (i.e., deductible) from $47.5 million to $18.7 million (of which losses of $9.3 million have been paid) for a five-year underwriting period between 1991 and 1995 by entering into a commercial insurance contract. Prior to entering into the insurance contract, the Company carefully reviewed the economics of the transaction and its implications as to current reserve levels. The Company concluded that, based upon recent favorable loss development trends (a factor that was clearly confirmed by the proposed insurance arrangement), a change in estimate of reserves was appropriate. The outcome was a $19.3 million adjustment to estimated reserves, offset by a $3.1 million premium for the outside insurance. This resulted in an addition to operating income of $16.2 million before taxes, and an increase to after-tax earnings of $10.4 million or 28 cents per share. Liquidity and Capital Resources The Company generally relies upon internally generated cash flows to satisfy working capital needs and to fund capital expenditures. Cash generated from operations improved to $75.6 million compared to $45.4 million last year. Last year's cash flows included $132.2 million, net of income taxes, received from the sale of Fleetwood Credit Corp. These proceeds along with the sale of investment securities yielded net cash from investing activities of $291.7 million last year compared to net cash used in the current year of $92.9 million. During the first half of last year, the Company purchased approximately 22.5 percent of its outstanding Common stock at a cost of $311.7 million. Also, $25.0 million in long term debt was retired last year. Cash outlays in the current year included $18.4 million in dividends to shareholders and $19.4 million for capital expenditures. This compares with $18.7 million and $30.8 million, respectively, last year. Subsequent to January 25, 1998, the Company purchased all of the shares of Common stock owned by its retiring Chairman of the Board and founder. The approximate 5.2 million shares were acquired at a cost of $176.9 million. On February 10, 1998, a $287.5 million convertible preferred stock offering was completed to fund the share repurchase. Proceeds from the preferred stock offering not required for the share repurchase are expected to be used to fund the Company's planned entry into the manufactured housing retail business. (See Item 5 included in this Form 10-Q for information regarding a proposed acquisition by the Company.) Year 2000 Project The Company is dependent on a cluster of centralized computers to provide data in support of vital company-wide operational and accounting functions. Many of the computer routines used to generate this data were programmed in-house, following the common practice of using only two digits to designate a year. As a consequence, as we approach the year 2000, programs with date-related logic will not be able to distinguish between the years 1900 and 2000, potentially causing software and hardware to fail, generate erroneous calculations or present information in an unusable form. In recognition of this potential, the Company launched a "Year 2000" conversion project in February 1996 to correct and fully test all offending computer code by mid-1998. At this date, the project is progressing as planned and is expected to be completed on schedule. Given these efforts, management does not anticipate any appreciable impact on company operations consequent to the use of the Company's computer systems in the new millennium. The estimated amount the Company plans to spend on the year 2000 project, which is being expensed as incurred, will not have a material effect on results of operations, liquidity and capital resources. 	SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. 	 FLEETWOOD ENTERPRISES, INC. 	 _______________________________ 	 Paul M. Bingham 	 Senior Vice President - Finance 	 and Chief Financial Officer June 24, 1998