FTHR Featherlite

Featherlite, Inc. (Nasdaq:FTHR), a leading manufacturer and marketer of specialty aluminum trailers, transporters and luxury motorcoaches, today reported record net income of $1.5 million, or 13 cents per diluted share, on net sales of $54.1 million for the second quarter ended June 30, 2006. Net income increased 43.1 percent in the second quarter of 2006, up from $1.1 million, or 9 cents per diluted share, in the same period in 2005. On a consolidated basis, higher second quarter net income in 2006 was primarily the result of increased sales and gross margin improvements in the trailer division compared to 2005. Net income for the first six months of 2006 was $2.9 million compared with $2.5 million for the same period in 2005. On a diluted per share basis, the Company earned 25 cents in the first six months of fiscal 2006 compared to 22 cents for the same period in 2005. Second quarter net sales in 2006 rose by $2.0 million, or 3.8 percent, over the same period last year. Trailer segment sales increased 25 percent in the second quarter of 2006 over the same period last year. This increase resulted from greater trailer unit sales in nearly all product categories as well as a significant improvement in average revenue per unit as a result of the favorable impact of the price increases and surcharges initiated in 2006 to offset commodity price increases. Luxury coach segment sales decreased by 37.6 percent in the second quarter of 2006 over the same quarter last year with unit sales down in both new and pre-owned coaches. Declines in coach unit sales were partially offset by higher net revenues per unit sold in both new and pre-owned categories. Net sales of $114.5 for the first six months of 2006 were up three percent from $110.7 million reported in the same period last year as increased trailers sales of 14.8 percent were substantially offset by a 17.5 percent decrease in motorcoach sales. "Despite softness in the luxury coach segment, Featherlite posted its strongest second quarter earnings ever," President and CEO Conrad Clement said. "We remain cautiously optimistic about sales through the remainder of 2006. Though the trailer segment backlog is at $14.2 million compared with $16.3 million at the same period last year, we are pleased that order levels have remained strong throughout 2006. Motorcoach segment backlog has declined from $9.2 million at June 30, 2005 to $2.3 million at December 31, 2005 and $1.7 million at June 30, 2006. We expect demand for coaches in the third and fourth quarters of 2006 to improve as uncertainties related to Company's process of exploring strategic alternatives have been removed, as discussed below. "This spring the Company launched the newest and most exclusive luxury coach edition in the industry, the Featherlite Vantare Platinum Plus. The early media attention has been the strongest of any we have received for a coach product launch, and we look forward to introducing it to audiences first hand at shows and events this summer, fall and beyond," Clement said. As previously announced, the Company has signed a definitive agreement to merge with a subsidiary of Universal Trailer Holdings Corp. Under the terms of the agreement, a subsidiary of Universal Trailer will merge with and into the Company, the Company will become a wholly-owned subsidiary of Universal Trailer, and Company shareholders will receive $6.50 in cash for each outstanding share of Company common stock. The aggregate consideration to be paid to Company shareholders and option and warrant holders is approximately $79.5 million, and Universal Trailer will assume approximately $29.1 million in debt obligations. In addition, as previously announced, Featherlite Coaches, a newly-formed company controlled by Conrad Clement, Tracy Clement, Featherlite's Executive Vice President, and Bulk Resources, Inc., has entered into a definitive agreement with Universal Trailer to purchase the assets and assume substantially all of the liabilities of the Company's motorcoach division immediately following the closing of the merger. The Company is not a party to this agreement and does not own any equity of Featherlite Coaches. The merger is expected to be completed by October 31, 2006 and is subject to various conditions, including the continued effectiveness of the agreement between Featherlite Coaches and Universal Trailer. The Company expects to announce a special meeting of the Company's shareholders following preparation and filing of proxy materials with the Securities and Exchange Commission. -0- *T Featherlite, Inc. Condensed Balance Sheets (Unaudited) (In thousands) June 30, Dec. 31, ASSETS 2006 2005 --------- --------- Current assets Cash $140 $91 Receivables 9,249 7,178 Refundable income taxes 337 337 Inventories 59,695 55,714 Leased promotional trailers 1,496 1,550 Prepaid expenses 1,083 1,820 Deferred tax asset 1,329 1,329 --------- --------- Total current assets 73,329 68,019 Property and equipment,net 16,320 16,583 Other assets 3,945 3,199 --------- --------- $93,594 $87,801 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Wholesale financing and other notes payable $19,569 $18,923 Current maturities of long-term debt 1,868 1,791 Checks issued not yet presented 4,399 4,419 Accounts payable 5,613 4,384 Motorcoach shell costs payable 6,436 3,142 Accrued liabilities 9,980 8,194 Customer deposits 1,536 2,832 --------- --------- Total current liabilities 49,401 43,685 Bank line of credit 183 2,418 Other long-term debt, net of current maturities 9,531 10,168 Deferred tax liabilities 1,259 1,259 Other long-term liabilities 28 35 Shareholders' equity 33,192 30,236 --------- --------- $93,594 $87,801 ========= ========= Featherlite, Inc Condensed Statements of Income (Unaudited) (In Thousands, except for per share data) Three months Ended Six months Ended June 30, June 30, ------------------ ------------------- 2006 2005 2006 2005 --------- -------- --------- --------- Net Sales $54,096 $52,084 $114,529 $110,671 Cost of Sales 44,581 44,159 95,736 92,994 --------- -------- --------- --------- Gross profit 9,515 7,925 18,793 17,677 Selling and administrative expenses 6,366 5,510 12,783 12,291 --------- -------- --------- --------- Income from operations 3,149 2,415 6,010 5,386 Other income(expense) Interest (662) (704) (1,307) (1,335) Other, net 36 13 71 41 --------- -------- --------- --------- Total other expense (626) (691) (1,236) (1,294) --------- -------- --------- --------- Income before taxes 2,523 1,724 4,774 4,092 Minority interest in subsidiary income - 11 - (1) Provision for income taxes (984) (660) (1,862) (1,555) --------- -------- --------- --------- Net income $1,539 $1,075 $2,912 $2,536 ========= ======== ========= ========= Net income per share- Basic $0.14 $0.10 $0.26 $0.23 --------- -------- --------- --------- Diluted $0.13 $0.09 $0.25 $0.22 --------- -------- --------- --------- Weighted average shares outstanding - Basic 11,060 10,930 11,050 10,909 --------- -------- --------- --------- Diluted 11,697 11,627 11,681 11,532 --------- -------- --------- --------- *T Important Additional Information will be filed with the SEC The Company plans to file with the SEC and mail to shareholders a proxy statement in connection with the merger referred to above. The proxy statement will contain important information about the Company, the merger and related matters. Shareholders are urged to read the proxy statement, and any other relevant documents filed with the SEC, carefully when they become available because they will contain important information about the companies and the proposed transaction. The Company, the special committee of its board of directors, and the Company's officers and directors may be deemed to be participants in the solicitation of proxies from the shareholders of the Company with respect to the transactions contemplated by the merger agreement referred to above. Information regarding the Company's directors and executive officers is contained in the Company's annual report on Form 10-K for the year ended December 31, 2005, which is filed with the SEC. Shareholders will be able to obtain free copies of the proxy statement, Form 10-K and other documents filed by the Company with the SEC through the website maintained by the SEC at www.sec.gov and through the Company's website at www.fthr.com. About Featherlite With more that 75 percent of its business in the leisure, recreation and entertainment categories, Featherlite(R), Inc. has highly diversified product lines offering hundreds of standard model and custom-designed aluminum specialty trailers, specialized transporters, mobile marketing trailers and luxury motorcoaches. For more information about the Company, please visit www.fthr.com. Safe Harbor Statement under the Private Securities Litigation Reform Act: Certain statements in this release are forward-looking in nature and relate to trends and events that may affect the Company's future financial position and operating results. Any statements that are not based upon historical facts, including the outcome of events that have not yet occurred and our expectations for future performance, are forward-looking statements. Statements in this release regarding expectations of the importance of sales leads on future sales levels and the effectiveness of price increases and surcharges on margins are forward-looking statements. In general, words such as "believe," "estimate," "expect," "intend," "may," "could," "will," "plan," "anticipate," and similar words and expressions identify forward-looking statements. These statements speak only as of the date of this release, are based on current expectations, are inherently uncertain, are subject to risks, and should be viewed with caution. Actual results and experience may differ materially from the forward-looking statements as a result of many factors, including but not limited to: the health of the economy and disposable income for recreational and leisure activities, product demand and acceptance of products in each segment of the Company's markets, the need for and impact of product sales price increases, fluctuations in the price of aluminum, changes in our product sales mixes, competition, facilities utilization, the availability of additional capital as may be required to finance any future net liquidity deficiency, and certain other unanticipated events and conditions. In addition, the following factors relating to the proposed merger could cause actual results to differ materially from those described in the forward-looking statements: the risk that the Featherlite and Universal Trailer businesses will not be integrated successfully; costs related to the proposed merger; failure of the Company's shareholders to approve the proposed merger; and other economic, business, competitive and/or regulatory factors affecting the Company's and Universal Trailer's businesses generally, including those set forth in the Company's filings with the SEC, including its Annual Report on Form 10-K for the most recent fiscal year, its most recent Quarterly Report on Form 10-Q, and its Current Reports on Form 8-K. The risks and uncertainties listed are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business operations. The Company makes no commitment to update any forward-looking statement or to disclose any facts, events, or circumstances after the date hereof that may affect the accuracy of any forward-looking statement, other than as required by law.