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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q

Commission File Number 1-7699

FLEETWOOD ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)

        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 ý    No o

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule12b-2 of the Exchange Act). Yes ý    No o

        Indicate the number of shares outstanding of each of the issuer's classes of Common stock as of the latest practicable date.

PART I    FINANCIAL INFORMATION

Independent Accountants' Review Report

To the Board of Directors and Shareholders
Fleetwood Enterprises, Inc.

        We have reviewed the accompanying condensed consolidated balance sheet and the related condensed consolidated statements of operations, changes in shareholders' equity, and cash flows of Fleetwood Enterprises, Inc. as of October 27, 2002, and for the thirteen-week and twenty-six week periods ended October 27, 2002. These financial statements are the responsibility of the Company's management. The condensed consolidated statements of operations and cash flows of Fleetwood Enterprises, Inc. for the thirteen-week and twenty-six week periods ended October 28, 2001 were reviewed by other accountants whose report dated December 12, 2001 stated that they were not aware of any material modifications that should be made to those statements for them to be in conformity with accounting principles generally accepted in the United States.

        We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States, which will be performed for the full year with the objective of expressing an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

        Based on our review, we are not aware of any material modifications that should be made to the accompanying condensed financial statements at October 27, 2002, and for the thirteen-week and twenty-six week periods then ended for them to be in conformity with accounting principles generally accepted in the United States.

        We have previously audited, in accordance with auditing standards generally accepted in the United States, the consolidated balance sheet of Fleetwood Enterprises, Inc. as of April 28, 2002, and the related consolidated statements of operations, changes in shareholders' equity, and cash flows for the year then ended (not presented herein), and in our report dated July 12, 2002, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of April 28, 2002, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

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FLEETWOOD ENTERPRISES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)

See accompanying notes to condensed consolidated financial statements.

2

FLEETWOOD ENTERPRISES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands except per share data)

(Unaudited)

See accompanying notes to condensed consolidated financial statements.

3

FLEETWOOD ENTERPRISES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)

See accompanying notes to condensed consolidated financial statements.

4

FLEETWOOD ENTERPRISES, INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES
IN SHAREHOLDERS' EQUITY

(Amounts in thousands)

(Unaudited)

See accompanying notes to condensed consolidated financial statements.

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FLEETWOOD ENTERPRISES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

October 27, 2002

(Unaudited)

1)    Basis of Presentation    

        Fleetwood Enterprises, Inc. (the "Company") is the nation's largest manufacturer of recreational vehicles, including motor homes, travel trailers, folding trailers and slide-in-truck campers, and one of the nation's largest producers and retailers of manufactured housing. The Company conducts manufacturing in 16 states within the U.S., and to a much lesser extent in Canada. In addition, it operates five supply companies, which provide components for the manufactured housing and recreational vehicle operations, while also generating outside sales. The accompanying condensed financial statements consolidate the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated. Certain amounts previously reported have been reclassified to conform to the fiscal 2003 presentation.

        The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the accompanying financial statements. Actual results could differ from those estimates. Significant estimates made in preparing these financial statements include the reserve for excess and obsolete inventory, accrued warranty costs, workers' compensation reserves, and accrued postretirement health care benefits.

        In the opinion of the Company's management, the accompanying condensed consolidated financial statements include all normal recurring adjustments necessary for a fair presentation of the financial position at October 27, 2002, and results of operations for the thirteen and twenty-six week periods ended October 27, 2002, and October 28, 2001. The condensed consolidated financial statements do not include footnotes and certain financial information normally presented annually under generally accepted accounting principles and, therefore, should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended April 28, 2002. Results of operations for the thirteen and twenty-six week periods ended October 27, 2002, are not necessarily indicative of results to be expected for the full year.

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2)    Industry Segment Information    

        Information with respect to industry segments for the periods ended October 27, 2002 and October 28, 2001 is shown below (amounts in thousands):

3)    Earnings Per Share    

        Basic earnings per share are computed by dividing income available to Common shareholders by the weighted average number of Common shares outstanding. In the prior fiscal year, the effect of stock options and preferred securities was anti-dilutive and was, therefore, not considered in determining diluted earnings (loss) per share. Although there are a small number of dilutive stock options in the current fiscal year, there is no effect on earnings per share, and the effect of preferred securities remains anti-dilutive.

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The table below shows the components of the calculations for both basic and diluted earnings per share (amounts in thousands):

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4)    Inventory Valuation    

        Inventories are valued at the lower of cost (first-in, first-out) or market. Manufacturing cost includes materials, labor and manufacturing overhead. Retail finished goods are valued at cost less intercompany manufacturing profit. Inventories consist of the following:

5)    Cumulative Effect of Accounting Change    

        In the first quarter of fiscal year 2002, we adopted SFAS No. 142, "Goodwill and Other Intangible Assets," which requires that goodwill not be amortized but instead be tested at least annually for impairment and expensed against earnings when the implied fair value of a reporting unit, including goodwill, is less than its carrying amount. As a result of our review of two reporting units, we determined, with the assistance of a third party appraiser, that the remaining goodwill on the retail housing reporting unit was fully impaired as of April 30, 2001. Since the determination was not made until the fourth quarter of fiscal year 2002, the first quarter's reported results were restated to reflect the goodwill impairment of $80.6 million or $2.46 per diluted share as a cumulative effect of an accounting change. The net loss prior to restatement was $23.5 million or 72 cents per diluted share for the six months ended October 28, 2001. The restated net loss was $104.1 million or $3.18 per diluted share.

6)    Other Comprehensive Income (Loss)    

        The difference between net income (loss) and total comprehensive income (loss) is shown below (amounts in thousands):

7)    New Accounting Pronouncements    

        In August 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS 144 supersedes FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a

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Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions," for the disposal of a segment of a business (as previously defined in that opinion). SFAS 144 requires that one accounting model be used for long-lived assets to be disposed of by sale, whether previously held and used or newly acquired, and broadens the presentation of discontinued operations to include more disposal transactions than were included under the previous standards. Effective April 29, 2002, the Company adopted SFAS 144, which did not have an effect on its consolidated results of operations.

        In July 2002, the Financial Accounting Standards Board issued SFAS No. 146 "Accounting for Costs Associated with Exit or Disposal Activities." SFAS 146 nullifies EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." The principal difference between SFAS 146 and Issue 94-3 relates to SFAS 146's requirements for recognition of a liability for a cost associated with an exit or disposal activity. SFAS 146 requires that a liability for cost associated with an exit or disposal activity be recognized when the liability is incurred. Under Issue 94-3, a liability for an exit cost was recognized at the date of an entity's commitment to an exit plan. The new statement is effective for exit or disposal activities that are initiated after December 31, 2002, with early application encouraged. We will adopt this new standard at the beginning of our third fiscal quarter.

8)    Repurchase Commitments    

        As is customary in the manufactured housing and recreational vehicle industries, we are contingently liable under the terms of repurchase agreements with many of the financial institutions that provide inventory financing for dealers of the Company's products. These agreements generally provide that, in the event of a default by a dealer in its obligation to these credit sources, we will repurchase product. With most repurchase agreements our obligation ceases when the amount for which we are contingently liable to the lending institution has been outstanding for more than 12 or 18 months depending on the terms of the agreement. The contingent liability under these agreements approximates the outstanding principal balance owed by the dealer for units subject to the repurchase agreement less any scheduled principal payments waived by the lender. The risk of loss is reduced by the resale value of any products that are subject to repurchase, and is spread over numerous dealers and financial institutions. Thus, while the aggregate contingent liability may be material, losses under these agreements have not been significant in the past. Through the first half of fiscal year 2003, we have repurchased $2.0 million of product compared to $6.4 million for the same period in the prior year and losses related to those repurchases were $373,000 and $532,000, respectively.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Preliminary Note Regarding Forward-Looking Statements

        This Quarterly Report on Form 10-Q contains statements which may constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934. Forward-looking statements regarding future events and the future performance of the Company involve risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties include, without limitation, the following items:

•

the cyclical nature of both the manufactured housing and recreational vehicle industries;



•

ongoing weakness in the manufactured housing market;



•

the potential impact on demand for our products as a result of declining consumer confidence;



•

continued acceptance of the Company's products;



•

the availability of manufactured housing wholesale and retail financing in the future;



•

changes in retail inventory levels in the manufactured housing and recreational vehicle industries;



•

competitive pricing pressures;



•

the ability to attract and retain quality dealers, executive officers and other personnel; and



•

the ability to obtain the financing we need in order to execute our business strategy.

        Although management believes that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this report. Fleetwood undertakes no obligation to publicly release the results of any revisions to these forward-looking statements that may arise from changing circumstances or unanticipated events. Additionally, other risks and uncertainties are described in our Annual Report on Form 10-K for the fiscal year ended April 28, 2002 filed with the Securities and Exchange Commission, under "Item 1—Business," including the section therein entitled "Risks Relating to Our Business," and "Item 7—Management's Discussion and Analysis of Results of Operations and Financial Condition," including the section therein entitled "Business Outlook."

Critical Accounting Policies

        Our financial statements are prepared in accordance with accounting principles generally accepted in the United States. This requires us to make estimates and assumptions that affect the amounts reported in the financial statements and notes. We evaluate these estimates and assumptions on an ongoing basis and use historical experience factors and various other assumptions that we believe are reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from these estimates under different assumptions or conditions.

        The following is a list of the accounting policies that we believe reflect our more significant judgments and estimates, and that could potentially result in materially different results under different assumptions and conditions.

Revenue Recognition

        We recognize revenue in accordance with SEC Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements (SAB 101), as amended by SAB 101A and 101B.

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        Revenue for manufacturing operations is generally recorded when all of the following conditions have been met:

1.

an order for a product has been received from a dealer;



2.

written or verbal approval for payment has been received from the dealer's flooring institution;



3.

a common carrier signs the delivery ticket accepting responsibility for the product as agent for the dealer; and



4.

product is removed from Fleetwood's property for delivery to the dealer who placed the order.

        Most manufacturing sales are made for cash, with most dealers financing their purchases under flooring arrangements with banks or finance companies. Products are not sold on consignment; dealers do not have the right to return products; and dealers are typically responsible for interest costs to floor-plan lenders. On average, we receive payments from floor-plan lenders on products sold to independent dealers within 15 days of the invoice date, i.e. the date product is shipped.

        To adopt the provisions of SAB 101, in fiscal 2001 we changed our retail housing revenue recognition policy. For retail sales from Company-owned retail stores, sales revenue is recognized when the home has been delivered, set up and accepted by the consumer, title has been transferred and funds have been received either from the finance company or the homebuyer. Prior to fiscal 2001, we followed the industry practice of recording credit retail sales when a written contract and down payment were secured. We recorded the cumulative effect of this accounting change on the amount of retained earnings at the beginning of fiscal year 2001 as a charge against net income in the second quarter of fiscal 2001. The after-tax amount of the cumulative effect was $11.2 million, or 34 cents per diluted share.

Warranty

        Fleetwood provides customers of our products with a warranty covering defects in material or workmanship for periods ranging from one to two years, with longer warranties on certain structural components. We record a liability based on our best estimate of the amounts necessary to settle future and existing claims on products sold as of the balance sheet date. Factors we use in estimating the warranty liability include a history of units sold to customers, the average cost incurred to repair a unit and a profile of the distribution of warranty expenditures over the warranty period. A significant increase in dealer shop rates, the cost of parts or the frequency of claims could have a material adverse impact on our operating results for the period or periods in which such claims or additional costs materialize.

Insurance Reserves

        Generally, we are self-insured for workers' compensation and product liability and personal injury insurance. Under these plans, liabilities are recognized for claims incurred, including those incurred but not recorded, changes in the reserves related to prior claims and an administration fee. At the time a claim is filed, a liability is estimated to settle the claim. The liability for workers' compensation claims is determined by state statute. Factors considered in establishing the estimated liability for product liability and personal injury claims are the nature of the claim, the geographical region in which the claim originated, loss history, severity of the claim, the professional judgment of our legal counsel, and inflation. Any material change in the aforementioned factors could have an adverse impact on our operating results. We maintain excess liability insurance with outside insurance carriers to minimize our risks related to catastrophic claims.

Deferred Taxes

        We consider future taxable income and prudent and feasible tax planning strategies in assessing the need for a valuation allowance. If we determine that we will not realize all or part of our net deferred tax

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assets in the future, we will make an adjustment to the deferred tax assets, which will be charged to income tax expense in the period of such determination.

Legal Proceedings

        We are currently involved in certain legal proceedings involving primarily former employees and products. Because of the uncertainties related to the outcome of the litigation and range of loss on cases other than breach of warranty, we are unable to make a reasonable estimate of the liability that could result from an unfavorable outcome. In other cases, including products liability (discussed above) and personal injury cases, we prepare estimates based on historical experience, the professional judgment of our legal counsel, and other assumptions that we believe are reasonable. As additional information becomes available, we reassess the potential liability related to our pending litigation and revise our estimates. Such revisions and any actual liability that greatly exceeds our estimates could materially impact our results of operations and financial position.

Repurchase Commitments

        Producers of recreational vehicles and manufactured housing customarily enter into repurchase agreements with lending institutions that provide wholesale floor plan financing to independent dealers. These agreements generally provide that, in the event of a default by a dealer in its obligation to these credit sources, we will repurchase product. With most repurchase agreements our obligation ceases when the amount for which we are contingently liable to the lending institution has been outstanding for more than 12 or 18 months depending on the terms of the agreement. The contingent liability under these agreements approximates the outstanding principal balance owed by the dealer for units subject to the repurchase agreement less any scheduled principal payments waived by the lender. The risk of loss is reduced by the potential resale value of any products that are subject to repurchase, and is spread over numerous dealers and financial institutions. Past losses under these agreements have not been significant. In the past three fiscal years we have had the following repurchase activity:

        The number of dealers, lack of dealer concentration and geographical distribution of dealers mitigate the risk of repurchase.

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Results of Operations

        The following is an analysis of changes in key items included in the condensed consolidated statements of operations for the thirteen and twenty-six week periods ended October 27, 2002, compared to the thirteen and twenty-six week periods ended October 28, 2001.

Current Quarter Compared to Same Quarter Last Year

Consolidated Results:

        We earned net income of $4.6 million or 13 cents per diluted share in the second quarter of fiscal 2003 compared with a loss of $12.3 million or 38 cents per diluted share last year. The net income in the current period, after nine straight quarters of losses, resulted from a turnaround in the recreational vehicle segment. Income from RV operations swung from a loss of $10.1 million in the prior year to an operating profit of $17.0 million for the current October quarter. Housing's manufacturing segment earned $4.4 million this year compared to $16.6 million in the prior year. All manufacturing segments were profitable in the second quarter. Partially offsetting the income from manufacturing operations was an $8.6 million loss from housing retail.

        Consolidated revenues increased $50.4 million or 9 percent to $641.1 million compared with $590.8 million in last year's second quarter. All recreational vehicle business segments experienced double-digit percentage increases in sales due to improved market conditions, while housing revenues declined as a result of further deterioration in an already restrictive financing environment.

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        Gross margin declined from 20.6 percent to 20.0 percent of sales mainly due to a shift in product mix towards RVs, which have lower gross margins. Gross profit for the RV segment increased from 13.2 percent to 16.4 percent of sales in the current year, primarily due to a shift in product mix to higher-priced diesel products and reductions in travel trailer raw material costs. Gross margin for the manufactured housing segment declined from 25.9 percent to 22.0 percent as a result of price competition and a more competitive product mix of units containing additional features at lower margins. Retail housing margins improved from 18.5 percent to 20.5 percent for the current year due to the sale of fewer units that are aged or distressed. The percent of units that had been in inventory for more than 12 months improved from approximately 47 percent in the prior year to 37 percent at the end of September 2002.

        Operating expenses, which include selling, general and administrative expenses, decreased $21.1 million in the second quarter to $113.1 million, and fell as a percentage of sales from 22.7 percent to 17.7 percent in the current quarter. Included in operating expense last year was $8.3 million for the potential settlement of two class action suits. The remaining $12.8 million decrease from the prior year was primarily due to the downsizing of manufacturing and retail operations in prior quarters and lower recreational vehicle product warranty expense. Selling expenses decreased $5.3 million, and fell as a percentage of sales from 9.8 percent in the prior year to 8.2 percent for the current quarter mostly due to lower advertising expense in the Housing Group and reduced product warranty expense in the RV Group. General and administrative expenses declined $6.5 million (excluding the legal settlement and restructuring charges in the prior year) and decreased as a percentage of sales from 12.8 percent to 9.5 percent due to staff reductions resulting from manufacturing plant and retail store cost-reduction initiatives.

        Other income for the second quarter was $418,000 compared to an expense of $2.9 million in the prior year. The current quarter included a $2.5 million gain from the sale of two facilities. Excluding the gain from the current year would result in an expense of $2.1 million, which is about $800,000 lower than the prior year due to lower interest rates and borrowings. Investment income was up 19 percent from the prior year as a result of an increase in invested cash.

Recreational Vehicles:

        Recreational vehicle sales increased 33 percent to $395.8 million compared to $296.9 million for last year's second quarter. Motor home sales led the group with a 40 percent increase to $240.7 million compared to $171.6 million in the prior year. The strong motor home performance was the result of improved market conditions and customer acceptance of three new diesel products. Deliveries of Class A diesel products rose 45 percent during the quarter. Travel trailer revenues were $117.0 million, up $23.8 million or 26 percent on a 29 percent increase in unit volume, also a reflection of improving market conditions. Folding trailer sales rose 19 percent to $38.2 million on an 8 percent rise in unit volume. The disproportionate increase in folding trailer revenues to shipments reflects the sales growth of the larger, higher-priced Caravan product that has been offered since July 2001.

        The RV Group's turnaround in profitability from a loss of $10.1 million in the prior year to an operating profit of $17.0 million for the current October quarter was mainly due to the increase in diesel sales, which have higher selling prices and gross margins, plus a significant improvement in travel trailer revenues and gross margins. Motor homes and travel trailers achieved higher sales and operating income over the second quarter of the prior year. Operating expenses declined $1.3 million and decreased from 16.6 percent of sales to 12.1 percent in the current year. The largest declines were in product warranty costs and payroll-related expenses due to staff reductions in prior quarters.

Manufactured Housing:

        Gross manufacturing revenues of $195.6 million were off 19 percent from the prior year and included $31.5 million of intercompany sales to Company-owned retail home centers. Manufacturing unit volume

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declined 24 percent to 6,634 homes, but the number of sections was off a lesser 22 percent to 11,994 due to the continuing shift in sales mix toward multi-section homes. Multi-section homes represented 79 percent of factory sales versus 75 percent last year.

        Sales volume was below the prior year because of a weaker manufactured housing market, which has been adversely affected by competition from repossessed units and restrictive retail financing conditions. This condition has further deteriorated in the past ten months, with new legislation passed in Texas, the largest manufactured housing market, which has the effect of restricting the use of chattel financing. During the same period, the two largest retail lenders and the two largest inventory floor plan lenders announced they are exiting the business.

        Operating income, before addition of intercompany profit of $1.9 million in the current year and $1.7 million in the prior year, decreased from $14.9 million to $2.5 million, and operating margin fell from 6.2 percent to 1.3 percent of sales. The decrease in earnings was due to the decline in volume and erosion of gross margin caused by the competitive market conditions. Gross profit margin for the Housing Group decreased from 25.9 percent to 22.0 percent of sales, mainly as a result of adding features without corresponding price increases to improve the competitiveness of the product. Housing Group operating costs decreased by $6.8 million as a result of lower advertising, commissions and bonus expense.

Retail Housing Operations:

        Retail housing revenues decreased 20 percent to $70.3 million in the second quarter on a 34 percent decline in unit sales due to difficult market conditions and fewer retail stores. During Fleetwood Retail Corp.'s (FRC) fiscal quarter ended September 30, 2002, the average number of stores operated was down 12 percent from 153 stores last year to 135 stores this year. The retail division incurred an operating loss of $8.6 million for the current quarter compared to a loss of $8.9 million a year ago. The operating loss was lower despite the drop in revenues due to an improvement in gross margins improving from 18.5 percent to 20.5 percent and a 9 percent reduction in operating expenses resulting from lower volume, store closures and reduced staffing. Interest expense on inventory financing decreased by 41 percent from $864,000 to $506,000, reflecting a 31 percent drop in inventories and lower interest rates. The retail housing segment was operating 135 stores at the end of October compared to 147 a year ago.

Supply Operations:

        The supply group contributed second quarter revenues of $10.9 million compared to $8.3 million a year ago. Operating income decreased to $1.0 million despite higher sales due to a shift to a less profitable product mix.

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Fleetwood Retail Corp.

Key Statistics

*

The above statistics are as of FRC's second fiscal quarter end, which is the last day in September. Unless noted otherwise, all other statistics in this report related to FRC are as of Fleetwood Enterprises, Inc.'s second fiscal quarter ended October 27, 2002.

Current Year-to-Date Compared to Same Period Last Year

Consolidated Results:

        For the first six months of fiscal 2002, we earned $3.1 million or 9 cents per diluted share compared to a net loss of $104.1 million or $3.18 per diluted share for the similar period last year. Last year's net loss was initially reported as $23.5 million or 72 cents per diluted share, but was restated for an $80.6 million or $2.46 per diluted share cumulative effect of an accounting change, net of tax, related to the adoption of SFAS No. 142, "Goodwill and Other Intangible Assets." The turnaround in the first half of fiscal year 2003 was the result of a swing in recreational vehicles operating income from a loss of $27.9 million to an operating profit of $34.7 million.

        Consolidated revenues rose 8 percent to $1.25 billion compared to $1.15 billion for last year's first half. A strong recreational vehicle market and improved products drove a 36 percent sales increase in RVs,

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which more than offset a 15 percent decline in manufactured housing revenues and a 27 percent drop in housing retail sales.