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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-K

Commission file number 1-7699

F L E E T W O O D  E N T E R P R I S E S ,  I N C .
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

Registrant's telephone number, including area code: (909) 351-3500

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

None
(Title of class)

        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.

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of the Form 10-K or any amendment to this Form 10-K. /X/

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule12b-2 of the Exchange Act).

        The aggregate market value of common stock held by non-affiliates computed by reference to the price at which the common stock was last sold as of the last business day of the registrant's most recently completed second fiscal quarter was $223,172,700.

Common stock outstanding on July 14, 2003: 35,934,892 shares

Documents incorporated by reference:

        To the extent indicated herein, portions of the registrant's Proxy Statement with respect to its 2003 Annual Meeting, which will be filed no later than 120 days after the close of the registrant's fiscal year ended April 27, 2003, are incorporated by reference into Part III, Items 10, 11, 12 and 13 of this Form 10-K.

FLEETWOOD ENTERPRISES, INC.

PART I

        Unless otherwise indicated, "we," "us," "our," "Fleetwood," the "Company" and similar terms refer to Fleetwood Enterprises, Inc. Throughout this report, we use the term "fiscal," as it applies to a year, to represent the fiscal year ending on the last Sunday in April of that year.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

        Statements used in this report, including the sections entitled "Business Outlook" and "Risk Factors," that relate to future plans, events, financial results or performance are forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. These statements are based on the beliefs of the Company's management as well as assumptions made by it, and information currently available to it. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expects," intends," "plans," "anticipates," "believes," "estimates," "predicts," "potential" or "continue," or the negative of these terms or other comparable terminology. These forward-looking statements are only predictions, and may be inaccurate. Actual events or results may differ materially. In evaluating these statements, you should specifically consider various factors including the factors listed under "Risk Factors," as well as elsewhere in this report and in other SEC filings. These risk factors include, without limitation, the cyclical nature of both the manufactured housing and recreational vehicle industries, ongoing weakness in the manufactured housing market, continued acceptance of Fleetwood's products, the potential impact on demand for our products as a result of weak consumer confidence, the effect of global tensions on consumer confidence, expenses and uncertainties associated with the manufacturing and introduction of new products, our ability to secure additional financing on favorable terms and in a timely manner, the future availability of manufactured housing retail financing as well as housing and RV wholesale financing, 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 strategies. 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, and actual results, events or performance may differ materially. 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.

Item 1. Business

General

        We are the nation's leader in recreational vehicle sales, 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. In fiscal year 2003, we sold 57,069 recreational vehicles. In calendar 2002, we held an 18.2 percent share of the overall recreational vehicle market, consisting of a 17.7 percent share of the motor home market, a 13.4 percent share of the travel trailer market and a 42.7 percent share of the folding trailer market. For calendar year 2002, our Folding Trailer Division was the leader in market share in that segment, while our motor home business was the second largest and the travel trailer division was in third position. For calendar year 2002, we shipped 25,032 manufactured homes and were the second largest producer of HUD-Code homes in the United States in terms of units sold. HUD-Code homes are homes manufactured in accordance with regulations published by the Federal Department of Housing and Urban Development. In calendar 2002, the manufactured housing industry had an 11 percent share of the single-family housing market, of which we had a 2 percent share and a 14.9 percent share of the manufactured housing wholesale market.

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        Fleetwood conducts manufacturing activities through various subsidiaries in 16 states within the U.S., and to a much lesser extent in Canada. In addition, we operate five supply companies that provide components for the manufactured housing and recreational vehicle operations, while also generating outside sales.

        We entered the manufactured housing retail business in fiscal 1999 through a combination of acquisitions and internal development of new retail sales centers. At the end of fiscal 2003, we operated 135 retail sales locations in 21 states, and were one of the four largest retailers of manufactured homes in the U.S.

        Fleetwood's business began in 1950 through the formation of a California corporation. The present Company was incorporated in Delaware in September 1977, and succeeded by merger to all the assets and liabilities of the predecessor company. Our principal executive offices are located in Riverside, California.

        This annual report, and each of our other periodic and current reports, including any amendments, are available, free of charge, on our website, www.fleetwood.com, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission. The information contained on our website is not incorporated by reference into this annual report on Form 10-K and should not be considered part of this report.

        The following table sets forth revenues by business segment and the relative contribution of these revenues to total revenues for the past three fiscal years. Information with respect to operating profit (loss) and identifiable assets by industry segment is shown in the Notes to Consolidated Financial Statements in Item 8 of Part II of this Form 10-K.

Manufactured Housing

Industry Overview

        A manufactured home is a single-family house that is constructed in accordance with HUD construction and safety standards entirely in a factory environment rather than at the home site. There are two basic categories of manufactured housing: single-section and multi-section. The manufactured housing industry grew significantly from 1991 to 1998, but has retrenched since then. According to the Manufactured Housing Institute (MHI), domestic shipments increased from 170,713 homes in calendar 1991 to 372,843 homes in calendar 1998, before declining to 168,491 in calendar 2002. Total retail sales increased overall from approximately $4.7 billion in calendar 1991 to more than $8.7 billion in calendar

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2002. In addition, the manufactured housing industry's share of new single-family housing starts increased significantly, from about 17 percent in calendar 1991 to 24 percent in calendar 1998, before declining to 11 percent in calendar 2002. We believe that the growth during the 1990s resulted from the increased availability of financing and also in large part from increasing consumer acceptance of and preference for manufactured housing, both of which were driven by the following:

1.

improved product quality and design, and enhanced features;



2.

a significant difference in the average price per square foot between site-built housing and manufactured housing;



3.

favorable demographic and regional economic trends;



4.

increased attractiveness of financing terms available to manufactured housing retailers and consumers in 1991 through 1998; and



5.

liberal credit underwriting due to competition among retail lenders for more volume.

        Today's manufactured homes offer customers quality similar to many site-built homes at a more affordable price. Manufactured homes are constructed in a factory environment, utilizing assembly line techniques, which allows for volume purchases of materials and components and more efficient use of labor. The quality of manufactured homes has increased significantly over the past 20 years, as producers generally build with the same materials as site-built homes. In addition, many features associated with site-built homes are included in manufactured homes, such as central heating, name brand appliances, carpeting, cabinets, walk-in closets, vaulted ceilings, wall coverings and porches. Also, optional features include such amenities as fireplaces, wet bars and spa tubs, as well as retailer-installed options such as central air conditioning, garages and furniture packages.

        As acceptance of manufactured housing has increased among higher-income buyers and financing for single-section homes has become more scarce, demand has shifted toward larger, multi-section homes, which accounted for 78 percent of industry shipments in calendar 2002, up from 47 percent in calendar 1991.

        Approximately 55 percent of the manufactured homes produced in the United States are placed on individually owned lots. The balance are located on leased sites in manufactured housing communities. Most manufactured housing is sold in rural regions and towns outside of major urban areas.

        The manufactured housing industry is cyclical, and is affected by general economic conditions and consumer confidence. For the last four years, the industry has been burdened by excess manufacturing and retailing capacity, high retailer inventories, competition from repossessed units being resold at greatly distressed prices and a slowing of retail sales. This imbalance between capacity and inventories on one hand and retail demand on the other has largely been caused by the reversal of loose credit practices, which artificially stimulated demand during most of the 1990s until replaced by the current restrictive financing conditions. Prior rapid overexpansion of the retail distribution network and retailers' inflated expectations of future business also contributed to the imbalance.

        With respect to the retail financing of manufactured housing, interest rates are generally higher and the terms of loans shorter than for site-built homes. In addition, some lenders have stopped extending loans to finance the purchase of manufactured homes, including three national lenders that exited the business since the last half of fiscal 2002. This has had the effect of making financing for manufactured homes even more expensive and more difficult to obtain relative to financing for site-built homes.

        Retail financing was a significant factor in the expansion of the industry, particularly toward the latter part of the 1990s growth cycle, when competitive retail lenders employed relatively liberal underwriting standards to capture more business. Although a major catalyst in fueling higher sales volume through 1998, the lower standards have given rise to an abnormally high rate of defaults and repossessions as loan

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portfolios have matured in the last four calendar years. In turn, retail lenders have responded by sharply curtailing the availability of financing to our retail customers and elevating underwriting standards to overly restrictive levels. At the same time, manufacturers have found themselves competing for the sale of new homes with resellers of these repossessed homes. Due to the difficult financing environment for chattel financing nationwide, the industry has been trending toward more "land and home" type financing. Chattel financing is personal property financing secured only by the home and not by the underlying land on which the home is sited.

        Calendar year 2002 industry shipments were negatively impacted by legislation passed in Texas, a state which accounted for 11 percent of industry shipments in calendar year 2001, that required mortgage-type or "land and home" financing instead of chattel financing, which had been the industry norm, especially for the purchase of single-section homes. The chattel financing process is simpler for customers, understood by dealers, and faster to process than mortgage-type lending. For example, in calendar 2002, industry shipments in Texas fell 28 percent from the prior year, compared to a 13 percent drop in shipments for the industry nationwide. Recently, new legislation has been passed in Texas that is expected to substantially ease the negative impact on chattel financing.

        Another recent industry development affecting wholesale sales volume was the announcement on March 1, 2002, by Conseco Finance Servicing Corp. (Conseco), the largest wholesale floorplan lender, that it would stop approving and funding new floorplan requests in April 2002. Another large wholesale lender, Deutsche Financial Services (Deutsche), announced in October 2002 it was exiting the business. Independent retailers generally finance their inventory purchases with wholesale floorplan financing provided by lending institutions such as Conseco. Despite some disruption to the industry, generally, there has been sufficient wholesale floorplan financing available through other lenders to fill the vacuum created by the Conseco and Deutsche departures.

        Industry manufacturing and retail capacity have been reduced significantly in response to the financing environment and the related inventory imbalance. More than half of the retail lending capacity available in 2000 has exited the business and has not been replaced by other significant sources. We expect that weak market conditions will continue until the availability of financing improves, the current high number of repossessed homes is reduced and the imbalance of high inventories among retailers is fully resolved, which may necessitate further reductions in industry capacity, particularly at the retailer level. Ultimately, the reasonable availability of retail financing will be the key to an industry recovery.

Our Manufactured Housing Business

        We are the second largest producer of HUD-Code manufactured housing in the United States in terms of units shipped by us to retailers, and we distribute our products through a network of approximately 1,210 retailers in 48 states. At the end of fiscal 2003, we operated 135 retail locations under the name Fleetwood Retail Corp., with the balance of approximately 1,075 locations owned and operated by independent retailers. In calendar 2002, approximately 81 percent of our manufactured homes were shipped to retailers in the 20 states with the highest retail sales, including Texas, Florida, North Carolina, California and Kentucky. We are a leading producer of both single-section and multi-section manufactured

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homes, and our share of the manufactured housing market, based upon shipments to retailers, was 14.9 percent in calendar 2002.

        Source: Manufactured Housing Institute

        We held a 13.2 percent share of the single-section manufactured housing market in calendar 2002, as measured by shipments to retailers. Our single-section homes range in size from 550 square feet to 1,290 square feet. The average single-section home retailed for approximately $27,000 (excluding land costs) and represented approximately 23 percent of our manufactured housing unit shipments in fiscal 2003. Our single-section homes are designed for the affordable housing market, which includes first-time, retiree and value-oriented buyers.

        We held a 15.3 percent share of the multi-section manufactured housing market in calendar 2002, as measured by shipments to retailers. Our multi-section homes, which range in size from 930 square feet to 2,600 square feet, sold for an average retail price of approximately $54,500 (excluding land costs) in fiscal 2003, and represented approximately 77 percent of our manufactured housing unit shipments.

Manufactured Housing—Retail

Industry Overview

        The manufactured housing retail industry generated over $8.7 billion in sales in calendar year 2002 and is highly fragmented, with approximately 4,500 retail sales centers. Most manufactured housing retailers are independently owned private companies operating a single sales center. Until 1997, Fleetwood and most other manufacturers, with the exception of a few vertically integrated entities, marketed their manufactured homes exclusively through independent retailers. At that time, however, certain manufactured housing producers began to acquire retailers with the objective of exercising greater control over retail distribution and upgrading marketing and merchandising practices, including brand name development. Additionally, some financial consolidators and residential developers entered the manufactured housing business by acquiring retailers.

        One factor leading to the industry imbalance between retail inventories and consumer demand has been the large number of retailers, each of which must maintain adequate inventory at its location to appeal to potential customers. Although the number of retail stores in the industry has decreased significantly, it is anticipated that a further reduction will likely be necessary to help restore balance

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between the level of overall retailer inventories and the level of consumer demand for which financing is available.

Our Manufactured Housing—Retail Business

        In the latter part of calendar 1997 and during the first half of calendar 1998, a few competing manufacturers acquired several of our important retailers, which collectively accounted for about 25 percent of our distribution network in terms of volume. In order to protect our distribution channels and to take advantage of business opportunities in the manufactured housing retail industry, in 1998 we acquired HomeUSA, Inc., then the nation's largest independent retailer of manufactured homes. In addition, we completed several other acquisitions of independent retailers during fiscal 1999 and fiscal 2000. We also expanded our Company-owned retail network through the development of new "greenfield" locations. The combination of these two strategies carried us to a high of 244 stores in November 2000. Since then, as the retail market for manufactured housing has continued to slow down and losses in our retail operation have risen, we have implemented a downsizing strategy to better match our retail capacity to market demand. By assigning retail store operations of certain locations to a third party and closing and selling other locations, we have reduced the number of stores that we operate to 135 at the end of fiscal 2003. The downsizing actions may extend into fiscal 2004, although they may be offset by strategic openings of new stores in selected markets.

Recreational Vehicles

Industry Overview

        Recreational vehicles include motor homes, travel trailers, folding trailers and slide-in truck campers. Recreational vehicles are either driven or towed and are primarily used for vacations, camping trips and other leisure activities.

        A motor home is a self-propelled mobile unit used primarily as a temporary dwelling during vacation and camping trips. It consists of a truck or bus chassis with a living unit built onto it. The living area and driver's compartment (on Class A models) are designed and produced by the recreational vehicle manufacturer. Motor homes are classified by the Recreation Vehicle Industry Association (RVIA) into three categories: Class A, Class B and Class C. Conventional, or Class A, motor homes are constructed directly on medium-duty truck chassis that include the engine and drive train components. They are fully self-contained, typically including a driver area and kitchen, dining, bathroom and sleeping accommodations for four to eight people, and have such optional features as air conditioning, an auxiliary power generator and home electronics such as a stereo, television and VCR. Approximately 42 percent of Class A units are diesel-powered. Class B models, which comprise a small segment of the market, are panel-type trucks to which kitchen, sleeping and toilet facilities are added. Many of these models also have a top extension added to them for more headroom. Compact, or Class C, models are classified as mini motor homes, which are built on a cut-away van-type chassis onto which the manufacturer constructs a living area with access to the driver's compartment. Class C models have basically the same features and options as Class A products, but the chassis manufacturer's original dashboard and front cab section are retained.

        RVIA reported factory shipments of 39,600 Class A motor homes and 18,000 Class C motor homes for calendar 2002. These figures compare with shipments of 33,400 Class A motor homes and 13,200 Class C motor homes in calendar 2001. There are numerous competitors and potential competitors in this industry. However, the five largest manufacturers, including Fleetwood, represented approximately 67 percent of the combined Class A and Class C motor home retail market for calendar 2002.

        There are two major classes of towable recreational vehicles: travel trailers and folding trailers. Travel trailers are designed to be towed by pickup trucks, vans or other tow vehicles, and are similar to motor homes in use and features. Typically, travel trailers include sleeping, kitchen, dining and bathroom facilities

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and are self-contained units with their own lighting, heating, refrigeration, fresh water storage tanks and sewage holding tanks so that they can be used for short periods without being attached to utilities. RVIA identifies travel trailers as being either conventional or fifth-wheel trailers. Fifth-wheel trailers extend over the bed of their tow vehicles and must be hitched to the bed of the truck. For calendar 2002, RVIA reported factory shipments of 129,700 conventional trailers and 66,100 fifth-wheel trailers, compared with shipments of 102,200 and 54,700, respectively, for calendar 2001. The five largest manufacturers in calendar 2002, including Fleetwood, represented approximately 67 percent of the total travel trailer retail market.

        Folding trailers are smaller and lighter than their travel trailer counterparts and are consequently less expensive and easier to tow. Folding trailers typically include sleeping and eating facilities, fresh water storage and either a built-in icebox or a refrigerator. RVIA reported shipments of 44,800 folding trailers in calendar 2002, in contrast to 40,800 shipments in calendar 2001. Of all of the markets for recreational vehicles, the folding trailer market is the most concentrated, with the five largest manufacturers, including Fleetwood, holding almost 96 percent of the retail market in calendar 2002.

        Slide-in truck campers represent another class of towable recreational vehicles, but have a less significant market presence. Slide-in truck campers are similar to travel trailers in terms of use and features, but are designed to fit in the bed of a pickup truck. For calendar 2002, RVIA reported factory shipments of 9,400 slide-in truck campers, compared to shipments of 9,900 for calendar 2001.

        Sales of recreational vehicles tend to be a leading economic indicator, and sales started to decline when the stock market began to show signs of weakness late in fiscal 2000. Recreational vehicle shipment growth rebounded post September 11, 2001, stimulated by low interest rates and a heightened awareness by consumers of the benefits of the RV lifestyle. Based on recent RVIA forecasts, recreational vehicle shipments are expected to increase during calendar 2003 from the much improved 2002 levels, although we believe that declining consumer confidence, resulting from international hostilities and an uncertain stock market, may impede growth. Recreational vehicles typically are a discretionary purchase for consumers, and sales are therefore affected principally by general economic conditions and consumer confidence, and to a lesser extent by the price of fuel. Retail financing conditions have historically been a less significant factor affecting the recreational vehicle industry than the manufactured housing business. Purchasers of recreational vehicles generally have proven to have an overall greater ability to obtain necessary credit than customers of the manufactured housing industry.

Our Recreational Vehicle Business

        We have been the nation's leader in recreational vehicle sales since 1973 and distribute our products through a network of approximately 1,200 independent retailers in 49 states and Canada. In calendar 2002, approximately 82 percent of our recreational vehicles were shipped to retailers in the 25 states with the highest retail sales, including California, Texas, Florida, Michigan and Washington. We were the market share leader in terms of units sold in 6 of the top 25 recreational vehicle states. Our retail market share and

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industry unit sales for each of the three segments in which we participated for the last three calendar years are as follows:

        Source: Statistical Surveys, Inc.

        Fleetwood's motor home market share declined during calendar years 2000 and 2001, mainly due to our diesel products lacking some innovative features that were available in competitor products in the fast-growing diesel market, a delay in the life-cycle redesign of our mid-price gas products and the closure of two manufacturing plants that produced Class C products. We responded by launching three new diesel products, introducing three other completely redesigned diesel products and five completely redesigned gas products within the past 24 months, and moving Class C production to a different facility. As a result, we have posted significant gains in market share in calendar 2002 in both the gas and diesel Class A product categories.

        We manufacture motor homes under the brand names Jamboree, Tioga, Terra, Fiesta, Flair, Storm, Bounder, Southwind, Pace Arrow, Bounder Diesel, Expedition, Discovery, Providence, Excursion, Revolution, American Tradition, American Dream, American Eagle and American Heritage. Our Class A motor homes are available in a variety of models ranging in length from 25 to 45 feet and have an average retail price of approximately $138,000. Class C units are available in various models ranging in length from 23 to 31 feet and have an average retail price of approximately $61,400. For calendar 2002, three of the industry's 10 top-selling Class A motor homes were manufactured by Fleetwood, as well as two of the top 10 Class C motor homes.

        In the past two calendar years, Fleetwood's travel trailer market share declined from 19.3 percent to 13.4 percent due to poor acceptance of new products introduced at the industry's largest trade show in November 2000. The dealers' perception that the new and lower-priced travel trailers did not provide the same value as similarly priced products from regional competitors, combined with limited fifth-wheel floorplan offerings, resulted in a significant loss of market share. At the same trade show in November 2002, the Company introduced completely new innovative products in its core brands of travel trailers and fifth-wheels.

        We manufacture a variety of travel trailers under the Pioneer, Mallard, Wilderness, Prowler, Terry, Pride, and Triumph brand names. Most of our travel trailers are 8 feet wide, vary in length from 15 to 39 feet (including trailer hitch) and have an average retail price of approximately $19,100. For calendar 2002, two of the industry's 10 top-selling travel trailers were manufactured by us.

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        We are the largest manufacturer of folding trailers, which we currently sell under the trademarks Coleman® and Coleman Parallelogram with Lantern Logo®. Our folding trailers range in length from 17 to 25 feet when deployed, and have an average retail price of approximately $8,200.

        We also produce slide-in truck campers at one of our travel trailer factories under the Elkhorn brand. Most of our slide-in truck campers vary in length from 8 to 11 feet and have an average retail price of approximately $13,400.

Supply Operations and Other Businesses

        Our supply manufacturing operations include two fiberglass companies, a drapery operation and a lumber milling operation. These businesses provide a reliable source of quality components for our principal manufacturing businesses, while also generating outside sales. In fiscal year 2003, approximately 53 percent of the product volume of these manufacturing operations was used by us internally, and the remaining 47 percent was sold to third parties. The supply operations also include a lumber brokerage operation and a component import distribution business, each of which provides our manufactured housing and recreational vehicle businesses with reliable sources of quality raw materials and components.

Competition in Our Business

        The manufactured housing industry is highly competitive. For calendar 2002, there were approximately 66 manufacturers, with the 10 largest companies accounting for 79 percent of the retail market, including our sales, which represented 16.9 percent of the retail market. The top five manufacturers, which account for approximately 63 percent of the homes manufactured, now operate about 19 percent of the nation's retail sales centers, which account for approximately 24 percent of retail sales. Manufactured homes compete with new and existing site-built homes, apartments, townhomes and condominiums. Competition exists at both the manufacturing and retail levels and is based primarily on price, product features, reputation for service and quality, merchandising, and terms and availability of dealer and retail customer financing. Growth in the manufactured housing market in the southern United States during the 1990s increased competition at both the manufacturing and retail levels and resulted in both regional and national competitors increasing their presence in the region.

        The recreational vehicle market is also highly competitive and we have numerous competitors and potential competitors in this industry. The five largest manufacturers represented approximately 65 percent of the retail market in calendar 2002, including our sales, which represented 18.2 percent of the total market. For calendar year 2002, we held a 17.7 percent share of the motor home market, a 13.4 percent of the travel trailer market and a 42.7 percent of the folding trailer market.

Competitive Advantages

        We believe that we have certain competitive advantages as described below.

Commitment to Quality and Customer Satisfaction

        Our quality improvement process focuses on increasing customer satisfaction by improving the quality and design of Fleetwood products and enhancing the customer's shopping experience. In this regard, we have developed a number of ongoing processes, including:

1.

designing our products with materials that frequently exceed both government requirements and industry standards;



2.

training both our employees and our retailers' employees in customer satisfaction techniques and quality improvement procedures;

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3.

providing additional services, such as comprehensive training of our retailers' employees and contractors regarding proper installation techniques for manufactured homes;



4.

offering some of the most extensive warranties in the manufactured housing and recreational vehicle industries; and



5.

responding quickly and effectively to customer inquiries and concerns.

        We use independent consumer surveys to determine whether retail customers are satisfied with the quality of our products and the level of service provided by us and our retailers. An independent consumer research firm conducts telephone surveys and communicates customer responses to our manufacturing entities and retailers to reinforce quality performance and minimize customer problems. Each year, specific customer satisfaction goals are established for our manufacturing operations and independent retailers. Retailers who meet these performance standards are recognized with our Circle of Excellence Award, and our manufacturing centers are similarly honored for meeting targeted levels of customer satisfaction. We believe that these efforts have resulted in increased awareness of the importance of product quality and service, which in turn has significantly improved our customer satisfaction ratings.

Focus on Engineering and Innovative Product Development

        We conduct our product development activities on a national basis for recreational vehicles and on a regional basis for manufactured housing in order to reflect regional preferences and trends. As a result of our approach to product development in our manufactured housing business, for instance, we have introduced two-story housing in some urban communities in selected regions. During fiscal 2001, our RV Group invested significant time and resources into the redesign and reengineering of our product development function. With the assistance of an outside consulting firm, specializing in the Product Development Process (PDP) that is patterned largely after methodologies employed by Japanese automobile manufacturers, we undertook a comprehensive review of our approach to the development of new products. Upon completion of the review, the consulting firm issued a broad set of recommendations calling for comprehensive changes to our approach.

        Our new system is designed to facilitate a faster response to market changes. Under this system, product development projects are carefully evaluated throughout the process from a business perspective. We are now developing new products and product enhancements through an integrated approach that involves engineering, manufacturing and marketing personnel, as well as feedback received through our customer surveys. As a result, we believe that we are able to proactively design and manufacture products that address both industry trends and specific customer requirements in an efficient, cost-effective and timely manner. The system is designed to enforce the disciplines required to deliver quality products. Amounts spent on engineering and product development totaled approximately $19.6 million for fiscal 2003, $19.3 million for fiscal 2002, and $21.7 million in fiscal 2001.

Experienced Management Team

        Both our Manufactured Housing and RV Groups benefit from the significant experience of our senior managers, many of whom have over 20 years of operating expertise with us. As previously noted, both of our core businesses are subject to significant cyclical swings, similar to the one we are currently experiencing in manufactured housing. Current circumstances in that industry are not unlike those encountered in previous downturns in the 1979-80 and 1990-91 periods. Many of our managers have previously navigated through times such as these and possess valuable knowledge and skills that are well suited to our current challenges.

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Our Business Strategy

        Our goals are to enhance our position as a leading provider of affordable, high-quality manufactured homes and recreational vehicles, to sustain long-term profitable growth, and to enhance shareholder value. The key components of our business strategy are described below.

Providing the Best Product and Value Proposition to Our Customer

        Our goal is to consistently offer the highest quality product at an attractive value that is not exclusively price-driven. We seek to achieve the value proposition by focusing on the needs and preferences of our buyer populations at different price points by product. We believe we are also effective at controlling cost factors while maintaining high quality standards because of our economies of scale, purchasing efficiencies, and a leverageable fixed infrastructure. Our focus on engineering and innovative product development translates into products that meet ever-changing consumer preferences at the business unit level for recreational vehicles and at the regional level for manufactured housing. For example, because of the relative affluence of the recreational vehicle buyer and the discretionary nature of the recreational vehicle purchase, the design process is critical and is embedded throughout the development, manufacturing and marketing cycle. Those costs are absorbed over significant unit volumes because of the economies of our market penetration and volumes. Our customers expect consistency and quality because of the brand reputation and awareness in the market of our products. Finally, we believe that the customers' experience with our products remains consistent through changing economic and social cycles because of the depth and background of our management team who have experience functioning in different environments.

Upgrading Our Retail Distribution Networks

        Since 1991, we have reduced the number of independent third-party retail distribution centers approved to sell our manufactured housing products from approximately 1,800 to about 1,100 at April 27, 2003. We believe that this action has allowed us to focus our efforts on larger retailers that share our approach to merchandising homes and customer satisfaction. Historically, we had not focused on exclusive retailer arrangements and most retailers sold competitive lines; however, in recent years, we have developed exclusive retailer arrangements. Currently, approximately 49 percent of our manufactured housing retailers, including Company-owned stores, are exclusive, up from approximately 30 percent six years ago. During fiscal 2000, our housing group introduced the Pinnacle Retailer Program, which is designed to encourage more exclusive retailer relationships. This program includes a number of attractive retailer incentives, including funding for signage and additional marketing support not available to non-exclusive retailers. We have increased our efforts to develop and implement "best practices" for our retailers through our sponsored training programs and manuals. Topics of recent training seminars have included professional selling techniques and proper home installation procedures. We actively seek to expand our manufactured housing retail network by adding retailers that meet our criteria.

        With respect to recreational vehicles, we have implemented a comprehensive dealer agreement for all Fleetwood recreational vehicle dealers that is endorsed by the Recreation Vehicle Dealer Association (RVDA). The agreement requires the dealer to meet our criteria in regard to sales and stocking requirements and customer satisfaction goals. The new agreement provides measurement tools and enables us to replace underperforming dealers with market leaders. Programs such as sales training, service training and certification, quarterly promotions and other marketing programs add value to our dealer network.

Promoting and Expanding Recognition of the "Fleetwood" Brand Name

        We seek to expand consumer awareness of the "Fleetwood" name in both our manufactured housing and recreational vehicle operations. Beginning in fiscal 1997, we began working with selected manufactured housing retailers to develop "Fleetwood Home Centers," which exclusively carry our

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products, have consistent signage identifying the location as a Fleetwood Home Center and meet our highest standards for home presentation and customer satisfaction.

        In the RV Group, we have leading brand names in each segment. In the past we have sought to promote each individual brand as a part of the Fleetwood family of recreational vehicles. However, in the future, there will be more emphasis on "Fleetwood" as part of the brand name. We have been involved in NASCAR promotions and believe that the large NASCAR audience, estimated at 75 million, aligns with targeted customer categories for recreational vehicles.

Sales and Distribution of Our Products

        Consistent with industry practice, we have historically marketed our products through many independent retailers, none of which individually accounted for a material part of our total sales. We expect this industry practice to continue with respect to recreational vehicles. However, the acquisition activity a few years ago in the retail sector of the manufactured housing industry prompted us to modify our manufactured housing sales and distribution strategies. We responded to this industry trend by upgrading our manufactured home retail distribution network, developing alternatives to replace retailers purchased by competitors, and promoting and expanding recognition of the Fleetwood brand name through exclusive "Fleetwood Home Centers" and through our own retail strategies, including acquisitions and the opening of stores built and owned by us. Our entry into the manufactured housing retail business required that we maintain an inventory of finished homes for purposes of display and immediate sale to retail homebuyers. This was a departure from our manufacturing policy of building homes to order and not maintaining inventories of completed homes. Largely as a result of the move into the retail business, our inventories increased sharply to $343 million at April 2000. Reflecting weaker market conditions and a reduction in the number of Company-owned stores, inventories have declined to $241 million at the end of April 2003.

        As part of the sales process, we offer purchasers of our recreational vehicles comprehensive one-year warranties against defects in materials and workmanship, excluding only certain components separately warranted by a supplier. The warranty period for motor homes is one year or until the unit has been driven 15,000 miles, whichever occurs first, except for structural items, which are covered for three years. The travel trailer warranty is for 24 months, while the folding trailer warranty covers 12 months on most parts and manufacturing-related defects. Our RV Group has installed an electronic dealer communications network that facilitates the processing of product warranty claims and parts ordering. With respect to manufactured homes, our warranty now covers a one-year period, and includes coverage for factory-installed appliances. Between March 2000 and December 2002, our home warranty covered a two-year period. Prior to March 1, 2000, our home warranty covered a one-year period, except for structural, plumbing, heating and electrical systems, which were covered for five years. Our annual expenses for product warranties and service were approximately $115 million for fiscal year 2003, $145 million for fiscal year 2002, and $132 million for fiscal year 2001. We believe that our warranty program is an investment that enhances our reputation for quality and reliability.

Financing of Our Products

        Sales of recreational vehicles and manufactured housing are generally made to retailers under commitments by financial institutions that have agreed to finance retailer purchases. Consumer financing for recreational vehicles is currently readily available from a variety of sources including commercial banks, savings and loan institutions, credit unions and consumer finance companies. With respect to manufactured housing, wholesale and retail financing has historically been provided by similar lending sources, although highly concentrated with a few large institutions and by the finance affiliates of certain vertically integrated manufacturers/retailers.

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        Conseco, which acquired Green Tree Financial Corp. and was the largest manufactured housing lender, announced in October 2002 it would no longer provide retail financing. GreenPoint announced in January 2002 that it was discontinuing its manufactured housing finance business. These announcements followed the previously announced exits from the retail finance business by Associates First Capital Corporation (Associates), Bombardier Capital, Inc. and CIT Group Inc. In addition, several other smaller lenders have exited the business during the past three to four years.

        Manufactured housing lenders have experienced higher loan losses and a more difficult funding environment over the past three years. Repossessions increased due to the fact that some lenders had made loans in earlier periods to less qualified applicants, and a significant number of these borrowers had begun to default on their loans. Access to the asset-backed securities market as a source of funding similarly has been constricted and the cost of funds has risen sharply. As a result, lenders have reacted by tightening credit standards for manufactured housing borrowers, by significantly increasing interest rates and in some cases exiting the business. These unfavorable developments have created a very restrictive retail financing environment, which in turn has constrained sales activity at both the wholesale and retail levels.

        Subsequent to the end of the fiscal year, a national lender announced its intention to provide manufactured housing retail financing. Depending on the extent of financing actually made available by this or other lenders in the future, combined with retail financing that Fleetwood may make available through our HomeOne Credit Corp. finance subsidiary, it is possible that these new sources of financing could begin to moderate the effect of the restrictive retail financing environment that has challenged the manufactured housing industry in recent years.

        Conseco, also the largest wholesale inventory lender, announced on March 1, 2002, it would exit that business, and in October 2002, Deutsche, another large housing wholesale floorplan lender, announced it was exiting the business. Since the announcements by Conseco and Deutsche, dealer transitions to other floorplan lenders have been orderly and we have experienced relatively little difficulty finding alternative sources of inventory financing for most of our dealers, including Company-owned stores. Despite some disruption to the industry, generally, there has been sufficient wholesale floorplan financing available through other lenders to fill the vacuum created by the Conseco and Deutsche departures.

        Until May 1996, we owned Fleetwood Credit Corp., which provided a substantial portion of the wholesale and retail financing for sales of our recreational vehicles. We sold Fleetwood Credit Corp. to Associates in May 1996. In connection with the sale, an agreement was signed to assure continuing cooperation between Associates and us and to facilitate wholesale and retail financing for our retailers and customers. Early in calendar 1999, Fleetwood Credit Corp. was sold by Associates to Bank of America. We consented to an assignment of the operating agreement to the new owner. Under the agreement, we agreed to certain limitations on our permissible involvement in recreational vehicle financing programs until 2006.

Regulatory Issues Applicable to Our Business and Products

        Our manufactured housing operations are subject to provisions of the Housing and Community Development Act of 1974, under which the U.S. Department of Housing and Urban Development (HUD) establishes construction and safety standards for manufactured homes, and also may require manufactured housing producers to send notifications to customers of noncompliance with standards or to repair or replace manufactured homes that contain certain hazards or defects. Our recreational vehicle operations are subject to a variety of Federal, state and local regulations, including the National Traffic and Motor Vehicle Safety Act, under which the National Highway Traffic Safety Administration (NHTSA) may require manufacturers to recall recreational vehicles that contain safety-related defects, and numerous state consumer protection laws and regulations relating to the operation of motor vehicles, including so-called "Lemon Laws." Recently, the Transportation Recall Enhancement Accountability

13

Documentation Act was approved by Congress and administered by the NHTSA. Under this rule, motor vehicle manufacturers (automotive, truck and RV) and motor vehicle equipment manufacturers are required to report information and submit documents relating to customer complaints, warranty claims, field reports, injuries, property damage and deaths beginning in 2003. This information may assist NHTSA to promptly identify defects related to motor vehicle safety. Fleetwood has implemented systems and processes to meet the new reporting requirements. Amendments to any of these regulations and the implementation of new regulations could significantly increase the costs of manufacturing, purchasing, operating or selling our products and could have a material adverse effect on our results of operations.

        Our failure to comply with present or future regulations could result in fines, potential civil and criminal liability, suspension of sales or production, or cessation of operations. In addition, a major product recall could have a material adverse effect on our results of operations.

        Certain U.S. tax laws currently afford favorable tax treatment for the purchase and sale of recreational vehicles that are used as the equivalent of second homes. These laws and regulations have historically been amended frequently, and it is likely that further amendments and additional regulations will be applicable to us and our products in the future. Amendments to these laws and regulations and the implementation of new regulations could have a material adverse effect on our results of operations.

        Our operations are subject to a variety of Federal and state environmental regulations relating to noise pollution and the use, generation, storage, treatment, emission and disposal of hazardous materials and wastes. Although we believe that we are currently in material compliance with applicable environmental regulations, our failure to comply with present or future regulations could result in fines, potential civil and criminal liability, suspension of production or operations, alterations to the manufacturing process, costly cleanup or capital expenditures.

Our Intellectual Property

        Fleetwood®, Fleetwood Homes® and the principal brand and series names we use in connection with our recreational vehicles and manufactured homes are registered trademarks of ours. We use the trademarks Coleman® and Coleman Parallelogram with Lantern Logo® in connection with our folding trailers, in accordance with a license from The Coleman Company, Inc., which extends through June 2005 with an option in our favor to renew through June 2010. As described below in Item 3. Legal Proceedings, we are currently engaged in a dispute with The Coleman Company, Inc. over the use of these trademarks. We believe that our trademarks and trade names are significant to our business, and we will vigorously protect them against infringement. Aside from design patents on certain distinctive features of our most prominent motor home models, we have not typically obtained patent protection on our products. In addition to our trademarks and patents, we have developed numerous trade secrets in connection with the design, manufacture, sales and marketing of our products. We believe that these trade secrets are of great significance to our business success and we will take reasonable steps to prevent their disclosure to competitors.

Our Relationship with Our Employees

        As of April 27, 2003, we had approximately 13,000 employees. Most full-time employees are provided with paid annual vacations, group life insurance, medical and hospitalization benefits, a retirement plan and other fringe benefits. Approximately 770 of these employees hold management or supervisory positions.

        As of April 27, 2003, collective bargaining agreements were in effect at two of our manufacturing locations covering a total of approximately 1,200 employees. The expiration dates for these agreements are in September 2003 and October 2005. Except for employees at these two plants, none of our other employees are represented by a certified labor organization. In recent years, we have experienced labor

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union organizing activity at several other manufacturing locations, but employees at all these locations voted against union representation.

Risks Relating to Our Business

        If any of the following risks actually occur, they could materially adversely affect our business, financial condition or operating results.

We have had significant losses in the last three fiscal years and it is possible that we may not be able to regain profitability in the foreseeable future. This could cause us to limit future capital expenditures and also increase the difficulty of implementing our business and finance strategies or meeting our obligations when due.

        We had net losses totaling $71 million, $162 million and $284 million for the fiscal years 2003, 2002 and 2001, respectively. Continued losses may reduce our liquidity and may cause us to reduce our expenditures on capital improvements, machinery and equipment, and research and development. This could have a negative effect on our ability to maintain production schedules, manufacture products of high quality, and develop and manufacture new products that will achieve market acceptance. This could, in turn, have a negative effect on our sales and earnings. If we continue to suffer losses, we could be unable to implement our business and financial strategies or meet our obligations when due. Our losses for fiscal years 2003, 2002 and 2001 were partially caused by the following conditions:

•

reduced demand in the manufactured housing and, until the third quarter of fiscal 2002, recreational vehicle industries;



•

excess capacity, particularly in our manufactured housing plants;



•

some wholesale and retail lenders abandoning the manufactured housing market;



•

excess manufactured housing retail inventories;



•

restrictive lending standards in the manufactured housing market by the remaining retail lenders;



•

tightened credit standards by wholesale lenders for both manufactured housing and recreational vehicles;



•

relatively high interest rates for manufactured homes as opposed to site-built homes;



•

competition with resellers of repossessed manufactured homes; and



•

weaker general economic conditions, stock market declines, and diminished consumer confidence.

        We cannot provide assurance that the conditions that have resulted in our substantial losses in fiscal years 2001 through 2003 will not continue into fiscal 2004 and beyond.

        In addition to the foregoing conditions, actions taken by us in response to the circumstances that contributed significantly to the losses included:

•

charges in 2002 and 2001 related to the impairment of goodwill that originated with our acquisitions of retail housing businesses in prior years, some of which have been closed or downsized; and



•

downsizing initiatives within our manufacturing and retail housing businesses, including asset impairment charges, write down of idled manufacturing facilities, employee severance payments and plant closing costs.

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We may be unable to comply in the future with financial covenants contained in our senior secured credit facility, which could result in a default under our debt obligations, and our lenders could accelerate our debt or take other actions which could restrict our ability to operate.

        We have amended our senior secured credit facility seven times since its inception in 2001 in part because of concerns regarding one or more of its covenants. In the future, if our operating results and/or liquidity deteriorate significantly due to business or economic conditions, we may breach covenants under the amended facility, resulting in a default.

        Our amended credit facility is funded by a syndicate of banks led by Bank of America and requires us to maintain particular financial ratios and meet specific financial tests, including an EBITDA covenant and a covenant requiring us to maintain liquidity, which includes the daily average of cash equivalents and unused borrowing capacity, of at least $80 million for the Company as a whole and $50 million for subsidiaries designated as borrowers. A breach of any of the financial covenants could result in a default under this facility, as well as our retail floorplan facility, which includes cross-default provisions. In the event of a future default under our debt obligations, we cannot assure you that our lenders will agree to forbear from enforcing any remedies otherwise available to them or that they will grant us waivers or amend our covenants.

        Our credit facility ranks senior to our convertible trust preferred securities, and is secured by substantially all of our assets, except for some inventories that are used to secure floorplan arrangements, the cash value of our Company-owned life insurance, certain fixed assets and housing retail finance receivables (chattel loans and/or mortgages). Upon the occurrence of an event of default, our lenders could elect to declare all amounts outstanding under the facility, together with accrued interest, to be immediately due and payable. A default under our senior secured facility could also cause a default under our retail floorplan debt. If we were unable to repay all outstanding balances, the lenders could proceed against our assets, and any proceeds realized upon the sale of assets would be used first to satisfy all amounts outstanding under our senior debt, and thereafter, any of our other liabilities, including liabilities relating to our convertible trust preferred securities. In addition, we may be prevented from borrowing additional amounts under our other existing credit agreements, including any retail inventory floorplan facilities.

        Lender actions in the event of default might:

•

restrict our investment in working capital and capital expenditures;



•

limit our ability to react to changes in market conditions due to a lack of resources to develop new products;



•

hamper the marketing of our products due to a lack of funds to support advertising expenditures;



•

increase our risk of not surviving an extended downturn in the business compared to other competitors whose capital structures are less highly leveraged;



•

restrict our ability to merge, acquire or sell properties; and



•

cause us to seek protection from our creditors through bankruptcy proceedings or otherwise.

Reduced availability of financing for our retailers or retail customers, particularly in our manufactured housing business, could continue to affect our sales volume.

        Our retailers, as well as retail buyers of our products, generally secure financing from third party lenders, which, in the case of manufactured housing, have been negatively affected by adverse loan experience. For example, Conseco, Associates and GreenPoint, which had been very important lenders for customers of our retailers in the 1990s, have withdrawn from the manufactured housing finance business. Reduced availability of such financing and higher interest rates are currently having an adverse effect on

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the manufactured housing business and our housing sales. If third party financing were to become unavailable or were to be further restricted, this could have a material adverse effect on our results of operations. Availability of financing is dependent on the lending practices of financial institutions, financial markets, governmental policies and economic conditions, all of which are largely beyond our control. For example, floorplan lenders have tightened credit and Conseco and Deutsche have exited that business in the manufactured housing industry. In addition, quasi-governmental agencies such as Fannie Mae and Freddie Mac, which are important purchasers of loans from financial institutions, have tightened standards relating to the manufactured housing loans that they will buy. Most states classify manufactured homes as personal property rather than real property for purposes of taxation and lien perfection and interest rates for manufactured homes are generally higher and the terms of the loans shorter than for site-built homes. In the current environment, financing for the purchase of manufactured homes is often more difficult to obtain than conventional home mortgages. There can be no assurance that affordable wholesale or retail financing for either manufactured homes or recreational vehicles will continue to be available on a widespread basis.

Our repurchase agreements with floorplan lenders could result in increased costs.

        In accordance with customary practice in the manufactured housing and recreational vehicle industries, we enter into repurchase agreements with various financial institutions pursuant to which we agree, in the event of a default by an independent retailer in its obligation to these credit sources, to repurchase product at declining prices over the term of the agreements, typically 12, 18 or 24 months. The difference between the gross repurchase price and the price at which the repurchased product can then be resold, which is typically at a discount to the original sale price, is an expense to us. Thus, if we were obligated to repurchase a large number of manufactured homes or recreational vehicles in the future, this would increase our costs, which could have a negative effect on our earnings. Tightened credit standards by lenders and more aggressive attempts to accelerate collection of outstanding accounts with retailers could result in defaults by retailers and consequent repurchase obligations on our part that may be higher than has historically been the case. During fiscal 2003, we repurchased 136 manufactured homes and 46 recreational vehicles, at an aggregate gross purchase price to us of $4.4 million without incurring a loss upon resale, compared to repurchases of 203 manufactured homes and 214 recreational vehicles, at an aggregate purchase price of $10.5 million, and incurring a $2.1 million loss from the resale of the repurchased units, for fiscal 2002.

Excess inventories of our products among retailers and repossessions could continue to have a negative effect on our sales volume and profit margins.

        The level of manufactured housing and recreational vehicle retail inventories and the existence of repossessed homes in the market can have a significant impact on manufacturing shipments and operating results, as evidenced in the manufactured housing industry during the past three years. For example, due to the rapid overexpansion of the retail distribution network in the manufactured housing industry, retailers' overstocking based on inflated expectations of future business, and readily available wholesale financing, there is currently an imbalance among the number of retail dealers, industry retail inventories and consumer demand for manufactured homes. The recent and continuing deterioration in the availability of retail financing has already extended the inventory adjustment period beyond what was originally expected. Competition from repossessed homes has further extended this inventory adjustment period. More liberal lending standards in the past resulted in loans to less-creditworthy customers, many of whom have defaulted on these loans. Lenders are repossessing the customers' homes and reselling them at prices significantly below the retail price of a new home, thereby increasing competition for manufacturers of new homes. This situation has been exacerbated by the recent bankruptcy filings of Oakwood Homes and Conseco, which has led both companies to sell large numbers of repossessed homes for cash at distressed prices at auctions or at wholesale, rather than to attempt to refinance the defaulted loans. This practice has led to an increase in the past year in the number of available repossessed homes and to a further

17

deterioration in the price of these homes. If these trends were to continue, or if retail demand were to significantly weaken further, the inventory overhang could result in intense price competition and further pressure on profit margins within the industry and could have an adverse impact on our operating results.

We may not be able to obtain financing in the future, and the terms of any future financings may limit our ability to manage our business. Difficulties in obtaining financing on favorable terms will have a negative effect on our ability to execute our business strategy.

        In addition to capital available under the senior secured credit facility and the capital provided by a cash offer of convertible trust preferred securities in the third quarter of fiscal year 2002, we anticipate that we may be required to seek additional capital in the future, including financing necessary to support the growth of our HomeOne Credit Corp. subsidiary and to finance capital expenditure needs in our recreational vehicle business. There can be no assurance that we will be able to obtain future financings on acceptable terms, if at all.

        Further, on November 16, 2001, Moody's Investors Services, Inc. announced that it had lowered its rating on our senior implied debt from B1 to B2, and on our convertible trust preferred securities from B3 to Caa3, with a negative rating outlook. At the time, Moody's stated that its action reflected the continuing erosion in our operating performance due to a protracted decline in the manufactured housing industry and a slowdown in the recreational vehicle business, and that the negative outlook reflected the highly uncertain intermediate-term outlook for demand in the manufactured housing and recreational vehicle markets. On December 6, 2001, Standard and Poor's announced that it had lowered our corporate credit rating from BB+ to BB–, and the rating on our convertible trust preferred securities from B+ to D, with a negative rating outlook. At the time, Standard and Poor's cited our materially weakened business position due to a continuation of very competitive business conditions in both our manufactured housing and recreational vehicle business segments, and our constrained financial profile, as reflected by the granting of security to our lenders and the discontinuation and deferral of our common dividends and existing convertible trust preferred security distributions, respectively. Standard and Poor's attributed its negative outlook to the prospects for continued weak performance within both of our primary business segments and the vulnerability of our corporate credit ratings to further downgrades. These actions could result in any capital that we might raise in the future being more expensive or more difficult to raise.

        If we are unable to obtain alternative or additional financing arrangements in the future, or if we cannot obtain financing on acceptable terms, we may not be able to execute our business strategies. Moreover, the terms of any such additional financing may restrict our financial flexibility, including the debt we may incur in the future, or may restrict our ability to manage our business as we had intended.

We may incur losses related to our HomeOne Credit finance subsidiary as we build its loan portfolio, including losses relating to defaults and delinquencies and we may be required to bear a greater portion of that risk than our competitors if we are unable to securitize our loans in the secondary market.

        We have limited recent experience operating a consumer finance business. We previously originated loans for our recreational vehicle business through our Fleetwood Credit Corp. subsidiary, but we sold that subsidiary in 1996. We have never previously originated or serviced manufactured housing loans. Our ability to build our loan portfolio in connection with this new consumer finance business depends in part upon our ability to compete with established lenders, and to effectively market our consumer finance services to buyers of our manufactured homes, in the same unfavorable economic conditions that have caused experienced consumer finance companies to exit the manufactured housing business.

        We may incur losses as we develop our loan portfolio and integrate our consumer finance business into our existing operations. Many purchasers of manufactured homes may be deemed to be relatively high credit risks due to various factors, including the lack of or impaired credit histories and limited financial

18

resources. Accordingly, the loans we originate may bear relatively high interest rates and may involve higher than average default and delinquency rates and servicing costs. In the event that we foreclose on delinquent loans, our ability to sell the underlying collateral to recover or mitigate our loan losses will be subject to market valuations of the collateral. These valuations may be affected by factors such as the amount of available inventory of manufactured homes in the market, the availability and terms of consumer financing and general economic conditions.

        Moreover, due to our limited operating history and non-participation in the securitization market to date, we may be unable to sell our loans in the asset-backed securities market. Currently the asset-backed securities market for manufactured housing-related consumer loans is uncertain as a result of poor performance of such securities in recent years. As a result, and due to our recent entry into the business, we may have difficulty accessing that market. Even if we are able to securitize our loans, they may receive lower ratings than those of our competitors that have an established consumer finance record. As a result, we may be required to bear a larger portion of the risk of loss on the financing agreements and may pay higher interest rates or provide greater over-collateralization than our competitors. Alternatively, if we should endeavor to sell the loans as whole loans, our lack of experience in the whole loan sale market may impact the proceeds we receive from whole loan sales transactions. These conditions could negatively affect our cash flow or result in losses at our consumer finance business.

        Prepayments of our managed receivables, whether due to refinancing, repayments or foreclosures, in excess of management's estimate could result in reduced future cash flow due to the resulting loss of net interest income on such prepaid receivables. Prepayments can result from a variety of factors, all of which are beyond our control, including changes in interest rates and general economic conditions.

        The foregoing risks become more acute in any economic slowdown or recession. Periods of economic slowdown or recession may be accompanied by decreased demand for consumer credit and declining asset values. Delinquencies, foreclosures and losses generally increase during economic slowdowns or recessions. Loss of employment, increases in cost-of-living, increases in rents on leased land for homes in manufactured housing communities or other adverse economic conditions would likely impair the ability of our consumer borrowers to meet their payment obligations, which could impair our ability to continue to fund our finance operations.

The manufactured housing and recreational vehicle industries are highly competitive and some of our competitors have stronger balance sheets and cash flow, as well as greater access to capital, than we do. The relative strength of our competitors could result in decreased sales volume and earnings for us, which could have a material adverse effect on our results of operations and financial condition.

        The manufactured housing industry is highly competitive. As of December 31, 2002, there were approximately 66 manufacturers of homes and fewer than 5,000 retail sales centers. Based on retail sales, the 10 largest manufacturers accounted for approximately 79 percent of the retail manufactured housing market in calendar 2002, including our sales, which represented 16.9 percent of the market. The manufactured housing retail market is much more fragmented, with the five largest companies accounting for approximately 24 percent of the market in calendar 2002.

        Competition with other housing manufacturers on both the manufacturing and retail levels is based primarily on price, product features, reputation for service and quality, retail inventory, merchandising, and the terms and availability of wholesale and retail customer financing. Growth in manufacturing capacity during the 1990s increased competition at both the manufacturing and retail levels and resulted in both regional and national competitors increasing their presence in the markets in which we compete. Overproduction of manufactured housing in these regions could lead to greater competition and result in decreased margins, which could have a material adverse effect on our results of operations.

        In addition, manufactured homes compete with new and existing site-built homes, apartments, townhouses and condominiums. The supply of such housing has increased in recent years with the

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increased availability of construction financing and low-rate mortgage financing, reducing the demand for manufactured homes.

        Manufactured homes also compete with resales of homes that have been repossessed by financial institutions as a result of credit defaults by dealers or customers. Repossession rates for manufactured homes have increased in recent years and there can be no assurance that repossession rates will not continue to increase, thereby adversely affecting our sales volume and profit margins.

        The manufactured housing industry, as well as the site-built housing development industry, has experienced consolidation in recent years, which could result in the emergence of competitors, including developers of site-built homes, that are larger than we are and have greater financial resources than we have. For example, the large conglomerate Berkshire Hathaway recently agreed to acquire our competitor, Clayton Homes. If this transaction is consummated, this could strengthen competition in the industry and adversely affect our business.

        The recreational vehicle market is also highly competitive. Sales from the five largest manufacturers represented approximately 65 percent of the retail market in calendar 2002, including our sales, which represented 18.2 percent of the market. Competitive pressures, especially in the entry-level segment of the recreational vehicle market for travel trailers, have resulted in a reduction of profit margins. Sustained increases in competitive pressures could have a material adverse effect on our results of operations. There can be no assurance that existing or new competitors will not develop products that are superior to our recreational vehicles or that achieve better consumer acceptance, thereby adversely affecting our sales volume and profit margins.

Our businesses are cyclical and this can lead to fluctuations in our operating results.

        The industries in which we operate are highly cyclical and there can be substantial fluctuations in our manufacturing shipments, retail sales and operating results, and the results for any prior period may not be indicative of results for any future period. Companies within both the manufactured housing and recreational vehicle industries are subject to volatility in operating results due to external factors such as economic, demographic and political changes. Factors affecting the manufactured housing industry include:

•

interest rates and the availability of financing for manufactured housing products, both of which have had a particularly adverse effect on our business in the past three fiscal years;



•

defaults by retail customers resulting in repossessions, which have also had a particularly adverse effect on our business in the past three fiscal years;



•

inventory levels, which have also negatively impacted our business;



•

availability of manufactured home sites;



•

unemployment trends;



•

international tensions and hostilities;



•

consumer confidence; and



•

general economic conditions.

        Factors affecting the recreational vehicle industry include:

•

overall consumer confidence and the level of discretionary consumer spending, which had an adverse effect on our business in calendar years 2001 and 2002 and may do so again depending on consumer reaction to economic uncertainty and potential volatility in the stock market;



•

general economic conditions;

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•

interest rates;



•

international tensions and hostilities;



•

employment trends; and



•

fuel availability and prices.

        We cannot provide assurance that the factors that are currently adversely affecting our business will not continue to have an adverse effect beyond fiscal 2003.

Our businesses are seasonal, and this leads to fluctuations in sales, production and operating results.

        We have experienced, and expect to continue to experience, significant variability in sales, production and net income as a result of seasonality in our businesses. Demand in both the manufactured housing and recreational vehicle industries generally declines during the winter season, while sales and profits are generally highest during the spring and summer months. In addition, unusually severe weather conditions in some markets may delay the timing of purchases and shipments from one quarter to another.

We have replaced some of our manufactured housing retailers, and in the past some of our retailers have been acquired. This may lead to a decrease in our sales volume and a loss of market share.

        Our market share in the manufactured housing market, based on unit shipments, declined from 21.6 percent in calendar 1994 to 14.9 percent in calendar 2002. The reason for this change was, in part, our reduction of the number of independent retail distribution points from approximately 1,800 to 1,100 during the period from January 1994 through April 27, 2003, in order to concentrate on more sophisticated retailers that share our approach towards merchandising and customer satisfaction. We have also, from time to time in the past, lost significant retailers that were acquired by competitors. Such acquisitions can reduce our retail distribution network and market share, as the competitors may choose not to sell our products. There can be no assurance that we will be able to adequately replace retailers acquired by competitors if they cease selling our manufactured homes, or that we will be able to maintain our sales volume or market share in these competitive markets.

We established a network of Company-owned retail stores that has required significant restructuring and downsizing, but our efforts may not succeed in making it profitable.

        We responded to the retail consolidation in the manufactured housing sector, beginning in fiscal 1998, by forming our own retail business and establishing a network of Company-owned stores to replace distribution points lost to competitors. We made numerous acquisitions between June 1998 and August 2001, the largest of which was the purchase of HomeUSA in August 1998, comprising 65 stores. We also originated more than 100 "greenfield" locations, which are locations that we have started ourselves rather than through acquisition of existing operations. The combination of the two strategies carried us to a high of 244 stores in November 2000. Since its inception, this business segment has operated at a loss, and as the retail market for manufactured housing has slowed, the losses have grown. During fiscal 2002, we implemented a downsizing strategy to better match our retail capacity to market demand. By assigning management of some of our locations to third parties, and closing and selling other locations, we reduced the number of stores that we operate to 135 at the end of fiscal 2003. These actions have resulted in goodwill impairment and restructuring charges and other costs, including severance payments to employees. Given existing industry conditions and the performance of this new business to date, there can be no assurance that we will be able to complete the restructuring of our retail network as a successful and profitable part of our manufactured housing group in the future. In addition, we may have to undergo additional downsizing of this business depending on the length of time that the current factors affecting it continue to have a negative impact.

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Changes in consumer preferences for our products or our failure to gauge those preferences could lead to reduced sales and additional costs.

        We believe that historical consumer preferences for our products in general, and recreational vehicles in particular, are likely to change over time. We further believe that the introduction of new features, designs and models will be critical to the future success of our recreational vehicle operations. Delays in the introduction of new models or product features, or a lack of market acceptance of new features, designs or models, could have a material adverse effect on our business. For example, we may incur significant additional costs in designing or redesigning models that are not accepted in the marketplace. Products may not be accepted for a number of reasons, including changes in consumer preferences, or our failure to properly gauge consumer preferences. We may also experience production difficulties, such as inefficiencies in purchasing and increased labor costs, as we introduce new models. We cannot be certain that new product introductions will not reduce revenues from existing models and adversely affect our results of operations. There can be no assurance that any of these new models or products will be introduced to the market on time or that they will be successful when introduced.

If the frequency and size of product liability and other claims against us, including wrongful death, rises, our business, results of operations and financial condition may be harmed.

        We are frequently subject, in the ordinary course of business, to litigation involving products liability and other claims, including wrongful death, against us related to personal injury and warranties. We partially self-insure our products liability claims and purchase excess products liability insurance in the commercial insurance market. We cannot be certain that our insurance coverage will be sufficient to cover all future claims against us. Any increase in the frequency and size of these claims, as compared to our experience in prior years, may cause the premiums that we are required to pay for insurance to rise significantly. It may also increase the amounts we pay in punitive damages, which are typically not covered by our insurance. We are also presently party to actions in litigation that the plaintiffs are seeking to have certified as class actions, and actions where a subclass of plaintiffs has been certified. If any of these actions is certified as a class action and decided in a manner adverse to us, the resulting liability may be significant. These factors may have a material adverse effect on our results of operations and financial condition. In addition, if these claims rise to a level of frequency or size that is significantly higher than similar claims made against our competitors, our reputation and business will be harmed.

When we introduce new products we may incur expenses that we did not anticipate, such as recall expenses, resulting in reduced earnings.

        The introduction of new models is critical to our future success, particularly in our recreational vehicle business. We have additional costs when we introduce new models, such as initial labor or purchasing inefficiencies, but we may also incur unexpected expenses. For example, we may experience unexpected engineering or design flaws that will force a recall of a new product. In addition, we may make business decisions that include offering incentives to stimulate the sales of products not adequately accepted by the market, or to stimulate sales of older or obsolete models. The costs resulting from these types of problems could be substantial and have a significant adverse effect on our earnings.

Fuel shortages, or higher prices for fuel, could have a negative effect on sales of recreational vehicles.

        Gasoline or diesel fuel is required for the operation of motor homes and most vehicles used to tow travel trailers and folding trailers. Particularly in view of increased international tensions, there can be no assurance that the supply of these petroleum products will continue uninterrupted, that rationing will not be imposed or that the price of or tax on these petroleum products will not significantly increase in the future. Increases in gasoline prices and speculation about potential fuel shortages have had an unfavorable effect on consumer demand for recreational vehicles from time to time in the past, which then had a material adverse effect on our sales volume, and may do so in the future.

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If we do not successfully upgrade our computer systems, we may lose sales to those of our competitors that have more sophisticated and better integrated systems than we do.

        Our computer systems are not as sophisticated as those that are currently available, and are not fully integrated. We are in the process of upgrading our computer systems, but we are still in the relatively early stages of this process. Competitors with more sophisticated and fully integrated computer systems may have efficiencies that will lead to lower costs and faster delivery schedules, and that may make it difficult for us to compete with them. We will be required to expend significant resources to fully implement a system suitable for a business as large and complex as ours. It is possible that the cost of building a computer system of this nature will be higher than budgeted, and that the system, when completed, will not perform as originally planned. This would increase our costs and disrupt our business.

The market for our manufactured homes is heavily concentrated in the southern part of the United States, and a continued decline in demand in that area could have a material negative effect on sales.

        The market for our manufactured homes is geographically concentrated, with the top 15 states accounting for over 70 percent of the industry's total retail sales in calendar 2002. The southern United States accounts for a significant portion of our manufactured housing sales. As is the case with our other markets, we have experienced a downturn in economic conditions in the southern states, and a continuing downturn in this region that is worse than that of other regions could have a disproportionately material adverse effect on our results of operations. There can be no assurance that the demand for manufactured homes will not continue to decline in the southern United States or other areas in which we experience high product sales and any such decline could have a material adverse effect on our results of operations.

Changes in zoning regulations could affect the number of sites available for our manufactured homes, and zoning regulations could affect the market for our new products, both of which could affect our sales.

        Any limitation on the growth of the number of sites available for manufactured homes, or on the operation of manufactured housing communities, could adversely affect our sales. In addition, new product opportunities that we may wish to pursue for our manufactured housing business could cause us to encounter new zoning regulations and affect the potential market for these new products. Manufactured housing communities and individual home placements are subject to local zoning ordinances and other local regulations relating to utility service and construction of roadways. In the past, there has been resistance by property owners to the adoption of zoning ordinances permitting the location of manufactured homes in residential areas, and we believe that this resistance has adversely affected the growth of the industry. The inability of the manufactured home industry to effect change in these zoning ordinances could have a material adverse effect on our results of operations and we cannot be certain that manufactured homes will receive more widespread acceptance or that additional localities will adopt zoning ordinances permitting the location of manufactured homes.

Increased costs, including costs of component parts and labor costs, potentially impacted by changes in labor rates and practices, could reduce our operating income.

        Our results of operations may be significantly affected by the availability and pricing of manufacturing components and labor, as well as changes in labor rates and practices. Although we attempt to offset the effect of any escalation in components and labor costs by increasing the sales prices of our products, we cannot be certain that we will be able to do so without it having an adverse impact on the competitiveness of our products and, therefore, our sales volume. Changes in labor rates and practices, including changes resulting from union activity, could significantly affect our costs and thereby reduce our operating income. If we cannot successfully offset increases in our manufacturing costs, this could have a material adverse impact on our margins, operating income and cash flows. Even if we were able to offset higher manufacturing costs by increasing the sales prices of our products, the realization of any such increases

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often lags behind the rise in manufacturing costs, especially in our manufactured housing operations, due in part to our commitment to give our retailers price protection with respect to previously placed customer orders.

We depend on a small group of suppliers for some of our components, and the loss of any of these suppliers could affect our ability to obtain components at competitive prices, which would decrease our margins.

        Most recreational vehicle and manufactured home components are readily available from a variety of sources. However, a few components are produced by only a small group of quality suppliers that have the capacity to supply large quantities on a national basis. Primarily, this occurs in the case of gasoline-powered motor home chassis, where Workhorse Custom Chassis is the dominant supplier. Shortages, production delays or work stoppages by the employees of such suppliers could have a material adverse effect on our sales. If we cannot obtain an adequate chassis supply, this could result in a decrease in our sales and earnings.

The market price of our common stock has been depressed, and may decline further. We expect the trading price of our common stock to be highly volatile.

        The market price of our common stock has fluctuated significantly and generally declined, from a closing price of $47.44 per share on March 6, 1998, to $2.57 per share on August 9, 2002. The market price of our common stock may continue to be volatile as a result of a number of factors. Factors that could cause fluctuations in the market price of our common stock include:

•

actual and anticipated variations in our operating results;



•

general economic and market conditions;



•

interest rates;



•

general conditions, including changes in demand, in the manufactured housing and recreational vehicle industries;



•

future issuances of our common stock, including issuances of common stock in connection with financing activities, in payment of distributions on our convertible trust preferred securities, conversion of our convertible trust preferred securities, or upon exercise of stock options, any of which could have a dilutive effect on our earnings per share and otherwise cause the market price of our common stock to decline;



•

perceptions of the strengths and weaknesses of the manufactured housing and recreational vehicle industries;



•

our ability to pay principal and interest on our debt when due;



•

developments in our relationships with our lenders, customers, and/or suppliers;



•

announcements of alliances, mergers or other relationships by or between our competitors and/or our suppliers and customers;



•

announcements and the introduction of new products and models by us or our competitors and the success or failure of these new products and models;



•

developments related to regulations, including zoning regulations; and



•

further downgrades of our corporate credit ratings of our senior implied debt or of specific securities.

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        We expect this volatility to continue in the future. In addition, in recent years the stock market in general has experienced extreme price and volume fluctuations that have affected the manufactured housing and recreational vehicle industries and that may be unrelated to the operating performance of the companies within these industries. These broad market fluctuations may also adversely affect the market price of our common stock.

We do not pay dividends on our common stock, and under the terms of the documents governing our 6% convertible trust preferred securities, we are currently deferring payment of dividends on those securities.

        On October 30, 2001, we elected to defer distributions due to be made on November 15, 2001, on our then outstanding 6% convertible trust preferred securities and we have subsequently elected to defer all subsequent quarterly distributions to date. In addition, with respect to our newly issued series of 9.5% convertible trust preferred securities, we elected to pay distributions due on February 15, 2002, and May 15, 2002, in shares of our common stock. In light of our business environment and recent operating results, we currently anticipate that we will find it prudent to defer distributions on our existing 6% convertible trust preferred securities for the foreseeable future, subject to the terms in the governing documents. In addition, we are permitted under the terms of our 9.5% convertible trust preferred securities to defer dividends on these securities commencing February 15, 2004, and we may elect to do so at that time. The deferral of distributions on our existing preferred securities prevents us from declaring or paying any dividends on our common stock during the period of such deferrals. Additionally, even if we choose to resume cash distributions on our 6% convertible preferred securities in the future, we may choose not to pay dividends on our common stock.

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Item 2. Properties

        We own our executive offices, which are located at 3125 Myers Street in Riverside, California. The corporate administrative offices, which occupy 201,000 square feet, are situated on parcels of land owned by us, totaling approximately 18.1 acres. Our manufacturing regional, sales and service offices are located in Arizona, California, Indiana, North Carolina, Tennessee, Texas and Virginia and occupy a total of 69,000 square feet of leased office space. The following table describes additional property and buildings utilized for manufacturing, research and development and administrative purposes as of April 27, 2003. For the most part, these properties and buildings are owned by the Company, except as noted below, and we believe they are suitable and adequate for our purposes. We have granted a security interest in most of these properties to our lenders under the senior secured credit facility.

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(1)

Manufacturing facility activated in fiscal 2003.

(2)

Includes 4.0 acres and a 27,100 square foot building leased from an unaffiliated third party.

(3)

Includes a 40,000 square foot building leased from an unaffiliated third party.

Retail Properties

        At the end of fiscal 2003, we operated 135 retail sales locations in 21 states, of which 17 are owned and 118 are leased from third parties. The current annual lease obligation related to these properties is approximately $5 million.

Idle Facilities

        There were 22 idle manufacturing facilities at the end of fiscal 2003 and 21 at the end of fiscal 2002. During fiscal 2003, active manufacturing capacity for the manufactured housing group was reduced by the closure of facilities in Fitzgerald, Georgia; Lumberton, North Carolina; Wichita Falls, Texas; Waco, Texas, and two facilities in Westmoreland, Tennessee. Housing Group idle facilities activated during the year were Alma, Georgia; Garrett, Indiana; and Elizabethtown, Pennsylvania. The recreational vehicle group's capacity was increased by the activation of an idle motor home facility in Decatur, Indiana. An idle housing facility in Mooresville, North Carolina, and an idle travel trailer facility in Riverside, California, were sold during the year. Undeveloped land parcels associated with an idle travel trailer facility in Omaha, Nebraska, and an idle motor home facility in Chico, California, were also sold.

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        The following Company-owned manufacturing facilities were not in operation as of April 27, 2003.

(1)

Manufacturing facility partially used for housing service operations.

(2)

Manufacturing facility deactivated in fiscal 2003.

(3)

Lease to third party ceased in fiscal 2003.

(4)

Manufacturing facility sold subsequent to fiscal 2003.

Item 3. Legal Proceedings

        We previously reported that we are a defendant in a class action lawsuit in the case of McManus v. Fleetwood Enterprises, Inc., which was filed on April 9, 1999, and is pending in the U. S. District Court for the Western District of Texas, San Antonio Division. The complaint attempts to establish a class of purchasers of our Class A motor homes for the model years 1994-1999 and makes claims with respect to the alleged breach of express and implied warranties, negligent misrepresentation, fraudulent concealment, and violation of various state statutes in connection with the ability of such motor homes to tow an automobile or other vehicle or cargo. On September 24, 2001, the Court certified a subclass of Texas residents who purchased a subject motor home from a Texas dealer and who still own the motor home. We appealed this certification to the Fifth Circuit Court of Appeals on October 4, 2001, and on February 14, 2003, the Fifth Circuit ruled that the trial court had erred in certifying a State sub-class based upon fraud and/or misrepresentation, but confirmed a class based upon the implied warranty of merchantability. On May 1, 2003, we reached a preliminary settlement agreement with representatives of the class, which received preliminary approval from the Court on June 25, 2003. A hearing for final approval has been scheduled for September 30, 2003. Pursuant to the preliminary settlement agreement, we would pay attorneys' fees in the amount of $2.85 million in settlement of the case plus $250 to each

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member of the class who still owns their vehicle and who can demonstrate that they have purchased a supplemental braking system or intend to purchase a supplemental braking system.

        We also previously reported that on July 29, 2002, a purported class action entitled Fairley v. Fleetwood Enterprises, Inc., was filed in Los Angeles, California, Superior Court, Central District, alleging fraud and misrepresentation in the marketing of Fleetwood motor homes from model years 1994 through 2000. The complaint contends that Fleetwood misrepresented the towing capacities of its motor homes without informing consumers of the need for auxiliary brakes on the towed vehicle, and seeks a variety of damages and injunctive relief. This matter is virtually the same as the McManus lawsuit referenced above, and the preliminary settlement in the McManus case will also settle the Fairley case.

        On January 29, 2002, a purported class action lawsuit was filed by 16 individual plaintiffs against us and 13 of our subsidiaries, along with 253 other companies in the manufactured housing industry. The matter, designated Matte v. Sunshine Homes, Inc., was filed in the 27^th Judicial District Court, St. Landry Parish, Lafayette, Louisiana, and purports to be a class action consisting of all individuals in the United States who purchased a manufactured home built to the federal Department of Housing and Urban Development (HUD) construction and safety standards. HUD regulates all manufactured housing in the United States. The complaint alleges breach of warranty claims and various personal injuries and property damages resulting from water infiltration, mold and mildew. On February 28, 2002, the matter was removed to the United States Federal District Court, Western District of Louisiana, Lafayette-Opelousas Division. Currently, several motions are pending before the Court. We deny the material allegations in the complaint and plan to assert a vigorous defense to that end. It is not possible at this time to properly assess the risk of an adverse verdict or the magnitude of possible exposure.

        On May 29, 2003, we filed a complaint in state court in Kansas, in the 18^th Judicial District, District Court, Sedgewick County, Civil Department, against The Coleman Company, Inc. in connection with a dispute over the use of the "Coleman" brand name. Our Folding Trailer Division has licensed the name since 1989, when we bought Coleman Recreation Vehicles, Inc. Coleman recently notified us that it now has a different interpretation of the manner in which royalties were intended to be calculated under the license agreement. We had entered into discussions with Coleman to address these concerns in good faith, but on May 12, 2003, Coleman notified us that it had terminated the agreement and ordered us to cease using the name. Our lawsuit seeks declaratory and injunctive relief. On June 6, 2003, Coleman filed an answer and counterclaimed against us alleging various counts, including breach of contract and trademark infringement. A hearing on the matters was held on June 17, 18 and 19. On July 11, 2003, the Court issued an order stating that the rights and obligations of the parties should be resolved at a trial and not by injunctive relief. We intend to aggressively pursue this litigation and provide a vigorous defense to Coleman's counterclaim. It is not possible at this time to properly assess the risk of an adverse verdict or the magnitude of the possible exposure.

        We are also subject to other litigation from time to time in the ordinary course of business. Our liability under some of this litigation is covered in whole or in part by insurance. Although the amount of any liability with respect to such claims and litigation over and above our insurance coverage cannot currently be determined, in the opinion of our management such liability is not expected to have a material adverse effect on our financial condition or results of operations.

Item 4. Submission of Matters to a Vote of Security Holders

        No matters were submitted to a vote of the shareholders of the Company during the fourth quarter of fiscal year 2003.

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Executive Officers of the Registrant

        The executive officers of the Company are set forth below:

        Edward B. Caudill was named to his current position in August 2002. Mr. Caudill has 25 years of management experience with leading manufacturers and distributors. He was named a Vice President of PACCAR, Inc. in 1996 and was General Manager of its Kenworth Truck Company, a manufacturer of heavy-duty on- and off-highway trucks and medium-duty trucks, from 1997 until he joined Fleetwood.

        Boyd R. Plowman was named Senior Vice President and Chief Financial Officer in October 2000, and was promoted to Executive Vice President in December 2001. He rejoined the Company in 1997 as Vice President-Retail Housing as well as the Senior Vice President and Chief Financial Officer of its subsidiary, Fleetwood Retail Corp. Prior to that, he was President and Chief Executive Officer of Lee & Associates Commercial Real Estate Services/Inland Empire from 1990 to 1997. He first joined the Company in 1969, and had been Chief Financial Officer for 14 years before leaving Fleetwood in 1987.

        Charles A. Wilkinson has been with the Company continuously since 1996 and was appointed to his current position in September 2002, after serving as Executive Vice President-Operations for one year. Previously, he had been Senior Vice President-Housing Group, a position to which he was appointed in January 2000. Earlier positions included Vice President-Housing Western Region and Director of Operations-Housing Central Region. He was employed by the Company prior to 1996 for a total of 11 years in several manufactured housing management positions.

        Christopher J. Braun joined the Company in May 2003. Until he joined Fleetwood, he had been employed at PACCAR, Inc. since 1987. From 2001 to 2003, he was Assistant General Manager for the Kenworth Truck Division. His responsibilities included sales and marketing for the North American organization, as well as operations. He served as the Director of Operations for Kenworth from 1999 to 2001, with full responsibility for four Kenworth Truck manufacturing plants in North America.

        Scott W. Grafft joined Fleetwood in November 2002. Previously, he had served as Executive Vice President—Marketing and Sales for Delphion, Inc. since January 2002. In 1998, he joined Flycast as vice president of direct marketing. One year later Flycast was rolled into Engage, Inc., a leading enterprise marketing software company, where he served as Senior Vice President of the global initiatives group from 1999 to 2001. Before joining Engage, he was Executive Vice President at Foote, Cone & Belding's direct marketing group from 1997 to 1998, prior to which he served as Senior Vice President of the custom marketing group at Draft Worldwide from 1991 to 1997.

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        Roger L. Howsmon joined Fleetwood in June 2003. From 2000 to 2003, he was Chairman and Chief Executive Officer of Global Promo Group, Inc., a holding company specializing in mergers and acquisitions in the promotional products segment of the advertising industry. Previously, he was a Consultant in private equity markets with Aurora Capital Partners from 1998 to 2000, and he served as Chairman and Chief Executive Officer at Sierra Detroit Diesel Allison from 1992 to 1998.

        Forrest D. Theobald was named Vice President, General Counsel and Secretary in April 2001, and was promoted to Senior Vice President in December 2001. He had served previously as Associate General Counsel and Director-Corporate Real Estate since 1980. He joined Fleetwood's legal department in 1975 as Assistant General Counsel.

        Ronald L. Brewer was promoted to his current position in October 2001. He joined the Company in 1973 as a Trainee/Assistant Production Manager and held various managerial positions until 1989, at which time he left the Company to become Vice President—General Manager for Modular Structures International, Inc. He rejoined the Company in 1998 as Director-Manufacturing for the Western Region.

        J. Wesley Chancey joined the Company in 1988 as a District Sales Manager. He served as Central Region Vice President from 1997 until he was promoted to his current position in February 2001. Including his experience at Fleetwood, he has worked in the manufactured housing industry for 29 years.

        John (Jack) H. Darnall Jr. joined the Company in 1998 as Senior Vice President for the Central Region and was promoted to his current position in March 2001. Prior to joining the Company, he was President of Pulte Home Corporation's Manufactured Housing Group, Expression Homes and Stonebridge Ranch Development Corporation.

        John C. Draheim joined the Company in 1997 as a Regional Sales Director for the Motor Home Division and was promoted to his current position in November 2000. Prior to joining Fleetwood, he had 15 years of experience in automotive sales and marketing with Kia, Volkswagen and Chrysler.

        Lyle N. Larkin joined the Company in 1979 as a Controller in the RV Group and has served in his current position of Treasurer since 1990. He was promoted to Vice President in July 1998.

        James F. Smith joined Fleetwood in 1977 as Assistant Controller in the Housing Group. He was named RV Group Controller in 1987, and appointed to his current position as Vice President-Controller and Chief Accounting Officer in February 2001.

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PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

        The following table lists the high and low intraday sales prices for our common stock during the past two fiscal years as reported on the New York Stock Exchange Composite Tape, along with information on dividends declared per share during the same periods. Our common stock is listed on the New York and the Pacific stock exchanges and trades on various regional exchanges (Ticker Symbol: FLE). Call and put options are traded on the American Stock Exchange and the Chicago Board Options Exchange.

        On July 14, 2003, there were approximately 1,200 shareholders of record of our common stock.

Dividend Policy

        On October 30, 2001, the Company announced that it would discontinue the payment of dividends after the previously declared dividend payment on November 14, 2001. Dividends until such time had been paid quarterly. Any future resumption of dividends would be at the discretion of our Board of Directors, and is not currently contemplated.

Equity Compensation Plan Information

        The following table provides information as of April 27, 2003, for compensation plans under which equity securities may be issued.

(1)

Includes securities available for future issuance under shareholder approved compensation plans other than upon the exercise of an option, warrant or right, as follows:

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The Company's Amended and Restated 1992 Stock-Based Incentive Compensation Plan presently provides that awards may be granted in the form of shares of common stock to replace all or a portion of compensation (other than base salary) that could otherwise become payable to any employee. A limit of 990,000 shares of common stock is imposed on stock awards. In addition, the Plan provides that awards may be made in shares of restricted stock, up to an aggregate of 600,000 shares.

(2)

Reflects warrants granted in November 2001 to Bain & Company, Inc. as partial consideration for business consulting services. The warrants to purchase up to 150,000 shares of Fleetwood common stock may be exercised at $14.45 per share, through January 3, 2005. Shares issuable upon exercise of the warrants have been registered for resale.

(3)

Reflects restricted stock granted as an inducement to becoming an employee of the Company to Edward B. Caudill effective August 12, 2002.

(4)

Reflects stock options awarded as an inducement to becoming an employee of the Company to Edward B. Caudill effective August 12, 2002.

Material Features of Equity Compensation Plans Not Approved by Shareholders

        The Company issued warrants in November 2001 to Bain & Company, Inc. as partial consideration for business consulting services. The warrants to purchase up to 150,000 shares of Fleetwood common stock may be exercised at $14.45 per share, through January 3, 2005. Shares issuable upon exercise of the warrants have been registered for resale.

        The Company granted 147,860 shares of restricted stock, pursuant to the Edward B. Caudill Restricted Stock Plan and Agreement effective August 12, 2002, to Edward B. Caudill as an inducement to his becoming an employee of the Company. Mr. Caudill became President and Chief Executive Officer of Fleetwood on that date. Good and adequate consideration was provided by Mr. Caudill in the amount of the par value of the stock, or $1 per share, insofar as he had commenced his employment with the Company, terminated his employment with his previous employer and forfeited significant benefits with his former employer. Pursuant to the Agreement, the shares may not be sold, assigned, transferred or otherwise disposed of until they vest in accordance with the schedule described in this paragraph. In addition, unvested shares will be repurchased by the Company at no cost if Mr. Caudill is terminated other than in a Qualifying Termination, as defined in the Agreement. In the event of a Qualifying Termination, the restrictions lapse. The shares vest according to the following schedule: 96,109 on the first anniversary of the effective date; 44,358 on the second anniversary; and 7,393 on the third anniversary.

        The Company granted options to acquire 352,698 shares of common stock, pursuant to the Edward B. Caudill Stock Option Plan and Agreement, effective August 12, 2002, to Edward B. Caudill as an inducement to his becoming an employee of the Company. Mr. Caudill became President and Chief Executive Officer of Fleetwood on that date. Pursuant to the Agreement, the options generally may not be transferred except in limited circumstances for estate planning purposes. The options vest according to the following schedule: one-third on the first anniversary of the effective date; one-third on the second anniversary; and one-third on the third anniversary. The exercise price is $2.57 per share, and the options expire if unexercised on August 12, 2012. In the event of a change in control, the options may be exercised in full if adequate provision is not otherwise made for replacement awards or other consideration.

Sale of Unregistered Securities

        The 147,860 shares of restricted stock issued to Mr. Caudill pursuant to the Edward B. Caudill Restricted Stock Plan and Agreement described above have not been registered under the Securities Act of 1933. Transfer of the shares is subject to the restrictions and limitations under that Act. The issuance of the shares was exempt from registration pursuant to Section 4(2) of the Act as a transaction not involving any public offering.

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Item 6. Selected Financial Data

Five-Year Summary of Selected Financial Data

34

(1)

The effect of the distributions on preferred securities was anti-dilutive in fiscal years 2003, 2002 and 2001 and was, therefore, not added back to determine diluted earnings (loss).

(2)

Adjusted EBITDA is defined as operating income (loss) plus depreciation and amortization in accordance with the definition per our credit agreement. Adjusted EBITDA is a significant covenant of the Company's senior credit agreement, a default under which could have a material adverse effect on the Company and its operations. Management believes adjusted EBITDA to be a meaningful indicator of our performance that provides useful information to investors regarding our financial condition and results of operations. Presentation of adjusted EBITDA is consistent with our past practice, and adjusted EBITDA is a non-GAAP financial measure commonly used in our industries and by financial analysts and others who follow the industries to measure operating performance and to determine a valuation for companies in our industries. While management considers adjusted EBITDA to be an important measure of comparative operating performance, it should be considered in addition to, but not as a substitute for, operating income, net income and other measures of financial performance reported in accordance with GAAP. Adjusted EBITDA does not reflect cash available to fund cash requirements. Not all companies calculate adjusted EBITDA in the same manner and the measure as presented may not be comparable to similarly titled measures presented by other companies. Included in adjusted EBITDA were non-cash charges for goodwill impairment of $165.9 million in fiscal 2001 and other asset impairment charges of $1.2 million, $12.5 million and $22.7 million in fiscal years 2003, 2002 and 2001, respectively.

The following table reconciles adjusted EBITDA to net income (loss):

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Selected Segment Data
(Dollars in thousands)