Fleetwood Reports Results for First Quarter Fiscal 2007

RIVERSIDE, Calif., Sept. 7 -- Fleetwood Enterprises, Inc. announced today results for the first quarter of fiscal 2007, which ended July 30, 2006.

The Company reported income from continuing operations of $0.7 million, or $0.01 per diluted share, for the 13-week first quarter of fiscal 2007 compared to a loss from continuing operations of $17.4 million, or $0.31 per diluted share, for the 14-week period ended July 31, 2005. Results for the quarter included a pretax gain of $18.5 million and a related deferred tax charge of $3.6 million that were generated by the repurchase of one million shares of Fleetwood's 6% convertible trust preferred securities in July 2006. Results for the comparable quarter of the prior year included a non-cash charge of $10.5 million, related to an adjustment to the deferred tax valuation allowance, due to an increase in market value of the 6% securities at that time.

The net loss for the fiscal 2007 first quarter, including discontinued operations, was $0.4 million or $0.01 per diluted share, compared with a net loss of $29.6 million, or $0.53 per diluted share, for the first quarter of last year. The loss from discontinued operations in the first quarter of fiscal 2007 was $1.1 million, compared with a loss from discontinued operations of $12.1 million for the 2006 period. Fleetwood's manufactured housing retail and financial services businesses were sold during the summer of 2005.

Revenues from continuing operations totaled $529.8 million for the fiscal 2007 first quarter, down 14 percent from $616.5 million in the prior year. Revenues declined 12 percent for the RV Group, 29 percent for the Housing Group and 6 percent in the Supply Group. The lower revenues produced an operating loss of $8.2 million in the current first quarter, compared with an operating loss of $0.9 million in the prior year. In fiscal 2006, the first quarter results included restructuring charges, primarily severance costs, of $4.3 million, while the current year includes a gain of $2.1 million from the sale of two idle housing facilities.

"The decline in sales volume masks the progress we have made in improving our products and reducing costs," said Elden L. Smith, president and chief executive officer. "Motor homes and manufactured housing in particular are operating in difficult industry environments. We reduced operating costs by $33.1 million during fiscal 2006, but with sales at current levels, it has not been enough. In a further effort to better align our costs with market conditions, subsequent to the end of the quarter, we made additional cuts to operating budgets and eliminated a number of management and staff positions at our corporate headquarters and in our operating divisions. In many cases, these moves also served to further decentralize the organization and continue our drive to become a more focused and responsive organization throughout all our business segments."

The RV Group recorded an operating loss of $13.3 million in the quarter, compared with an operating loss of $5.1 million last year. At the operating line, the motor home division incurred a loss of $3.5 million compared to earnings of $5.2 million in the prior year; the travel trailer division lost $10.0 million compared with a loss of $8.7 million; and the folding trailer division earned $0.2 million compared to a loss of $1.6 million. The results in motor homes were primarily attributable to a 24 percent drop in revenues, which were $225.2 million, compared with $297.8 million in the prior year. Although travel trailer sales were up 16 percent to $121.7 million from $104.8 million, previously reported difficulties with the changeover to the new model year products and part shortages led to incremental labor and freight costs. Folding trailer sales increased by 18 percent to $24.3 million from $20.6 million, which, in conjunction with significant cost reductions, led to improved margins.

"Currently, the market for motor homes remains challenging, particularly for high-end Class A's and mid-level Class C's, two markets that have traditionally been areas of strength for Fleetwood," Smith said. "In response to increases in sales of lower-priced Class A's, we recently introduced a high-value, entry-level Class A unit that is gaining traction, and we have plans to continue to augment our offerings to take greater advantage of the current market environment. Last week, we held our first National RV Dealer Meeting since 2000. The attendees' reactions were positive and optimistic with regard to overall industry fundamentals but more importantly with regard to the new product lineup and overall direction of Fleetwood's RV Group."

The Housing Group earned $2.1 million in operating income for the quarter, compared with $5.0 million last year, which included restructuring costs of $3.0 million. Manufactured housing revenues in the first quarter fell 29 percent to $145.7 million from $204.3 million in the prior year.

"The manufactured housing industry is essentially flat calendar year to date," Smith said. "Sales in California and Florida, states that were providing some momentum at this time last year, have declined, but the industry is seeing increased activity in the Gulf Coast area. Fleetwood's market share is being impacted by our concentration in the softer California and Florida markets, compounded by the significant proportion of our divested retail stores that were located in the Southeast. We are aggressively pursuing non-traditional business, and are beginning to write relatively modest initial orders which we believe are early indications of more exciting future opportunities. For instance, we fully expect to be an active participant in the rebuilding of the Gulf Coast, through builder/developer relationships as well as through our traditional dealer network. We are also part of a consortium that was selected to provide units for military housing."

The Supply Group earned $1.2 million in operating income in the first quarter, compared with $1.7 million in the prior year. Revenues were down 13 percent to $46.8 million compared with $53.8 million last year.

"At least through the next quarter, we expect continued pressure on margins from weak motor home sales and a highly competitive travel trailer market," Smith concluded. "In manufactured housing, new business during the second quarter will not yet offset the declines in our traditional areas of strength. We will also incur one-time restructuring costs in connection with the recent personnel changes that will largely offset the cost savings for the second quarter."

The Company has scheduled a conference call with analysts and investors to discuss quarterly results. The call is scheduled for 1:30 p.m. EDT/10:30 a.m. PDT on Thursday, September 7, 2006, and will be broadcast live over the Internet at www.streetevents.com and www.earnings.com. It also will be accessible from the Company's website, www.fleetwood.com. An archive of the call will be available on all three sites shortly after the conclusion of the call.

About Fleetwood

Fleetwood Enterprises, Inc., through its subsidiaries, is a leading producer of recreational vehicles and manufactured homes. This Fortune 1000 company, headquartered in Riverside, Calif., is dedicated to providing quality, innovative products that offer exceptional value to its customers. Fleetwood operates facilities strategically located throughout the nation, including recreational vehicle, manufactured housing and supply subsidiary plants. For more information, visit the Company's website at www.fleetwood.com.