314132--7/13/2006--FLEETWOOD_ENTERPRISES

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Investors or potential investors in Fleetwood should carefully consider the risks described below. These risks are not the only ones we face. Additional risks of which we are presently unaware or that we currently consider immaterial may also impair our business operations and hinder our financial performance. We have had significant losses in the last six 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 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 may not be able to obtain corporate 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 would have a negative effect on our ability to execute our business strategy. The market price of our common stock has been volatile, and may decline again in the future. Ongoing weakness in the manufactured housing market and more recent weakness in the motor home market. Global tensions and fuel shortages, higher prices for fuel or rising interest rates could have a negative impact on consumer confidence and could have a resulting negative effect on sales of recreational vehicles. Availability and cost of financing for our retailers or retail customers, particularly in our manufactured housing business, could continue to affect our sales volume. Our repurchase agreements with floorplan lenders could result in increased costs. Our businesses are both cyclical and seasonal and this can lead to fluctuations in our operating results. If there is a rise in the frequency and size of product liability and other claims against us, including wrongful death, our business, results of operations and financial condition may be harmed. When we introduce new products we may incur expenses that we did not anticipate, such as recall expenses, resulting in reduced earnings. Excess inventories of our products among retailers and housing repossessions may have a negative effect on our sales volume and profit margins. The recreational vehicle and manufactured housing industries are highly competitive and some of our competitors have stronger balance sheets and cash flows, 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. Changes in consumer preferences for our products or our failure to gauge those preferences could lead to reduced sales and additional costs. We established a network of Company-owned retail stores that required significant restructuring and downsizing, but our efforts did not succeed in making it profitable. Our sale of the business in fiscal 2006 resulted in significant losses and restructuring charges, and fewer retail outlets. We have not yet fully replaced the distribution network. 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. Increased costs, including costs of component parts and labor, potentially impacted by changes in labor rates and practices, could reduce our operating income. 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 sales or margins. 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. Amendments of the regulations governing our businesses could have a material impact on our operations. Failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have an adverse effect on our business and stock price. We do not currently pay dividends on our common stock, and under the terms of the documents governing the Convertible Trust Preferred Securities, we have the right to defer payment of distributions on those securities.

Full 10-K form ▸

314132--7/13/2006--FLEETWOOD_ENTERPRISES_INC/DE/