NEW ACCOUNTING PRONOUNCEMENTS:

In November 2002, the Financial Accounting Standards Board (FASB) issued Interpretation No. 45 (FIN 45), “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” This interpretation specifies the disclosures to be made by a guarantor in its interim and annual financial statements concerning its obligations under certain guarantees that it has issued. FIN 45 also requires a guarantor to recognize a liability, at the inception of the guarantee, for the fair value of obligations it has undertaken in issuing the guarantee. The disclosure requirements of FIN 45 are effective for interim and annual periods ending after December 15, 2002. The initial recognition and initial measurement requirements of FIN 45 are effective prospectively for guarantees issued or modified after December 31, 2002. Accordingly, we adopted the disclosure provisions of FIN 45, which have been reflected in the accompanying consolidated financial statements. The adoption of these provisions did not have a material impact on the Company’s financial position, results of operations or cash flows.

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.” This statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. This statement requires an issuer to classify a financial instrument issued in the form of shares that are mandatorily redeemable — that embodies an unconditional obligation requiring the issuer to redeem them by transferring its assets at a specified or determinable date — as a liability. This statement was adopted during fiscal 2004 and had no impact on our financial reporting.

In January 2003, the FASB issued Interpretation No. 46 (FIN 46), “Consolidation of Variable Interest Entities,” which expands upon and strengthens existing accounting guidance concerning when a company should consolidate in its financial statements the assets, liabilities and activities of another entity. A revised Interpretation was issued in December 2003 (FIN 46R).

Prior to the issuance of FIN 46, a company generally included another entity in its consolidated financial statements only if it controlled the entity through voting interests. FIN 46 now requires a variable interest entity, as defined in FIN 46, to be consolidated by a company only if that company is subject to a majority of the risk of loss from the variable interest entity’s activities or is entitled to receive a majority of the entity’s residual returns or both. FIN 46 also requires disclosures about variable interest entities that the Company is not required to consolidate but in which it has a significant variable interest.

The Company owns three Delaware business trusts that were established for the purpose of issuing optionally redeemable convertible trust preferred securities. The obligations of the business trusts to the holders of the trust preferred securities are supported by convertible subordinated debentures issued by Fleetwood to the respective business trusts. Under FIN 46, which was adopted by the Company as of January 25, 2004, the trust preferred securities continued to be presented as minority interests based on the fact that the Company has the ability to “call” the trust preferred securities and that no single party holds a majority of the preferred securities; therefore, the Company was considered the primary beneficiary of the trusts. Under FIN 46R, which was adopted by the Company as of April 25, 2004, the business trusts were deemed to have no primary beneficiary and as required, were deconsolidated, resulting in the presentation of the convertible subordinated debenture obligations to the underlying trusts as a long-term liability for all years presented. Amounts previously shown in the Statements of Operations as minority interest in Fleetwood Capital Trusts I, II and III, net of taxes, were reclassified for all periods presented to interest expense, with the related tax effect included in the tax provision. Other than as indicated, the Company does not believe that the adoption of FIN 46 or FIN 46R will have a material impact on the Company’s financial position, results of operations or cash flows.

In December 2003, the FASB issued SFAS No. 132 Revised (SFAS 132R), “Employers’ Disclosure about Pensions and Other Postretirement Benefits.” A revision of the pronouncement originally issued in 1998, SFAS 132R expands employers’ disclosure requirements for pension and postretirement benefits to enhance information about plan assets, obligations, benefit payments, contributions and net benefit cost. SFAS 132R does not change the accounting requirements for pensions and other postretirement benefits. This statement was implemented beginning with the fourth quarter of fiscal 2004. The Company has determined that there are no material benefits requiring disclosure under this pronouncement.

-- (2) SUPPLEMENTAL FINANCIAL INFORMATION --

EARNINGS PER SHARE:

Basic earnings per share are computed by dividing income available to common shareholders by the weighted average number of common shares outstanding. The effect of stock options and convertible securities was anti-dilutive in fiscal 2004, 2003 and 2002, and was, therefore, not considered when determining diluted earnings (loss). However, during fiscal 2002, the Company exchanged new 9.5% convertible trust preferred securities with a liquidation value of $37.95 million for existing 6% convertible trust preferred securities with a liquidation value of $86.25 million. The $29.4 million after-tax difference between the liquidation value of the two securities was excluded from the net loss as shown on the statement of operations. However, the gain did increase shareholders’ equity and was therefore treated as additional income attributable to common shareholders for purposes of computing basic and diluted earnings per share.

The table below shows the calculation components of both basic and diluted earnings per share for each of the three fiscal years in the period ended April 25, 2004:

		2004							2003						2002
					Weighted							Weighted						Weighted
		Income			Average				Income			Average			Income			Average
(AMOUNTS IN THOUSANDS)		(Loss)			Shares				(Loss)			Shares			(Loss)			Shares
Loss before cumulative effect
of accounting change		$	(22,261	)		38,357			$	(70,739	)		35,869		$	(81,293	)		33,942
After-tax difference on
exchange of convertible
trust preferred securities			—			—				—			—			29,403			—
Basic and diluted loss before
cumulative effect of
accounting change			(22,261	)		38,357				(70,739	)		35,869			(51,890	)		33,942
Cumulative effect of
accounting change			—			—				—			—			(80,635	)		—
Basic and diluted loss		$	(22,261	)		38,357			$	(70,739	)		35,869		$	(132,525	)		33,942

Anti-dilutive securities outstanding as of the fiscal years ended April 25, 2004, April 27, 2003, and April 28, 2002, are as follows:

(AMOUNTS IN THOUSANDS)		2004			2003			2002
Options and warrants		5,963			6,645			4,316
Convertible trust preferred securities		8,975		21,631				21,631
Convertible senior subordinated debentures		8,503			—			—
INVESTMENT INCOME: Investment income for fiscal years 2004, 2003 and 2002 consisted of the following:
(AMOUNTS IN THOUSANDS)		2004			2003			2002
Interest income	$	2,669		$	3,561		$	3,843
Gross realized gains on investments		35			76			261
Gross realized losses on investments		(1	)		(20	)		(36	)
Investment management fees		(40	)		(37	)		(37	)
	$	2,663		$	3,580		$	4,031

INVENTORIES:

Inventories at April 25, 2004, and April 27, 2003,consisted of the following:

(AMOUNTS IN THOUSANDS)		2004			2003
Manufacturing inventory —
Raw materials	$	121,285		$	105,971
Work in process		32,505			29,176
Finished goods		36,172			25,146
		189,962			160,293
Retail inventory —
Finished goods		88,946			97,957
Less manufacturing profit		(16,098	)		(17,729	)
		72,848			80,228
	$	262,810		$	240,521
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 of Class A gas chassis and Ford Motor Company is the dominant supplier of Class C chassis. 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. WARRANTY RESERVES: Changes in the Company’s product warranty liability during the fiscal years ended April 25, 2004, and April 27, 2003, are as follows:
(AMOUNTS IN THOUSANDS)		2004			2003
Balance at beginning of year	$	62,137		$	68,046
Warranties issued and changes in the estimated liability during the period		67,644			72,169
Settlements made during the period	(75,860		)	(78,078		)
Balance at end of year	$	53,921		$	62,137

CONSOLIDATED INSURANCE SUBSIDIARY:

The insurance subsidiary was formed primarily for the purpose of insuring products liability risks of the parent company and its subsidiaries. Condensed financial information as of and for the fiscal years ended April 25, 2004, April 27, 2003, and April 28, 2002, for this subsidiary, excluding intercompany eliminations, was as follows:

(AMOUNTS IN THOUSANDS)		2004			2003			2002
Insurance subsidiary:
Investments	$	16,982		$	14,535		$	16,516
Other assets		22,102			22,339		21,047
Reserves for losses		33,166			30,996		24,857
Other liabilities		3,084			1,944			7,261
Net premiums		5,401			5,218			3,417
Underwriting loss		(867	)		(2,675	)		(1,129)
Investment income		349			537			1,106

OTHER CURRENT LIABILITIES:

Other current liabilities as of April 25, 2004,and April 27, 2003, consisted of the following:

(AMOUNTS IN THOUSANDS)		2004			2003
Dealer rebates	$	14,202		$	14,491
Accrued selling program expenses		13,467			12,853
Accrued litigation settlements		3,190			7,362
Retail customer deposits		8,325			8,807
Other		38,770			36,053
	$	77,954		$	79,566