We fulfill the dream of home ownership

by providing the best housing value and customer satisfaction.

 

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Fleetwood's strength

in both

The wholesale

and retail markets

reflects a constant

focus on product value

and quality

customer service

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Once again, retail home buyers made Fleetwood their first choice in calendar 1999.

Manufactured Housing in Calendar 1999:
Industry Growth Pattern Interrupted

After eight years of fairly consistent growth, manufactured housing industry shipments slowed in calendar 1999 to 348,671 homes, 6.5 percent below the prior year. Excessive dealer inventories and a slowdown in retail sales constrained wholesale factory shipments, with the rate of decline in industry shipments accelerating in the fourth quarter and in the early months of calendar 2000. In response to years of exceptional market growth, the industry aggressively added both manufacturing and retail capacity, outstripping retail demand and creating an inventory imbalance. Despite some reductions in capacity during the past year, progress in reducing inventories has been slow, hindered by restricted availability of retail financing and higher interest rates. Lenders have increased credit standards and raised down payment requirements, temporarily preventing many prospective buyers from purchasing homes. Industry retail sales, which were down about six percent in 1999, were off 10 percent in the first three months of calendar 2000.

Fleetwood Housing Sales Declined in a
Challenging Market Environment

Paralleling the industry, Fleetwood's shipments to retailers in fiscal 2000 dropped nearly 10 percent to 59,458 homes, leading to a seven percent decline in manufacturing revenues for the housing group. Fiscal 2000 revenues of $1.45 billion included $298 million of intercompany sales, representing shipments of 11,768 homes to our expanding distribution chain of Company-owned retail stores. Net manufacturing revenues, after elimination of intercompany sales, totaled $1.16 billion, down from $1.39 billion in fiscal 1999. A continuing favorable change in sales mix caused multi-section homes to rise above 64 percent of housing unit sales, up from 58 percent in the prior year. The lower housing shipments and revenues led to a 17 percent drop in segment operating income (before intercompany profit elimination) from $100 million to $84 million, and a decline in operating margin from 6.4 percent to 5.8 percent of sales.

Fleetwood Homes is a proud sponsor of Neil McCoy's 24•7375 Tour.

Fleetwood Again Led the
Industry in Retail Market Share

Capitalizing on the strength of our independent and Company-owned retail network, we captured 19.4 percent of the national manufactured housing retail market in calendar 1999. This placed Fleetwood in the number one industry position for the 12th consecutive year — an achievement taking on even greater significance considering it was accomplished with fewer than half the distribution points of our nearest competitor. The efficiency per distribution point is a key measure and a meaningful gauge of the quality of our retail network. Our efforts in recent years to replace lost retail capacity and upgrade the retail distribution network have paid off handsomely. In calendar 1999, these efforts resulted in an uptick in wholesale market share from 17.7 percent to 17.9 percent, placing us in a strong second position among the nation's largest producers of manufactured housing.

Pinnacle Program Encourages Exclusive Retailer Relationships
Fleetwood has long been at the forefront of the manufactured housing industry in developing exclusive retailer relationships. Today, 53 percent of our retailer locations sell Fleetwood products exclusively. Our belief that these partnerships benefit both parties is supported by recent statistics indicating that retailers who sell Fleetwood products exclusively generate 17 percent more sales than the average non-exclusive Fleetwood retailer. To capitalize on this, we further encouraged exclusivity in January 2000 by launching the Fleetwood Homes Pinnacle Retailer Program. Under this program, dedicated Fleetwood retailers receive unparalleled marketing support to drive traffic, identify customer leads and increase sales. Other benefits include funding for retailer signage, preferred product delivery schedules and preferential treatment from national lenders and suppliers. Also, we make our sales and marketing training courses available to Pinnacle retailers at a significantly lower cost. All of these Pinnacle benefits enable exclusive Fleetwood retailers to more effectively serve the needs of our mutual retail customers.

Fleetwood Introduces
Industry's First Two-Year Warranty

Reflecting our commitment to provide the best housing value to our customers, we introduced the industry's first two-year home warranty on March 1, 2000. We recognize that buying a home is a huge decision and a major financial commitment, and want Fleetwood homebuyers to know they will be cared for beyond the date of purchase. When we asked customers what they wanted in a warranty, they told us to "cover it all and do it longer than anyone else." Fleetwood's warranty thus sets a new standard for the manufactured housing industry, providing comprehensive coverage for plumbing, heating and electrical systems, as well as all structural components, for a full two years from the date of sale. The warranty also covers all factory-installed appliances. All warranty repairs and replacements are free, with no homeowner responsibility for deductibles or service charges. We've gone a step further by adding convenient, one-call service to our toll-free hotline: one call takes care of everything, including the coordination of repairs to factory-installed appliances. We're so confident in the quality of our homes that we didn't hesitate to take the bold step to extend our warranty coverage, providing assurance that our customers' investment is secure in a Fleetwood home.

Through attractive retail home centers, Fleetwood offers consumers a favorable home buying experience.

Population Trends Projected
to Drive Increase in Housing Demand

Looking ahead to the next decade and beyond, it is expected that steady population growth and favorable demographics will continue to drive increases in national housing demand. The U.S. Census Bureau projects the population to grow at an average annual rate of 2.4 million people over the next 15 years. During the same time period, the population segment accounting for the most household formations, those aged 25 to 64, will increase by about 1.1 million per year. In addition, net immigration is expected to remain high, adding more than 800,000 new residents to the population each year. Based on these population trends, it is projected that the number of U.S. households will increase by 1.1 to 1.2 million annually through the next decade, fueling a need for as many as 1.5 million new homes a year. More than half of the projected population growth in the 25 to 64 age group is expected to be in five key states: California, Texas, Florida, Georgia and Washington. These are vital markets for the manufactured housing industry and for Fleetwood, both of which have ample production capacity in these geographic areas.
     In recent years, the rate of home ownership has accelerated to an all-time high, reaching more than two-thirds of American households. Because of the superior value offered by manufactured housing, the industry has played a significant role in filling the increased demand, accounting for almost 28 percent of all new single family homes sold in calendar 1999. That number is likely to grow, given that manufactured homes offer quality shelter at less than half the cost per square foot of a site-built home. Since much of the recent employment growth is occurring in the moderate-paying service sector, affordable manufactured housing increasingly provides an opportunity for home ownership for families that otherwise would be priced out of the market. Clearly, manufactured housing will continue to play a critical role in satisfying the nation's growing need for housing. And with 50 years of experience in providing quality housing to America's families, Fleetwood promises to be an integral part of this industrywide effort for many years to come.

 

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