Fleetwood Enterprises, Inc.

Fleetwood Enterprises, Inc.

3125 Myers Street
Riverside, California 92503-5527
U.S.A.
Telephone: (951) 351-3500
Fax: (951) 351-3312
Web site: http://www.fleetwood.com

Public Company
Incorporated: 1950 as Coach Specialties Company
Employees: 11,500
Sales: $2.43 billion (2006)
Stock Exchanges: New York
Ticker Symbol: FLE
NAIC: 321992 Prefabricated Wood Building Manufacturing; 336213 Motor Home Manufacturing; 336214 Travel Trailer and Camper Manufacturing

Fleetwood Enterprises, Inc., is one of the nation's largest makers of both recreational vehicles (including motor homes, travel trailers, and folding trailers) and manufactured housing. The company's line of motor homes are sold under various brands, including Jamboree, Tioga, Terra, Fiesta, Flair, Storm, Bounder, Southwind, Pace Arrow, Expedition, Discovery, Providence, Excursion, Revolution, American Tradition, American Eagle, and American Heritage. Fleetwood's travel trailers are marketed under the names Pioneer, Mallard, Wilderness, Prowler, Terry, Gearbox, Pegasus, Orbit, Pride, and Triumph. The company's folding trailer division, which leads that sector of the market, manufactures products under the Fleetwood name. As a whole, Fleetwood recreational vehicles (RVs) span the full range of the market, with their retail prices ranging from a few thousand dollars to more than $200,000; they are marketed through a network of approximately 1,300 independent dealers in 49 states and Canada. The company maintains more than a dozen plants in the United States and Ontario to handle its RV production. Manufactured housing is sold under the corporate name, Fleetwood, and is produced at 22 plants throughout the United States. Fleetwood housing is distributed through a network of more than 1,300 dealers in 46 states. Other company operations include two fiberglass manufacturing companies.

FROM WINDOW BLINDS TO MOBILE HOMES

Fleetwood was founded by John C. Crean in a greenhouse in southern California in 1950. Under the name Coach Specialties Company, he and his wife manufactured and sold a new and improved line of window blinds for travel trailers. At the same time, Crean built a travel trailer for his own use. One of his window blind customers, a trailer dealer, was so impressed by the trailer's construction that a deal was struck for Crean to assemble trailer units with materials supplied to him by the dealer. Production was to be in quantities large enough to make sure the dealer could keep pace with his seasonal orders. Around 1953 Crean changed the name of his company to Fleetwood Trailer Company, adopting the name from the Cadillac automobile line of General Motors Corporation (and leading to a lengthy dispute with the automaker, eventually resolved). Soon thereafter, however, Crean shifted his focus from trailers to mobile homes. Mobile homes, currently referred to as manufactured housing, provided a more stable market for growth because of increasing demand for inexpensive housing in southern California. By 1954 the company had outgrown its greenhouse to become a thriving enterprise with three production plants.

The growth of the manufactured home market was caused by the product's moderate price. The cost of a quality manufactured home runs about one-third that of an onsite constructed home, in each case excluding land. Offsite production eliminates the use of many different contractors, construction is not affected by weather, and less time is required for construction because every component arrives at the assembly point ready to use. Manufactured homes are trucked in sections to the homesite, where they are assembled in a matter of days, instead of the normal onsite construction times that can stretch into weeks and months.

EXPANDING INTO RVS

In 1957 the company changed its name and reincorporated as Fleetwood Enterprises, Inc. Having shifted headquarters from Compton to Paramount to Anaheim during its early years, the firm found more lasting roots in Riverside, California, in 1962. During the 1950s the manufactured housing industry had split into two distinct markets. Fleetwood had its feet firmly planted in the mobile home market, and because of its healthy growth had accumulated a large cash surplus. The other market, the recreational vehicle (RV) market, Crean saw offered good opportunities. In 1964 Fleet-wood acquired Terry Coach Industries, Inc., and Terry Coach Manufacturing, Inc., of El Monte, California. This was a time when an ever increasing number of U.S. outdoor enthusiasts wanted to travel. The company's line of travel trailers included sleeping, eating, and bathroom facilities. As the size and weight of these units grew, Fleetwood designed and built a line of fifth-wheel travel trailers, a model that is exclusively built to be towed by larger pickup trucks. As sales grew and the market expanded, the company continued to open new production plants to meet increasing sales. In 1965 Fleetwood became a public company. Its first public financial statement showed annual sales of $18.5 million.

As the RV market boomed, Fleetwood continued to diversify with the 1969 acquisition of Selgran, a motor home manufacturer based in Brea, California. Fleetwood subsequently rebranded this line under the Pace Arrow name. The acquisition was a logical extension of the company's travel trailer business. Motor homes are similar to travel trailers in construction and use. The interior looks the same as a travel trailer except that the motor home provides an area for the driver. The entire unit is constructed on a purchased truck chassis. The product line offers two types, both of which are self-contained. Type A motor homes are full-size units, with sleeping room for four to eight people and typically equipped with air conditioning, onboard power generators, and stereo systems. Type C units are smaller, built on cutaway van chassis, and usually accommodate fewer people. At a time when inexpensive gasoline and the U.S. public's wanderlust fueled the RV market, Fleet-wood was marketing a diverse product line, the prices of which accommodated a wide range of buyers' budgets. The company rounded out its product line with the acquisition, for cash, of Avion Coach Corporation in 1976. Based in Benton Harbor, Michigan, Avion augmented the company's line of trailers with its expensive, luxury class models. In 1977 the company incorporated in the state of Delaware, keeping the same name.

COMPANY PERSPECTIVES

Fleetwood will lead the Recreational Vehicle and Manufactured Housing industries in providing quality products, with a passion for customer-driven innovation. We will emphasize training, embrace diversity and provide growth opportunities for our associates and our dealers. We will lead our industries in the application of appropriate technologies. We will operate at the highest levels of ethics and compliance with a focus on exemplary corporate governance. We will deliver value to our shareholders through consistent, positive operating results and industry-leading earnings.

The 1970s was a period of rapid growth and expansion for Fleetwood. As the decade ended, the revolution in Iran, skyrocketing gasoline costs, and the buying public's fear of a recession, along with rising interest rates, created an across-the-board slump in sales. Two-thirds of Fleetwood's product line were vehicles that were intended for use on U.S. highways. Gasoline shortages, which in some states resulted in day-to-day rationing, along with the spiraling costs of fuel, shook the RV market to its foundations. Many manufacturers were forced out of business as RV retailers began closing their doors and defaulting on their bank-financed inventories. The ensuing recession brought with it escalating interest rates, making mortgages for all types of housing and for financing RVs prohibitive. The company, for the first time since the early 1950s, found itself in a situation calling for drastic cutbacks in production and staffing.

ENCOUNTERING VARIOUS TROUBLES

The year 1980 was difficult for Fleetwood. It was forced to close nine of its production plants. The cutbacks closed three travel trailer plants, three motor home facilities, and three manufactured housing plants. Fleet-wood had to consider massive worker layoffs.

Fleetwood was forced to take a close look at its entire structure during these hard times. It developed a tightly focused management policy, employing regionalized management within its housing group, which permitted the company to react more quickly to market trends. Housing design and development was spread to five areas: West Coast, central, Southeast, mid-Atlantic, and Florida. Each plant facility began operation as a separate profit center with day-to-day decisions made locally. Fleetwood slowly rode out the recession, and in 1982 Fleetwood's motor home division was projecting sales of 40,000 units in 1983.

The rapid growth and expansion Fleetwood had experienced in the 1980s had not been without legal and regulatory problems. The company is subject to provisions of the Housing and Community Development Act of 1974. These provisions, which are regulated by the U.S. Department of Housing and Urban Development (HUD), resulted in an action by the department against Fleetwood in 1985 claiming potential safety defects in 4,000 mobile homes made by the company during the years 1981 through 1984. Fleet-wood was ordered to notify the owners of the mobile homes in question about possible defects in the units' walls, floors, and beams. The problems did prompt HUD to initiate an investigation into engineering techniques used by other mobile home manufacturers.

The four-year-old dispute came to a head in February 1988, resulting in a U.S. Justice Department complaint filed against Fleetwood in Wilmington, Delaware, seeking civil penalties in excess of $20 million. The complaint alleged the existence of certain standards violations in manufactured homes produced by several of Fleetwood's subsidiaries. On February 9, 1989, Fleet-wood entered into a settlement agreement with HUD and the Justice Department. The settlement resulted in the dismissal of government charges against Fleetwood in exchange for a settlement payment.

Fleetwood, along with other companies in the manufactured housing industry, was the target of a class-action suit filed in Delaware in 1985. The complaint alleged that veterans who had purchased mobile homes had paid excessive prices and finance charges as a result of illegal rebates that were falsely certified to the Veterans Administration by the manufacturers. In 1990 the court certified a class of plaintiffs consisting of certain veterans who purchased mobile homes from Fleetwood dating back as far as April 1981. Two of the company's subsidiaries pleaded guilty to six counts of filing false certifications in 1987, resulting in approximately $650,000 in fines and civil settlements.

KEY DATES

1950:

John C. Crean forms Coach Specialties Company, which makes window blinds for travel trailers.

1953:

Crean begins making travel trailers, changes company name to Fleetwood Trailer Company, but then switches focus to manufactured housing.

1957:

Company is reincorporated as Fleetwood Enterprises, Inc.

1962:

Headquarters are established in Riverside, California.

1964:

Fleetwood reenters the recreational vehicle (RV) market by acquiring Terry Coach Industries, Inc., and Terry Coach Manufacturing, Inc.

1965:

Company goes public.

1969:

Fleetwood enters the motor home market through acquisition of Selgran, which is renamed Pace Arrow.

1989:

Company acquires the Coleman Company's folding trailer business.

1998:

Following dispute over the company's move into mobile-home retailing, Crean retires from the company.

2001:

Company weathers first of several consecutive years in the red.

2005:

Elden L. Smith, the new CEO, takes Fleet-wood out of mobile-home retailing.

Fleetwood Credit Corporation (FCC) was established in 1986. The finance company's objective was to become the major source of both wholesale and retail financing of Fleetwood's RV products on a nationwide basis. Using $25 million of its own funds, the company hired Robert B. Baker, former head of Nissan Motor Acceptance Corporation, to head the project. FCC began operations by servicing just 12 Orange County, California, dealers. By the early 1990s the company had lending operations in southern and northern California, Oregon, Indiana, Massachusetts, Georgia, New Jersey, and Texas. Fleetwood Credit showed a net income of $2.9 million in 1990, a 56 percent increase over the previous year.

In 1989 Fleetwood acquired the Coleman Company's folding trailer business. The Coleman product line ranged in retail price from $2,000 to $10,000, and in 1989 it accounted for more than 30 percent of the folding trailer market. With the acquisition of this line, Fleetwood had products for most consumers' budgets. The company also introduced new lower-priced trailer models in response to changing market conditions. That year, revenues surpassed the $1 billion mark for the first time.

UPS AND DOWNS

The 1990s were an up-and-down period for Fleetwood as its results were affected by the economic downturn early in the decade, the mid-1990s recovery, and increasing competition in the later years of the decade. Following the difficult years of 1990 and 1991, revenues and operating income increased each year, although the growth rate for both slowed considerably by fiscal 1996 and 1997, as competitors began to eat away at Fleet-wood's market share positions.

Fleetwood began the decade optimistic about the future, as evidenced by its 1990 $6.3 million purchase of a 75-acre parcel in southern California that it planned to develop as a site-built housing tract. This would have been the company's first foray into nonmanufactured housing, but after several years of preliminary work on the project, it decided in 1996 not to pursue the project. By that time the land was worth only $2.8 million, thanks to the collapse of the California real estate market.

Another attempt at expansion failed as well, when the company looked for growth outside the maturing U.S. motor home market. In September 1992 Fleet-wood acquired an 80 percent interest in Niesmann & Bischoff, a Koblenz, Germany-based manufacturer of luxury-priced ($150,000 to $300,000) motor homes under the brands Clou Liner and Clou Trend. Continued weakness in the German economy, however, led to slow sales following the purchase, even after Fleetwood introduced lower-priced models. In May 1996 Fleet-wood gave up on its European adventure, selling its stake in Niesmann & Bischoff and taking a $28 million charge for fiscal 1996 in the process.

May 1996 also saw another divestment, and a further focusing in on core operations, through the sale of Fleetwood Credit to Associates First Capital Corporation for $156.6 million, resulting in an after-tax gain of $33.9 million for fiscal 1997. In conjunction with the sale, Fleetwood and Associates First Capital signed a long-term operating agreement that assured financing continuity.

These divestments came at a time when Fleetwood needed to devote more attention to its domestic manufactured housing and RV units, both of which were losing ground to aggressive competitors. The company's share of the manufactured housing market reached a peak of 21.6 percent in 1994, then declined to 20.1 percent in 1995 and to 18.5 percent in 1996. On the rise was Auburn Hills, Michigan-based Champion Enterprises, Inc., which had grown rapidly in the mid-1990s through acquisitions, was undercutting Fleetwood's prices, and had attained 16.5 percent of the market by 1996. In the RV sector, Fleetwood's share of the motor home market, the most lucrative RV niche, fell from 34 percent in 1992 to 27.5 percent in 1996. Winnebago Industries, Inc., remained a fairly distant second at 16.7 percent, but Winnebago and other competitors had gained edges over Fleetwood by introducing popular space-increasing slideouts to their motor homes well before Fleetwood added them in fiscal 1996.

Like many an industry leader, Fleetwood had seemed to take its longstanding top positions for granted. The company began in 1996 and 1997 to become more customer-focused, for example by realigning its manufactured housing operations into three autonomous regional units, which brought decision-making closer to the customer level. Fiscal 1997 saw the establishment of 49 Fleetwood Home Centers, which were retail centers selling only Fleetwood homes and designed to offer improved customer service. In October 1997 the company entered into a joint venture (49 percent owned by Fleetwood) with Bloomfield Hills, Michigan-based Pulte Corporation to form Expression Homes Inc., a venture intended to establish a nationwide network of retail centers where manufactured homes would be sold and home financing and insurance would be offered. It intended to grow through acquisitions, including the purchase of some of Fleetwood's independent agents. Fleetwood saw Expression Homes as a way that its homes could be marketed in a more consistent and cohesive way.

PUSH INTO RETAILING, YEARS OF RED INK

The late 1990s were boom years for Fleetwood as the strong economy buoyed sales of both RVs and manufactured housing. Revenues climbed steadily, reaching $3.71 billion by the fiscal year ending in April 2000. Behind the scenes, however, trouble was brewing. Fleetwood's arch-rival on the manufactured housing side, Champion, had aggressively moved into retailing, by early 1998 acquiring dealers that had previously been responsible for one-quarter of Fleetwood's business. A group of executives at Fleetwood led by Glenn F. Kum-mer, the firm's president and chief operating officer since 1982, pushed for a major expansion into mobile-home retailing, but Crean disagreed, arguing that such a move would backfire by angering the firm's remaining independent distributors. Crean in February 1998 elected to accept a buyout of his remaining 14 percent stake in the company for $177 million and retired from the company. Kummer was named chairman and CEO, while Nelson W. Potter was promoted to president and COO.

The new leaders immediately embarked on an acquisition spree, spending some $350 million in the late 1990s acquiring manufactured housing retailers. The largest deal was the purchase of Houston-based HomeUSA, Inc., in 1998 for approximately $162 million. At the time, HomeUSA was the nation's largest independent mobile-home retailer, with annual revenues in excess of $200 million and more than 100 sales centers in Alabama, Colorado, Kentucky, Mississippi, Oklahoma, Tennessee, Texas, and Washington. Fleet-wood also bought out Pulte's stake in Expression Homes. By early 2000 the company had nearly 250 retail locations.

One price of this expansion was a greatly increased debt load. The acquisitions and the buyout of Crean's stock caused debt and preferred stock obligations to skyrocket from $55 million to $367 million. At the same time, sales of manufactured housing were collapsing following a late 1990s overexpansion, and the RV industry, which had enjoyed its best year in two decades in 1999, went into a decline in 2000 as the economy began to weaken. For Fleetwood, the combination of these factors spelled red ink. In August 2000 the company reported its first quarterly net loss in 20 years, and it began aggressively restructuring. During fiscal 2001, two motor home plants and ten manufactured housing plants were shut down, and 73 of the retail centers were either sold or closed. The workforce was reduced from 20,700 to 14,000. Revenues fell 33 percent, to just $2.53 billion, while restructuring charges pushed the net loss for the year to $284 million.

As Fleetwood's losses continued, the company board responded in February 2002 by ousting both Kummer, then serving as chairman, and Potter, who had been promoted to president and CEO. Hired on as CEO in August of that year was Edward R. Caudill, who had been an executive with PACCAR Inc., a manufacturer of heavy- and medium-duty trucks. Caudill appeared to make progress on a turnaround over the next two years. While continuing to suffer from the ongoing slump in the mobile-home market, Fleetwood was buoyed by an improvement in its RV operations, particularly with the introduction of such new products as the Revolution and Excursion diesel-powered motor homes. At this time, gas prices were on the rise, sparking a rise in popularity in diesel RVs, which were quieter, more fuel efficient, and able to haul more weight than gasoline-powered models. However, a $54.7 million loss in the third quarter of fiscal 2005 prompted the board of directors to conclude that new leadership was once again needed. Caudill was ousted in March 2005 and replaced by Elden L. Smith, who had retired from Fleetwood in 1997 after nearly 30 years at the company, having served as head of the RV division from 1972 until his retirement.

Smith returned Fleetwood to its core manufacturing operations. By August 2005 he had sold substantially all of the firm's manufactured housing retail operations and its entire loan portfolio to affiliates of Clayton Homes, Inc. Operationally, surging gas prices were hurting the sales of RVs, but Fleetwood received a boost by filling large orders from the Federal Emergency Management Agency (FEMA) for travel trailers and mobile homes designated as temporary housing for Gulf Coast residents displaced by Hurricanes Katrina and Rita. The FEMA orders totaled $129 million in the third quarter of fiscal 2006, enabling Fleetwood to eke out a small net profit that quarter. Although still headed for its sixth consecutive year in the red, Fleetwood under Smith's leadership finally appeared positioned to end its prolonged slump.

                                         William R. Grossman

                                Updated, David E. Salamie

PRINCIPAL SUBSIDIARIES

Fleetwood Homes of Arizona, Inc.; Fleetwood Homes of California, Inc.; Fleetwood Homes of Florida, Inc.; Fleetwood Homes of Georgia, Inc.; Fleetwood Homes of Idaho, Inc.; Fleetwood Homes of Indiana, Inc.; Fleet-wood Homes of Kentucky, Inc.; Fleetwood Homes of North Carolina, Inc.; Fleetwood Homes of Oregon, Inc.; Fleetwood Homes of Pennsylvania, Inc.; Fleetwood Homes of Tennessee, Inc.; Fleetwood Homes of Texas, LP; Fleetwood Homes of Virginia, Inc.; Fleetwood Homes of Washington, Inc.; Fleetwood Motor Homes of California, Inc.; Fleetwood Motor Homes of Indiana, Inc.; Fleetwood Motor Homes of Pennsylvania, Inc.; Fleetwood Travel Trailers of California, Inc.; Fleetwood Travel Trailers of Indiana, Inc.; Fleetwood Travel Trailers of Kentucky, Inc.; Fleetwood Travel Trailers of Maryland, Inc.; Fleetwood Travel Trailers of Ohio, Inc.; Fleetwood Travel Trailers of Oregon, Inc.; Fleetwood Travel Trailers of Texas, Inc.; Fleetwood Canada Ltd.; Fleetwood Folding Trailers, Inc.; Gold Shield, Inc.; Gold Shield of Indiana, Inc.; Continental Lumber Products, Inc.; Fleetwood Housing International, Inc.; Fleetwood International, Inc.; Fleetwood Vacation Club, Inc.; Gibralter Insurance Company, Ltd. (Bermuda).

PRINCIPAL COMPETITORS

Thor Industries, Inc.; Forest River Inc.; Jayco, Inc.; Coachman Industries, Inc.; Winnebago Industries, Inc.; Monarch Coach Corporation; Clayton Homes, Inc.; Champion Enterprises, Inc.

FURTHER READING

Ashley, Bob, "Smith: Fleetwood Poised to Rebound in Wake of Katrina, Management Reorganization," RV Business, October 2005, pp. 7+.

Brammer, Rhonda, "Built to Last," Barron's, April 17, 2000, pp. 28, 30, 32.

Clifford, Mark, "Business As Usual," Forbes, November 18, 1985, p. 62.

Crean, John, with Jim Washburn, The Wheel and I: My Life Driving Fleetwood Enterprises to the Top, Newport Beach, Calif.: J.C. Crean, 2000, 436 p.

Crider, Jeff, "Fleetwood Founder, CEO Retiring After 48 Years," Riverside (Calif.) Press-Enterprise, January 14, 1998, p. C1.

――――――, "Follow the Leader: Fleetwood Is Still the Dominant Company in the Manufactured Housing and RV Industries, but Competitors Have Been Gaining," Riverside (Calif.) Press-Enterprise, June 8, 1997, p. G1.

Flint, Jerry, "John Crean's Recipe for Success," Forbes, October 25, 1993, pp. 200, 204.

"A Glimpse of Fleetwood Enterprises, Inc.," Fleetwood Enterprises corporate typescript, 1987.

Goldenberg, Sherman, "Fleetwood Stresses '92 Economy, New Quality Program," RV Business, October 7, 1991, pp. 1, 11.

Granelli, James S., "Fleetwood, Pulte to Form Alliance," Los Angeles Times, October 9, 1997, pp. D2, D6.

――――――, "Fleetwood's Elden Smith: The View from the Top," RV Business, November 1993, pp. 32-33.

McCarthy, Tom, "Fleetwood Plans More European Acquisitions, Class C Production," RV Business, November 1992, pp. 11, 12.

Palmeri, Christopher, "Fleetwood: Not a Happy Camper Company," Business Week, October 9, 2000, pp. 88, 90.

Paris, Ellen, "Keeping Its Powder Dry," Forbes, October 11, 1982, p. 130.

Reingold, Jennifer, "Fleetwood Enterprises: Movin' on Up," Financial World, October 26, 1993, p. 22.

Rescigno, Richard, "Revved Up for Recovery: Recreational-Vehicle Makers Seem Ready to Roll Again," Barron's, June 17, 1991, pp. 14-15, 37-39.

Shikes, Jonathan, "Fleetwood Enterprises: Retired Officer Takes Wheel at RV Maker," Riverside (Calif.) Press-Enterprise, May 17, 2005, p. E1.

Wadley, Jared O., "No Fleeting Fancy: As It Celebrates Its 50th Year, Fleetwood Enterprises Is at a Critical Juncture," Riverside (Calif.) Press-Enterprise, June 4, 2000, p. A1.

――――――, "Two Top Officers Leave Fleetwood," Riverside (Calif.) Press-Enterprise, February 12, 2002, p. A1.

Witherall, Graham, "Just a Speed Bump?," Los Angeles Times, August 24, 1997, p. D1.