1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2000

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.

Commission File Number 0-24210

AMERICAN HOMESTAR CORPORATION
(Exact name of registrant as specified in its charter)

TEXAS 76-0070846
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)

2450 SOUTH SHORE BOULEVARD, SUITE 300, LEAGUE CITY, TEXAS 77573
(Address of principal executive offices, including zip code)

(281) 334-9700

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]

Number of shares outstanding of each of the issuer's classes of common stock,
as of May 8, 2000.

Common Stock, Par Value $.05 Per Share 18,423,707

PART I - FINANCIAL INFORMATION

PAGE
----

Item 1. Financial Statements

Consolidated Balance Sheets - May 31, 1999 and March 31, 2000........ 2
Consolidated Statements of Operations - three months ended
February 28, 1999 and March 31, 2000 ............................. 3
Consolidated Statements of Operations - nine months ended
February 28, 1999 and March 31, 2000 ............................. 4
Consolidated Statements of Cash Flows - nine months ended
February 28, 1999 and March 31, 2000.............................. 5
Notes to Consolidated Financial Statements........................... 6

Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................... 12

PART II - OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K..................................... 19

1
3

PART I -- FINANCIAL INFORMATION

AMERICAN HOMESTAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

MAY 31, MARCH 31,
1999 2000
------------ ------------
(UNAUDITED)

ASSETS

Current assets:
Cash ................................................................. $ 6,865,000 $ 7,463,000
Restricted cash - insurance deposit .................................. -- 300,000
Cash in transit from financial institutions .......................... 44,414,000 29,298,000
------------ ------------
Total cash and cash equivalents ................................ 51,279,000 37,061,000
Inventories, net ..................................................... 118,681,000 100,281,000
Accounts receivable .................................................. 48,965,000 35,723,000
Manufacturer incentives receivable ................................... 543,000 540,000
Deferred tax assets .................................................. 4,488,000 4,636,000
Prepaid expenses and other current assets ............................ 12,925,000 12,757,000
------------ ------------
Total current assets ........................................... 236,881,000 190,998,000
Property, plant and equipment, net ...................................... 94,826,000 92,925,000
Goodwill (net of accumulated amortization of $11,403,000 and
$13,856,000, respectively) .......................................... 87,324,000 90,604,000
Investment in affiliates ................................................ 8,610,000 9,302,000
Other assets ............................................................ 11,675,000 10,604,000
------------ ------------
$439,316,000 $394,433,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Current installments of notes payable and capital lease .............. $ 3,086,000 $ 2,851,000
Floor plan payable, net of participations ............................ 86,671,000 80,743,000
Accounts payable ..................................................... 36,391,000 26,607,000
Accrued expenses ..................................................... 41,406,000 7,265,000
Accrued warranty costs ............................................... 8,368,000 30,163,000
------------ ------------
Total current liabilities ...................................... 175,922,000 147,629,000
Notes payable and capital lease, less current installments .............. 126,728,000 122,219,000
Deferred tax liabilities ................................................ 362,000 242,000
Minority interest in consolidated subsidiary ............................ 839,000 743,000
Shareholders' equity:
Series A convertible preferred stock, no par value, authorized
5,000,000 shares; 509,167 shares issued and outstanding ............ -- 6,110,000
Common stock, $0.05 par value; authorized 50,000,000 shares;
issued and outstanding 18,412,900 and 18,423,707 shares at
May 31, 1999 and March 31, 2000, respectively ...................... 921,000 921,000
Additional paid-in capital ........................................... 62,472,000 62,519,000
Retained earnings .................................................... 72,072,000 54,050,000
------------ ------------
Total shareholders' equity ..................................... 135,465,000 123,600,000
------------ ------------
$439,316,000 $394,433,000
============ ============

2
4

AMERICAN HOMESTAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

THREE MONTHS ENDED
------------------------------
FEBRUARY 28, MARCH 31,
1999 2000
------------- -------------
(UNAUDITED) (UNAUDITED)

Revenues:
Net sales ........................................ $ 140,303,000 $ 120,790,000
Other revenues ................................... 11,097,000 9,565,000
------------- -------------
Total revenues ............................. 151,400,000 130,355,000
------------- -------------
Costs and expenses:
Cost of sales .................................... 112,545,000 102,485,000
Selling, general and administrative .............. 32,616,000 35,526,000
Restructuring charge ............................. -- 120,000
------------- -------------
Total costs and expenses ................... 145,161,000 138,131,000
------------- -------------
Operating income (loss) .................... 6,239,000 (7,776,000)
Interest expense .................................... (3,907,000) (4,700,000)
Other expense ....................................... (3,000) (68,000)
------------- -------------
Income (loss) before items shown below ..... 2,329,000 (12,544,000)
Income tax expense (benefit) ........................ 956,000 (5,080,000)
------------- -------------
Income (loss) before items shown below ..... 1,373,000 (7,464,000)
Earnings (loss) from affiliates ..................... 410,000 (627,000)
Minority interests .................................. 33,000 (58,000)
------------- -------------
Net income (loss) .......................... $ 1,816,000 $ (8,149,000)
============= =============
Earnings (loss) per share - basic:
Net income (loss) per share ................ $ 0.10 $ (0.44)
============= =============
Earnings (loss) per share - diluted:
Net income (loss) per share ................ $ 0.10 $ (0.44)
============= =============

3
5

AMERICAN HOMESTAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

NINE MONTHS ENDED
------------------------------
FEBRUARY 28, MARCH 31,
1999 2000
------------- -------------
(UNAUDITED) (UNAUDITED)

Revenues:
Net sales ......................................... $ 437,560,000 $ 404,149,000
Other revenues .................................... 30,393,000 30,774,000
------------- -------------
Total revenues .............................. 467,953,000 434,923,000
------------- -------------
Costs and expenses:
Cost of sales ..................................... 342,792,000 337,250,000
Selling, general and administrative ............... 95,089,000 107,203,000
Restructuring charges ............................. -- 2,443,000
------------- -------------
Total costs and expenses .................... 437,881,000 446,896,000
------------- -------------
Operating income (loss) ..................... 30,072,000 (11,973,000)
Interest expense ..................................... (9,382,000) (13,070,000)
Other income (expense) ............................... 81,000 (277,000)
------------- -------------
Income (loss) before items shown below ...... 20,771,000 (25,320,000)
Income tax expense (benefit) ......................... 8,536,000 (8,862,000)
------------- -------------
Income (loss) before items shown below ...... 12,235,000 (16,458,000)
Earnings (loss) from affiliates ...................... 1,219,000 (389,000)
Minority interests ................................... (97,000) (178,000)
------------- -------------
Net income (loss) ........................... $ 13,357,000 $ (17,025,000)
============= =============
Earnings (loss) per share - basic:
Net income (loss) per share ................. $ 0.75 $ (0.92)
============= =============
Earnings (loss) per share - diluted:
Net income (loss) per share ................. $ 0.71 $ (0.92)
============= =============

4
6

AMERICAN HOMESTAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED
------------------------------
FEBRUARY 28, MARCH 31,
1999 2000
------------- -------------
(UNAUDITED) (UNAUDITED)

Cash flows from operating activities:
Net income (loss) ....................................................... $ 13,357,000 $ (17,025,000)
Adjustments to reconcile net income (loss) to net cash (used in)
provided by operating activities:
Depreciation and amortization ......................................... 5,056,000 12,112,000
Minority interests in income of consolidated subsidiaries ............. 97,000 178,000
Earnings in affiliates ................................................ (1,219,000) 389,000
Restructuring charge .................................................. -- 2,231,000
Deferred taxes ........................................................ 101,000 (242,000)
Change in assets and liabilities, net of acquisitions
(Increase) decrease in receivables .................................. (14,962,000) 16,930,000
(Increase) decrease in inventories .................................. (30,299,000) 22,238,000
Decrease (increase) in prepaid expenses and other current assets .... 2,837,000 (896,000)
Decrease in other assets ............................................ 861,000 1,375,000
Decrease in accounts payable ........................................ (432,000) (1,208,000)
Decrease in accrued expenses ........................................ (3,777,000) (20,650,000)
------------- -------------
Net cash (used in) provided by operating activities .......... (23,380,000) 15,432,000
------------- -------------
Cash flows from investing activities:
Payment for purchase of acquisitions, net of cash acquired .............. (32,696,000) (690,000)
Purchases of property, plant and equipment .............................. (24,324,000) (9,014,000)
------------- -------------
Net cash used in investing activities ........................ (57,020,000) (9,704,000)
------------- -------------
Cash flows from financing activities:
Participation in floor plan payable ..................................... (8,498,000) 12,552,000
Borrowings under floor plan payable ..................................... 177,648,000 114,296,000
Repayments of floor plan payable ........................................ (144,882,000) (142,043,000)
Proceeds from long-term debt borrowings ................................. 51,000,000 --
Principal payments of long-term debt .................................... (1,184,000) (2,384,000)
Exercise of stock options ............................................... 5,000 35,000
------------- -------------
Net cash provided by (used in) financing activities .......... 74,089,000 (17,544,000)
------------- -------------
Net decrease in cash and cash equivalents .................................. (11,311,000) (11,816,000)
Cash and cash equivalents, beginning of period ............................. 56,141,000 48,877,000
------------- -------------
Cash and cash equivalents, end of period ................................... $ 44,830,000 $ 37,061,000
============= =============
Supplemental disclosures of cash flow information:
Cash paid for interest .................................................. $ 9,231,000 $ 13,131,000
Cash paid for income taxes .............................................. 8,409,000 962,000
============= =============

5
7

AMERICAN HOMESTAR CORPORATION SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements
of American Homestar Corporation and subsidiaries (the "Company") have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, they do not include all the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Because of the seasonal nature of the Company's business, operating
results for the three and nine months ended March 31, 2000, respectively, are
not necessarily indicative of the results that may be expected for the fiscal
year ending June 30, 2000. These condensed consolidated financial statements
should be read in conjunction with the financial statements and the notes
thereto included in the Company's latest annual report on Form 10-K.

In May 1999, the Board of Directors voted to change the Company's
fiscal year end from May 31 to June 30 to be effective for the year beginning
July 1, 1999. Such change was subject to IRS approval which was received on
August 31, 1999. Accordingly, the Company included the financial information for
the one month ended June 30, 1999 (the transition period) in the quarterly
report on Form 10-Q for the quarterly period ended September 30, 1999. This new
fiscal year will allow the Company to conform its quarterly reporting periods to
those predominantly used in its industry.

RECLASSIFICATIONS

Certain prior years' amounts have been reclassified to conform to
classifications used in the current period.

NON-CASH TRANSACTIONS

In connection with the Company's December 29, 1998 acquisition of
R-Anell Custom Homes, Inc. and its related manufacturing companies, Gold Medal
Homes, Inc. and Gold Medal Homes of North Carolina, Inc. (collectively
"R-Anell"), and pursuant to certain earn out provisions of the stock purchase
agreement, a third amendment to the stock purchase agreement dated September 30,
1999 was entered into by the Company and R-Anell. The purchase price was
increased by $7.5 million and paid as follows; $4.5 million (375,000 shares) of
Series A Convertible Preferred Stock (the "Series A Stock") of American Homestar
Corporation, a $1.5 million note payable and a $1.5 million payable which was
paid in cash October 15, 1999. Each share of Series A Stock is: (i) entitled to
receive dividends at a rate equal to seven and one-half percent (7-1/2%) per
annum; (ii) is generally non-voting; and (iii) is entitled to a liquidation
preference. In addition, each share of Series A Stock is convertible into one
share of the Company's Common Stock, par value $.05 per share (the "Common
Stock") from April 1, 2001 to October 1, 2001. After October 1, 2001, each share
of Series A Stock is convertible into shares of Common Stock equal to the
greater of: (1) one share of Common Stock; or (2) the number of shares of Common
Stock equal to $4.5 million divided by the average closing price of the Common
Stock. The purchase price adjustment had the effect of increasing goodwill by
$7.5 million.

On February 8, 2000, the Company entered into a settlement agreement
with DWP Management, Inc. ("DWP") and Dean W. Pollman, pursuant to which, among
other things, the Company acquired the remaining 20% interest in Pacific
Northwest Homes, Inc. As part of this settlement, the Company's $3.3 million
promissory note to DWP was cancelled and DWP and its affiliates purchased the
personal property and certain new and used home inventory of two retail sales
centers from the Company. Consideration paid by the Company for the remaining
20% interest included $690,000 in cash as well as $1.6 million (134,167 shares)
of Series A Stock. Each share of Series A Stock is: (i) entitled to receive
dividends at a rate equal to seven and one-half percent (7-1/2%) per annum; (ii)
is generally non-voting; and (iii) is entitled to a liquidation preference. In
addition, each share of Series A Stock is convertible into one share of Common
Stock from April 1, 2001 to October 1, 2001. After October 1, 2001, each share
of Series A Stock is convertible into shares of Common Stock equal to the
greater of: (1) one share of Common Stock; or (2) the number of shares of Common
Stock equal to $1.6 million divided by the average closing price of the Common
Stock.

AMERICAN HOMESTAR CORPORATION SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

REPURCHASE AGREEMENTS

The Company has entered into agreements with various financial
institutions and other credit sources under which the Company has agreed to
repurchase manufactured homes sold to independent dealers in the event of
default by a dealer in its obligation to such credit sources. Under the terms of
such agreements, the Company agrees to repurchase manufactured homes at
declining prices over the periods of the agreements (which generally range from
12 to 15 months). At March 31, 2000, the Company's contingent repurchase
liability was approximately $107.7 million. Historically these repurchase
activities have been negligible, however during the three months ended March 31,
2000, the Company set up a reserve for future losses of approximately $2 million
related to such repurchase liabilities.

INVENTORIES

A summary of inventories follows:

MAY 31, MARCH 31,
1999 2000
------------ ------------

Manufactured homes:
New ................................ $ 82,564,000 $ 78,798,000
Used ............................... 9,179,000 6,547,000
Furniture and supplies ............... 10,176,000 4,665,000
Raw materials and work-in-process .... 16,762,000 10,271,000
------------ ------------
$118,681,000 $100,281,000
============ ============

INVESTMENT IN AFFILIATES

Summary financial information for the Company's 50% owned subsidiary, 21st
Century Mortgage Corporation, and the Company's 25% owned subsidiary, HomeMax,
Inc., ("HomeMax") on a stand alone basis, for the three months ended
February 28, 1999 and March 31, 2000 follows:

21st Century Mortgage Corporation THREE MONTHS ENDED
---------------------------
FEBRUARY 28, MARCH 31,
1999 2000
------------ ------------

Total revenues ....................... $ 4,312,000 $ 4,099,000
Net income ........................... $ 820,000 $ 352,000
============ ============

HomeMax THREE MONTHS ENDED
---------------------------
FEBRUARY 28, MARCH 31,
1999 2000
------------ ------------

Total revenues ....................... -- $ 9,022,000
Net loss ............................. -- $ (3,320,000)
============ ============

Summary financial information for the Company's 50% owned subsidiary, 21st
Century Mortgage Corporation, and the Company's 25% owned subsidiary, HomeMax,
on a stand alone basis, for the nine months ended February 28, 1999 and
March 31, 2000 follows:

7
9

AMERICAN HOMESTAR CORPORATION SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

21st Century Mortgage Corporation NINE MONTHS ENDED
---------------------------
FEBRUARY 28, MARCH 31,
1999 2000
------------ ------------

Total revenues ....................... $ 12,555,000 $ 12,771,000
Net income ........................... $ 2,438,000 $ 1,454,000
============ ============

HomeMax NINE MONTHS ENDED
---------------------------
FEBRUARY 28, MARCH 31,
1999 2000
------------ ------------

Total revenues ....................... -- $ 17,874,000
Net loss ............................. -- $ (7,652,000)
============ ============

RESTRUCTURING CHARGES

The Company incurred a restructuring charge during the first quarter of
fiscal year 2000 of $2.3 million due to the closing of one manufacturing
facility. Certain assets used in the affected operation were written down to
their net realizable value. The Company also incurred severance and other
benefit-related costs in connection with the restructuring of this operation.
The restructuring charge is shown as a separate component of operating expenses.
In addition to the restructuring charge, the Company also took inventory
write-downs of approximately $0.7 million to allow for reduced selling prices
and selling concessions on the discontinued models of the closed manufacturing
facility at Company-owned retail sales centers and franchise locations. The
additional inventory charge is included in cost of sales for the nine months
ended March 31, 2000.

The Company incurred a restructuring charge during the third quarter of
fiscal year 2000 of $120,000 due to the idling of one manufacturing facility.
The Company incurred severance and other benefit-related costs in connection
with the restructuring of this operation. The restructuring charge is shown as a
separate component of operating expenses. In addition to the restructuring
charge, the Company also took an inventory write-down of approximately $100,000
to allow for reduced selling prices and selling concessions on the discontinued
models of the idled manufacturing facility at Company-owned retail sales centers
and franchise locations. The additional inventory charge is included in cost of
sales for the three and nine months ended March 31, 2000.

EARNINGS PER SHARE

The following data show the amounts used in computing earnings (loss)
per share and the weighted average number of shares of dilutive potential common
stock for the periods indicated:

THREE MONTHS ENDED
----------------------------
FEBRUARY 28, MARCH 31,
1999 2000
------------ ------------

Net income (loss) ............................. $ 1,816,000 $ (8,149,000)
============ ============
Weighted average common shares outstanding .... 18,192,645 18,423,707

Dilutive effect of stock options .............. 568,784 --
------------ ------------
Common shares denominator ..................... 18,761,429 18,423,707
============ ============

8
10

AMERICAN HOMESTAR CORPORATION SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NINE MONTHS ENDED
----------------------------
FEBRUARY 28, MARCH 31,
1999 2000
------------ ------------

Net income (loss) ............................. $ 13,357,000 $(17,025,000)
============ ============
Weighted average common shares outstanding .... 17,773,783 18,422,966

Dilutive effect of stock options .............. 929,621 --
------------ ------------
Common shares denominator ..................... 18,703,404 18,422,966
============ ============

For the three and nine months ended March 31, 2000, potentially dilutive
securities, which includes outstanding stock options and Series A Stock,
totalling 194 and 134,167 and 29,097 and 509,167 shares, respectively. These
potentially dilutive options were not included in the loss per share calculation
for the three and nine months ended March 31, 2000, as their effect would be
anti-dilutive due to the net loss incurred in the respective periods.

LONG-TERM DEBT

On September 30, 1998, the Company completed the private placement of
$46 million of 7.25% Series A Senior Unsecured Notes and $5 million of 7.14%
Series B Senior Unsecured Notes with an average life of eight years and a final
maturity in September 2008. Such notes require quarterly interest payments and
equal annual principal reductions beginning in 2004. Proceeds from the notes
were used to fund acquisitions and expansions with the remainder used for
general corporate purposes.

The Company's amended loan agreements related to the 8.32% Senior
Unsecured Notes issued in July 1997 and the 7.25% Series A and 7.14% Series B
Senior Unsecured Notes described above contain certain requirements as to net
working capital, consolidated net worth, fixed charge coverage and restrictions
as to disposition of assets, additional long-term debt, redemption of common
stock, payment of dividends and prepayment of subordinated debt. The terms of
the agreements, as amended, provide for the maintenance of certain financial
covenants as well as possible increases in the interest rate based on levels of
the fixed cost coverage ratio. Because of the operating losses reported by the
Company during fiscal year 2000, the Company would not have been in compliance
with the fixed cost coverage requirement at March 31, 2000 had the noteholders
not granted a waiver of such technical defaults. The waiver extends to September
29, 2000. In addition, based on the levels of the fixed cost coverage ratios, an
additional 35 and 60 basis points was added to the interest rate for the second
and third quarters, respectively, of fiscal year 2000. The Company has met with
the noteholders and opened negotiations for a permanent solution. The
noteholders have assured management that they are agreeable to such a
longer-term solution. Substantial progress has been made and the Company
believes it is highly likely that a permanent solution will be agreed to.

BUSINESS SEGMENTS

The Company operates primarily in three business segments, retail
sales, manufacturing of manufactured housing and financial services. The
following table summarizes, for the periods indicated, information about these
segments:

9
11
AMERICAN HOMESTAR CORPORATION SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

(IN THOUSANDS) ADJUSTMENTS/
RETAIL MANUFACTURING OTHER ELIMINATIONS TOTAL
------ ------------- ----- ------------ -----

THREE MONTHS ENDED
FEBRUARY 28, 1999

Revenues from external customers .............. $ 95,675 $ 50,862 $ 4,863 $ -- $ 151,400
Intersegment revenues ......................... 980 41,694 1,507 (44,181) --
Interest expense .............................. 2,480 1,024 2,291 (1,888) 3,907
Depreciation and amortization ................. 636 736 120 -- 1,492
Segment profit (loss) before income taxes .... (2,284) 4,808 (299) 104 2,329
Earnings from affiliate ....................... -- -- 410 -- 410
Segment assets ................................ 205,755 165,248 259,241 (209,343) 420,901
Expenditures for segment assets ............... 8,020 2,460 597 -- 11,077

THREE MONTHS ENDED
MARCH 31, 2000

Revenues from external customers .............. $ 81,251 $ 45,408 $ 3,696 $ -- $ 130,355
Intersegment revenues ......................... 768 37,579 798 (39,145) --
Interest expense .............................. 2,511 1,035 2,508 (1,354) 4,700
Depreciation and amortization ................. 2,131 1,515 573 -- 4,219
Segment profit (loss) before taxes ........... (10,274) (2,287) (637) 654 (12,544)
Segment assets ................................ 207,371 150,099 332,332 (295,369) 394,433
Earnings (loss) from affiliates ............... (803) -- 176 -- (627)
Segment assets ................................ 207,371 150,099 332,332 (295,369) 394,433
Expenditures for segment assets ............... 35 2,521 252 -- 2,808

NINE MONTHS ENDED
FEBRUARY 28, 1999

Revenues from external customers .............. $ 298,620 $ 155,980 $ 13,353 $ -- $ 467,953
Intersegment revenues ......................... 2,695 138,087 4,879 (145,661) --
Interest expense .............................. 6,622 2,568 5,562 (5,370) 9,382
Depreciation and amortization ................. 2,226 2,521 309 -- 5,056
Segment profit (loss) before income taxes .... 474 24,178 (1,738) (2,143) 20,771
Earnings from affiliate ....................... -- -- 1,219 -- 1,219
Expenditures for segment assets ............... 19,175 4,129 1,020 -- 24,324

NINE MONTHS ENDED
MARCH 31, 2000

Revenues from external customers .............. $ 264,645 $ 157,804 $ 12,474 $ -- $ 434,923
Intersegment revenues ......................... 383 118,441 6,094 (124,918) --
Interest expense .............................. 8,242 3,419 7,318 (5,909) 13,070
Depreciation and amortization ................. 6,512 4,260 1,340 -- 12,112
Segment profit (loss) before income taxes .... (21,920) (2,323) (1,863) 786 (25,320)
Earnings (loss) from affiliates ............... (1,116) -- 727 -- (389)
Expenditures for segment assets ............... 3,153 5,162 699 -- 9,014

Intersegment revenues are primarily sales by the manufacturing segment
to the retail segment and are transferred at market price. The adjustment to
intersegment revenue is made to eliminate intercompany sales between the
manufacturing and retail segments. The interest expense adjustment is made to
eliminate intersegment interest between the corporate and manufacturing and
retail segments and to net the interest expense on the floor plan credit
facility against the interest earned. The segment assets adjustment is primarily
made up of an adjustment to eliminate

12
AMERICAN HOMESTAR CORPORATION SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

subsidiary's equity at the corporate level, a reclass of the floor plan
participation balance and the elimination of intercompany receivables.

SUBSEQUENT EVENT

In April 2000, the Company announced a formal plan to return its retail
operations to profitability through the conversion of selected, under-performing
non-core market Company retail stores to franchises or exclusive independent
dealer locations in the coming months. When completed, floor plan debt will be
reduced by as much as $25 million and fixed operating expenses, including
interest, will be reduced by $16 million annually. In connection with this plan,
the Company expects to incur after-tax restructuring and asset impairment
charges of approximately $18 million, or $0.98 per diluted share, in its fourth
quarter ended June 30, 2000. The restructuring charges include the write-off of
$14 million in goodwill associated with prior retail acquisitions plus a
provision for impaired leasehold improvements at the affected stores. In
addition, other related special charges are expected for impairment of inventory
at these same stores.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

This Form 10-Q contains certain forward-looking statements and
information relating to the Company that are based on the beliefs of the
Company's management as well as assumptions made by and information currently
available to the Company's management. When used in this document, the words
"anticipate," "believe," "estimate," "should," and "expect" and similar
expressions as they relate to the Company or management of the Company are
intended to identify forward-looking statements. Such statements reflect the
current views of the Company with respect to future events and are subject to
certain risks, uncertainties and assumptions, including the risk factors
described in the Company's most recently filed registration statement. Should
one or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
described herein as anticipated, believed, estimated or expected. The Company
does not intend to update these forward-looking statements.

GENERAL

American Homestar Corporation is a national vertically integrated
manufactured housing company in the United States with operations in
manufacturing, retailing, financing and insurance.

In December 1998, the Company acquired R-Anell, which produces
manufactured and modular homes in three facilities located in North Carolina and
sells its homes through approximately 100 independent and Company-owned retail
sales centers located primarily in North Carolina, South Carolina and Virginia.

In March 1999, the Company acquired 25% of the outstanding common stock
of HomeMax from Zaring National Corporation ("Zaring") in exchange for a $4.4
million note, and the Company loaned HomeMax $4 million in exchange for a
subordinated note convertible into an additional 25% of HomeMax's common stock.
The Company also received an option to acquire all of the remaining HomeMax
common stock after three years at a predefined price. Zaring may require, or the
Company may elect, earlier exercise of this option if HomeMax meets certain
performance goals within the three-year period. In connection with this
transaction, the Company entered into a Management and Consulting Agreement with
Zaring and HomeMax pursuant to which the Company will manage the HomeMax
operations. In addition, the Company, Zaring and HomeMax entered into a
Securityholders Agreement providing for the joint control of HomeMax by the
Company and Zaring and certain restrictions on the capital stock of HomeMax.
HomeMax currently operates eleven retail sales centers in North Carolina, South
Carolina and Kentucky.

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14

VERTICAL INTEGRATION AND INTERNALIZATION

The Company's business strategy is based on an increasing degree of
vertical integration over time. Vertical integration allows the Company to
increase its profit margins on the manufacture and sale of its products, and
provides the ability to realize additional sources of income from financing the
sales and insuring the Company's products.

MANUFACTURING AND RETAIL RESTRUCTURING

The Company incurred a restructuring charge during the third quarter of fiscal
year 2000 of $120,000 due to the idling of one manufacturing facility. The
Company incurred severance and other benefit-related costs in connection with
the restructuring of operations. The restructuring charge is shown as a separate
component of operating expenses. In addition to the restructuring charge, the
Company also took an inventory write-down of approximately $100,000 to allow for
reduced selling prices and selling concessions on the discontinued models of the
idled manufacturing facility at Company-owned retail sales centers and franchise
locations. The additional inventory charge is included in cost of sales for the
three and nine months ended March 31, 2000.

In April 2000, the Company announced a formal plan to return its retail
operations to profitability through the conversion of selected, under-performing
non-core market Company retail stores to franchises or exclusive independent
dealer locations in the coming months. When completed, floor plan debt will be
reduced by as much as $25 million and fixed operating expenses, including
interest, reduced by $16 million annually. In connection with this plan, the
Company expects to incur after-tax restructuring and asset impairment charges of
approximately $18 million, or $0.98 per diluted share, in its fourth quarter
ended June 30, 2000. The restructuring charges include the write-off of $14
million in goodwill associated with prior retail acquisitions plus a provision
for impaired leasehold improvements at the affected stores. In addition, other
related special charges are expected for impairment of inventory at these same
stores.

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15

RESULTS OF OPERATIONS

The following table summarizes certain key sales statistics for the
three and nine months ended February 28, 1999 and March 31, 2000:

THREE MONTHS ENDED
------------------------
FEBRUARY 28, MARCH 31,
1999 2000
------------ ---------

Company-manufactured new homes sold at retail ........... 1,215 1,214
Total new homes sold at retail .......................... 1,396 1,389
Internalization rate (1) ................................ 87% 87%
Previously-owned homes sold at retail ................... 599 596
Average retail selling price--new homes (HUD code) ...... $ 53,622 $ 55,330
Average retail selling price--new homes (modular) ....... -- $122,796
Number of retail sales centers at end of period ......... 121 120
Total manufacturing shipments ........................... 2,703 2,386
Manufacturing shipments to independent
dealers, including franchisees ...................... 1,434 1,292

NINE MONTHS ENDED
------------------------
FEBRUARY 28, MARCH 31,
1999 2000
------------ ---------

Company-manufactured new homes sold at retail ......... 4,000 3,786
Total new homes sold at retail ........................ 4,706 4,303
Internalization rate (1) .............................. 85% 88%
Previously-owned homes sold at retail ................. 1,594 1,637
Average retail selling price--new homes (HUD code) .... $ 53,081 $ 55,141
Average retail selling price--new homes (modular) ..... -- $115,621
Number of retail sales centers at end of period ....... 121 120
Total manufacturing shipments ......................... 8,874 7,943
Manufacturing shipments to independent
dealers, including franchisees ..................... 4,506 4,535

(1) The internalization rate is the proportion of new homes sold by
Company-owned retail sales centers that are manufactured by the Company.

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16

The following table summarizes the Company's operating results,
expressed as a percentage of revenues, for the periods indicated:

THREE MONTH ENDED
-----------------------
FEBRUARY 28, MARCH 31,
1999 2000
------------ ---------

Total revenues ......................... 100.0% 100.0%
Gross profit ........................... 25.7% 21.4%
Selling, general and administrative .... 21.6% 27.3%
Restructuring charge ................... -- 0.0%
Operating income (loss) ................ 4.1% (6.0%)
Net income (loss) ...................... 1.2% (6.3%)

NINE MONTHS ENDED
-----------------------
FEBRUARY 28, MARCH 31,
1999 2000
------------ ---------

Total revenues ......................... 100.0% 100.0%
Gross profit ........................... 26.8% 22.5%
Selling, general and administrative .... 20.3% 24.6%
Restructuring charge ................... -- 0.6%
Operating income (loss) ................ 6.4% (2.8%)
Net income (loss) ...................... 2.9% (3.9%)

Three months ended March 31, 2000 compared to three months ended February 28,
1999

Net Sales. Net sales of manufactured homes were $120.8 million for the
three months ended March 31, 2000, compared to $140.3 million for the three
months ended February 28, 1999. Prevailing industry conditions characterized by
a highly competitive retail environment, increasing interest rates and general
credit tightening were all factors contributing to decreased sales. The weighted
average number of new homes sold per retail sales center in the core Nationwide
Housing Corporation ("Nationwide") operations decreased from 12 in the third
quarter of fiscal 1999 to 11 in the third quarter of fiscal 2000. The Company
closed two retail sales centers during the third quarter of fiscal 2000.

Other Revenues. Other revenues decreased to $9.6 million for the three
months ended March 31, 2000, compared to $11.1 million for the three months
ended February 28, 1999. Revenues from insurance operations decreased to $3.7
million for the three months ended March 31, 2000, compared to $4.9 million for
the three months ended February 28, 1999.

Cost of Sales. Cost of manufactured homes sold were $102.5 million
(84.8% of net sales) for the three months ended March 31, 2000, as compared to
$112.6 million (80.2% of net sales) for the three months ended February 28,
1999. The increase in cost of sales, expressed as a percentage of sales, was
primarily the result of lower gross margins in the Company's retail operations
and in the Company's manufacturing operations due to decreased efficiency in
connection with lower operating levels.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the three months ended March 31, 2000, were $35.5
million (27.3% of total revenues), as compared to $32.6 million (21.6%

15
17

of total revenues) for the three months ended February 28, 1999. The increase in
selling, general and administrative expenses is attributable to an increase in
fixed costs and expenses related to the R-Anell manufacturing facilities which
were acquired in December 1998.

Restructuring Charge. The Company incurred a restructuring charge
during the three months ended March 31, 2000 of $120,000 due to the idling of
one manufacturing facility in the third quarter of fiscal year 2000. The Company
incurred severance and other benefit-related costs in connection with the
restructuring of operations. The restructuring charge is shown as a separate
component of operating expenses. In addition to the restructuring charge, the
Company also took inventory write-downs of approximately $100,000 to allow for
reduced selling prices and selling concessions on the discontinued models of the
idled manufacturing facility at Company-owned retail sales centers and franchise
locations. The additional inventory charge is included in cost of sales for the
three months ended March 31, 2000.

Interest Expense. Interest expense increased 20.3% to $4.7 million for
the three months ended March 31, 2000, from $3.9 million for the three months
ended February 28, 1999. This increase was primarily attributable to increased
interest rates on the Company's floor plan debt, which fluctuates with prime.
Interest expense also increased as a result of a 60 basis point increase in the
interest rate on the Company's Senior Unsecured Notes due to the levels of the
fixed cost coverage ratio.

Nine months ended March 31, 2000 compared to nine months ended February 28, 1999

Net Sales. Net sales of manufactured homes were $404.1 million for the
nine months ended March 31, 2000, compared to $437.6 million for the nine months
ended February 28, 1999. The decrease was primarily the result of a 6% decrease
in the number of new and previously-owned homes sold at retail. Prevailing
industry conditions characterized by a highly competitive retail environment,
increasing interest rates and general credit tightening were all factors
contributing to decreased sales. The weighted average number of new homes sold
per retail sales center in the core Nationwide Housing Corporation
("Nationwide") operations decreased from 45 in the first nine months of fiscal
1999 to 35 in the first nine months of fiscal 2000. The Company closed 5 retail
sales centers during the first nine months of fiscal 2000.

Other Revenues. Other revenues increased to $30.8 million for the nine
months ended March 31, 2000, compared to $30.4 million for the nine months ended
February 28, 1999. Revenues from insurance operations decreased to $12.5 million
for the nine months ended March 31, 2000, compared to $13.4 million for the nine
months ended February 28, 1999.

Cost of Sales. Cost of manufactured homes sold were $337.3 million
(83.4% of net sales) for the nine months ended March 31, 2000, as compared to
$342.8 million (78.3% of net sales) for the nine months ended February 28, 1999.
The increase in cost of sales, expressed as a percentage of sales, was primarily
the result of lower gross margins in the Company's retail operations and in the
Company's manufacturing operations due to decreased efficiency in connection
with lower operating levels.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the nine months ended March 31, 2000, were $107.2
million (24.6% of total revenues), as compared to $95.1 million (20.3% of total
revenues) for the nine months ended February 28, 1999. The increase in selling,
general and administrative expenses is attributable to an increase in fixed
costs and expenses related to the R-Anell manufacturing facilities which were
acquired in December 1998.

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18

Restructuring Charges. The Company incurred a restructuring charge
during the nine months ended March 31, 2000 of $2.4 million due to the closing
of one manufacturing facility in the first quarter of fiscal year 2000 and the
idling of one manufacturing facility in the third quarter of fiscal year 2000.
Certain assets used in the operation of the closed facility were written down to
their net realizable value. The Company also incurred severance and other
benefit-related costs in connection with the restructuring of operations. The
restructuring charge is shown as a separate component of operating expenses. In
addition to the restructuring charge, the Company also took inventory
write-downs of approximately $0.8 million to allow for reduced selling prices
and selling concessions on the discontinued models of these manufacturing
facilities at Company-owned retail sales centers and franchise locations. The
additional inventory charge is included in cost of sales for the nine months
ended March 31, 2000.

Interest Expense. Interest expense increased 39.3% to $13.1 million for
the nine months ended March 31, 2000, from $9.4 million for the nine months
ended February 28, 1999. This increase was primarily attributable to increased
borrowings associated with the Company's private placement of 7.25% Series A and
7.14% Series B Senior Unsecured Notes totaling $51 million in September 1998 and
increased interest rates on the Company's floor plan debt, which fluctuates with
prime. Interest expense also increased as a result of a 35 and 60 basis point
increase in the interest rate for the second and third quarters, respectively,
of fiscal year 2000 on the Company's Senior Unsecured Notes due to the levels of
the fixed cost coverage ratio.

Income Taxes. The income tax expense (benefit), expressed as a
percentage of income (loss) before income taxes, minority interests and earnings
(loss) from affiliates, was a benefit of (35.0%) for the nine months ended March
31, 2000 versus expense of 41.1% for the nine months ended February 28, 1999.
The lower effective tax rate was the result of the Company's loss position for
the current year period and the proportionate relationship of permanent
differences, principally nondeductible goodwill amortization expense, to the
loss.

LIQUIDITY AND CAPITAL RESOURCES.

Cash provided by operations was $15.4 million for the nine months ended
March 31, 2000. Substantial decreases in receivables and inventory accounted for
a significant portion of the cash provided in the period.

The Company had capital expenditures of $9.0 million for the nine
months ended March 31, 2000. These expenditures were used primarily to enhance
and maintain existing retail sales centers, manufacturing capacity and for
leasehold improvements with respect to the Company's franchisees.

At March 31, 2000, the Company had a $125 million floor plan credit
facility with Associates Housing Finance, LLC ("the Associates"). The facility,
similar to a revolving credit facility, bears interest at a rate of prime less
0.05% and is used to finance the purchase of inventory of new homes at
Company-owned retail sales centers. The Company is able to purchase
participations in the floor plan credit facility, effectively reducing its net
borrowings under the facility. These participations have earned interest at a
rate of prime less 0.75% (with such interest income reported as a reduction of
total interest expense) and are immediately available to the Company in cash as
the Company redeems them. At March 31, 2000, the Company had net borrowings of
$80.7 million (gross borrowings of $110.1 million less participations of $29.4
million). In January 2000, the Associates announced that they would be
discontinuing retail and floor plan financing for the manufactured housing
industry. The Company does however have an eighteen-month contract from January
2000 until June 2001 with the Associates to continue to provide floor plan
financing. The Associates has acknowledged this and assured the Company that it
will continue to provide their floor plan credit facility under the same terms,
except that the rate paid to the Company on its participation balance is being
lowered to prime less 1.5% from prime less 0.75%. The Company has actively
engaged in the ordinary course of business to identify alternative sources of
floor plan financing. The Company has established a $50 million floor plan
credit facility with Bombardier Capital and has had discussions with other
lenders who have expressed an interest in establishing floor plan credit
facilities for the Company. The Company intends to establish smaller floor plan
credit facilities with several lenders over time so as not to be as dependent on
a single lender in the future.

17
19

On September 28, 1998, the Company completed the private placement of
$46 million of 7.25% Series A Senior Unsecured Notes and $5 million of 7.14%
Series B Senior Unsecured Notes with an average life of eight years and a final
maturity in September 2008. Such notes require quarterly interest payments and
equal annual principal reductions beginning in 2004. Proceeds from the notes
were used to fund acquisitions and expansion with the remainder used for general
corporate purposes. The terms of the agreement noted above as well as the 8.32%
Senior Unsecured Notes issued in July 1997, as amended, provide for the
maintenance of certain financial covenants as well as possible increases in the
interest rate based on levels of the fixed cost coverage ratio. Because of the
operating losses reported by the Company during fiscal year 2000, the Company
would not have been in compliance with the fixed cost coverage requirement at
March 31, 2000 had the noteholders not granted a waiver of such technical
defaults. The waiver extends to September 29, 2000. In addition, based on the
levels of the fixed cost coverage ratios, an additional 35 and 60 basis points
was added to the interest rate for the second and third quarters, respectively,
of fiscal year 2000. The Company has met with the noteholders and opened
negotiations for a more permanent solution. The noteholders have assured
management that they are agreeable to such a longer-term solution. Substantial
progress has been made and the Company believes it is highly likely that a
permanent solution will be agreed to.

Management believes that current cash resources, additional borrowing
capacity and future cash provided from operations will be sufficient to satisfy
internal working capital and capital expenditure requirements for the
foreseeable future. Management's current focus is on improving performance and
profitability in existing operations rather than substantial near term growth.
Management has also undertaken a series of initiatives designed to reduce net
debt levels and to enhance overall liquidity over the next two quarters.

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20

PART II -- OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

EXHIBIT INDEX

EXHIBIT REPORT WITH WHICH
DESCRIPTION NO. EXHIBIT WAS FILED
- ----------- ------- -----------------

Restated Articles of Incorporation of American Homestar Corporation. 3.1 S-1 Registration Statement
No. 33-78628
Amended and Restated Bylaws of American Homestar Corporation. 3.2 S-1 Registration Statement
No. 33-78628
Specimen Common Stock Certificate. 4.1 S-1 Registration Statement
No. 33-78628
First Amendment to Employment Agreement dated April 1, 2000 by 10.1 Filed herewith
and between American Homestar Corporation and Laurence A. Dawson, Jr.
First Amendment to Employment Agreement dated April 1, 2000 by 10.2 Filed herewith
and between American Homestar Corporation and Finis F. Teeter
Amended and Restated Note Purchase Agreement, 8.32% Senior 10.3 Filed herewith
Unsecured Notes due July 7, 2007 and 7.25% Series A and 7.14%
Series B Senior Unsecured Notes due September 15, 2008.
None 11
None 15
None 18
None 19
None 22
None 24
Financial Data Schedule 27 Filed herewith
None 99

(b) REPORTS ON FORM 8-K - The Company did not file any reports on Form 8-K
during the quarter for which this report is filed.

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21

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

AMERICAN HOMESTAR CORPORATION

Date: May 12, 2000 By: /s/ Craig A. Reynolds
---------------------
Craig A. Reynolds
Executive Vice President, Chief Financial
Officer and Secretary (Principal
Financial and Accounting Officer)

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22
EXHIBIT INDEX

EXHIBIT REPORT WITH WHICH
DESCRIPTION NO. EXHIBIT WAS FILED
- ----------- ------- -----------------