U. S. SECURITIES AND EXCHANGE COMMISSION
                              Washington, D. C. 20549
                                    FORM 10-K
(Mark One)
[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR l5(d) OF
         THE SECURITIES EXCHANGE ACT OF 1934
         For the fiscal year ended December 31, 2000
         OR
[  ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
         THE SECURITIES EXCHANGE ACT OF 1934
         For the transition period from ____________ to ____________

                          Commission file number 1-9792
                               CAVALIER HOMES, INC.
           (Exact name of Registrant as specified in Its Charter)

           Delaware                                             63-0949734
 State or other jurisdiction of                             (I.R.S. Employer
 incorporation or organization)                           Identification Number)


Highway 41 N. and 32 Wilson Boulevard,
        Addison, Alabama                                        35540
(Address of principal executive offices)                       Zip Code

                Registrant's telephone number, including area
                   code: (256) 747-9800 Securities registered
                     pursuant to Section 12(b) of the Act:

                                                               Name of
                                                            Each Exchange
    Title of Each class                                  on Which Registered
Common Stock, par value $.10                            New York Stock Exchange

           Securities registered pursuant to Section 12(g) of the Act:
                                      None

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

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. __

The  aggregate  market value of the voting stock held by  non-affiliates  of the
Registrant,  computed by reference to the closing price of such stock on the New
York Stock Exchange as of March 27, 2001, was $34,671,614.

    Indicate   the number of shares outstanding ofeach of the Registrant's
                classes of common stock, as of March 27, 2001.
                                   17,487,843

                           Common, $0.10 par value
                     Documents Incorporated by Reference
              Part III of this report incorporates by reference
          certain portions of the Registrant's Proxy Statement for its
            Annual Meeting of Stockholders to be held May 15, 2001.


<PAGE>


                               CAVALIER HOMES, INC.
                           ANNUAL REPORT ON FORM 10-K
                     FOR THE YEAR ENDED DECEMBER 31, 2000

                                     PART I

ITEM 1.           BUSINESS

General
Cavalier  Homes,  Inc.  (the  "Company"),  incorporated  in 1984,  is a Delaware
corporation with its executive offices located at Highway 41 North and 32 Wilson
Boulevard,  Addison,  Alabama  35540.  Effective  December 31, 1997, the Company
completed a merger (the "Merger")  involving  Belmont Homes,  Inc.  ("Belmont"),
pursuant to which the Company  issued  7,555,121  shares of its common  stock in
exchange for Belmont's common stock and Belmont became a wholly owned subsidiary
of the Company.  The information herein is presented on a combined basis. Unless
otherwise  indicated by the context,  references in this report to the "Company"
or to  "Cavalier"  include the  Company,  its  subsidiaries,  divisions of these
subsidiaries and their respective predecessors, if any.

Cavalier  is  engaged  in  the  production,  sale,  financing  and  insuring  of
manufactured  homes.  The  Company has chosen to build its  distribution  system
around independent dealers,  including independent exclusive dealers,  which the
Company believes gives it many of the same efficiencies and market presence that
captive  retail  centers  provide to other  companies.  At  December  31,  2000,
Cavalier  had a total of 198 dealer  locations  participating  in its  Exclusive
Dealer Program,  including five Company-owned retail locations. In addition, the
Company  markets  its  homes  through  approximately  600  active  non-exclusive
independent dealer locations in over 30 states.

The  Company  designs  and  manufactures  a wide  range of homes with a focus on
serving  the low- to  medium-priced  manufactured  housing  market  in the South
Central and South Atlantic regions of the United States. The Company's homes are
sold under multiple brand names,  normally include appliances,  may be furnished
and are  comprised of one or more floor  sections.  At December  31,  2000,  the
Company   operated  15  home   manufacturing   facilities  and  one  plant  that
manufactures  laminated wallboard.  Cavalier also participates in joint ventures
with  other  manufactured  housing  companies  for lumber  distribution  and the
manufacture of roof trusses and cabinet doors.

Through its financial services segment,  the Company purchases qualifying retail
installment  sales  contracts  for  manufactured  homes sold  through its dealer
network and sells  various  commissioned  insurance  products to the retail home
buyer.  Beginning in 1998,  the business focus of CIS Financial  Services,  Inc.
("CIS"),  formerly  Cavalier  Acceptance  Corporation,   the  Company's  finance
subsidiary, changed from building, holding and servicing a portfolio of loans to
purchasing  loans  from its  dealers  that  are  subsequently  re-sold  to other
financial institutions, without recourse (provided that the transferred loan was
properly originated by the dealer and purchased by CIS). CIS does not retain the
servicing function and does not earn interest income on those re-sold loans.

Revenue,  operating profit (loss),  identifiable assets and other financial data
of the Company's  industry  segments for the three years ended December 31, 2000
are contained in Note 11 of Notes to Consolidated  Financial  Statements in Part
II.

Home Manufacturing Operations
At December 31, 2000, the Company, through four wholly owned subsidiaries, owned
or leased 15 manufacturing  facilities  (excluding idled facilities)  engaged in
the production of manufactured  homes. Due to deteriorating  market  conditions,
since the fall of 1999,  Cavalier has idled nine home manufacturing  plants, one
of which was re-opened  during the fourth  quarter of 2000,  and disposed of the
operations  of one other.  Another  plant was  destroyed by fire in June 2000 (a
previously idled facility was re-opened to replace that capacity). Consequently,
Cavalier,  at  December  31,  2000,  operated  a total of 15 home  manufacturing
facilities,  reflecting  an  approximate  one-third  reduction in  manufacturing
capacity over the last year. See "Item 2. Properties".  The Company's  operating
facilities  normally  function on a  single-shift,  five-day week basis with the
approximate annual capacity to produce 34,000 floors.
<PAGE>
The  management  of each of the Company's  home  manufacturing  units  typically
consists of a president  or general  manager,  a production  manager,  a general
sales  manager,  a controller,  a service  manager,  a purchasing  manager and a
quality  control  manager.  These  mid-level  management  personnel  manage  the
Company's  home  manufacturing  operations,  and  typically  participate  in  an
incentive   compensation   system  based  upon  their   respective   operation's
profitability.

The following  table sets forth certain sales  information  for 2000,  1999, and
1998:

<TABLE>
<CAPTION>

                                                        For the Year Ended December 31,
                             ---------------------------------------------------------------------------------------
                                       2000                           1999                           1998
                             --------------------------     -------------------------      -------------------------
<S>                          <C>           <C>              <C>           <C>              <C>           <C>

Number of homes sold:

   Single-section homes            4,406           38%          10,546           47%           12,430           51%
   Multi-section homes             7,072           62%          11,831           53%           11,957           49%
                             ------------  ------------     -----------   -----------      -----------   -----------

      Total homes                 11,478          100%          22,377          100%           24,387          100%
                             ============  ============     ===========   ===========      ===========   ===========

Number of floors sold             18,590                        34,294                         36,517
                             ============                   ===========                    ===========
</TABLE>

Construction of a home begins by welding steel frame members together. The frame
is then moved  through  the plant,  stopping at a number of  workstations  where
various components and sub-assemblies are attached. Certain sub-assemblies, such
as plumbing,  cabinets,  ceilings and wall  systems,  are  assembled at off-line
workstations.   The   completed   home  is  sold   ready   for   connection   to
customer-supplied utilities.

The principal raw materials purchased by the Company are steel, lumber, plywood,
sheetrock, vinyl siding, roofing materials, insulating materials, and electrical
supplies.  The Company purchases axles,  wheels,  tires,  appliances,  laminated
wallboard,  roof trusses,  plumbing  fixtures,  furniture,  floor covering,  and
windows.  Currently,  the Company  maintains  approximately  two to three weeks'
inventory of raw materials. The Company is not dependent on any single source of
supply and believes that the materials and parts necessary for the  construction
and assembly of its homes are generally  available from other sources.  However,
during  1999,  the Company  experienced  tightened  supply from its  traditional
vendors of  certain  types of raw  materials,  including  sheetrock,  lumber and
insulation,  required for the production of its manufactured  homes. The Company
obtained these and similar products from other vendors, which resulted in higher
than normal costs, some of which the Company was unable to recover through price
increases.

The Company's component  manufacturing  subsidiary provides laminated wallboards
for  some  of  its  home  manufacturing   facilities  and  other  manufacturers.
Additionally,  certain of the Company's home manufacturing  facilities currently
purchase  lumber,  roof trusses,  and cabinet doors from joint ventures in which
the Company  owns an  interest.  The  Company  believes  prices  obtained by the
Company for these  products from these joint ventures are  competitive  with the
Company's other sources of supply.

Because the cost of transporting a manufactured home is significant,  there is a
limit to the distance  between a  manufacturing  facility and the dealers it can
service. The Company believes that the location of its manufacturing  facilities
in multiple states allows it to serve more dealers in more markets.  The Company
generally arranges,  at the dealer's expense, for the transportation of finished
homes  to  dealers  using  independent  trucking  companies.  Dealers  or  other
independent  installers are responsible for placing the home on site,  combining
of multi-section  homes, making utility connections and providing and installing
certain  accessory  items  and  appurtenances,   such  as  decks,  carports  and
foundations.

Products
The Company's homes include both  single-section and multi-section  models, with
the  substantial  majority of such  products  being "HUD Code  Homes"  which are
manufactured  homes that meet the  specifications  of the National  Manufactured
Home  Construction  and Safety Act of 1974, as amended,  and administered by the
U.S. Department of Housing and Urban Development  ("HUD").  Single-section homes
are  14 to 16  feet  wide,  vary  in  length  from  40 to 80  feet  and  contain
approximately 560 to 1,280 square feet. The multi-section  models consist of two
<PAGE>
or more floor sections that are joined at the home site,  vary in length from 40
to 80 feet and contain approximately 1,120 to 2,560 square feet.

The Company currently produces around 800 different models of manufactured homes
with a variety of decors that are  marketed  under  multiple  brand  names.  The
Company is currently  reviewing its product offerings and eliminating  redundant
products by geographic location to streamline manufacturing processes. We expect
during 2001 that this strategy will  dramatically  reduce the quantity of models
offered to a level  reflecting  market demand.  * The homes typically  include a
living room, dining area, kitchen, two to four bedrooms and two bathrooms.  Each
home contains a cooking range and oven,  refrigerator,  water heater and central
heating.  Customers may also choose many available options including fireplaces,
ceiling fans,  dishwashers,  garbage  disposals,  microwave  ovens,  composition
shingle roofs, and sliding glass patio doors.

The Company's  product  development  and engineering  personnel  design homes in
consultation with operating management,  sales representatives and dealers. They
also evaluate new materials and construction  techniques and use  computer-aided
and other design methods in a continuous program of product development,  design
and enhancement.  The Company's  product  development  activities do not require
significant capital investments.

Independent Dealer Network, Sales and Marketing
As of December 31, 2000,  the Company had, under its Exclusive  Dealer  Program,
198 participating  dealer locations selling the Company's homes,  which included
five Company-owned retail locations.  In addition, the Company markets its homes
through  approximately 600 active non-exclusive  independent dealer locations in
over 30 states.

Since 1991, the Company has been  developing its  independent  exclusive  dealer
network. The Company's  independent exclusive dealers market and sell only homes
manufactured  by the  Company,  while the  Company's  independent  non-exclusive
dealers  typically will choose to offer the products of other  manufacturers  in
addition to those of the Company. The Company's number of independent  exclusive
dealers and percentage of total Company sales  represented by them is summarized
in the following table:

  For the Year Ended December 31,                   2000       1999      1998
-------------------------------------              --------  --------- ---------

Number of independent exclusive dealer locations      193      274       232

Percentage of manufactured home sales                  49%      55%       40%


Through its finance  subsidiary,  CIS, the Company  purchases  qualifying retail
installment  sales contracts for  manufactured  homes sold through the Company's
dealer network and provides other services and support.

Approximately 86% of the Company's sales in 2000 were to dealers operating sales
centers in the  Company's  core states as follows:  Texas - 18%,  Alabama - 10%,
North Carolina - 10%, Arkansas - 10%, Georgia - 9%, Louisiana - 7%,  Mississippi
- 6%, South Carolina - 5%, Tennessee - 4%, Missouri - 4% and Oklahoma - 3%.

Generally, the Company has written agreements with its independent dealers which
may be terminated at any time by either party,  with or without  cause,  after a
short notice  period.  The Company does not have any control over the operations
of, or financial interests in, any of its independent dealers,  including any of
its independent  exclusive  dealers.  The Company is not dependent on any single
dealer,  and in 2000, the Company's  largest dealer accounted for  approximately
1.1% of sales.

The Company believes that its independent  dealer network enables the Company to
avoid the substantial investment in management,  capital and overhead associated
with company owned sales centers.  To enable  dealers to maximize  retail market
penetration  and enhance  customer  service,  typically only one dealer within a
given  market area  distributes  a particular  product line of the Company.  The
Company believes its strategy of selling its homes through  independent  dealers
helps to ensure that the  Company's  homes are  competitive  with those of other
manufacturers in terms of consumer  acceptability,  product design,  quality and
* See Safe Harbor Statement on page 27.
<PAGE>
price.  Accordingly,  a  component  of the  Company's  business  strategy  is to
continually strengthen its dealer relations.  The Company believes its relations
with its independent dealers,  including its independent  exclusive dealers, are
good. *

Each of the  Company's  manufacturing  units  typically  employs a general sales
manager and its own respective  sales  representatives  who are compensated on a
commission  basis. The plant-level  sales  representatives  are charged with the
day-to-day  servicing  of  the  needs  of  the  Company's  independent  dealers,
including its exclusive  dealers.  The Company markets its homes through product
promotions, participation in regional manufactured housing shows, advertisements
in local media and trade  publications.  As of December  31,  2000,  the Company
maintained a sales force of 64 full-time salesmen and 10 full-time general sales
managers.

Retail Financing Activities
A significant  factor affecting sales of manufactured  homes is the availability
and terms of  financing.  CIS  purchases  qualifying  retail  installment  sales
contracts for  manufactured  homes sold through the Company's  exclusive  dealer
network.

CIS seeks to provide  competitive  financing terms to customers of the Company's
dealers. CIS currently offers various conventional loan programs which require a
down-payment  ranging from 5% to 20% of the purchase  price,  in cash,  trade-in
value of a  previously-owned  manufactured home and/or appraised value of equity
in any real property pledged as collateral. Repayment terms generally range from
84 to 360  months,  depending  upon the type of home and  amount  financed,  the
amount of the down payment and the customer's creditworthiness.  CIS's loans are
secured by a purchase money security  interest in the manufactured  home and, in
certain instances, a mortgage on real property pledged as additional collateral.
As of December 31, 2000,  all of CIS's  outstanding  loans were  secured.  Loans
purchased by CIS normally  provide a fixed rate of interest  with equal  monthly
payments and are  non-recourse to the dealer.  The interest rates  applicable to
CIS's loan  portfolio as of such date  generally  ranged from 9% to 16%, and the
approximate   weighted  average  annual  percentage  interest  rate  was  9.57%.
Currently,  CIS  operates  in  most of the  states  in  which  the  Company  has
independent exclusive dealers.

For those retail  customers  who meet CIS's  lending  standards,  CIS strives to
provide  prompt  credit  approvals and funding of loans.  CIS has  established a
standardized credit scoring system to facilitate prompt  decision-making on loan
applications.  The most important criteria in the scoring system are the income,
employment stability and creditworthiness of the borrower.

In the event an  installment  sale  contract  becomes  delinquent,  CIS normally
contacts  the  customer  within  10 days  thereafter  in an  effort  to cure the
delinquency.  After the contract becomes 30 days delinquent,  CIS has an on-site
review  of the  customer's  account  and  inspection  of the  property  with the
customer. CIS generally repossesses the home after payments have become 60 to 90
days delinquent.  After  repossession,  CIS normally has the home delivered to a
dealer's sales center where CIS attempts to resell the home or contracts with an
independent party to resell the home. To a limited extent, CIS sells repossessed
homes at wholesale.

The Company  maintains a reserve for estimated credit losses on installment sale
contracts  owned by CIS to provide  for  future  losses  based on the  Company's
historical  loss   experience,   current   economic   conditions  and  portfolio
performance. Amounts provided for credit losses were $0.7, $2.2 and $1.0 million
in 2000, 1999, and 1998,  respectively.  Additionally,  as a result of defaults,
early  payoffs and  repossessions,  $1.2,  $1.3 and $1.6  million  were  charged
against  the  reserve in 2000,  1999,  and 1998,  respectively.  The reserve for
credit  losses at December 31, 2000 was $1.2 million as compared to $1.7 million
at December 31, 1999, and $0.8 million at December 31, 1998.

In 2000, 1999 and 1998, CIS repossessed 16, 62 and 77 homes,  respectively.  The
Company's  inventory of repossessed homes was six homes at December 31, 2000, as
compared to 28 homes at December 31, 1999 and 30 homes at December 31, 1998. The
Company's net losses  resulting from  repossessions  on CIS purchased loans as a
percentage of the average  principal amount of such loans outstanding for fiscal
2000, 1999 and 1998 was 14.24%, 7.83% and 5.01%, respectively.
* See Safe Harbor Statement on page 27.
<PAGE>

At  December  31, 2000 and  December  31,  1999,  delinquencies  expressed  as a
percentage of the total number of  installment  sale  contracts  which CIS owned
were as follows:
<TABLE>
<CAPTION>
                                                                 Delinquency Percentage
                      Total Number      ------------------------------------------------------------------------
   December 31,       of Contracts          30 Days             60 Days            90 Days            Total
                   -----------------    ---------------    ----------------   ----------------  ----------------
<S>                      <C>                     <C>                 <C>                <C>               <C>

       2000              220                     1.79%               0.45%              0.00%             2.24%

       1999              290                     1.03%               0.00%              0.00%             1.03%
</TABLE>


At  December  31, 2000 and  December  31,  1999,  delinquencies  expressed  as a
percentage  of the total  outstanding  principal  balance  of  installment  sale
contracts which CIS owned were as follows:
<TABLE>
<CAPTION>

                                                                 Delinquency Percentage
                      Total Value       ------------------------------------------------------------------------
   December 31,       of Contracts          30 Days             60 Days            90 Days            Total
                   -----------------    ---------------    ----------------   ----------------  ----------------
<S>                                              <C>                 <C>                <C>               <C>

       2000           $7,887,000                 1.47%               0.49%              0.00%             1.96%

       1999           $9,450,000                 0.90%               0.00%              0.00%             0.90%
</TABLE>


There can be no  assurance  that the  Company's  future  results with respect to
delinquencies and  repossessions  will be consistent with its past experience as
reflected above.

Certain operating data relating to CIS are set forth in the following table:
<TABLE>
<CAPTION>
                                                            December 31,
                                        ------------------------------------------------------
                                             2000               1999               1998
                                        ---------------    ----------------   ----------------
<S>                                 <C>                <C>                 <C>
Total loans receivable              $        7,887,000 $         9,450,000 $       26,117,000
Allowance for credit losses         $        1,180,000 $         1,656,000 $          760,000
Number of loans outstanding                        220                 290                986
Number of delinquencies                              5                   3                 21
Net loss ratio on average
   outstanding principal balance                 14.24%               7.83%              5.01%
Weighted average annual
   percentage rate                                 9.6%               11.2%              10.9%
</TABLE>



During  1998,  the  business  focus of CIS changed  from  building,  holding and
servicing a portfolio  of loans to  purchasing  loans from its dealers  that are
subsequently  resold to other financial  institutions  without CIS retaining the
servicing  function.  Although  the  level of  CIS's  future  activities  cannot
presently be determined,  the Company  expects to utilize  internally  generated
working  capital  and  amounts  generated  from sales of loans  under the retail
finance agreements  discussed in the following paragraph to fund the purchase of
retail installment sale contracts on homes sold by the Company's dealers and may
use borrowings to develop a portfolio of such installment sale contracts.  * The
Company  believes  that its  relationships  with its  dealers  will  assist  the
development of this business strategy. *

Since its  inception,  CIS has been  restricted in the amounts of loans it could
purchase based on underwriting standards, as well as the availability of working
capital and funds  borrowed  under its credit line with its primary  lender.  In
February 1998,  CIS entered into an agreement with another lender  providing for
the periodic resale of a portion of CIS's loans that meet  established  criteria
and without recourse (provided that the transferred loan was properly originated
by the dealer and purchased by CIS).  In March 1998 and in June 1999,  CIS sold,
under this retail  finance  agreement,  a  substantial  portion of its  existing
portfolio of loans on those dates. In April 2000, the Company received  proceeds
of  approximately  $1.4 million from the sale of loans that were previously held
in its  installment  loan  portfolio.  The effect of these  transactions  on net
* See Safe Harbor Statement on page 27.
<PAGE>
income was to reduce the amount of  financial  services  revenue  from  interest
income on these portions of the portfolio, offset by reduced interest expense on
debt retired in March 1998 and earnings on the remaining proceeds.  From time to
time,  the  Company  evaluates  the  potential  to sell all or a portion  of its
remaining  installment  loan  portfolio,  in  addition to the  periodic  sale of
installment  contracts  purchased  by CIS in the  future.  * While the  original
retail finance ageement is no longer in effect,  CIS is currently  continuing to
re-sell loans to lenders under various  retail  finance  contracts.  The Company
believes the periodic sale of installment  contracts  under these retail finance
agreements  will reduce  requirements  for both working  capital and borrowings,
increase the Company's liquidity, reduce the Company's exposure to interest rate
fluctuations  and  enhance  the  ability of CIS to  increase  its volume of loan
purchases.  * There can be no assurance,  however, that additional sales will be
made under these agreements, or that CIS and the Company will be able to realize
the expected benefits from such agreements. *

Retail Insurance Activities
Through  its wholly  owned  insurance  agency,  the Company  sells  commissioned
insurance products to retail purchasers of the Company's homes.

Wholesale Dealer Financing and Repurchase Obligations
In accordance with manufactured housing industry practice,  substantially all of
the Company's  dealers  finance their  purchases of  manufactured  homes through
wholesale  "floor  plan"  financing  arrangements.  Under a typical  floor  plan
financing  arrangement,  a financial institution provides the dealer with a loan
for the purchase price of the home and maintains a security interest in the home
as collateral.  The financial institution which provides financing to the dealer
customarily  requires the Company to enter into a separate repurchase  agreement
with the  financial  institution  under  which the  Company is  obligated,  upon
default by the dealer,  to repurchase  the financed  homes at a declining  price
based upon the Company's original invoice price plus, in specific cases, certain
administrative  expenses.  A portion of  purchases  by dealers  are  pre-sold to
retail customers and are paid through retail financing commitments.

The risk of loss under such repurchase  agreements is mitigated by the fact that
(i) sales of the Company's manufactured homes are spread over a relatively large
number of independent  dealers, the largest of which accounted for approximately
1.1% of sales in 2000,  (ii) the  repurchase  obligation  expires on  individual
homes after a reasonable  period of time (generally 18 months from invoice date)
and also declines  during such period based on  predetermined  amounts and (iii)
the  Company  is able to sell  homes  repurchased  from  credit  sources.  As of
December  31,  2000,  the maximum  amount for which the Company is  contingently
liable  under  these  repurchase  and  other  similar  recourse  agreements  was
approximately $170 million. The Company has a reserve for repurchase commitments
of $4.1 million as of December 3l, 2000,  based on prior  experience  and market
conditions.

Quality Control, Warranties and Service
The  Company  believes  the quality in  materials  and  workmanship,  continuous
refinement in design and production procedures as well as price and other market
factors,  are important elements in the market acceptance of manufactured homes.
The Company  maintains a quality  control  inspection  program at all production
stages. The Company's manufacturing  facilities and the plans and specifications
of its  manufactured  homes have been  approved by a  HUD-designated  inspection
agency. An independent,  HUD-approved third-party inspector regularly checks the
Company's manufactured homes for compliance during construction.

The  Company  provides  the initial  retail  homebuyer  with a one-year  limited
warranty  against  manufacturing  defects in the home's  construction.  Warranty
services after the sale are performed,  at the expense of the Company,  by plant
personnel,  dealers  or  local  independent  contractors.  Additionally,  direct
warranties often are provided by the  manufacturers  of specific  components and
appliances.

The  Company   employs  a  full-time   service  manager  at  each  of  its  home
manufacturing   units  and  177   full-time   service   personnel   to   provide
administrative and on-site service and to correct  production  deficiencies that
are attributable to the manufacturing  process.  Warranty service  constitutes a
significant  cost to the  Company,  and  management  of the  Company  has placed
emphasis on diagnosing  potential  problem  areas to help minimize  costly field
* See Safe Harbor Statement on page 27.
<PAGE>
repairs.  At December 31, 2000, the Company had established a reserve for future
warranty claims of $11.8 million relating to homes sold, based upon management's
assessment of historical experience factors and current industry trends.

Competition
The manufactured  housing industry is highly  competitive,  characterized by low
barriers to entry and severe price  competition.  Competition is based on price,
repair service,  product  features and quality,  reputation for service quality,
depth of field inventory, delivery capabilities, warranty repair service, dealer
promotions, merchandising and terms of dealer and retail consumer financing. The
Company also competes with other manufacturers, some of which maintain their own
retail  sales  centers,  for  quality  independent  dealers.  In  addition,  the
Company's  manufactured  homes  compete  with other forms of  low-cost  housing,
including site-built,  prefabricated,  modular homes, apartments, townhouses and
condominiums.  The selection by retail buyers of a manufactured home rather than
an apartment or other alternative forms of housing is significantly  affected by
their  ability  to obtain  satisfactory  financing.  The  Company  faces  direct
competition  from  numerous   manufacturers,   many  of  which  possess  greater
financial, manufacturing, distribution and marketing resources.

The Company's business strategy  currently  includes the continued  operation of
financial services provided through CIS. The Company believes that operations of
CIS will have a positive  impact on the  Company's  efforts to sell its products
and enhance its  competitive  ability  within the  industry.  * However,  due to
strong  competition in the retail finance segment of the industry from companies
much larger than CIS,  there can be no assurance that CIS will be able to expand
its operations or that it will have a positive  impact on the Company's  ability
to compete.

Regulation
The  Company's  businesses  are subject to a number of federal,  state and local
laws, regulations and codes. Construction of manufactured housing is governed by
the National Manufactured Home Construction and Safety Standards Act of 1974, as
amended,  and  regulations  issued  thereunder  by HUD,  which have  established
comprehensive  national  construction  standards.  The HUD regulations cover all
aspects of manufactured home construction,  including structural integrity, fire
safety, wind loads, thermal protection and ventilation. Such regulations preempt
state and local  regulations  on such  matters.  The  Company  cannot  presently
determine what, if any, legislation may be adopted by Congress or state or local
governing  bodies, or the effect any such legislation may have on the Company or
the manufactured housing industry as a whole.

The Company's  manufacturing  facilities and the plans and specifications of its
manufactured  homes have been approved by a  HUD-designated  inspection  agency.
Furthermore, an independent, HUD-approved third-party inspector regularly checks
the Company's manufactured homes for compliance during construction.  Failure to
comply with the HUD  regulations  could  expose the Company to a wide variety of
sanctions, including closing the Company's manufacturing facilities. The Company
believes its manufactured homes meet or surpass all present HUD requirements. *

HUD has promulgated  regulations with respect to structural  design,  wind loads
and energy  conservation.  The Company's operations were not materially affected
by the regulations; however, HUD and other state and local governing bodies have
these and other  regulatory  matters under  continuous  review,  and the Company
cannot predict what effect (if any) additional regulations promulgated by HUD or
other  state  or  local  regulatory  bodies  would  have on the  Company  or the
manufactured housing industry as a whole.

Certain  components of manufactured  and modular homes are subject to regulation
by the U.S. Consumer Product Safety Commission  ("CPSC"),  which is empowered to
ban the use of  component  materials  believed to be  hazardous to health and to
require  the  repair  of  defective  components.  The  CPSC,  the  Environmental
Protection Agency and other governmental  agencies are evaluating the effects of
formaldehyde.   Regulations  of  the  Federal  Trade   Commission  also  require
disclosure of a manufactured  home's  insulation  specifications.  Manufactured,
modular and site-built homes may be built with compressed  board,  wood paneling
and other products that contain  formaldehyde  resins.  Since February 1985, HUD
has regulated the allowable  concentration  of formaldehyde in certain  products
used in  manufactured  homes  and  required  manufacturers  to  warn  purchasers
concerning  formaldehyde  associated risks. The Company currently uses materials
* See Safe Harbor Statement on page 27.
<PAGE>
in its  manufactured  homes that it believes meet HUD standards for formaldehyde
emissions and otherwise comply with HUD regulations in this regard. *

The transportation of manufactured homes on highways is subject to regulation by
various federal, state and local authorities. Such regulation may prescribe size
and road use  limitations  and impose lower than normal speed limits and various
other requirements.

The  Company's  manufactured  homes are  subject  to local  zoning  and  housing
regulations.  A number of states  require  manufactured  home  producers to post
bonds to ensure the satisfaction of consumer warranty claims. A number of states
have adopted  procedures  governing  the  installation  of  manufactured  homes.
Utility connections are subject to state and local regulation.

The Company is subject to the  Magnuson-Moss  Warranty  Federal Trade Commission
Improvement Act, which regulates the descriptions of warranties on products. The
description  and  substance of the  Company's  warranties  are also subject to a
variety of state laws and regulations.

The  Company's  operations  are  subject  to  federal,  state and local laws and
regulations   relating  to  the   generation,   storage,   handling,   emission,
transportation  and  discharge of materials  into the  environment.  The Company
currently does not believe it will be required under existing environmental laws
and  enforcement  policies to expend amounts which will have a material  adverse
effect on its results of  operations  or  financial  condition.  * However,  the
requirements  of such  laws  and  enforcement  policies  have  generally  become
stricter  in recent  years.  Accordingly,  the  Company is unable to predict the
ultimate cost of compliance with environmental laws and enforcement policies.

A variety of federal laws affect the financing of manufactured homes,  including
the financing  activities  conducted by CIS. The Consumer Credit  Protection Act
(Truth-in-Lending)  and Regulation Z promulgated  thereunder require substantial
disclosures  to be made in writing to a consumer with regard to various  aspects
of the  particular  transaction,  including  the  amount  financed,  the  annual
percentage  rate, the total finance  charge,  itemization of the amount financed
and other matters. The Equal Credit Opportunity Act and Regulation B promulgated
thereunder prohibit discrimination against any credit applicant based on certain
prohibited  bases,  and also require that certain  specified  notices be sent to
credit  applicants whose  applications are denied.  The Federal Trade Commission
has adopted or proposed  various trade  regulation rules to specify and prohibit
certain unfair credit and collection  practices and also to preserve  consumers'
claims and defenses.  The  Government  National  Mortgage  Association  ("GNMA")
specifies  certain credit  underwriting  requirements  in order for  installment
manufactured home sale contracts to be eligible for inclusion in a GNMA program.
HUD also has promulgated  substantial disclosure and substantive regulations and
requirements  in order for a  manufactured  home  installment  sale  contract to
qualify for insurance under the Federal Housing Authority  ("FHA") program,  and
the failure to comply with such  requirements  and procedures can result in loss
of the FHA guaranty protection. In addition, the financing activities of CIS may
also become  subject to the reporting and  disclosure  requirements  of the Home
Mortgage  Disclosure  Act. In addition to the  extensive  federal  regulation of
consumer  credit  matters,   many  states  have  also  adopted  consumer  credit
protection  requirements that may impose  significant  requirements for consumer
credit lenders. For example,  many states require that a consumer credit finance
company such as CIS obtain  certain  regulatory  licenses or permits in order to
engage in such  business in that state,  and many states also set forth a number
of substantive contractual limitations regarding provisions that permissibly may
be included in a consumer contract,  as well as limitations upon the permissible
interest  rates,  fees and other  charges  that may be imposed  upon a consumer.
Failure by the  Company  or CIS to comply  with the  requirements  of federal or
state law  pertaining to consumer  credit could result in the  invalidity of the
particular  contract for the affected consumer,  civil liability to the affected
customers,  criminal liability and other adverse results.  The sale of insurance
products  by the  Company  is  subject  to  various  state  insurance  laws  and
regulations which govern allowable charges and other insurance practices.

Employees
As of December 31,  2000,  the Company had 2,914  employees,  of whom 2,311 were
engaged in home  manufacturing  and  supply  distribution,  89 in sales,  177 in
warranty and service, 279 in general administration, 5 in delivery, 33 in retail
finance and insurance services and 20 in retail locations. At year-end, only one
home  manufacturing  operation's  employees  (91  employees)  were  covered by a
collective  bargaining  agreement.  Management  considers its relations with its
employees to be good.

Risk Factors
If you are interested in making an investment in Cavalier,  you should carefully
consider the following  risk factors  concerning  Cavalier and its business,  in
addition to the other information contained in this Report on Form 10-K:

Cyclical and Seasonal Nature of the Manufactured Housing Industry
The  manufactured  housing  industry is highly  cyclical  and  seasonal  and has
experienced wide  fluctuations in aggregate sales in the past,  resulting in the
failure of many manufacturing  concerns.  Many of the same national and regional
economic and demographic  factors that affect the broader housing  industry also
affect the market for manufactured homes. Historically, most sectors of the home
building  industry,  including  the  manufactured  housing  industry,  have been
affected by the following, among other things:

o        changes in general economic conditions;
o        inflation;
o        levels of consumer confidence;
o        employment and income levels;
o        housing supply and demand;
o        availability of alternative forms of housing;
o        availability of financing; and
o        the level and stability of interest rates.

The  Manufactured  Housing  Institute  ("MHI")  reported that from 1983 to 1991,
aggregate  domestic  shipments of manufactured  homes declined 42%. According to
industry  statistics,  after a  ten-year  low in floor  shipments  in 1991,  the
industry  recovered  significantly.  Between  1992  and  1998,  floor  shipments
increased  each year, as set forth in the table below,  although the growth rate
gradually  slowed  and  began to  decline  in 1999,  and  continued  to  decline
significantly in 2000.

Percentage Increase (Decrease) in Floor Shipments Through 2000
o        1992............................21%
o        1993............................22%
o        1994............................23%
o        1995............................12%
o        1996............................10%
o        1997............................ 1%
o        1998............................ 8%
o        1999............................(4.3)%
o        2000...........................(25.9)%

Over  the  past  several  years,  the  manufactured  housing  industry  has also
experienced  increases  in both the number of retail  dealers and  manufacturing
capacity,  which we believe is currently  resulting in slower  retail  turnover,
higher dealer  inventories and increased price  competition.  * These conditions
significantly  affected the industry in 2000.  According to MHI, floor shipments
declined 25.9% in 2000 from 1999,  falling 34.7% in the fourth quarter alone. In
addition,   a  number  of  retail  dealers  have  failed  and  repossessions  of
manufactured  homes have  increased.  Some  manufactured  housing  wholesale and
retail lenders have also stopped doing business in the industry, and some of the
remaining  lenders have raised their interest  rates and tightened  their credit
standards.  We think  more  dealers  may fail,  repossessions  may  continue  to
increase and more lenders may exit the market in the future.  * We believe these
conditions  reflect that the  manufactured  housing industry is in a down cycle,
which has had a material adverse effect on Cavalier's  results of operations and
financial  condition.  * Sales in the  manufactured  housing  industry  are also
* See Safe Harbor Statement on page 27.
<PAGE>
seasonal in nature,  with sales of homes  traditionally  being stronger in April
through  October and weaker during the first and last part of the calendar year.
While  seasonality did not significantly  impact  Cavalier's  business from 1992
through 1996,  when industry  shipments  were  steadily  increasing,  the recent
tightening of competitive  conditions seems to signal a return to the industry's
traditional  seasonal  patterns.  We cannot  predict how long the  tightening of
competitive  and  industry  conditions  will  last,  or what the extent of their
impact will be on the future  results of operations  and financial  condition of
Cavalier.

Limitations on Ability to Pursue Business Strategy
Cavalier's current business strategies are to:

o control costs in light of currently prevailing industry conditions;
o attempt to generate an increase in  sales  in  an  increasingly    competitive
  environment;
o return to profitability;
o develop our exclusive and independent dealer network;
o pursue the financing, insurance and other activities of CIS and the financial
  services segment, and
o eliminate redundant products   to streamline production in an effort to reduce
  costs.

Downturns in shipments in the manufactured housing industry and a decline in the
demand for  Cavalier's  homes have had a material  adverse  effect on us and may
continue to have a material  adverse effect on us in the future.  Our ability to
execute our  business  strategy  depends on a number of factors,  including  the
following:

o general economic and industry conditions;
o competition from other companies in the same business as us;
o our ability to attract, retain or sell to   additional   independent  dealers,
  especially, exclusive dealers;
o the availability of semi-skilled workers in the areas in which our
  manufacturing facilities are located;
o the ability of CIS and the Company's insurance and component parts  operations
  to be competitive;
o the availability of capital and financing;
o the ability of our independent dealers and retail locations to compete   under
  current industry conditions;
o the availability and terms of wholesale and retail financing from lenders   in
  the manufactured housing industry;
o market acceptance of new product offerings, and
o the effect of continuing operating losses on the financial position   of   the
  Company.

There are other  factors in addition to those  listed  above,  many of which are
beyond our control.  Cavalier cannot assure investors that our business strategy
will be successful.  If our strategy is  unsuccessful,  this may have a material
adverse effect upon Cavalier's results of operations or financial condition. *

Limitations on Availability of Consumer and Dealer Financing
Third-party  lenders generally provide consumer  financing for manufactured home
purchases.  Our  sales  depend  in large  part on the  availability  and cost of
financing for manufactured home purchasers and dealers as well as our own retail
locations.  The availability and cost of such financing is further  dependent on
the  number  of  financial  institutions  participating  in  the  industry,  the
departure  of  financial   institutions   from  the   industry,   the  financial
institutions'  lending practices,  the strength of the credit markets generally,
governmental policies and other conditions, all of which are beyond our control.
In  addition,  most states  classify  manufactured  homes for both legal and tax
purposes as personal  property rather than real estate.  As a result,  financing
for the  purchase  of  manufactured  homes  is  characterized  by  shorter  loan
maturities and higher interest  rates,  and in certain periods such financing is
more difficult to obtain than conventional home mortgages.  Unfavorable  changes
in these factors and the current adverse trend in the  availability and terms of
financing  in the  industry  may have a material  adverse  effect on  Cavalier's
results of operations or financial condition.

Changes in Industry Retail Inventories
* See Safe Harbor Statement on page 27.
<PAGE>
Changes in the level of retail inventories in the manufactured housing industry,
either up or down,  can have a  significant  impact on the  Company's  operating
results.  For example,  due to the rapid  expansion  of the retail  distribution
network in the manufacturing housing industry that occurred in the 1990's, there
is currently an  imbalance  between  industry  retail  inventories  and consumer
demand for manufactured  homes. The  deterioration in the availability of retail
financing,  along with competition from repossessed  homes, has already extended
the inventory  adjustment period beyond what was originally  expected.  If these
trends  were to  continue,  or if retail  demand  were to  significantly  weaken
further,  the  inventory  overhang  could result in even greater  intense  price
competition,  further pressure on profit margins within the industry, and have a
material  adverse  effect on  Cavalier.  The  Company's  inventory at all retail
locations,  including  Company-owned retail sales centers,  declined 34% in 2000
from levels at the end of 1999. While Cavalier  believes that inventories of its
homes are approaching  levels which are more consistent with retail demand,  due
in part to the  Company's  emphasis on working with its dealers to reduce retail
inventories,  we cannot give investors  assurances to this effect. * In spite of
these efforts,  significant  unfavorable  developments or further  deterioration
within  the  industry  would  undoubtedly  have an  adverse  impact  on  Company
operating results.

Dependence on Independent Dealers
Cavalier depends on independent  dealers for  substantially  all retail sales of
our  manufactured  homes.  Typically  only one dealer within a given market area
distributes  a  particular  product  line of ours.  Our  relationships  with our
dealers are cancelable on short notice by either party. The manufactured housing
industry recently has experienced a trend of increasing  competition for quality
independent  dealers.  In  addition,  a number of  dealers in the  industry  are
experiencing difficulty in the current market conditions,  as a number of retail
dealers have failed and more dealers may fail before the current  downturn ends.
*oWhile we believe that our relations with our independent dealers are generally
good,  we cannot  assure our  investors  that we will be able to maintain  these
relations,  that these  dealers  will  continue  to sell our  homes,  that these
dealers  will be  successful,  or that we  will be able to  attract  and  retain
quality independent dealers. *

Intense Competition
The production and sale of manufactured homes is a highly competitive  industry,
characterized by low barriers to entry and severe price competition. Competition
is based primarily on the following factors:

o price;
o repair service;
o product features and quality;
o reputation for service and quality;
o depth of field inventory;
o delivery capabilities;
o warranty repair service;
o dealer promotions;
o merchandising; and
o terms of dealer and retail consumer financing.

In addition, Cavalier competes with other manufacturers,  some of which maintain
their own retail sales centers, for independent dealers. Manufactured homes also
compete   with  other  forms  of   low-cost   housing,   including   site-built,
prefabricated and modular homes,  apartments,  townhouses and  condominiums.  We
face direct  competition  from  numerous  manufacturers,  many of which  possess
greater financial,  manufacturing,  distribution and marketing  resources.  As a
result of these competitive conditions, Cavalier may not be able to sustain past
levels of sales or profitability.

Contingent Repurchase and Guaranty Obligations
Manufactured  housing  companies  customarily  enter into  repurchase  and other
recourse  agreements  with lending  institutions  which have provided  wholesale
floor plan financing to dealers.  Substantially all of Cavalier's sales are made
* See Safe Harbor Statement on page 27.
<PAGE>
to dealers located  primarily in the South Central and South Atlantic regions of
the United States pursuant to repurchase  agreements with lending  institutions.
These agreements generally provide that we will repurchase our products from the
lending  institutions  for the  balance  due them in the event  such  product is
repossessed  upon  a  dealer's  default.  The  risk  of  loss  under  repurchase
agreements is lessened by the fact that (1) sales of our manufactured  homes are
spread over a relatively large number of independent dealers; (2) the price that
Cavalier is obligated to pay under such repurchase agreements generally declines
over the period of the agreement  and also declines  during such period based on
predetermined   amounts;  and  (3)  Cavalier  has  been  able  to  resell  homes
repurchased  from  lenders.  While we have  established  a reserve for  possible
repurchase  losses,  we cannot assure  investors that we will not incur material
losses in excess of these reserves in the future. *

Uncertainties Regarding Retail Financing Activities
Cavalier purchases retail installment finance loans that have been originated by
our independent  exclusive  dealers.  We maintain a reserve for estimated credit
losses on installment  sale contracts  owned by CIS to provide for future losses
based  on our  historical  loss  experience,  current  economic  conditions  and
portfolio  performance.  It is  difficult  to  predict  with any  certainty  the
appropriate reserves to establish,  and we cannot assure investors that CIS will
not experience  losses that exceed  Cavalier's loss reserves and have a material
adverse  effect on  Cavalier's  results of operations  and financial  condition.
*Volatility  or a  significant  change in interest  rates might also  materially
affect  CIS's and  Cavalier's  business,  results  of  operations  or  financial
condition.

Our  strategy  currently  includes  the  continued  operation  of the  financial
services segment of our business.  Accordingly, we may incur additional debt, or
other forms of financing,  in order to continue to fund such growth. We may also
engage in other  transactions,  such as selling portions of our installment loan
portfolio, that are designed to facilitate the ability of CIS to purchase and/or
originate  an  increased  volume of loans and to reduce our exposure to interest
rate  fluctuations and installment  loan losses.  * CIS has periodically  resold
installment loan contracts to other financial institutions. The Company may sell
a substantial portion of its existing loan portfolio in 2001, in addition to the
periodic  sale of loans  purchased by CIS in the future.  Cavalier  believes the
periodic sale of installment  contracts under various retail finance  agreements
will reduce  requirements  for both  working  capital and  borrowings,  increase
Cavalier's  liquidity,  reduce Cavalier's exposure to interest rate fluctuations
and  enhance  the ability of CIS to  increase  its volume of loan  purchases.  *
However,  we cannot  assure  investors  that we will be able to make  additional
sales. We also cannot offer any assurance that possible additional financing, or
the aforementioned  transactions involving our installment loan portfolio,  will
be  available  on terms  acceptable  to  Cavalier.  If not,  we may be forced to
curtail our financial services business and to alter our other strategies.

Potential Unavailability and Increases in Prices of Raw Materials
The  availability  and pricing of certain raw  materials,  particularly  lumber,
sheetrock,  particleboard  and insulation may  significantly  affect  Cavalier's
operating  costs.  Sudden increases in demand for these  construction  materials
caused by natural  disasters  or other  market  forces can greatly  increase the
costs of materials or limit the  availability  of such  materials.  Increases in
costs  cannot  always  be  reflected   immediately  in  prices,   especially  in
competitive   times,   and,   consequently,   may  adversely  impact  Cavalier's
profitability.  Further,  a reduction in the  availability of raw materials also
may affect our ability to meet or maintain production requirements.

Operations May Be Limited by the Availability of Manufactured Housing Sites
Any  limitation  on  the  growth  of  the  number  of  sites  for  placement  of
manufactured homes or on the operation of manufactured housing communities could
adversely  affect  the  manufactured  housing  business.   Manufactured  housing
communities   and  individual  home  placements  are  subject  to  local  zoning
ordinances  and  other  local  regulations   relating  to  utility  service  and
construction of roadways.  In the past,  property owners often have resisted the
adoption of zoning ordinances  permitting the location of manufactured  homes in
residential  areas, which Cavalier believes has adversely affected the growth of
the industry.  We cannot assure investors that  manufactured  homes will receive
widespread acceptance or that localities will adopt zoning ordinances permitting
the location of manufactured  home areas. The inability of the manufactured home
industry to gain such  acceptance  and zoning  ordinances  could have a material
adverse effect on our financial condition or results of operations.
* See Safe Harbor Statement on page 27.
<PAGE>

Reliance on Executive Officers
Cavalier's success depends highly upon the personal efforts and abilities of its
current executive officers. Specifically,  Cavalier relies on the efforts of its
Chairman of the Board,  Barry B.  Donnell,  its  President  and Chief  Executive
Officer, David A. Roberson, and its Vice President,  Chief Financial Officer and
Secretary-Treasurer,  Michael R. Murphy. The loss of the services of one or more
of these individuals could have a material adverse effect upon our business.  We
do not have employment or  non-competition  agreements with any of our executive
officers.  Our  ability to  continue  to work  through  the  industry's  current
downturn  will  depend  upon  our  ability  to  attract  and  retain  additional
experienced management personnel.

Potential Adverse Effects of Regulation
Cavalier  is  subject  to a  variety  of  federal,  state  and  local  laws  and
regulations   affecting  the  production,   sale,   financing  and  insuring  of
manufactured  housing.  We suggest you read the section  above under the heading
"Regulation" for a description of many of these laws and regulations. Cavalier's
failure  to  comply  with such laws and  regulations  could  expose us to a wide
variety of sanctions,  including closing one or more  manufacturing  facilities.
Governmental  bodies have  regulatory  matters  affecting our  operations  under
continuous review and we cannot predict what effect (if any) additional laws and
regulations  promulgated  by HUD would  have on us or the  manufactured  housing
industry as a whole. Failure to comply with laws or regulations applicable to or
affecting Cavalier,  or the passage in the future of new and more stringent laws
affecting Cavalier, may adversely affect us.

Compliance with Environmental Laws
Federal,  state and  local  laws and  regulations  relating  to the  generation,
storage, handling, emission,  transportation and discharge of materials into the
environment  govern  Cavalier's  operations.  In  addition,  third  parties  and
governmental  agencies  in some  cases  have  the  power  under  such  laws  and
regulations to require remediation of environmental  conditions and, in the case
of  governmental  agencies  and  entities,  to impose fines and  penalties.  The
requirements  of such  laws  and  enforcement  policies  have  generally  become
stricter in recent years.  Accordingly,  we cannot assure investors that we will
not be required to incur response costs, remediation expenses,  fines, penalties
or other  similar  damages,  expenses or  liabilities,  or to incur  operational
shut-downs, business interruptions or similar losses, associated with compliance
with environmental laws and enforcement  policies that either individually or in
the aggregate would have a material  adverse effect on our results of operations
or financial condition.

Warranty Claims
Cavalier is subject to warranty  claims in the ordinary  course of its business.
Although we maintain reserves for such claims, which to date have been adequate,
there can be no assurance  that warranty  expense  levels will remain at current
levels or that such  reserves  will  continue to be adequate.  A large number of
warranty  claims  exceeding  our current  warranty  expense  levels could have a
material adverse effect on Cavalier's results of operations.

Litigation
We suggest that you read Item 3., Legal  Proceedings,  below, for description of
certain risk factors associated with litigation.

Volatility of Stock Price
The  Company's  common  stock is  traded on the NYSE.  The  market  price of the
Company's common stock may be subject to significant fluctuations in response to
variations in the Company's  operating  results and other factors  affecting the
Company specifically, the manufactured housing industry generally, and the stock
market generally.
* See Safe Harbor Statement on page 27.
<PAGE>

ITEM 2.           PROPERTIES

The following table sets forth the location and approximate square footage   for
each principal facility of the Company, separated by segment, as of December 31,
2000:
<TABLE>
<S>                                       <C>                                  <C>             <C>      <C>

                                                                                 Approximate   Owned/   (a)
         Location                         Use (Number of Facilities)           Square Footage  Leased
Manufacturing & Distribution
     Adrian Homes
          Adrian, Georgia                 Manufacturing facility (1)               107,000      Owned   (b)
     Astro Homes
          Shippenville, Pennsylvania      Manufacturing facility (1)               120,000      Owned
     Bellcrest Homes
          Millen, Georgia                 Manufacturing facilities (2)             169,000      Owned
     Belmont Homes, Inc.
          Belmont Mississippi             Manufacturing facilities (2)             384,000      Owned
          Clarksdale, Mississippi         Manufacturing facility (1)                91,000      Owned
     BRC Components, Inc.
          Phil Campbell, Alabama          Distribution facility (1)                 50,000     Leased   (c)
          Salisbury, North Carolina       Distribution facility (1)                 60,000     Leased   (c)
          Hillsboro, Texas                Distribution facility (1)                 42,500      Owned
     Brigadier Homes of North Carolina
          Nashville, North Carolina       Manufacturing facility (1)               182,000      Owned
     Buccaneer Homes
          Hamiliton, Alabama              Manufacturing facility (1)               195,000      Owned
          Winfield, Alabama               Manufacturing facilities (2)             205,000      Owned
     Cavalier Homes of Alabama
          Addison, Alabama                Manufacturing facilities (4)             545,000      Owned
     Homestead Homes
          Cordele, Georgia                Manufacturing facility (1)               110,000      Owned
     Mansion Homes
          Robbins, North Carolina         Manufacturing facility (1)                99,000     Leased
     Quality Housing Supply, LLC
          Hamiliton, Alabama              Manufacturing facility (1)                60,000      Owned   (d)
     Riverchase Homes
          Haleyville, Alabama             Manufacturing facility (1)                82,000      Owned
     Spirit Homes, Inc.
          Conway, Arkansas                Manufacturing facilities (2)             297,000      Owned
          Bigelow, Arkansas               Manufacturing facility (1)                80,000      Owned
     Town & Country Homes
          Fort Worth, Texas               Manufacturing facility (1)               101,000      Owned
          Graham, Texas                   Manufacturing facility (1)               103,000     Leased

Financial Services
          Hamilton, Alabama               Administrative Office                      7,000      Owned

General Corporate & Other
          Addison, Alabama                Administrative Office                     10,000      Owned
          Wichita Falls, Texas            Administrative Office                      1,000     Leased
          Decatur, Alabama                Administrative Office                      5,000     Leased

 (a) Certain of the facilities listed as owned are financed under industrial
     development bond issues, including the Adrian, Buccaneer, Cavalier Homes of
     Alabama (2), and Riverchase facilities. Not included in this table is the
     Georgia facility for which construction is not complete.

(b)  During 2000, the Company leased this facility to a third party with an option to purchase.

(c)  During 2000, the Company recorded an impairment charge related to these two
     leased supply company facilities due to the expected disposition of this
     supply company.

(d)  In March 2001, the Company exercised the purchase option on this previously leased facility for $1,125,000.
</TABLE>

In general, the manufacturing facilities are in good condition and are  operated
at capacities which range from approximately 25% to 92%, excluding   seven idled
facilities in Addison and Winfield, Alabama, Bigelow, Arkansas, and Belmont  and
Clarksdale, Mississippi.



<PAGE>


ITEM 3.           LEGAL PROCEEDINGS

The Company and its subsidiaries  are engaged in various legal  proceedings that
are incidental to and arise in the course of its business.  Certain of the cases
filed  against  the  Company  and its  subsidiaries  and  companies  engaged  in
businesses  similar to it allege,  among other  things,  breach of contract  and
warranty,  product  liability,  personal  injury and  fraudulent,  deceptive  or
collusive  practices in connection with their  businesses.  These kinds of suits
are typical of suits that have been filed in recent  years,  and they  sometimes
seek  certification  as  class  actions,  the  imposition  of large  amounts  of
compensatory and punitive damages and trials by jury. The outcome of many of the
cases in which the  Company is  involved  or may in the future  become  involved
cannot be predicted with any degree of reliability, and the potential exists for
unanticipated  material adverse judgments against the Company and its respective
subsidiaries.

ITEM 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

                  No matters were submitted to the shareholders during the  last
                  quarter of the fiscal year.

                                     PART II

ITEM 5.           MARKET   FOR   THE   REGISTRANT'S   COMMON   STOCK AND RELATED
                  STOCKHOLDER MATTERS

The Company's common stock is traded on the New York Stock Exchange ("NYSE")
under the symbol "CAV". The following table sets forth, for each of the periods
indicated, the reported high and low closing sale prices per share on the NYSE
for the Company's common stock and the cash dividends paid per share in such
periods. All adjusted prices of the Company's common stock have been rounded to
the nearest one-eighth of one dollar.

                                          Closing Sales Price
                                        ------------------------
                                           High          Low       Dividends
                                        -----------  ----------- -------------
Year ended December 31, 2000
     Fourth Quarter                        $ 1.63        $0.75         $    -
     Third Quarter                           1.88         1.38           0.01
     Second Quarter                          2.81         1.44           0.04
     First Quarter                           4.31         2.63           0.04

Year ended December 31, 1999
     Fourth Quarter                        $ 5.00        $3.75         $ 0.04
     Third Quarter                           6.69         3.94           0.04
     Second Quarter                          9.88         6.88           0.04
     First Quarter                          11.25         8.81           0.04


As of March 16, 2001, the Company had  approximately  400 shareholders of record
and 4,400  beneficial  holders of its common stock,  based upon  information  in
securities position listings by registered clearing agencies upon request of the
Company's transfer agent.

In October 2000,  Cavalier's Board of Directors voted to discontinue the payment
of cash dividends which had been reduced from $0.04 per share to $0.01 per share
for third quarter of 2000.  While the Company does not expect to recommence cash
dividend payments in the foreseeable  future, the future payment of dividends on
the  Company's  common stock will be determined by the Board of Directors of the
Company in light of  conditions  then  existing,  including  the earnings of the
Company  and  its  subsidiaries,   their  funding   requirements  and  financial
conditions,  certain loan  restrictions  and  applicable  laws and  governmental
regulations. The Company's present loan agreement contains restrictive covenants
which,  among other things,  limit the aggregate dividend payments and purchases
of treasury  stock to 50% of the Company's  consolidated  net income for the two
most recent fiscal years.


<PAGE>


ITEM 6.           SELECTED CONSOLIDATED FINANCIAL DATA

The following  table sets forth selected  consolidated  financial data regarding
the Company for the periods  indicated.  The statement of operations  data,  the
balance  sheet  data,  and other data of the  Company for each of the five years
ended  December  31,  2000 have been  derived  from the  consolidated  financial
statements of the Company.  The  Company's  audited  financial  statements as of
December 31, 2000 and 1999, and for each of the years in the  three-year  period
ended  December 31, 2000,  including the notes thereto and the related report of
Deloitte & Touche LLP,  independent  auditors,  are  included  elsewhere in this
report. The selected  consolidated  financial data should be read in conjunction
with the Consolidated Financial Statements (including the Notes thereto) and the
other financial  information  contained  elsewhere in this report,  and with the
Company's  consolidated  financial statements and the notes thereto appearing in
the Company's previously filed Annual Reports on Form 10-K.
<TABLE>
<CAPTION>

                                                                          Year Ended December 31,
                                             ----------------------------------------------------------------------------------
                                                  2000             1999             1998             1997             1996
                                             --------------   --------------   --------------   --------------   --------------
                                                                 (in thousands, except per share amounts)
Statement of Operations Data
<S>                                       <C>              <C>               <C>             <C>              <C>

Revenue:
     Home manufacturing net sales         $        290,165 $        555,756  $       598,116 $        553,730 $        572,997
     Financial services                              4,878            6,107            6,088            5,346            3,333
     Retail                                         16,842           20,914            7,167                -                -
     Supply                                          4,903            5,023            2,699            2,112              841
                                             --------------   --------------   --------------   --------------   --------------

     Total revenue                                 316,788          587,800          614,070          561,188          577,171

Cost of sales                                      277,070          476,969          496,708          464,222          482,204
Selling, general and administrative                 84,846          103,312           87,611           72,526           54,120
Impairment and other related charges                 6,975            4,002                -                -                -
Non-recurring merger and related costs                   -                -                -            7,359                -
                                             --------------   --------------   --------------   --------------   --------------

Operating profit (loss)                            (52,103)           3,517           29,751           17,081           40,847
Life insurance proceeds                                  -                -                -            1,500            1,750
Other income (expense) - net                          (494)              36            1,531             (242)           1,589
                                             --------------   --------------   --------------   --------------   --------------

Income (loss)before income taxes (benefit)$        (52,597)$          3,553           31,282 $         18,339 $         44,186
                                             ==============   ==============   ==============   ==============   ==============

Net income (loss)                         $        (33,468)$          2,150 $         18,655 $         10,247 $         27,479
                                             ==============   ==============   ==============   ==============   ==============

Basic net income (loss) per share 1       $          (1.88)$            .12 $            .94 $            .52 $           1.42
                                             ==============   ==============   ==============   ==============   ==============

Diluted net income (loss) per share 1     $          (1.88)$            .12 $            .93 $            .51 $           1.39
                                             ==============   ==============   ==============   ==============   ==============

Cash dividend per share 1                 $            .09 $            .16 $            .13 $            .07 $            .06
                                             ==============   ==============   ==============   ==============   ==============
Weighted average number of shares
     outstanding                                    17,800           18,126           19,905           19,835           19,363
                                             ==============   ==============   ==============   ==============   ==============
Weighted average number of shares
     outstanding, assuming dilution 1               17,800           18,204           20,144           20,028           19,799
                                             ==============   ==============   ==============   ==============   ==============

Other Data

Capital expenditures                      $          3,807 $         24,546 $         14,655 $         10,186 $         16,106
                                             ==============   ==============   ==============   ==============   ==============

Balance Sheet Data

Working capital                           $         27,213 $         33,065 $         41,707 $         28,484 $         24,746
Total assets                              $        187,595 $        233,578 $        235,952 $        211,554 $        196,387
Long-term debt                            $         24,054 $         10,218 $          3,650 $         15,808 $          6,227
Stockholders' equity                      $         94,318 $        129,391 $        144,911 $        133,551 $        122,652


1  All per share data has been adjusted for all stock splits.
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND  RESULTS
        OF OPERATIONS

Industry and Company  Outlook
Cavalier Homes,  Inc. and its subsidiaries are engaged in the production,  sale,
financing,  and  insuring of  manufactured  housing.  The  manufactured  housing
industry is cyclical and seasonal and is influenced by many of the same economic
and  demographic  factors that affect the housing market as a whole. As a result
of the growth in the  industry  during  much of the 1990s,  the number of retail
dealerships,   manufacturing   capacity   and   wholesale   shipments   expanded
significantly,  which ultimately  created slower retail turnover,  higher retail
inventory levels and increased price  competition.  Inventory  oversupply at the
retail level continues to have a significant impact on wholesale shipments as it
did during much of 1999. The  Manufactured  Housing  Institute  ("MHI") reported
that industry  wholesale floor  shipments  declined 25.9% in 2000 as compared to
1999,  falling  34.7% in the fourth  quarter  alone.  The industry also has been
impacted by an increase in dealer  failures,  higher interest rates, a reduction
in available consumer credit and wholesale  financing for manufactured  housing,
more  restrictive  credit  standards  and  increased  home  repossessions  which
re-enter  home  distribution  channels.  In  response  to  deteriorating  market
conditions,  manufacturers  have  closed  or idled  some of their  manufacturing
facilities  and retail  dealers  have closed some  locations.  The Company  also
believes that the possibility  exists for additional retail dealer failures,  as
well as for the loss of  additional  lenders  from the  industry,  and a further
reduction in the availability of wholesale and retail financing. *

Industry  conditions  significantly  impacted  Cavalier's business and financial
results  during 2000. The Company is uncertain at this time as to the extent and
duration of these  developments and as to what effect these factors will have on
the Company's future sales and earnings.  * The Company currently believes these
conditions will continue to adversely affect its financial  performance at least
through the second quarter and perhaps  through the end of 2001. * The Company's
revenues during the first quarter-to-date continue to be substantially below the
same period in 2000, and the Company  currently  expects to record a significant
loss in the first quarter of 2001.

Due to  deteriorating  market  conditions,  during  2000,  the Company  recorded
impairment  and other related  charges of $6,975  ($5,183 after tax or $0.29 per
diluted  share)  in  connection  with the  closing  of four  home  manufacturing
facilities,  Company-owned  retail sales  centers,  the sale of a portion of the
Company's insurance and premium finance business - a step related to the scaling
back of the  Company's  retail  operations,  and the expected  disposition  of a
portion of the Company's  supply  operations.  Since the fall of 1999,  Cavalier
idled nine home  manufacturing  plants,  one of which was  re-opened  during the
fourth  quarter of 2000,  and disposed of the  operations of one other.  Another
plant  was  destroyed  by fire in June 2000 (a  previously  idled  facility  was
re-opened to replace that  capacity).  Consequently,  Cavalier,  at December 31,
2000,  operated  a total  of 15 home  manufacturing  facilities,  reflecting  an
approximate  one-third  reduction in manufacturing  capacity over the last year.
Despite this consolidation of its manufacturing facilities, the Company does not
believe it has  reduced the  breadth of its  product  offering.  * On the retail
side,  the Company has closed or disposed of 11 of its 16 retail sales  centers.
In terms of operating costs,  Cavalier has made cost reductions in virtually all
areas of the Company,  including its exclusive dealer and marketing programs and
its administrative personnel and associated costs.  Altogether,  the Company has
reduced its  production  and  administrative  workforce by  approximately  2,800
employees or about 50% since  December 31, 1998.  The Company is  continuing  to
evaluate capacity,  cost and overhead issues, the need for further plant, retail
and other consolidations,  reductions, idlings and closings and methods designed
to address the Company's  decline in revenue in light of  developing  market and
business conditions. * The Company can give no assurance as to which one or more
of these options, if any, it may ultimately adopt, and, if adopted,  whether and
to what extent these actions will have an effect on the financial  condition and
results of operations of the Company.
* See Safe Harbor Statement on page 27.
<PAGE>

Results of Operations  (dollars in thousands)
The following table summarizes  certain  financial and operating data including,
as applicable, the percentage of total revenue:

<TABLE>
<CAPTION>

                                                            For the Year Ended December 31,
                                       ---------------------------------------------------------------------------
STATEMENT OF OPERATIONS DATA                   2000                      1999                      1998
                                       ----------------------   -----------------------   ------------------------
<S>                                  <C>           <C>        <C>            <C>        <C>            <C>
Revenue:
  Home manufacturing net sales       $   290,165              $   555,756               $   598,116
  Financial services                       4,878                    6,107                     6,088
  Retail                                  16,842                   20,914                     7,167
  Other                                    4,903                    5,023                     2,699
                                       ----------               ----------                ----------

Total revenue                        $   316,788      100.0%  $   587,800       100.0%  $   614,070        100.0%
Cost of sales                            277,070       87.5%      476,969        81.1%      496,708         80.9%
                                       ----------  ----------   ----------   ----------   ----------   -----------

     Gross profit                    $    39,718       12.5%  $   110,831        18.9%  $   117,362         19.1%
                                       ==========  ==========   ==========   ==========   ==========   ===========

Selling, general and administrative  $    84,846       26.8%  $   103,312        17.6%  $    87,611         14.3%
Impairment and other related charges $     6,975        2.2%  $     4,002         0.7%  $         -          0.0%
                                       ----------  ----------   ----------   ----------   ----------   -----------
Operating profit (loss)              $   (52,103)     -16.4%  $     3,517         0.6%  $    29,751          4.8%
                                       ----------  ----------   ----------   ----------   ----------   -----------
Other income (expense):
   Interest expense                  $    (2,736)      -0.9%  $    (1,643)       -0.3%  $      (820)        -0.1%
   Other, net                              2,242        0.7%        1,679         0.3%        2,351          0.4%
                                       ----------               ----------                ----------
                                     $      (494)             $        36               $     1,531
                                       ==========               ==========                ==========
Net income (loss)                    $   (33,468)     -10.6%  $     2,150         0.4%  $    18,655          3.0%
                                       ==========               ==========                ==========

OPERATING DATA
Home manufacturing sales:
Floor shipments                           18,590                   34,294                    36,517
Home shipments
  Single section                           4,406       38.4%       10,546        47.1%       12,430         51.0%
  Multi section                            7,072       61.6%       11,831        52.9%       11,957         49.0%
                                       ----------  ----------   ----------   ----------   ----------   -----------

Total shipments                           11,478      100.0%       22,377       100.0%       24,387        100.0%

Shipments to company owned stores           (200)      -1.7%         (645)       -2.9%         (164)        -0.7%
                                       ----------  ----------   ----------   ----------   ----------   -----------

Shipments to independent dealers          11,278       98.3%       21,732        97.1%       24,223         99.3%
                                       ==========  ==========   ==========   ==========   ==========   ===========

Retail sales:
  Single section                             335       49.3%          375        58.3%           70         37.2%
  Multi section                              345       50.7%          268        41.7%          118         62.8%
                                       ----------  ----------   ----------   ----------   ----------   -----------

Total sales                                  680      100.0%          643       100.0%          188        100.0%
                                       ==========  ==========   ==========   ==========   ==========   ===========

Cavalier produced homes sold                 568       83.5%          490        76.2%          121         64.4%
                                       ==========  ==========   ==========   ==========   ==========   ===========

Used homes sold                               99       14.6%          115        17.9%           26         13.8%
                                       ==========  ==========   ==========   ==========   ==========   ===========

Other operating data:
Installment loan purchases           $    59,569              $    47,063               $    27,438
Capital expenditures                 $     3,807              $    24,546               $    14,655
Home manufacturing facilities (operating)     15                       19                        23
Independent exclusive dealer locations       193                      274                       232
Company-owned retail locations                 5                       16                         5
</TABLE>

2000 Compared to 1999

Revenue
Total revenue for 2000 was $316,788, down 46% from 1999 revenue of $587,800. The
Company's  revenues and profits were adversely  affected by  challenging  market
conditions,  including, among other things, intense competition, reduced lending
availability and tightened credit  standards,  higher interest rates,  inventory
over-supply  at the retail level,  increased home  repossessions  which re-enter
home  distribution  channels,  the ongoing  contraction of dealer  locations and
homes  repurchased  from  dealers  which are  subsequently  re-sold  through the
Company's dealer network.

Home  manufacturing  net sales in 2000 accounted for the majority of the decline
against  1999,  falling  48% to $290,165  net of  intercompany  eliminations  of
$5,292. Home manufacturing net sales for 1999 were $555,756, net of intercompany
eliminations of $17,373.  Home shipments  decreased 48.7%,  with floor shipments
decreasing  by 45.8%.  Multi-section  home  shipments,  as a percentage of total
shipments,  increased  from 52.9% of  shipments in 1999 to 61.6% of shipments in
2000 in  response  to  increasing  consumer  demand for  multi-section  homes as
compared  to  single  section  homes.   Despite  the  increased   percentage  of
multi-section  homes sold,  the year 2000 average  price of homes sold  remained
consistent  with  1999's  average  price  due  to  industry  conditions.  Actual
shipments of homes for 2000 were 11,478 versus 22,377 in 1999.

Cavalier  attributes  the  decrease  in sales  and  shipments  primarily  to the
unfavorable industry conditions described above. Approximately 86% of Cavalier's
shipments  was to its core market of 11 states,  where the  Company's  shipments
declined  50%  compared  to 1999.  The Company has pursued a strategy of working
closely with its dealers to assist them in reducing  retail  inventories,  which
also reduces the Company's risk  associated  with dealer  failures.  The Company
believes   this   inventory   reduction   strategy   has   contributed   to  its
disproportionate  decline  in  manufacturing  sales  volume in  relation  to the
industry's decline. * The Company's inventory at all retail locations, including
company-owned  retail sales centers,  declined 34% to approximately  $191,000 at
December  31,  2000 from  $289,000  at year end 1999.  At its peak in June 1999,
dealer inventory approximated $314,000. Additionally,  industry sales in several
states  in  Cavalier's  core  market  have  declined  at a higher  rate than the
industry  overall,  which  the  Company  believes  also has had an impact on its
sales. *

Revenue from the financial  services segment  decreased 20.1% to $4,878 for 2000
compared to $6,107 in 1999,  due primarily to  competitive  pressure on the rate
earned on resold installment contracts.  For 2000, CIS Financial Services,  Inc.
("CIS"),  formerly  Cavalier  Acceptance  Corporation,  purchased  contracts  of
$59,569  and  resold  installment  contracts  totaling  $60,241.  In  1999,  CIS
purchased  contracts  of  $47,063  and  resold  installment  contracts  totaling
$60,558, including $16,000 previously held in its portfolio. CIS does not retain
the  servicing  function and does not earn the  interest  income on these resold
loans.

Revenue  from the retail  segment was  $16,842 for 2000  compared to $20,914 for
1999.  During 2000,  the Company closed or sold eleven  under-performing  retail
locations,  and has recorded  impairment and other related charges and inventory
valuation  charges as  discussed  below,  bringing  the number of  company-owned
retail locations to five at December 31, 2000.

Other revenue consists mainly of revenue from the Company's wholesale supply and
component manufacturing  businesses,  which sell primarily to the Company's home
manufacturing segment. Revenues from external customers decreased 2.4% to $4,903
for 2000 compared to $5,023 during 1999.

Gross  Profit
Gross profit is derived by  deducting  cost of sales from total  revenue.  Gross
profit was $39,718 or 12.5% of total revenue, for 2000, versus $110,831 or 18.9%
of total  revenue,  in 1999.  Of the $71,113  decrease,  the Company  attributes
approximately  $51,200 to volume  decrease  and $19,900 to margin  erosion.  The
margin erosion includes additional sales discounts at the manufacturing level in
response  to  intense  price  competition,  to help  encourage  sell-through  of
inventory,  inefficiencies  related to low volume  and plant  closings,  $400 of
supply company inventory valuation charges and $2,500 retail inventory valuation
charges.

Selling, General and Administrative
Selling,  general and administrative  expenses during 2000 were $84,846 or 26.8%
of total revenue,  versus $103,312 or 17.6% of total revenue in 1999, a decrease
of $18,466.  The overall  decrease is due  primarily  to a $10,003  reduction in
salaries,  wages and  incentive  compensation,  a $4,091  reduction  in employee
benefits cost (primarily  health  insurance),  a $5,424 reduction in advertising
and promotion  costs,  including costs to support the exclusive  dealer program,
and a $1,329 decrease in costs  associated  with the retail segment,  which were
offset by a $6,326 increase in inventory repurchase charges.

Impairment and Other Related Charges
Due to  deteriorating  market  conditions,  impairment and other related charges
totaling  $6,975  ($5,183 after tax or $0.29 per diluted share) were recorded in
2000.  These charges were  recorded in connection  with the closing of four home
manufacturing facilities ($1,024),  Company-owned retail locations ($4,212), the
sale of a portion  of the  Company's  insurance  and  premium  finance  business
* See Safe Harbor Statement on page 27.
<PAGE>
($1,497) - a step related to the scaling back of the Company's retail operations
and the expected  disposition  of a portion of the Company's  supply  operations
($242).  One  previously  closed home  manufacturing  facility was  re-opened to
replace the production  capacity of another  facility that was destroyed by fire
in June 2000 and a second  facility was re-opened in the fourth quarter of 2000.
During 1999, the Company recorded impairment and other related charges of $4,002
($2,458 after tax or $0.14 per diluted share) related to the idling of five home
manufacturing plants.

Operating Profit (Loss)
Operating profit (loss) is derived by deducting cost of sales, selling,  general
and administrative  expenses and impairment and other related charges from total
revenue. Operating loss for 2000 was $52,103, compared to an operating profit of
$3,517  in  1999.  Home  manufacturing   operating  loss,  before   intercompany
eliminations,  was  $33,211 in 2000 as  compared to a profit of $16,544 in 1999.
The  decline was  primarily  due to the  decrease in sales,  an increase in home
repurchase  costs,  impairment  and other  related  charges and the industry and
business  conditions  cited above. The year 2000 also included an operating loss
and  inventory and equipment  valuation  charges  relating to the closing of the
Adrian,  Georgia plant  totaling  $3,450  ($2,173 after tax or $0.12 per diluted
share).  In 1999,  the Adrian plant  sustained  an operating  loss of $709 ($429
after tax or $0.02 per diluted share).  On October 2, 2000, the Company sold the
inventory,  tools, and supplies of the Adrian plant and leased the facility to a
third  party  with an option to  purchase.  Financial  services  operating  loss
increased $1,032 from 1999 due primarily to the decrease in sales and impairment
and other  related  charges noted above.  The retail  segment's  operating  loss
increased  $7,580 due to costs of inventory  valuation  charges,  impairment and
other related charges, low sales volume and the competitive conditions currently
prevalent  in the  marketplace.  The  other  segment  operating  profit,  before
intercompany  eliminations,  decrease  of $2,497 is due mainly to the  inventory
valuation and  impairment and other related  charges  discussed  above.  General
corporate  operating  loss,  which is not  identifiable  to a specific  segment,
decreased $2,456 primarily due to a reduction in incentive compensation.

Other Income (Expense)
Interest  expense  increased $1,093 due primarily to the increase during part of
the  year  in  notes  payable  under  retail  floor  plan  agreements,   amounts
outstanding  under  industrial  development  revenue bond issues and  borrowings
under the Company's credit facility.

Other,  net is primarily  comprised of interest  income  (unrelated to financial
services),  gains or losses on sales of assets,  equity  earnings in investments
accounted for on the equity basis of  accounting  and  applicable  allocation of
minority  interest.  Other, net increased $563 due primarily to a fire insurance
gain  of  $920,   partially   offset  by  losses  from   supply-related   equity
partnerships.

Net Income (Loss)
Before  impairment and other related charges  discussed above, the Company's net
loss for 2000 was $28,285 or $1.59 per diluted  share  compared  with net income
before impairment and other related charges of $4,608 or $0.26 per diluted share
in 1999.  The Company's net loss for 2000,  after  impairment  and other related
charges,  was $33,468 or $1.88 per diluted  share,  as compared to net income of
$2,150 or $0.12 per diluted  share in 1999,  primarily  due to the factors noted
above.

1999 compared to 1998
Revenue
Total revenue for 1999 was $587,800 compared to $614,070 for 1998.

Home manufacturing net sales for 1999 compared to 1998 decreased 7%, or $42,360,
to $555,756, net of intercompany eliminations of $17,373. Home manufacturing net
sales for 1998 were $598,116,  net of intercompany  eliminations of $5,253. Home
shipments decreased 8.2%, with floor shipments  decreasing by 6.1%. During 1999,
52.9% of the Company's homes sold were multi-section homes compared to 49.0% for
the previous year. The expansion of the Company's  multi-section product base is
in response to increasing consumer demand for multi-section homes as compared to
single  section  homes.  Actual  shipments of homes for 1999 were 22,377  versus
24,387 in 1998.
<PAGE>

The Company  attributes the decrease in sales and shipments to the  increasingly
competitive  conditions in the industry  described above.  Approximately  88% of
Cavalier's  shipments were to its core market of 11 states,  where the Company's
floor  shipments  for 1999  declined  6.5% as  compared to 1998.  For 1999,  MHI
reported an 8.7% decline in floor  shipments  in these 11 states.  Additionally,
the Company's inventory at all retail locations,  including Company-owned retail
sales centers, increased, based on twelve month trailing sales, from 151 days at
the end of 1998 to 165 days at year end 1999.  The  average  price of homes sold
rose to  $25,600 in 1999 from  $24,700  in 1998.  The  increase  in the  average
selling  price was primarily  due to price  increases  instituted by the Company
associated  with rising prices in raw materials and an increase in the shipments
of multi-section  homes.  The Company's  exclusive dealer program expanded by 53
locations  since  December  31,1998,  bringing  the total to 290 at December 31,
1999, including 16 company-owned  stores. Sales to exclusive dealers represented
55% of total sales in 1999 versus 40% in 1998.

Revenue in 1999 from the financial  services segment  approximated 1998 revenue.
During 1999,  CIS  purchased  installment  loan  contracts of $47,063 and resold
$60,558 of installment  contracts.  In 1998, CIS purchased  contracts of $27,438
and resold  installment  contracts  totaling $45,804.  During 1998, the focus of
CIS's business changed from building, holding and servicing a portfolio of loans
to purchasing loans from its dealers, which are then resold to another financial
institution,  without recourse  (provided that the transferred loan was properly
originated  by the  dealer  and  purchased  by CIS).  CIS does  not  retain  the
servicing function and does not earn the interest income on these resold loans.

Revenue  from the retail  segment was  $20,914  for 1999,  of which 76.2% of the
units sold were Cavalier  product.  In 1998, retail revenue was $7,167, of which
64.4% of the units sold were Cavalier product. At December 31, 1999, the Company
operated 16 retail locations as compared to five at December 31, 1998.

Other revenue consists mainly of revenue from the Company's wholesale supply and
component manufacturing  businesses,  which sell primarily to the Company's home
manufacturing  segment.  Revenue  from  external  customers  increased  86.1% or
$2,324,  for 1999  compared  to 1998.  This  increase  is due  primarily  to the
addition of a supply company.

Gross Profit
Gross profit is derived by  deducting  cost of sales from total  revenue.  Gross
profit was $110,831 or 18.9% of total revenue,  in 1999 versus $117,362 or 19.1%
of total revenue, in 1998. During 1999, the Company experienced tightened supply
from its  traditional  vendors  of  certain  types of raw  materials,  including
sheetrock,  insulation  and lumber,  required for  production of its homes.  The
Company  obtained  these  products from other  vendors and purchased  substitute
products,  which  resulted in higher than normal costs.  Due to the  competitive
industry  conditions,  some of these costs were not  recoverable  through  price
increases.

Selling, General and Administrative
Selling,  general and administrative expenses during 1999 were $103,312 or 17.6%
of total revenue,  versus  $87,611 or 14.3% in 1998, an increase of $15,701.  Of
this  increase,  $1,931 is  related to  expanded  sales and  marketing  efforts,
including PowerHouse promotions,  and recruiting,  set-up and maintenance of the
exclusive  dealer network.  Additionally,  selling,  general and  administrative
expenses  increased $2,001 due to higher costs for employee  benefits,  $784 for
increased  warranty  service  activities  and  $3,140  for  the  start-up  costs
associated with implementing an enterprise-wide  management  information system.
Other   factors   contributing   to  the   increase  in  selling,   general  and
administrative  expenses are (1) costs of $3,364  associated  with operating new
retail locations and the continued development of a retail  infrastructure,  (2)
costs  associated  with the  expansion  of the supply  distribution  business of
$1,573, (3) $2,707 of costs associated with repurchased inventory, (4) $1,150 in
losses on installment contracts,  and (5) $324 in costs of opening an additional
home manufacturing facility. These costs were partially offset by a reduction in
incentive compensation of $4,111.

Impairment and Other Related Charges
Because of deteriorating market conditions,  Cavalier idled a total of five home
manufacturing  facilities,  including three  subsequent to the end of 1999, that
built  primarily  single  section  homes to  consolidate  production  into other
<PAGE>
plants.  During 1999, the Company recorded  impairment and other related charges
of $4,002 ($2,458 after tax or $0.14 per diluted share) related to the idling of
these plants.



Operating Profit (Loss)
Operating profit (loss) is derived by deducting cost of sales, selling,  general
and administrative  expenses and impairment and other related charges from total
revenue.  Operating  profit  declined  $26,234 to $3,517 in 1999 from $29,751 in
1998.

Home  manufacturing  operating  profit  declined  $18,799,  before  intercompany
eliminations,  due  primarily to lower  sales,  increased  raw material  prices,
increased selling, general and administrative expenses and the impairment charge
for idled facilities.  Financial  services operating profit decreased $2,434 due
principally  to  increased  selling,   general  and   administrative   expenses,
consisting  primarily of prepayment and repossession costs and payroll costs due
to the addition of area sales  personnel.  The retail  segment's  operating loss
increased  $1,507  due  to the  operation  of  start-up  retail  locations,  the
continued development of a retail infrastructure and the competitive  conditions
currently  prevailing in the industry.  Other operating  profit declined $1,966,
before  intercompany  eliminations,  due mainly to the costs associated with the
start-up of a new supply company.

Other Income (Expense)
Interest  expense  increased  to  $1,643  in 1999  from  $820 in 1998 due to the
increase  in notes  payable  under  retail  floor plan  agreements  and  amounts
outstanding under industrial development revenue bond issues.

Other,  net is primarily  comprised of interest  income  (unrelated to financial
services),  gains or losses on sales of assets,  equity  earnings in investments
accounted for on the equity basis of  accounting  and  applicable  allocation of
minority  interest.  The  decrease of $672 in 1999 to $1,679 from $2,351 in 1998
was primarily due to decreased  interest income earned due to lower average cash
balances during 1999 as compared to 1998.

Net Income (Loss)
Before  impairment  and other related  charges in connection  with the idling of
five home manufacturing  plants as discussed above, the Company's net income for
1999 was $4,608 or $0.26 per diluted  share  compared with net income of $18,655
or $0.93 per diluted share in 1998.  The  Company's  net income for 1999,  after
impairment and other related charges,  was $2,150 or $0.12 per diluted share, as
compared to net income of $18,655 or $0.93 per diluted share in 1999,  primarily
due to the factors noted above.

Liquidity and Capital Resources
                                           Balances as of December 31,
                                       -----------------------------------
(dollars in thousands)                    2000        1999         1998
                                       ----------  ----------   ----------

Cash and cash equivalents            $    35,394 $    39,635  $    64,243
Working capital                      $    27,213 $    33,065  $    41,707
Current ratio                           1.4 to 1    1.4 to 1     1.5 to 1
Long-term debt                       $    24,054 $    10,218  $     3,650
Ratio of long-term debt to equity         1 to 4     1 to 13      1 to 40
Installment loan portfolio           $     7,887 $     9,450  $    26,117


Operating  activities during 2000 used net cash of $9,575.  Inventory  decreased
$28,730  from  1999  to  2000,  as  the  Company  emphasized  conservative  cash
management   and  a   build-for-sale   philosophy  and  reduced  the  number  of
company-owned  retail  locations.  Of this decrease,  $12,241  related to retail
inventories  that resulted in a  corresponding  reduction in notes payable under
retail floor plan agreements.

The Company's capital  expenditures were $3,807 for 2000, as compared to $24,546
for 1999.  Capital  expenditures  during these periods included normal property,
plant  and  equipment   additions  and   replacements   and  the  expansion  and
modernization of certain of the Company's manufacturing facilities. During 2000,
additions also included $433 related to the replacement of property destroyed by
fire at the Belmont facility. Additionally,  during 1999, the Company purchased,
for a total of $3,400, two Alabama manufacturing facilities that were previously
<PAGE>
leased,  renovated  a Georgia  manufacturing  facility  at a cost of $1,693  and
capitalized  $3,469  in costs for  implementing  an  enterprise-wide  management
information system.

The  increase  in  long-term  debt of  $13,836  is  primarily  due to a  $15,000
borrowing under the Company's credit facility.

The Company  purchased  225,000  shares of treasury  stock during 2000 for $283.
Subsequent to year end, the Company purchased an additional  312,200 shares at a
cost of $607. The Company has continuing  authorization to acquire up to 831,200
additional shares under the current program.

In  addition  to its normal  purchasing  and  selling of loans to other  finance
companies,  during 2000, the Company received  proceeds of approximately  $1,400
from  the  sale of loans  that  were  previously  held in its  installment  loan
portfolio.

Between  the date of this report and the middle of 2001,  the Company  currently
expects to receive its tax refund within the range of $15,000 to $17,000. * This
amount is an  estimate,  however,  and the  receipt and timing of receipt of the
amounts  are subject to  processing  tax returns and a claim for refund with the
Internal Revenue Service and other  appropriate tax  authorities.  Consequently,
the Company cannot give  assurances  that it will receive cash within this range
or within this time frame.

The  Company has an amended  revolving  and  term-loan  agreement  (the  "Credit
Facility") with its primary  lender.  The maturity date under the revolving line
of credit  available  under the Credit Facility is set at April 2003. The Credit
Facility currently  consists of a $35,000 revolving and term-loan  agreement and
contains a revolving  line of credit that  provides  for  borrowings  (including
letters of credit) up to a maximum of $35,000.  If the  Company's  tangible  net
worth,  defined as the total of the  Company's  tangible  net worth and treasury
stock  purchases for 2000 and 2001, is less than $85,000,  the amount  available
under the Credit  Facility  is  reduced  from  $35,000  to 35% of the  Company's
tangible  net  worth.  However,  in  no  event  may  the  aggregate  outstanding
borrowings  under the revolving  line of credit and term-loan  agreement  exceed
$35,000 (or such lesser  amount as may be  available).  At  December  31,  2000,
$15,000 was  outstanding  under the  revolving  line of credit,  against a total
lending  capacity  of $27,354  based on the  Company's  tangible  net worth.  At
December  31,  1999,  no amounts  were  outstanding  under the Credit  Facility.
Interest is payable under the revolving  line of credit at the bank's prime rate
less 0.5%,  or, if elected by the Company,  the 90-day LIBOR Rate plus 2.0%.  If
the Company's tangible net worth is below $77,000,  the interest rate changes to
the bank's prime rate or, if elected by the Company,  the 90-day LIBOR Rate plus
2.5%. The Credit  Facility  provides the option for amounts drawn down for CIS's
benefit to be converted to a term loan with respect to  borrowings  of up to 80%
of the Company's  eligible (as defined)  installment  sales  contracts,  up to a
maximum of $35,000 (or such lesser amount as may be  available).  Interest under
the term notes is fixed for a period of five years from issuance at a rate based
on the weekly average yield on five-year treasury  securities  averaged over the
preceding 13 weeks, plus 1.95%, with a floating rate for the remaining two years
(subject to certain limits) equal to the bank's prime rate plus 0.75%.

The Credit Facility,  as amended,  contains certain restrictive  covenants which
limit, among other things, the Company's ability without the lender's consent to
(i) make  dividend  payments  and  purchases  of treasury  stock in an aggregate
amount  which  exceeds  50% of  consolidated  net income for the two most recent
years,  (ii) mortgage or pledge assets which exceed,  in the aggregate,  $1,000,
(iii) incur additional indebtedness,  including lease obligations,  which exceed
in the aggregate $18,000, excluding floor plan notes payable which cannot exceed
$6,000  and (iv) make  annual  capital  expenditures  in excess of  $10,000.  In
addition, the Credit Facility contains certain financial covenants requiring the
Company to  maintain  on a  consolidated  basis  certain  defined  levels of net
working  capital (at least  $15,000),  debt to tangible  net worth ratio (not to
exceed 2 to 1) and cash  flow to debt  service  ratio  (not less than 1.75 to 1)
commencing  with the year  ending  December  31,  2001  and  thereafter,  and to
maintain  a  current  ratio  of at least  1.17 to 1 and the sum of  consolidated
tangible net worth plus treasury stock purchases,  in 2000 and 2001, of at least
$65,000.  The Credit Facility also requires CIS to comply with certain specified
* See Safe Harbor Statement on page 27.
<PAGE>
restrictions  and  financial  covenants.  Cavalier  was not in  violation of any
financial covenants of the amended Credit Facility at December 31, 2000.

Since its  inception,  CIS has been  restricted in the amounts of loans it could
purchase based on underwriting standards, as well as the availability of working
capital and funds  borrowed  under its credit line with its primary  lender.  In
February 1998,  CIS entered into an agreement with another lender  providing for
the periodic resale of a portion of CIS's loans that meet  established  criteria
and without recourse (provided that the transferred loan was properly originated
by the dealer and purchased by CIS).  In March 1998 and in June 1999,  CIS sold,
under this retail  finance  agreement,  a  substantial  portion of its  existing
portfolio of loans on those dates. In April 2000, the Company received  proceeds
of approximately  $1,400 from the sale of loans that were previously held in its
installment loan portfolio.  The effect of these  transactions on net income was
to reduce the amount of financial services revenue from interest income on these
portions of the portfolio, offset by reduced interest expense on debt retired in
March  1998 and  earnings  on the  remaining  proceeds.  From time to time,  the
Company  evaluates  the  potential  to sell all or a  portion  of its  remaining
installment  loan  portfolio,  in addition to the periodic  sale of  installment
contracts  purchased by CIS in the future.  * While the original  retail finance
contract is no longer in effect, CIS is currently continuing to re-sell loans to
other lenders under various retail finance  contracts.  The Company believes the
periodic sale of installment  contracts  under these retail  finance  agreements
will reduce  requirements for both working capital and borrowings,  increase the
Company's liquidity, reduce the Company's exposure to interest rate fluctuations
and enhance the ability of CIS to increase its volume of loan purchases. * There
can be no assurance,  however,  that  additional  sales will be made under these
agreements,  or that CIS and the Company  will be able to realize  the  expected
benefits from such agreements. *

The Company  currently  believes  existing  cash and funds  available  under the
credit  facility,  together with cash  provided by operations  and cash received
from income tax refunds,  will be adequate to fund the Company's  operations and
plans for the balance of fiscal year 2001. * However, there can be no assurances
to this effect.  If it is not, the Company  could seek to enhance its  liquidity
position through further  modifications  to the credit  facility,  incurrence of
additional  short or long-term  indebtedness or other forms of financing,  asset
sales,  restructuring  of debt,  and/or the sale of equity or debt securities in
public or private transactions,  the availability and terms of which will depend
on various factors and market and other conditions, some of which are beyond the
control of the  Company.

Impact of Inflation
The Company  generally  has been able to increase  its selling  prices to offset
increased costs, including the costs of raw materials. Sudden increases in costs
as well as price competition,  however, can affect the ability of the Company to
increase  its  selling  prices.   As  discussed  above,  in  1999,  the  Company
experienced  tightened supply of certain types of raw materials,  which resulted
in some higher costs that were not recoverable  through price  increases.  For a
further  discussion of this matter,  see "1999 Compared to 1998 - Gross Profit."
The Company  believes that the  relatively  moderate rate of inflation  over the
past  several  years  has  not  had  a  significant   impact  on  its  sales  or
profitability,  but can give no assurance  that this trend will  continue in the
future. *

Impact of Accounting Statements
In June 1998, the FASB issued SFAS 133,  Accounting  for Derivative  Instruments
and Hedging  Activities.  SFAS 133,  as  amended,  is required to be adopted for
years  beginning  after June 15, 2000.  The Company  adopted SFAS 133  effective
January 1, 2001. The adoption of SFAS 133 did not have a material  impact on the
Company's consolidated financial statements.

Market Risk
Market risk is the risk of loss arising from  adverse  changes in market  prices
and interest rates. The Company is exposed to interest rate risk inherent in its
financial  instruments,  but is not  currently  subject to foreign  currency  or
commodity  price risk.  The Company  manages its  exposure to these market risks
through its regular operating and financing activities.
* See Safe Harbor Statement on page 27.
<PAGE>
The  Company  is  exposed  to  market  risk  related  to  investments  held in a
non-qualified trust used to fund benefits under its deferred  compensation plan.
These  investments  totaled  $2,455 at December 31, 2000.  Due to the  long-term
nature of the benefit  liabilities that these assets fund, the Company currently
considers  its exposure to market risk to be low. * The Company does not believe
that a decline in market value of these  investments  would result in a material
near term funding of the trust or exposure to the benefit liabilities funded. *

The Company purchases retail  installment  contracts from its dealers,  at fixed
interest rates, in the ordinary course of business,  and periodically  resells a
majority  of these  loans to  financial  institutions  under the terms of retail
finance  agreements.  The periodic resale of installment  contracts  reduces the
Company's exposure to interest rate  fluctuations,  as the majority of contracts
are held for a short period of time. The Company's  portfolio  consists of fixed
rate contracts with interest rates  generally  ranging from 9.0% to 16.0% and an
average original term of 296 months at December 31, 2000. The Company  estimated
the fair  value  of its  installment  contracts  receivable  which  approximates
carrying value, using discounted cash flows and interest rates offered by CIS on
similar contracts at December 31, 2000.

The Company has notes payable under retail floor plan agreements,  an industrial
development  revenue bond issue and a revolving  line of credit that are exposed
to interest  rate  changes.  Since these  borrowings  are floating rate debt, an
increase in short-term  interest rates would adversely affect interest  expense.
Additionally,  Cavalier has five industrial  development  revenue bond issues at
fixed  interest  rates.  The  estimated  fair  value of  outstanding  borrowings
approximated carrying value at December 31, 2000. The Company estimated the fair
value of its debt instruments using rates at which the Company believes it could
have obtained similar borrowings at that time.
<TABLE>
<CAPTION>

                                                          Assumed Annual Principal Cash Flows
                                      -----------------------------------------------------------------------------
<S>                                      <C>           <C>       <C>       <C>        <C>     <C>          <C>     <C>

(dollars in thousands)                   2001          2002      2003      2004       2005    Thereafter   Total   Fair value
Installment loan portfolio                $ 1,627 a      $ 205     $ 225     $ 248      $ 274    $ 5,308   $ 7,887    $ 6,684
(weighted average interest rate - 9.57%)
                                                           Expected Principal Maturity Dates
                                      -----------------------------------------------------------------------------
(dollars in thousands)                   2001          2002      2003      2004       2005    Thereafter   Total   Fair value
Notes payable and long-term debt          $ 4,475 b    $ 1,215   $16,254   $ 1,461    $ 1,124    $ 4,000   $28,529    $28,605
(weighted average interest rate - 7.35%)


a  The Company has recorded an allowance for credit losses of $1,180, primarily based upon management's assessment of historical
   experience factors and current economic conditions.
b  Amount payable in 2001 includes $1,154 of current portion of long-term debt and $3,321 of notes payable under retail
   floor plan agreements.
</TABLE>
* See Safe Harbor Statement on page 27.
<PAGE>

CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS

                Safe Harbor Statement under the  Private  Securities  Litigation
                Reform Act of 1995:

Our disclosure and analysis in this Annual Report on Form 10-K contain some
forward-looking statements. Forward looking statements give our current
expectations or forecasts of future events, including statements regarding
trends in the industry and the business, financing and other strategies of
Cavalier. You can identify these statements by the fact that they do not relate
strictly to historical or current facts. They generally are designated with an
asterisk (*) and use words such as "estimates," "projects," "intends,"
"believes," "anticipates," "expects," "plans," and other words and terms of
similar meaning in connection with any discussion of future operating or
financial performance. From time to time, we may also provide oral or written
forward-looking statements in other materials we release to the public. These
forward-looking statements include statements involving known and unknown
assumptions, risks, uncertainties and other factors which may cause our actual
results, performance or achievements to differ from any future results,
performance, or achievements expressed or implied by such forward-looking
statements or words. In particular, such assumptions, risks, uncertainties and
factors include those associated with the following:

o the cyclical and  seasonal nature  of the manufactured housing industry    and
  the economy generally;
o limitations in Cavalier's ability to pursue its business strategy;
o changes in demographic trends, consumer   preferences  and Cavalier's business
  strategy;
o changes  and  volatility  in  interest  rates and the  availability of capital
  and  consumer and dealer financing;
o changes in industry retail levels;
o the ability  to  attract  and  retain  quality independent  dealers, executive
  officers and other personnel;
o competition;
o contingent repurchase and guaranty obligations;
o uncertainties regarding Cavalier's retail financing activities;
o the potential unavailability and price increases for raw materials;
o the potential unavailability of manufactured housing sites;
o regulatory constraints;
o the potential for additional warranty claims;
o litigation; and
o potential volatility in our stock price.

Any or all of our forward-looking  statements in this report, in the 2000 Annual
Report to Stockholders  and in any other public  statements we make may turn out
to be wrong. These statements may be affected by inaccurate assumptions we might
make or by known or unknown risks and  uncertainties.  Many factors listed above
will  be   important   in   determining   future   results.   Consequently,   no
forward-looking  statement can be  guaranteed.  Actual  future  results may vary
materially.

We undertake no obligation to publicly  update any  forward-looking  statements,
whether as a result of new  information,  future  events or  otherwise.  You are
advised, however, to consult any further disclosures we make on related subjects
in our future filings with the  Securities and Exchange  Commission or in any of
our press  releases.  Also note that,  under the heading Risk  Factors,  we have
provided a discussion of factors that we think could cause our actual results to
differ  materially from expected and historical  results.  Other factors besides
those listed could also adversely affect  Cavalier.  This discussion is provided
as permitted by the Private Securities Litigation Reform Act of 1995.
<PAGE>


ITEM 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Selected Quarterly Financial Data (Unaudited)

The table below sets forth certain  unaudited  quarterly  financial data for the
two years ended  December  31,  2000 and 1999.  The  Company  believes  that the
following quarterly financial data includes all adjustments necessary for a fair
presentation, in accordance with accounting principles generally accepted in the
United States of America.  The following quarterly financial data should be read
in conjunction with the other financial  information contained elsewhere in this
report.  The  operating  results  for any  interim  period  are not  necessarily
indicative  of results  for a complete  year or for any future  period.
<TABLE>
<CAPTION>

                                     Fourth           Third          Second           First
                                     Quarter         Quarter         Quarter         Quarter           Total
                                  ------------     ------------    -------------   ------------     -------------
<S>                               <C>              <C>             <C>             <C>              <C>
2000
Revenue:
        Home manufacturing            $ 54,973         $ 64,606        $ 86,748        $ 83,838        $ 290,165
        Financial services                 709            1,132           1,590           1,447            4,878
        Retail                           2,654            3,382           7,865           2,941           16,842
        Other                            1,015              740           1,681           1,467            4,903
                                  -------------    -------------   -------------   -------------    -------------
        Total revenue                   59,351           69,860          97,884          89,693          316,788

Gross profit                             8,167            8,765          11,551          11,235           39,718
Net loss                                (5,630)          (6,192)        (13,009)         (8,637)         (33,468)
Basic net loss per share       a         (0.32) e         (0.35)d         (0.73)c         (0.49) b         (1.88) b,c,d,e
Diluted net loss per share     a         (0.32) e         (0.35)d         (0.73)c         (0.49) b         (1.88) b,c,d,e

1999
Revenue:
        Home manufacturing           $ 113,104        $ 126,083       $ 158,086       $ 158,483        $ 555,756
        Financial services               1,156            1,470           2,026           1,455            6,107
        Retail                 b         5,684            6,748           6,004           2,478           20,914
        Other                  b         1,246            1,534           1,243           1,000            5,023
                                  -------------    -------------   -------------   -------------    -------------
        Total revenue                  121,190          135,835         167,359         163,416          587,800

Gross profit                            21,887           24,952          31,151          32,841          110,831
Net income (loss)                       (3,550)          (1,621)          2,820           4,501            2,150
Basic net income (loss) per share    a   (0.20) g         (0.09)f           .16             .24              .12  f,g
Diluted net income (loss) per share  a   (0.20) g         (0.09)f           .16             .24              .12  f,g


   a    The sum of quarterly amounts may not equal the annual amounts due to rounding.
   b    Includes impairment and other related charges of $348 ($313 net of taxes, or $.02 per share basic and diluted) recorded in
        connection with idling two home manufacturing facilities and closing three retail sales centers.
   c    Includes impairment and other related charges of $4,397 ($3,465  net of taxes, or $.19 per share basic and diluted) recorded
        in connection with closing or disposition of retail sales centers, idling of two home manufacturing facilities and the  sale
        of a portion of the Company's insurance and premium finance business.
   d    Includes impairment and other related charges of $103 ($65 net of taxes, or $.00 per share basic and diluted) recorded in
        connection with the closing of a retail sales center.
   e    Includes impairment and other related charges of $2,127 ($1,340 net of taxes, or $.08 per share basic and diluted) recorded
        in connection with retail sales centers and the disposition of a supply company.
   f    Includes impairment and other related charges of $1,453 ($879  net of taxes, or $.05 per share basic and diluted) in
        connection with the idling of two home manufacturing facilities.
   g    Includes impairment and other related charges of $2,549 ($1,579  net of taxes, or $.09 per share basic and diluted) in
        connection with the idling of five home manufacturing facilities.

        Certain amounts from the prior periods have been reclassified to conform to the 2000 presentation.
</TABLE>



<PAGE>


                     CAVALIER HOMES, INC. AND SUBSIDIARIES
                   FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

             Index to Consolidated Financial Statements and Schedule

Independent Auditor's Report
                                                                              30

Consolidated Balance Sheets
                                                                              31

Consolidated Statements of Income
                                                                              33

Consolidated Statements of Stockholders' Equity
                                                                              34

Consolidated Statements of Cash Flows
                                                                              35

Notes to Consolidated Financial Statements
                                                                              36

Schedule -

         II - Valuation and Qualifying Accounts
                                                                              52



Schedules I, III, IV and V have been omitted because they are either not
required or are inapplicable.
<PAGE>

INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
of Cavalier Homes, Inc.:

We have audited the accompanying  consolidated balance sheets of Cavalier Homes,
Inc.  and  subsidiaries  as of  December  31,  2000 and  1999,  and the  related
consolidated statements of operations,  stockholders' equity, and cash flows for
each of the three years in the period ended  December 31, 2000.  Our audits also
included the financial  statement  schedule listed in the index at Item 8. These
financial  statements and financial statement schedule are the responsibility of
the Company's  management.  Our responsibility is to express an opinion on these
financial statements and the financial statement schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  such consolidated  financial  statements present fairly, in all
material   respects,   the  financial  position  of  Cavalier  Homes,  Inc.  and
subsidiaries at December 31, 2000 and 1999, and the results of their  operations
and their cash flows for each of the three  years in the period  ended  December
31, 2000 in conformity  with  accounting  principles  generally  accepted in the
United  States of  America.  Also,  in our  opinion,  such  financial  statement
schedule,  when  considered  in  relation  to the basic  consolidated  financial
statements taken as a whole,  presents  fairly,  in all material  respects,  the
information set forth therein.




Birmingham, Alabama
February 21, 2001



<PAGE>
<TABLE>
<CAPTION>

CAVALIER HOMES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
-----------------------------------------------------------------------------------------------

<S>                                                                  <C>             <C>
                                                                         2000           1999
ASSETS

CURRENT ASSETS:
  Cash and cash equivalents                                          $  35,394       $  39,635
  Accounts receivable, less allowance for losses of
    $346 (2000) and $134 (1999)                                          3,751          10,022
  Notes and installment contracts receivable - current                   1,890           3,202
  Inventories                                                           21,390          50,120
  Deferred income taxes                                                 11,776          13,316
  Income tax receivable                                                 15,052           2,133
  Other current assets                                                   2,211           3,109
                                                                     ---------       ---------
           Total current assets                                         91,464         121,537
                                                                     ---------       ---------
PROPERTY, PLANT AND EQUIPMENT:
  Land                                                                   5,943           5,999
  Buildings and improvements                                            49,784          52,182
  Machinery and equipment                                               44,763          49,118
                                                                     ---------       ---------
                                                                       100,490         107,299
  Less accumulated depreciation and amortization                        36,010          32,804
                                                                     ---------       ---------
           Total property, plant and equipment, net                     64,480          74,495
                                                                     ---------       ---------
INSTALLMENT CONTRACTS RECEIVABLE, less
  allowance for credit losses of $1,180 (2000) and
  $1,656 (1999)                                                          5,079           5,388
                                                                     ---------       ---------
DEFERRED INCOME TAXES                                                    4,591             391
                                                                     ---------       ---------
GOODWILL, less accumulated amortization
   of $5,990 (2000) and $5,368 (1999)                                   16,446          22,684
                                                                     ---------       ---------
OTHER ASSETS                                                             5,535           9,083
                                                                       -------         -------
TOTAL                                                                $ 187,595       $ 233,578
                                                                     =========       =========
</TABLE>


<PAGE>
<TABLE>
<CAPTION>

CAVALIER HOMES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
--------------------------------------------------------------------------------------------------------------


<S>                                                                                 <C>             <C>
                                                                                          2000           1999
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Current portion of long-term debt                                                 $     1,154     $    1,119
  Notes payable under retail floor plan agreements                                        3,321         15,562
  Accounts payable                                                                        8,176         12,303
  Amounts payable under dealer incentive programs                                        21,204         25,442
  Accrued compensation and related withholdings                                           2,725          5,312
  Accrued insurance                                                                       4,615          6,027
  Estimated warranties                                                                   11,800         13,000
  Reserve for repurchase commitments                                                      4,100          3,330
  Other accrued expenses                                                                  7,156          6,377
                                                                                     ----------     ----------
           Total current liabilities                                                     64,251         88,472
                                                                                     ----------     ----------
LONG-TERM DEBT                                                                           24,054         10,218
                                                                                     ----------     ----------
OTHER LONG-TERM LIABILITIES                                                               4,972          5,497
                                                                                     ----------     ----------
COMMITMENTS AND CONTINGENCIES (Note 10)

STOCKHOLDERS' EQUITY:
  Series A Junior Participating Preferred Stock, $.01 par value;
    200,000 shares authorized, none issued
  Preferred stock, $.01 par value; 300,000 shares authorized,
    none issued
  Common stock, $.10 par value; 50,000,000 shares authorized,
    18,504,266 (2000) and 18,271,433 (1999) shares issued                                 1,850          1,827
  Additional paid-in capital                                                             55,436         55,181
  Retained earnings                                                                      40,525         75,593
  Treasury stock, at cost; 705,100 (2000) and 480,100 (1999) shares                      (3,493)        (3,210)
                                                                                     -----------    -----------
           Total stockholders' equity                                                    94,318        129,391
                                                                                     -----------    -----------
TOTAL                                                                                $  187,595     $  233,578
                                                                                     ===========    ===========

See notes to consolidated financial statements.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
CAVALIER HOMES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
---------------------------------------------------------------------------------------------------------------
<S>                                                             <C>                <C>            <C>
                                                                      2000             1999            1998

REVENUE                                                         $    316,788       $  587,800      $  614,070
                                                                -------------      -----------     -----------
COST OF SALES                                                        277,070          476,969         496,708

SELLING, GENERAL AND ADMINISTRATIVE                                   84,846          103,312          87,611

IMPAIRMENT AND OTHER RELATED
  CHARGES                                                              6,975            4,002
                                                                -------------      -----------     -----------
                                                                     368,891          584,283         584,319
                                                                -------------      -----------     -----------
OPERATING PROFIT (LOSS)                                              (52,103)           3,517          29,751
                                                                -------------      -----------     -----------
OTHER INCOME (EXPENSE):
  Interest expense                                                    (2,736)          (1,643)           (820)
  Other, net                                                           2,242            1,679           2,351
                                                                -------------      -----------      ----------
                                                                        (494)              36           1,531
                                                                -------------      -----------      ----------
INCOME (LOSS) BEFORE INCOME TAXES
  (BENEFIT)                                                          (52,597)           3,553          31,282
INCOME TAXES (BENEFIT)                                               (19,129)           1,403          12,627
                                                                -------------      -----------      ----------
NET INCOME (LOSS)                                               $    (33,468)      $    2,150       $  18,655
                                                                =============      ===========      ==========
BASIC NET INCOME (LOSS) PER SHARE                               $      (1.88)      $     0.12       $    0.94
                                                                =============      ===========      ==========
DILUTED NET INCOME (LOSS) PER SHARE                             $      (1.88)      $     0.12       $    0.93
                                                                =============      ===========      ==========
WEIGHTED AVERAGE SHARES
  OUTSTANDING                                                     17,799,505       18,125,763      19,904,746
                                                                =============      ===========     ===========
WEIGHTED AVERAGE SHARES OUTSTANDING,
   ASSUMING DILUTION                                              17,799,505       18,204,030      20,143,795
                                                                =============      ===========     ===========

See notes to consolidated financial statements.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

CAVALIER HOMES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
-----------------------------------------------------------------------------------------------------------------------------


                                                                      Additional
                                                             Common     Paid-in       Retained       Treasury
                                                             Stock      Capital       Earnings         Stock          Total
<S>                                                        <C>         <C>            <C>            <C>           <C>

BALANCE, JANUARY 1, 1998                                   $ 1,994     $ 57,228       $ 74,329                     $ 133,551
  Stock options exercised                                        4          153                                          157
  Income tax benefit attributable to exercise of
    stock options                                                            90                                           90
  Sale of common stock under Employee Stock
    Purchase Plan                                                5          504                                          509
  Sale of common stock under Dividend
    Reinvestment Plan                                           25        2,579                                        2,604
  Accrued compensation                                                      206                                          206
  Cash dividends paid ($.13 per share)                                                  (2,584)                       (2,584)
  Purchase of treasury stock (852,600 shares)                                                          (8,277)        (8,277)
  Net income                                                                            18,655                        18,655
                                                           --------    ---------      ---------      ---------     ----------
BALANCE, DECEMBER 31, 1998                                   2,028       60,760         90,400         (8,277)       144,911
  Stock options exercised                                        4          280                                          284
  Income tax benefit attributable to exercise of
    stock options                                                            28                                           28
  Sale of common stock under Employee Stock
    Purchase Plan                                               10          481                                          491
  Sale of common stock under Dividend
    Reinvestment Plan                                                        14                                           14
  Accrued compensation                                                      114                                          114
  Cash dividends paid ($.16 per share)                                                  (2,926)                       (2,926)
  Purchase of treasury stock (1,779,000 shares)                                                       (15,675)       (15,675)
  Retirement of treasury stock (2,151,500 shares)             (215)      (6,496)       (14,031)        20,742
  Net income                                                                             2,150                         2,150
                                                           --------    ---------      ---------      ---------     ----------
BALANCE, DECEMBER 31, 1999                                   1,827       55,181         75,593         (3,210)       129,391
  Stock options exercised                                        1            3                                            4
  Income tax benefit attributable to exercise of
    stock options                                                             3                                            3
  Sale of common stock under Employee Stock
    Purchase Plan                                               22          196                                          218
  Sale of common stock under Dividend
    Reinvestment Plan                                                         8                                            8
  Accrued compensation                                                       45                                           45
  Cash dividends paid ($.09 per share)                                                  (1,600)                       (1,600)
  Purchase of treasury stock (225,000 shares)                                                            (283)          (283)
  Net loss                                                                             (33,468)                      (33,468)
                                                           --------    ---------      ---------      ---------     ----------
BALANCE, DECEMBER 31, 2000                                 $ 1,850     $ 55,436       $ 40,525       $ (3,493)      $ 94,318
                                                           ========    =========      =========      =========     ===========
See notes to consolidated financial statements.
</TABLE>
<PAGE>

<TABLE>
<CAPTION>


CAVALIER HOMES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(IN THOUSANDS)
--------------------------------------------------------------------------------------------------------------
<S>                                                                    <C>            <C>            <C>

                                                                           2000          1999           1998
OPERATING ACTIVITIES:
  Net income (loss)                                                    $ (33,468)     $  2,150       $ 18,655
  Adjustments to reconcile net income (loss) to net cash
    provided by (used in) operating activities:
      Depreciation and amortization                                        9,759        10,250          8,365
      Change in provision for credit losses and repurchase
        commitments                                                          506         3,159           (486)
      Gain on sale of installment contracts                               (2,037)       (2,257)        (2,048)
      (Gain) loss on sale of property, plant and equipment                  (864)           85             49
      Impairment and other related charges                                 6,975         4,002
      Other, net                                                             411             2            267
      Changes in assets and liabilities provided (used) cash,
        net of effects of acquisitions:
          Accounts receivable                                              6,059        (1,277)           787
          Inventories                                                     28,730        (5,376)        (6,248)
          Income tax receivable                                          (12,919)       (5,804)         2,168
          Accounts payable                                                (4,127)       (6,929)         6,313
          Other assets and liabilities                                    (8,600)       (4,525)         9,536
                                                                       ----------     ---------      ---------
           Net cash provided by (used in) operating activities            (9,575)       (6,520)        37,358
                                                                       ----------     ---------      ---------
INVESTING ACTIVITIES:
  Net cash paid in connection with acquisitions                                         (4,439)        (2,358)
  Proceeds from disposition of property, plant and equipment               3,673           437            282
  Capital expenditures                                                    (3,807)      (24,546)       (14,655)
  Purchases of certificates of deposit                                                                 (6,044)
  Maturities of certificates of deposit                                                                10,044
  Net change in notes and installment contracts                          (57,057)      (44,943)       (23,119)
  Proceeds from sale of installment contracts                             62,278        62,815         47,852
  Other investing activities                                                 270        (1,686)        (1,085)
                                                                       ----------     ---------      ---------
           Net cash provided by (used in) investing activities             5,357       (12,362)        10,917
                                                                       ----------     ---------      ---------
FINANCING ACTIVITIES:
  Net borrowings (payments) on notes payable                             (12,241)        4,824          1,307
  Proceeds from long-term borrowings                                      15,000         7,807
  Payments on long-term debt                                              (1,129)         (545)       (15,024)
  Net proceeds from sales of common stock                                    226           505          3,113
  Proceeds from exercise of stock options                                      4           284            157
  Cash dividends paid                                                     (1,600)       (2,926)        (2,584)
  Purchase of treasury stock                                                (283)      (15,675)        (8,277)
                                                                       ----------     ---------      ---------
           Net cash used in financing activities                             (23)       (5,726)       (21,308)
                                                                       ----------     ---------      ---------
NET INCREASE (DECREASE) IN CASH AND CASH
  EQUIVALENTS                                                             (4,241)      (24,608)        26,967

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                              39,635        64,243         37,276
                                                                       ----------     ---------      ---------
CASH AND CASH EQUIVALENTS, END OF YEAR                                 $  35,394      $ 39,635       $ 64,243
                                                                       ==========     =========      =========
See notes to consolidated financial statements.
</TABLE>


<PAGE>


CAVALIER HOMES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
--------------------------------------------------------------------------------


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Principles of Consolidation - The consolidated financial statements include
     the   accounts  of  Cavalier   Homes,   Inc.  and  its   wholly-owned   and
     majority-owned  subsidiaries  (collectively,  the "Company"). The Company's
     minority  ownership  interests in various joint  ventures are accounted for
     using  the  equity   method  and  are  included  in  other  assets  in  the
     accompanying  consolidated balance sheets.  Intercompany  transactions have
     been eliminated in  consolidation.  See Note 11 for information  related to
     the Company's business segments.

     Nature of Operations - The Company designs and produces  manufactured homes
     which are sold to a  network  of  dealers  located  primarily  in the South
     Central  and South  Atlantic  regions of the United  States.  In  addition,
     through  its  financial   services  segment,   the  Company  offers  retail
     installment sale financing and related insurance  products for manufactured
     homes sold through the  Company's  dealer  network.  The  Company's  retail
     segment  operates retail sales  locations which offer the Company's  homes,
     financing and insurance products to retail customers.

     Accounting   Estimates  -  The  preparation  of  financial   statements  in
     conformity  with  accounting  principles  generally  accepted in the United
     States of America  requires  management to make  estimates and  assumptions
     that affect the amounts  reported in the  financial  statements  and notes.
     Actual results could differ from those estimates.

     Fair Value of Financial  Instruments - The carrying  value of the Company's
     cash  equivalents,   accounts  receivable,  accounts  payable  and  accrued
     expenses  approximates fair value because of the short-term nature of these
     instruments.  Additional  information  concerning  the fair  value of other
     financial instruments is disclosed in Notes 3 and 5.

     Cash Equivalents - The Company considers all highly liquid investments with
     original maturities of three months or less to be cash equivalents.

     Inventories  -  Inventories  are  stated  at the  lower of cost  (first-in,
     first-out method) or market. Work-in-process and finished goods inventories
     include an allocation for labor and overhead costs.

     Property,  Plant and Equipment - Property, plant and equipment is stated at
     cost and  depreciated  primarily  over the  estimated  useful  lives of the
     related assets using the straight-line method.  Maintenance and repairs are
     expensed  as  incurred.  The  Company  paid $337 and $388 in 1999 and 1998,
     respectively, for construction of plant facilities, and paid $3,400 in 1999
     to  exercise  purchase  options on two  previously  leased  facilities,  to
     companies   among  whose   owners  are  certain   officers,   directors  or
     stockholders of the Company.

     Goodwill - Goodwill  represents  the excess of the purchase  price over the
     fair  value of the net  assets  acquired  and is being  amortized  over the
     expected periods to be benefited,  15 to 25 years,  using the straight-line
     method.

     Impairment of Long-Lived  Assets - The Company  periodically  evaluates the
     carrying value of long-lived assets to be held and used, including goodwill
<PAGE>
     and other intangible assets,  when events and circumstances  warrant such a
     review. The carrying value of long-lived assets is considered impaired when
     the  anticipated  undiscounted  cash flow from such assets is less than its
     carrying value. In that event, a loss is recognized  based on the amount by
     which the carrying  value  exceeds the fair market value of the  long-lived
     assets.  Fair market value is determined  primarily  using the  anticipated
     cash flows discounted at a rate commensurate with the risk involved. Losses
     on long-lived  assets to be disposed of are determined in a similar manner,
     except  that the fair  market  values are  primarily  based on  independent
     appraisals and  preliminary  or definitive  contractual  arrangements  less
     costs to dispose.

     Revenue  Recognition - Sales of manufactured  homes to independent  dealers
     are  recorded  as of the date the home is shipped  since  title and risk of
     loss  passes to the  dealer at that time.  All sales are final and  without
     recourse except for the contingency described in Note 10. For Company-owned
     retail locations, revenue is recorded upon funding and transfer of title to
     the retail home buyer.  Interest income on installment contracts receivable
     is recognized using the interest method.

     Product  Warranties - The Company provides the retail home buyer a one-year
     limited  warranty  covering  defects in  material  or  workmanship  in home
     structure,  plumbing and  electrical  systems.  A liability is provided for
     estimated  future  warranty  costs  relating  to  homes  sold,  based  upon
     management's  assessment  of  historical  experience  factors  and  current
     industry trends.

     Allowance  for Credit  Losses on  Installment  Contracts  - The Company has
     provided an allowance for estimated  future  credit losses  resulting  from
     retail  financing  activities  of CIS  Financial  Services,  Inc.  ("CIS"),
     formerly  Cavalier  Acceptance  Corporation,   a  wholly-owned  subsidiary,
     primarily based upon management's  assessment of historical  experience and
     current economic conditions.

     Insurance  - The  Company's  workmen's  compensation  (prior to February 1,
     1999),  product liability and general liability  insurance  coverages (with
     the exception of two subsidiaries,  whose insurance is provided under fully
     insured policies) are provided under incurred loss,  retrospectively  rated
     premium  plans.  Under these plans,  the Company incurs  insurance  expense
     based  upon  various  rates  applied to  current  payroll  costs and sales.
     Annually,  such  insurance  expense is  adjusted  by the  carrier  for loss
     experience  factors  subject to minimum and maximum  premium  calculations.
     Refunds or additional premiums are estimated and recorded when sufficiently
     reliable  data  is  available.   During  1999,   the  Company's   workmen's
     compensation coverage was converted to a fully insured policy.

     Net Income  (Loss) Per Share - The Company  reports two separate net income
     (loss) per share numbers,  basic and diluted. Both are computed by dividing
     net income (loss) by the weighted  average  shares  outstanding  (basic) or
     weighted average shares outstanding assuming dilution (diluted) as detailed
     below (in thousands of shares):
<TABLE>
<S>                                                            <C>          <C>            <C>
                                                                 2000          1999         1998

        Weighted average shares outstanding                     17,800       18,126        19,905

        Dilutive effect of stock options and warrants                            78           239
                                                               -------      -------        -------
        Weighted average shares outstanding,
        assuming dilution                                       17,800       18,204        20,144
                                                               =======      =======        =======
</TABLE>

     Options and  warrants  that could  potentially  dilute basic net income per
     share in the future  were not  included in the  computation  of diluted net
     income per share because to do so would have been antidilutive. All options
     and  warrants in 2000 are excluded  due to their  antidilutive  effect as a
     result of the  Company's  loss from  operations.  Antidilutive  options and
     warrants  (in  thousands of shares)  were 2,911,  2,602,  and 642 for 2000,
     1999, and 1998, respectively.
<PAGE>

     Recent  Accounting   Pronouncement  -  Statement  of  Financial  Accounting
     Standards  ("SFAS") No. 133,  Accounting  for  Derivative  Instruments  and
     Hedging Activities,  is effective for all fiscal years beginning after June
     15,  2000.  SFAS 133,  as amended,  establishes  accounting  and  reporting
     standards  for  derivative   instruments,   including  certain   derivative
     instruments  embedded in other contracts and for hedging activities.  Under
     SFAS 133, certain contracts that were not formerly  considered  derivatives
     may now meet the definition of a derivative.  The Company  adopted SFAS 133
     effective January 1, 2001. The adoption of SFAS 133 did not have a material
     impact on the financial position,  results of operations,  or cash flows of
     the Company.

     Reclassifications  -  Certain  amounts  from the  prior  periods  have been
     reclassified to conform to the 2000 presentation.

2.   IMPAIRMENT AND OTHER RELATED CHARGES

     During 2000, due to deteriorating  market conditions,  the Company recorded
     impairment  and other related  charges of $6,975 ($5,183 after tax or $0.29
     per  diluted  share  )  in  connection   with  the  closing  of  four  home
     manufacturing facilities, Company-owned retail sales centers, the sale of a
     portion of the Company's  insurance and premium finance  business,  and the
     expected  disposition of a portion of the Company's supply operations.  The
     charge  for  assets to be held and used  includes  write-downs  of $277 for
     property,  plant and  equipment  ($43 home  manufacturing  segment and $234
     retail segment) and $1,044 for goodwill  (retail  segment).  The charge for
     assets to be disposed of includes write-downs of $2,229 for property, plant
     and equipment ($981 home manufacturing  segment,  $1,058 retail segment and
     $190 other segment),  $3,038 for goodwill ($1,541 retail segment and $1,497
     financial services segment),  and $387 for  non-competition  agreements and
     lease  obligations  ($335  retail  segment  and $52 other  segment).  After
     recording the  impairment  charges,  the carrying value of the assets to be
     disposed  of was  $2,004  ($602 home  manufacturing  segment,  $901  retail
     segment and $501 other  segment).  The Company is  actively  marketing  the
     facilities to be disposed of. Before recording the impairment charges,  the
     results of operations for 2000 related to assets to be disposed of included
     a $3,323  after-tax loss from the retail segment,  $683 after tax loss from
     the other segment,  and $100 after-tax  income from the financial  services
     segment.  The  results of  operations  for the home  manufacturing  segment
     related to assets to be  disposed  of are not  separately  identifiable  as
     these closed facilities were not accounted for separately.

     During 1999, the Company  recorded  impairment and other related charges of
     $4,002 ($2,458 after tax or $0.14 per diluted share) in connection with the
     closing of five home manufacturing facilities.  The charge for assets to be
     held  and  used  includes  write-downs  of $850  for  property,  plant  and
     equipment.  The charge for assets to be disposed of includes write-downs of
     $2,186  for  property,  plant  and  equipment  and $966 for lease and other
     obligations.  After recording the impairment charges, the carrying value of
     the assets to be disposed of was $1,139.  The Company is actively marketing
     the  facilities to be disposed of. During 2000,  payments of $619 were made
     against  the  reserve  for lease  and other  obligations.  The  results  of
     operations  for the home  manufacturing  segment  related  to  assets to be
     disposed of are not separately identifiable as these closed facilities were
     not accounted for separately.

3.   INSTALLMENT CONTRACTS RECEIVABLE

     CIS finances  retail sales  through the purchase of  installment  contracts
     from a portion of the Company's dealer network, at fixed interest rates, in
     the  ordinary  course of  business,  and resells a majority of the loans to
     financial  institutions  under  the  terms of  retail  finance  agreements.
     Standard loan programs  require  minimum down payments,  ranging from 5% to
     20% of the purchase price of the home, on all  installment  contracts based
     on the  creditworthiness  of the  borrower.  In addition,  CIS requires the
     borrower to maintain adequate  insurance on the home throughout the life of
     the  contract.  Contracts  are  secured  by the home  which is  subject  to
     repossession by CIS upon default by the borrower.
<PAGE>

     CIS's  portfolio  consists  of fixed rate  contracts  with  interest  rates
     generally ranging from 9.0% to 16.0% and from 9.0% to 14.0% at December 31,
     2000 and 1999, respectively. The average original term of the portfolio was
     approximately   296  and  269  months  at  December   31,  2000  and  1999,
     respectively.   CIS  enters  into  agreements  to  sell,  without  recourse
     (provided that the transferred  loan was properly  originated by the dealer
     and  purchased by CIS),  contracts  in its  portfolio  that meet  specified
     credit  criteria.  Under these  agreements,  CIS sold $60,241,  $60,558 and
     $45,804 of contracts  receivable and realized  gains of $2,037,  $2,257 and
     $2,048 for the years ended December 31, 2000, 1999 and 1998, respectively.

     At December 31, 2000, scheduled principal payments of installment contracts
     receivable (including sales of contracts receivable in January 2001) are as
     follows:


                    Year Ending
                    December 31,
                        2001                                       $ 1,627
                        2002                                           205
                        2003                                           225
                        2004                                           248
                        2005                                           274
                     Thereafter                                      5,308
                                                                   --------
                        Total                                      $ 7,887
                                                                   ========


     Activity in the allowance for credit losses on installment contracts was as
     follows:

                                              2000           1999          1998

        Balance, beginning of year         $ 1,656        $   760       $ 1,272
        Provision for credit losses            687          2,192         1,042
        Charge-offs, net                    (1,163)        (1,296)       (1,554)
                                           --------       --------      --------
        Balance, end of year               $ 1,180        $ 1,656       $   760
                                           ========       ========      ========

     At December  31, 2000 and 1999,  the  estimated  fair value of  installment
     contracts  receivable  approximated  carrying value. These fair values were
     estimated using  discounted cash flows and interest rates offered by CIS on
     similar contracts at such times.


<PAGE>


4.   INVENTORIES

     Inventories consisted of the following:

                                            2000            1999

        Raw materials                    $ 14,501        $ 27,363
        Work-in-process                     2,224           3,513
        Finished goods                      4,665          19,244
                                         --------        --------
        Total                            $ 21,390        $ 50,120
                                         ========        ========

     During  2000,  1999,  and 1998,  the Company  purchased  raw  materials  of
     approximately  $11,893,  $20,166  and  $12,413,  respectively,  from  joint
     ventures in which the Company  owns a minority  interest and from a company
     in which a stockholder and director of the Company is also a stockholder.

5.   CREDIT ARRANGEMENTS

     The Company has a $35,000  revolving and term-loan  agreement  (the "Credit
     Facility")  with its primary  bank,  whose  president  is a director of the
     Company.  The Credit  Facility  contains a revolving  line of credit  which
     provides for borrowings  (including letters of credit) of up to $35,000. If
     the  Company's  tangible net worth,  defined as the total of the  Company's
     tangible net worth and treasury stock  purchases for 2000 and 2001, is less
     than $85,000,  the amount  available  under the Credit  Facility is reduced
     from $35,000 to 35% of the  Company's  tangible net worth.  However,  in no
     event may the aggregate outstanding  borrowings under the revolving line of
     credit and term-loan agreement exceed $35,000 (or such lesser amount as may
     be  available).  At December 31, 2000,  $15,000 was  outstanding  under the
     revolving line of credit, against a total lending capacity of $27,354 based
     on the Company's  tangible net worth. At December 31, 1999, no amounts were
     outstanding  under the  Credit  Facility.  Interest  is  payable  under the
     revolving  line of  credit at the  bank's  prime  rate  less 0.5%  (9.0% at
     December  31,  2000) or, if elected by the  Company,  the 90-day LIBOR Rate
     plus  2.0%.  If the  Company's  tangible  net worth is below  $77,000,  the
     interest  rate  changes  to the  bank's  prime  rate or, if  elected by the
     Company,  the  90-day  LIBOR  Rate  plus  2.5%.  The  maturity  date of the
     revolving line of credit is April 2003.

     The  term-loan  agreement  contained  in the Credit  Facility  provides for
     borrowings  of up  to  80%  of  the  Company's  eligible  installment  sale
     contracts,  up to a maximum of  $35,000  (or such  lesser  amount as may be
     available). Interest on term notes is fixed for a period of five years from
     issuance at a rate based on the weekly average yield on five-year  treasury
     securities averaged over the preceding 13 weeks, plus 1.95%, and floats for
     the remaining two years at a rate (subject to certain  limits) equal to the
     bank's  prime  rate  plus  .75%.  No  amounts  were  outstanding  under the
     term-loan portion of the Credit Facility at December 31, 2000 and 1999.

     The Credit Facility contains certain  restrictive and financial  covenants,
     which,  among other things,  limit the  aggregate of dividend  payments and
     purchases  of treasury  stock,  restrict  the  Company's  ability to pledge
     assets, incur additional  indebtedness and make capital  expenditures,  and
     require the Company to maintain certain defined financial  ratios.  Amounts
     outstanding   under  the  Credit  Facility  are  secured  by  the  accounts
     receivable and  inventories of the Company,  loans purchased and originated
     by CIS,  and the  capital  stock of certain of the  Company's  consolidated
     subsidiaries.

     The Company has $3,321 and $15,562 of notes payable under retail floor plan
     agreements  at  December  31,  2000 and 1999,  respectively.  The notes are
     collateralized by certain  inventories and bear interest ranging from prime
     to prime plus 2%.
<PAGE>

     The  Company  has  amounts  outstanding  under six  Industrial  Development
     Revenue  Bond issues  ("Bonds") of $10,208 and $11,337 at December 31, 2000
     and 1999,  respectively.  Four of the bond issues bear interest at variable
     rates  ranging from 4.0% to 5.4% and mature at various  dates through April
     2009. One of the bond issues is payable in equal monthly  installments  and
     bears  interest  at 75% of the prime rate and  matures in 2005.  One of the
     bond issues is payable in equal quarterly  principal payments with interest
     payable  at 6.75% and  matures  in 2004.  The bonds are  collateralized  by
     certain plant facilities.  Restricted bond proceeds of $228 and $1,725 were
     not disbursed and are reflected as a non-current  asset in the consolidated
     balance sheets at December 31, 2000 and 1999, respectively.


     At December 31, 2000,  principal  repayment  requirements on long-term debt
     are as follows:

               Year Ending
               December 31,

                   2001                                $   1,154
                   2002                                    1,215
                   2003                                   16,254
                   2004                                    1,461
                   2005                                    1,124
                Thereafter                                 4,000
                                                       ---------
                   Total                                  25,208
                  Less current portion                     1,154
                                                       ---------
                  Long-term debt                       $  24,054
                                                       =========

     The estimated fair value of outstanding  borrowings  approximated  carrying
     value at December 31, 2000 and 1999.  These estimates were determined using
     rates  at  which  the  Company  believes  it could  have  obtained  similar
     borrowings at such times.

     Cash paid for interest  during the years ended December 31, 2000,  1999 and
     1998 was $2,725, $1,480 and $776, respectively.

6.   STOCKHOLDERS' EQUITY

     The  Company  has  adopted  a  Stockholder  Rights  Plan with the terms and
     conditions  of the plan set forth in a Rights  Agreement  dated October 23,
     1996 between the Company and its Rights  Agent.  Pursuant to the plan,  the
     Board of  Directors  of the  Company  declared a dividend  of one Right (as
     defined  in  the  Rights   Agreement)  for  each  share  of  the  Company's
     outstanding common stock to stockholders of record on November 6, 1996. One
     Right is also  associated  with  each  share of the  Company's  outstanding
     common  stock  issued  after  November  6, 1996,  until the  Rights  become
     exercisable, are redeemed or expire. The Rights, when exercisable,  entitle
     the holder to purchase a unit equal to 0.80 one-hundredth share of Series A
     Junior  Participating  Preferred Stock, par value $.01, at a purchase price
     of $80 per unit.  Upon certain events  relating to the  acquisition  of, or
     right to  acquire,  beneficial  ownership  of 20% or more of the  Company's
     outstanding  common stock by a third  party,  or a change in control of the
     Company, the Rights entitle the holder to acquire,  after the Rights are no
     longer  redeemable  by the  Company,  shares of common stock of the Company
     (or, in certain  cases,  securities of an acquiring  person) for each Right
     held at a significant discount. The Rights will expire on November 6, 2006,
     unless  redeemed  earlier by the  Company at $.01 per Right  under  certain
     circumstances.

     Pursuant to a common stock  repurchase  program  approved by the  Company's
     Board of  Directors,  a total of 2,856,600  shares has been  purchased at a
     cost of $24,235.  The Company retired 2,151,500 of these shares at December
     31, 1999,  with the remaining  shares being recorded as treasury  stock. At
<PAGE>
     December 31, 2000,  the Company has authority  under the program to acquire
     up to 1,143,400 additional shares.

7.   INCENTIVE PLANS

     Dealership Stock Option Plan

     o    Effective  December 31, 1999,  the Company  cancelled  its  Dealership
          Stock  Option  Plan  (the  "Dealer  Plan")  to  eligible   independent
          dealerships.  The Dealer Plan allowed for 562,500 options to be issued
          at a price  equal to the fair market  value on the date of grant,  and
          these  options  were earned  based on the amount of  contracts  funded
          through CIS during the year. Options granted under the Dealer Plan are
          immediately  exercisable  and expire  three years from the grant date.
          Since these options have been granted to persons other than employees,
          the Company adopted the recognition and measurement provisions of SFAS
          123, Accounting for Stock-Based Compensation.

     Employee and Director Plans:

     o    The Company has a Key Employee Stock  Incentive Plan (the "1996 Plan")
          which  provides for the granting of both  incentive and  non-qualified
          stock  options.   Additionally,  the  1996  Plan  provides  for  stock
          appreciation   rights  and  awards  of  both   restricted   stock  and
          performance shares. Options are granted at prices and terms determined
          by the compensation committee of the Board of Directors. The 1996 Plan
          also provides for an additional number of common shares to be reserved
          for issuance each January 1, through January 1, 2001, equal to 1.5% of
          the  number of the common  shares  outstanding  on that date.  Options
          granted under the 1996 Plan are generally exercisable six months after
          the grant date and expire ten years from the date of grant.

     o    The Company also has a Non-employee  Director Plan under which 625,000
          shares  of the  Company's  common  stock  were  reserved  for grant to
          non-employee directors at fair market value on the date of such grant.
          Options  are  granted  upon  the  director's   initial   election  and
          automatically on an annual basis thereafter. Options granted under the
          plan are  generally  exercisable  six months  after the grant date and
          expire ten years from the date of grant.

     o    The Company has an Employee  Stock  Purchase  Plan under which 625,000
          shares  of the  Company's  common  stock  may be  issued  to  eligible
          employees at a price equal to the lesser of 85% of the market price of
          the  stock  as of the  first or last day of the  payment  periods  (as
          defined).  Employees may elect to have a portion of their compensation
          withheld,  subject to certain limits, to purchase the Company's common
          stock.

     o    The Company has a Deferred  Compensation and Flexible Option Plan (the
          "Deferred  Plan") which  provides for deferral of a portion of certain
          key employees' earnings plus a Company match. Upon the occurrence of a
          distributable  event, the employee will receive the greater of cash at
          a fixed annual return or shares of the Company's common stock credited
          to his account valued at fair market value. The Company funds benefits
          under the Deferred  Plan through  cash  contributions  and through the
          issuance of a stock  option to a trust at an  exercise  price equal to
          fair market value on the date of the grant.  Under the Deferred  Plan,
          there are  500,000  shares  of  Company  common  stock  available  for
          issuance.  At  December  31,  2000,  the  Company  had  recorded  plan
          investments of $2,455 and a deferred compensation liability of $2,942.

     Compensation  expense recorded in connection with these plans for the years
     ended December 31, 2000, 1999 and 1998 was not material.

     During 1998, the Company revised the Dividend Reinvestment Plan to increase
     the  shares  available  under  the Plan to  500,000  and to  eliminate  the
     optional  cash payment  feature of the Plan.  Participants  in the Plan may
<PAGE>
     purchase additional shares of the Company's common stock by reinvesting the
     cash  dividends on all, or part, of their  shares.  The price of the shares
     purchased  through the Plan is the higher of 95% of the average  daily high
     and low sale prices of the Company's  common stock on the four trading days
     including and preceding the Investment Date (as defined in the Plan) or 95%
     of the average high and low sales prices on the Investment Date.

     The Company applied Accounting  Principles Board Opinion 25, Accounting for
     Stock Issued to Employees,  and related  interpretations  in accounting for
     its employee and director plans.  Accordingly,  no compensation expense has
     been  recognized  for these plans except where the exercise  price was less
     than the fair  value on the date of grant.  Cavalier  has  granted  no such
     options.  Had compensation  cost been determined based on the fair value at
     the grant date for awards under these plans consistent with the methodology
     prescribed  under SFAS 123, the  Company's net income (loss) and net income
     (loss) per share would approximate the pro forma amounts below:
<TABLE>
<S>                                             <C>            <C>         <C>
                                                    2000          1999        1998

        Net income (loss):
         As reported                            $ (33,468)      $ 2,150    $ 18,655
         Pro forma                              $ (33,904)      $ 1,029    $ 16,506

        Basic net income (loss) per share:
         As reported                              $ (1.88)       $ 0.12      $ 0.94
         Pro forma                                $ (1.90)       $ 0.06      $ 0.83

        Diluted net income (loss) per share:
         As reported                              $ (1.88)       $ 0.12      $ 0.93
         Pro forma                                $ (1.90)       $ 0.06      $ 0.82
</TABLE>


     The fair value of options  granted were  estimated at the    date of  grant
     using  the  Black-Scholes  option  pricing  model    with   the   following
     weighted average assumptions:
<TABLE>
<S>                                                 <C>           <C>         <C>
                                                     2000          1999         1998

        Dividend yield                               0.10%         1.90%       1.56 %
        Expected volatility                         42.87%        40.10%      40.49 %
        Risk free interest rate                      6.57%         5.27%       5.52 %
        Expected lives                               6.2 years     9.0 years   5.0 years
</TABLE>


     The effects of applying  SFAS 123 in this pro forma  disclosure  may not be
     indicative of future  amounts,  and  additional  awards in future years are
     anticipated.

     With respect to options  exercised,  the income tax benefits resulting from
     compensation  expense  allowable  under federal  income tax  regulations in
     excess  of the  expense  (benefit)  reflected  in the  Company's  financial
     statements  have  been  credited  to  additional  paid-in  capital.   These
     benefits,  which totaled $3 (2000), $28 (1999), and $90 (1998), represent a
     noncash financing  transaction for purposes of the consolidated  statements
     of cash flows.
<PAGE>

     Information regarding all of the Company's stock option plans is summarized
     below:
<TABLE>
<S>                                                        <C>                 <C>                 <C>

                                                                                                     Weighted
                                                                                  Weighted            Average
                                                                                  Average           Fair Value
                                                             Shares             Exercise Price     At Grant Date
        Outstanding at December 31, 1997                   1,754,614             $ 10.56
         Granted at fair value                               890,393               10.26             $ 3.50
         Exercised                                           (35,267)               4.45
         Cancelled                                           (49,746)              11.39
                                                           ----------
        Outstanding at December 31, 1998                   2,559,994             $ 10.52
         Granted at fair value                               448,266                8.96             $ 3.48
         Exercised                                           (38,500)               7.37
         Cancelled                                          (174,357)              12.34
                                                           ----------
        Outstanding at December 31, 1999                   2,795,403             $ 10.20
        Granted at fair value                                343,048                3.73             $ 1.86
         Exercised                                            (7,071)               0.55
        Cancelled                                           (454,111)              10.20
                                                           ----------
        Outstanding at December 31, 2000                   2,677,269              $ 9.40
                                                           ==========           =========
        Options exercisable at December 31, 2000           2,656,869              $ 9.46
                                                           ==========           =========
        Options exercisable at December 31, 1999           2,762,803             $ 10.17
                                                           ==========           =========
        Options exercisable at December 31, 1998           2,438,434             $ 10.42
                                                           ==========           =========
</TABLE>

     Stock  options  available  for  future  grants at  December  31,  2000 were
     1,040,258 under all of the Company's various stock option plans.

<PAGE>


     The  following  table  summarizes   information  concerning  stock  options
     outstanding at December 31, 2000:
<TABLE>
<CAPTION>

                                              Options Outstanding                  Options Exercisable
                               --------------------------------------------- -------------------------------

                                                  Weighted
                                                   Average      Weighted                        Weighted
                                                  Remaining      Average                         Average
           Range of                 Number       Contractual    Exercise          Number        Exercise
       Exercise Prices           Outstanding        Life          Price        Exercisable        Price
<S>     <C>                      <C>               <C>          <C>            <C>               <C>

        $0.55 - $5.50              558,547         10.32        $ 3.96           538,547         $ 4.07
        $6.00 - $9.66              322,926         18.07          8.61           322,926           8.61
        $9.75 - $10.88           1,391,196          7.93         10.37         1,391,196          10.37
       $11.00 - $16.60             404,600          4.02         14.20           404,200          14.20
                                 ---------                                     ---------
        $0.55 - $16.60           2,677,269          9.06        $ 9.40         2,656,869         $ 9.46
                                 =========         ======       =======        =========         =======
</TABLE>

8.   INCOME TAXES (BENEFIT)

     Provision (benefit) for income taxes consist of:

                                         2000           1999            1998
        Current:
        Federal                     $  (16,469)      $  5,337       $  12,469
        State                                             750           2,238
                                    -----------      ---------      ----------
                                       (16,469)         6,087          14,707
                                    -----------      ---------      ----------
        Deferred:
        Federal                         (2,353)        (4,140)         (1,337)
         State                            (307)          (544)           (743)
                                    -----------      ---------      ----------
                                        (2,660)        (4,684)         (2,080)
                                    -----------      ---------      ----------
         Total                      $  (19,129)      $  1,403        $ 12,627
                                    ===========      =========      ==========

     Total income tax expense  (benefit) for 2000,  1999,  and 1998 is different
     from the amount that would be computed by  applying  the  expected  federal
     income tax rate of 35% to income (loss)  before  income taxes.  The reasons
     for this difference are as follows:
<TABLE>
<S>                                                                       <C>              <C>           <C>

                                                                              2000            1999          1998

        Income tax (benefit) at expected federal income tax rate          $ (18,409)       $ 1,143       $ 10,948
        State income taxes, net of federal tax effect                        (1,439)           125          1,100
        Valuation allowance                                                     500
        Non-deductible operating expenses                                       219            262            295
        State jobs tax credits                                                                 (38)          (126)
        Other                                                                                  (89)           410
                                                                          ----------       ---------     ---------
                                                                          $ (19,129)       $ 1,403       $ 12,627
                                                                          ==========       =========     =========
</TABLE>
<PAGE>



     Deferred tax assets and  liabilities  are based on the expected  future tax
     consequences  of  temporary  differences  between the book and tax bases of
     assets  and   liabilities.   The   approximate  tax  effects  of  temporary
     differences at December 31, 2000 and 1999 were as follows:
<TABLE>
<CAPTION>

                                                                       2000          1999
                                                                      Assets (Liabilities)
<S>                                                                <C>            <C>
        Current differences:
         Warranty expense                                          $   3,941      $   4,460
         Inventory capitalization                                        668            732
         Allowance for losses on receivables                           1,060          1,223
         Accrued expenses                                              5,275          4,974
         Repurchase commitments                                        1,552          1,260
         Other                                                          (102)           667
                                                                   ----------     ----------
                                                                      12,394         13,316
         Less valuation allowance                                        618
                                                                   ----------     ----------
                                                                   $  11,776      $  13,316
                                                                   ==========     ==========
</TABLE>
<TABLE>
<CAPTION>

                                                                        2000         1999
                                                                      Assets (Liabilities)
<S>                                                                <C>            <C>

        Noncurrent differences:
         Depreciation and basis differential of acquired assets    $  (2,601)     $ (2,384)
         Fixed asset valuation                                         1,813         1,850
         Net operating loss carryforwards                              2,681           462
         Goodwill                                                        621          (289)
         Merger related expenses                                         427           684
         Other                                                         1,891            68
                                                                   ----------     ----------
                                                                       4,832           391
         Less valuation allowance                                        241
                                                                   ----------     ----------
                                                                   $   4,591      $    391
                                                                   ==========     ==========
</TABLE>

     At December 31, 2000, the Company had a capital loss carryforward of $1,472
     which will expire in 2005. Additionally,  the Company had federal and state
     net operating loss carryforwards of $848 and $51,841, respectively. The net
     operating loss carryforwards will expire as follows:
<TABLE>
<S>                                                                  <C>           <C>

                                                                     Federal        State

         2010                                                         $848
         2019                                                                      $3,602
         2020                                                                      48,239
</TABLE>


     On December 31, 2000, the Company established a valuation allowance of $859
     against net deferred income tax assets.  In the opinion of management,  the
     likelihood of a portion of the capital loss  carryforward and the state net
     operating loss  carryforward  assets  expiring  before being fully utilized
     became more likely than not.  The  valuation  allowance  can be adjusted in
     future  periods as the  probability  of  realization  of the  capital  loss
     carryforward and state net operating loss carryforward assets change.

     Net cash paid  (received) for income taxes for the years ended December 31,
     2000, 1999 and 1998 was $(3,553), $11,835 and $12,250, respectively.
<PAGE>
9.   EMPLOYEE BENEFIT PLANS

     The Company has self-funded  group medical plans which are  administered by
     third party  administrators.  The medical plans have  reinsurance  coverage
     limiting  liability for any individual  employee loss to a maximum of $100,
     with an  aggregate  limit of losses in any one year  based on the number of
     covered employees.  Incurred claims identified under the Company's incident
     reporting system and incurred but not reported claims are funded or accrued
     based on estimates that incorporate the Company's past experience,  as well
     as other  considerations  such as the  nature  of each  claim or  incident,
     relevant trend factors and advice from  consulting  actuaries.  The Company
     has established  self-insurance trust funds for payment of claims and makes
     deposits to the trust funds in amounts determined by consulting  actuaries.
     The cost of these plans to the  Company  was $5,467,  $8,022 and $5,517 for
     years ended December 31, 2000, 1999 and 1998, respectively.

     The Company  sponsors an  employee  401(k)  retirement  plan  covering  all
     employees who meet participation  requirements.  Employee contributions are
     limited to a percentage of  compensation as defined in the plan. The amount
     of the Company's  matching  contribution is  discretionary as determined by
     the Board of Directors.  Company contributions amounted to $736, $1,071 and
     $623 for the years ended December 31, 2000, 1999 and 1998, respectively.

10.  COMMITMENTS AND CONTINGENCIES

     Operating Leases:

     Two of the Company's  manufacturing  facilities  were leased under separate
     operating  lease  agreements  with companies among whose owners are certain
     officers,  directors or stockholders of the Company.  One related lease was
     terminated in April 2000 with a one-time  cancellation payment of $150 made
     to the lessor. The other related lease contained a purchase option that was
     exercised in 2001 for $1,125 using proceeds from an industrial  development
     bond issue.

     Additionally,  the  Company is  obligated  under  various  operating  lease
     agreements with varying monthly  payments and expiration dates through June
     2017.  Total rent expense  under  operating  leases was $1,131,  $1,191 and
     $1,353 for the years ended December 31, 2000, 1999 and 1998,  respectively,
     including  rents paid to related  parties of $377  (2000),  $354 (1999) and
     $865 (1998).



<PAGE>


     Future  minimum rents payable under  operating  leases that have initial or
     remaining  noncancelable  lease terms in excess of one year at December 31,
     2000 are as follows:

                      Year Ending
                      December 31,

                          2001                                            $ 321
                          2002                                              249
                          2003                                              136
                          2004                                               89
                          2005                                               84
                       Thereafter                                            70
                                                                          ------
                          Total                                           $ 949
                                                                          ======

     Contingent Liabilities and Other:

     a.   The  Company  is   contingently   liable  under  terms  of  repurchase
          agreements with financial  institutions  providing inventory financing
          for retailers of its products. These arrangements, which are customary
          in the  industry,  provide  for the  repurchase  of  products  sold to
          retailers  in the event of default by the  retailer.  The risk of loss
          under these  agreements is spread over numerous  retailers.  The price
          the Company is obligated to pay generally  declines over the period of
          the  agreement  and  is  further   reduced  by  the  resale  value  of
          repurchased  homes.  The  maximum  amount  for  which the  Company  is
          contingently  liable under such  agreements  approximated  $170,000 at
          December  31,  2000.   The  Company  has  a  reserve  for   repurchase
          commitments  of  $4,100  (2000)  and  $3,330  (1999)  based  on  prior
          experience and market conditions.

     b.   Under  the  insurance  plans  described  in Note 1,  the  Company  was
          contingently  liable at  December  31,  2000 for future  retrospective
          premium  adjustments up to a maximum of  approximately  $14,856 in the
          event that additional losses are reported related to prior years.

     c.   The  Company  is  engaged  in  various  legal   proceedings  that  are
          incidental to and arise in the course of its business.  Certain of the
          cases  filed  against  the  Company  and other  companies  engaged  in
          businesses similar to the Company allege,  among other things,  breach
          of contract  and  warranty,  product  liability,  personal  injury and
          fraudulent,  deceptive or collusive practices in connection with their
          businesses.  These  kinds of suits are typical of suits that have been
          filed in recent years, and they sometimes seek  certification as class
          actions,  the imposition of large amounts of compensatory and punitive
          damages and trials by jury. In the opinion of management, the ultimate
          liability,  if any,  with  respect  to the  proceedings  in which  the
          Company is  currently  involved  is not  presently  expected to have a
          material adverse effect on the Company.  However, the potential exists
          for unanticipated material adverse judgments against the Company.

     d.   The Company and certain of its equity partners have guaranteed certain
          debt for companies in which the Company owns various equity interests.
          The guarantees are limited to various  percentages of the  outstanding
          debt up to a maximum guaranty of $5,505.  At December 31, 2000, $7,027
          was outstanding under the various guarantees, of which the Company had
          guaranteed $2,363.

11.  SEGMENT INFORMATION

     The  Company's  reportable  segments  are  organized  around  products  and
     services.   Through  its  Home  manufacturing  segment,  the  Company's  11
     divisions,   which  are  aggregated  for  reporting  purposes,  design  and
     manufacture  homes  which are sold in the  United  States  to a network  of
     dealers  which  includes  Company  owned  retail  locations.   Through  its
     Financial  services  segment,  the Company offers retail  installment  sale
<PAGE>
     financing  and  related  insurance  products  for  manufactured  homes sold
     through the  Company's  dealer  network.  The Company's  retail  segment is
     comprised of company owned retail lots that derive their revenues from home
     sales to individuals. Included in the "other" category are primarily supply
     companies  who sell  their  products  to the  manufacturing  segment of the
     Company as well as other  manufacturers.  The  accounting  policies  of the
     segments  are the same as those  described  in the  summary of  significant
     accounting  policies except that  intercompany  profits,  transactions  and
     balances have not been eliminated.  The Company's  determination of segment
     operating  profit does not reflect other income  (expenses) or income taxes
     (benefit).

<PAGE>
<TABLE>
<S>                                                  <C>              <C>            <C>

                                                         2000             1999          1998
        Gross revenue:
         Home manufacturing                          $ 295,457        $ 573,129      $ 603,369
         Financial services                              4,878            6,107          6,088
         Retail                                         16,842           20,914          7,167
         Other                                          29,011           40,315         36,699
                                                     ----------       ----------     ----------
          Gross revenue                                346,188          640,465        653,323
                                                     ----------       ----------     ----------
        Intersegment revenue:
         Home manufacturing                              5,292           17,373          5,253
         Financial services
         Retail
         Other                                          24,108           35,292         34,000
                                                     ----------       ----------     ----------
          Intersegment revenue                          29,400           52,665         39,253
                                                     ----------       ----------     ----------
        Revenue from external customers:
         Home manufacturing                            290,165          555,756        598,116
         Financial services                              4,878            6,107          6,088
         Retail                                         16,842           20,914          7,167
         Other                                           4,903            5,023          2,699
                                                     ----------       ----------     ----------
          Total revenue                              $ 316,788        $ 587,800      $ 614,070
                                                     ==========       ==========     ==========
        Operating profit (loss):
         Home manufacturing                          $ (33,211)        $ 16,544       $ 34,806
         Financial services                             (1,251)            (219)         2,215
         Retail                                         (9,514)          (1,934)          (427)
         Other                                          (1,808)             689          2,655
         Elimination                                     1,507           (1,281)          (826)
                                                     ----------       ----------     ----------
         Segment operating profit (loss)               (44,277)          13,799         38,423
         General corporate                              (7,826)         (10,282)        (8,672)
                                                     ----------       ----------     ----------
          Operating profit (loss)                    $ (52,103)         $ 3,517       $ 29,751
                                                     ==========       ==========     ==========
        Depreciation and amortization:
         Home manufacturing                            $ 7,370          $ 8,215        $ 7,305
         Financial services                                294              359            209
         Retail                                            327              544            146
         Other                                             548              463            385
                                                     ----------       ----------     ----------
         Segment depreciation and amortization           8,539            9,581          8,045
         General corporate                               1,220              669            320
                                                     ----------       ----------     ----------
          Total depreciation and amortization          $ 9,759         $ 10,250        $ 8,365
                                                     ==========       ==========     ==========
        Capital expenditures:
         Home manufacturing                            $ 3,290         $ 17,486       $ 13,173
         Financial services                                 86              167            181
         Retail                                             10              986            601
         Other                                             159            1,208            384
                                                     ----------       ----------     ----------
         Segment capital expenditures                    3,545           19,847         14,339
         General corporate                                 262            4,699            316
                                                     ----------       ----------     ----------
          Total capital expenditures                   $ 3,807         $ 24,546       $ 14,655
                                                     ==========       ==========     ==========
</TABLE>
<PAGE>
<TABLE>
<S>                                                  <C>              <C>             <C>

                                                        2000             1999            1998

         Identifiable assets:
          Home manufacturing                         $ 131,925        $ 159,493       $ 157,394
          Financial services                            12,674           17,248          28,424
          Retail                                        11,006           24,372           7,665
          Other                                         14,153           14,225          11,683
          Elimination                                  (45,526)         (32,752)         (9,548)
                                                     ----------       ----------      ----------
          Segment identifiable assets                  124,232          182,586         195,618
          General corporate                             63,363           50,992          41,509
                                                     ----------       ----------      ----------
           Total assets                              $ 187,595        $ 233,578       $ 237,127
                                                     ==========       ==========      ==========
</TABLE>

     The Financial  services  segment's  operating  profit includes net interest
     income of $1,223, $1,968, and $2,987 and gains from the sale of installment
     contracts  of $2,037,  $2,257 and $2,048 for the years ended  December  31,
     2000, 1999, and 1998, respectively.

     Identifiable  assets for the General  corporate  category  include  $1,768,
     $1,604, and $1,447 of investment in equity method investees at December 31,
     2000,  1999 and 1998,  respectively.  General  corporate  operating  income
     includes equity in the net income (loss) of investees  accounted for by the
     equity method of $(243),  $397,  and $250 for the years ended  December 31,
     2000, 1999 and 1998, respectively.
<PAGE>
<TABLE>
<CAPTION>
                                                            Increases    Additions
                                               Balance at   Attributable Charged to    Charged                  Balance at
                                               Beginning of     to       Costs and    to Other                    End of
                                                 Period     Acquisitions  Expenses    Accounts    Deductions      Period
                                               -----------  -----------  ----------- ------------ -----------   -----------
<S>                                         <C>             <C>          <C>         <C>          <C>           <C>

Allowance for losses on Accounts
   Receivable:
       Year Ended December 31, 2000         $         134                       369                     (157)$         346
                                               ===========  ===========  =========== ============ ===========   ===========

       Year Ended December 31, 1999         $          26                       127                      (19)$         134
                                               ===========  ===========  =========== ============ ===========   ===========

       Year Ended December 31, 1998         $                                    26                          $          26
                                               ===========  ===========  =========== ============ ===========   ===========

Allowance for credit losses:
       Year Ended December 31, 2000         $       1,656                       687                   (1,163)$       1,180
                                               ===========  ===========  =========== ============ ===========   ===========

       Year Ended December 31, 1999         $         760                     2,192                   (1,296)$       1,656
                                               ===========  ===========  =========== ============ ===========   ===========

       Year Ended December 31, 1998         $       1,272                     1,042                   (1,554)$         760
                                               ===========  ===========  =========== ============ ===========   ===========

Accumulated amortization of goodwill:
       Year Ended December 31, 2000         $       5,368                     1,203                     (581)$       5,990
                                               ===========  ===========  =========== ============ ===========   ===========

       Year Ended December 31, 1999         $       4,130                     1,278                      (40)$       5,368
                                               ===========  ===========  =========== ============ ===========   ===========

       Year Ended December 31, 1998         $       3,078                     1,052                          $       4,130
                                               ===========  ===========  =========== ============ ===========   ===========

Accumulated amortization of non-compete
   agreement:
       Year Ended December 31, 2000         $         169                        50                     (219)$
                                               ===========  ===========  =========== ============ ===========   ===========

       Year Ended December 31, 1999         $         154                       100                      (85)$         169
                                               ===========  ===========  =========== ============ ===========   ===========

       Year Ended December 31, 1998         $          78                        76                          $         154
                                               ===========  ===========  =========== ============ ===========   ===========

Warranty reserve:
       Year Ended December 31, 2000         $      13,000                    27,531                  (28,731)$      11,800
                                               ===========  ===========  =========== ============ ===========   ===========

       Year Ended December 31, 1999         $      12,400                    33,653                  (33,053)$      13,000
                                               ===========  ===========  =========== ============ ===========   ===========

       Year Ended December 31, 1998         $      11,700                    27,771                  (27,071)$      12,400
                                               ===========  ===========  =========== ============ ===========   ===========

Reserve for repurchase commitments:
       Year Ended December 31, 2000         $       3,330                     9,414                   (8,644)$       4,100
                                               ===========  ===========  =========== ============ ===========   ===========

       Year Ended December 31, 1999         $       1,175                     3,088                     (933)$       3,330
                                               ===========  ===========  =========== ============ ===========   ===========

       Year Ended December 31, 1998         $       1,175                       381                     (381)$       1,175
                                               ===========  ===========  =========== ============ ===========   ===========
</TABLE>
<PAGE>
ITEM 9.           CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON    ACCOUNTING
                  AND FINANCIAL DISCLOSURE

None.
                                    PART III

ITEM 10.          DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

For a description  of the directors and executive  officers of the Company,  see
"Election of Directors,"  "Executive  Officers and Principal  Stockholders," and
"Section 16(a) Beneficial Ownership Reporting Compliance" of the Company's Proxy
Statement  for the Annual  Meeting of  Stockholders  to be held on May 15, 2001,
which are incorporated herein by reference.

ITEM 11.         EXECUTIVE COMPENSATION

For a description  of the  Company's  executive  compensation,  see "Election of
Directors,"   "Executive  Officers  and  Principal   Stockholders,"   "Executive
Compensation" (other than the "Report of the Compensation Committee on Executive
Compensation" and the "Performance Graph"),  "Compensation  Committee Interlocks
and Insider Participation," and "Certain Relationships and Related Transactions"
of the Company's  Proxy  Statement for the Annual Meeting of  Stockholders to be
held on May 15, 2001, which are incorporated herein by reference.

ITEM 12.         SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS

For a description of the security ownership of management and certain beneficial
owners,  see "Executive  Officers and Principal  Stockholders"  of the Company's
Proxy  Statement for the Annual  Meeting of  Stockholders  to be held on May 15,
2001, which are incorporated herein by reference.

ITEM 13.         CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

For a  description  of certain  relationships  and related  transactions  of the
Company, see "Compensation  Committee Interlocks and Insider Participation," and
"Certain   Relationships  and  Related  Transactions"  of  the  Company's  Proxy
Statement  for the Annual  Meeting of  Stockholders  to be held on May 15, 2001,
which are incorporated herein by reference.

                                    PART IV

ITEM 14.         EXHIBITS, FINANCIAL   STATEMENT  SCHEDULES AND REPORTS  ON FORM
                 8-K

(a)      1.      The financial statements contained in this report and the  page
on which they may be found are as follows:
<TABLE>
<S>      <C>                                                                            <C>

         Financial Statement Description                                                Form 10-K Page No.
         -------------------------------                                                ------------------

         Independent Auditors' Report                                                            30
         Consolidated Balance Sheets as of December 31, 2000 and 1999                            31
         Consolidated Statements of Income for the years ended December 31, 2000,                33
                           1999 and 1998
         Consolidated Statements of Stockholders' Equity for the years ended                     34
                           December 31, 2000, 1999 and 1998
         Consolidated Statements of Cash Flows for the years ended December 31,                  35
                           2000, 1999 and 1998
         Notes to Consolidated Financial Statements                                              36
</TABLE>
<PAGE>
         2.       The financial statement schedules   required to  be filed with
this report and the pages on which they may be found are as follows:
<TABLE>
<S>      <C>                                                                            <C>
No.       Schedule Description                                                          Form 10-K Page
---      ---------------------                                                          ---------------

  II     Valuation and Qualifying Accounts                                                       52
</TABLE>

         3.       The exhibits required to be filed with this report are  listed
below. The Company will furnish upon request any of the exhibits listed upon the
receipt  of $15.00  per  exhibit,  plus $.50 per page,  to cover the cost to the
Company of providing the exhibit.

(3)      Articles of Incorporation and By-laws.

     * (a) The Composite  Amended and Restated  Certificate of  Incorporation of
the Company,  filed as Exhibit 3(a) to the Company's  Annual Report on Form 10-K
for the year ended December 31, 1998.

     * (b) The  Certificate  of  Designation  of  Series A Junior  Participating
Preferred Stock of Cavalier Homes, Inc. as filed with the Office of the Delaware
Secretary  of State on October  24,  1996 and filed as Exhibit A to Exhibit 4 to
the Company's Registration Statement on form 8-A filed on October 30, 1996.

     * (c) The Amended and  Restated  By-laws of the  Company,  filed as Exhibit
3(d) to the Company's  Quarterly  Report on Form 10-Q for the quarter ended June
27, 1997,  and the  amendments  thereto  filed as Exhibit 3(e) to the  Company's
Quarterly  Report on Form 10-Q for the quarter  ended  September 26, 1997 and as
Exhibit  3(c) to the  Company's  Quarterly  Report on Form 10-Q for the  quarter
ended September 25, 1998.

(4)      Instruments   Defining   the   Rights   of  Security Holders, Including
         Indentures.

     * (a) Articles four,  six, seven,  eight and nine of the Company's  Amended
and Restated Certificate of Incorporation,  as amended, included in Exhibit 3(a)
above.

     * (b) Article II, Sections 2.1 through 2.18;  Article III, Sections 3.1 and
3.2;  Article IV,  Sections 4.1 and 4.3;  Article VI,  Sections 6.1 through 6.5;
Article VIII,  Sections 8.1 and 8.2; and Article IX of the Company's Amended and
Restated By-laws, included in Exhibit 3(c) above.

     * (c)  Rights  Agreement  between  Cavalier  Homes,  Inc.  and  ChaseMellon
Shareholder Services, LLC, filed as Exhibit 4 to the Company's Current Report on
Form 8-K dated October 30, 1996.

(10) Material contracts

     * (a)  Rights  Agreement  between  Cavalier  Homes,  Inc.  and  ChaseMellon
Shareholder Services, LLC, filed as Exhibit 4 to the Company's Current Report on
Form 8-K dated October 30, 1996.

     * (b) Lease Agreement dated April 1, 1999, between Development Authority of
Johnson County,  Georgia and Bellcrest  Homes,  Inc.  regarding the lease of the
manufacturing facility located in Adrian, Georgia, filed as Exhibit 10(b) to the
Company's Annual Report on Form 10-K for the year ended December 31, 1999.

     * (c)  Industrial  Sublease  dated  October 2, 2000, by and among  Cavalier
Industries,  Inc.,  as successor by merger to Bellcrest  Homes,  Inc.,  Alliance
Homes, Inc., All-Span Homes, LLC and G. Hiller Spann,  regarding the sublease of
the manufacturing facility located in Adrian, Georgia.

     * (d) Lease  Agreement  with Option to Purchase  between  John H. Beard and
Alexander  P. Beard,  Trustees  under the Will of Bryce  Parker  Beard,  and BRC
Components,  Inc.  dated March 4, 1999,  filed as Exhibit 10(b) to the Company's
Quarterly Report on Form 10-Q for the quarter ended July 2, 1999.
<PAGE>
     * (e)  Sub-lease  Agreement  with  Option  to   Purchase  between  Winfield
Industrial  Development  Association,  Inc and Buccaneer Homes of Alabama,  Inc.
dated May 9, 1994,  filed as Exhibit  10(k) to Amendment  No. 1 to the Company's
Registration Statement on Form S-2 (Registration No. 33-78644).

     * (f) Lease Agreement dated March 1, 1997, between the City of Winfield and
Buccaneer  Homes, a division of Cavalier  Manufacturing,  Inc., filed as Exhibit
10(aa) to the Company's  Annual Report on Form 10-K for the year ended  December
31, 1996.

     * (g) Lease Agreement between the Industrial  Development Board of the Town
of Addison and Jerry F. Wilson,  Robert Lowell Burdick and John W Lowe, dated as
of June 1, 1984, filed as Exhibit 10(j) to the Company's  Registration Statement
on Form S-1, Registration No. 33-3525, dated February 21, 1986.

     * (h) Assignment and Assumption  Agreement by and among the Estate of Jerry
F. Wilson, Robert Lowell Burdick, John W Lowe, Cavalier Manufacturing,  Inc. and
Cavalier Real Estate Co., Inc.,  dated January 13, 1999,  regarding the lease of
the manufacturing  facility located in Addison,  Alabama, filed as Exhibit 10(g)
to the  Company's  Annual  Report on Form 10-K for the year ended  December  31,
1999.

     * (i) Lease Agreement between the Industrial  Development Board of the Town
of Addison and the Winston County Industrial Development  Association,  dated as
of February 1, 1994,  regarding the lease of the manufacturing  facility located
in Addison,  Alabama,  filed as Exhibit 10(h) to the Company's  Annual Report on
Form 10-K for the year ended December 31, 1999.

     * (j)  Assignment  and  Assumption  Agreement by and among  Winston  County
Industrial Development  Association,  Cavalier Manufacturing,  Inc. and Cavalier
Real  Estate  Co.,  Inc.  dated  January 13,  1999,  regarding  the lease of the
manufacturing facility located in Addison Alabama, filed as Exhibit 10(a) to the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2000.

   * * (k) Lease Agreement between The Industrial Development Board of the  Town
of   Addison   and    Cavalier  Homes   of   Alabama,  a   division  of Cavalier
Manufacturing,   Inc., dated   November 1, 1997,  filed as Exhibit 10(yy) to the
Company's  Annual Report on Form 10-K for the year ended December 31, 1997.

     * (l) Lease  Agreement  dated April 1, 1999,  between Crisp  County-Cordele
Industrial  Development  Authority and Cavalier  Industries,  Inc. regarding the
lease of the  manufacturing  facility  located  in  Cordele,  Georgia,  filed as
Exhibit  10(j) to the  Company's  Annual  Report on Form 10-K for the year ended
December 31, 1999.

     * (m) Lease  Agreement  dated  October 16, 1996,  between  Virginia Cary L.
McDonald and Star  Industries,  Inc.  regarding  the lease of the  manufacturing
facility  located in  Robbins,  North  Carolina,  filed as Exhibit  10(b) to the
Company's Annual Report on Form 10-K for the year ended December 31, 1996.

     * (n) Assignment and Assumption Agreement between Star Industries, Inc. and
Cavalier  Industries,  Inc.  regarding the lease of the  manufacturing  facility
located in Robbins,  North  Carolina,  filed as Exhibit  10(c) to the  Company's
Annual Report on Form 10-K for the year ended December 31, 1996.

     * (o)  Lease  Agreement  with  Option to  Purchase  between  Marion  County
Industrial Development  Corporation,  Inc and Quality Housing Supply, Inc. dated
May 9,  1994,  filed as  Exhibit  10(l)  to  Amendment  No.  1 to the  Company's
Registration Statement on Form S-2 (Registration No. 33-78644).

     * (p) Commercial  Sub-Lease and Agreement between Perfect Panels,  Inc. and
Quality Housing Supply, Inc., dated July 1, 1996, filed as Exhibit 10(zz) to the
Company's Annual Report on Form 10-K for the year ended December 31, 1997.
<PAGE>
     * (q)  Lease  Agreement  dated  March  1,  1995,  between   the  Industrial
Development Board of the City of Haleyville, Alabama and Wheel House Properties,
Inc., as assigned to and assumed by Star  Industries,  Inc. on January 11, 1996,
and as further  assigned  to and  assumed by  Cavalier  Manufacturing,  Inc.  in
December 1996,  filed as Exhibit  10(bb) to the Company's  Annual Report on Form
10-K for the year ended December 31, 1996.

     * (r) Lease  Agreement  between City of Mineral  Wells,  Texas and Cavalier
Homes of Texas dated February 27, 1996,  filed as Exhibit 10(c) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1995.

     * (s)  Lease  Agreement  dated  June 1,  1997,  between  Graham  Industrial
Association,  Inc. and Cavalier  Manufacturing,  Inc. regarding the lease of the
manufacturing  facility located in Graham,  Texas, filed as Exhibit 10(q) to the
Company's Annual Report on Form 10-K for the year ended December 31, 1999.

     * (t) Lease Agreement dated November 1, 1997, between Greenstar, L.L.C. and
The  Colonial  Group,  regarding  the  lease of an  administrative  facility  in
Greensboro,  North  Carolina,  filed as Exhibit  10(r) to the  Company's  Annual
Report on Form 10-K for the year ended December 31, 1999.

     * (u)  Addendum  to  Lease  Agreement  dated   January  18,  1999,  between
Greenstar,   L.L.C.   and  The  Colonial  Group,   regarding  the  lease  of  an
administrative facility in Greensboro, North Carolina, filed as Exhibit 10(s) to
the Company's Annual Report on Form 10-K for the year ended December 31, 1999.

     * (v) Assignment and Assumption Agreement dated April 29, 1999, between The
Colonial   Group  and  Cavalier   Homes,   Inc.   regarding  the  lease  of  the
administrative facility in Greensboro, North Carolina, filed as Exhibit 10(t) to
the Company's Annual Report on Form 10-K for the year ended December 31, 1999.

     * (w) Amended and Restated  Revolving and Term Loan Agreement,  dated as of
March 31, 2000,  by and among the  Company,  First  Commercial  Bank and certain
subsidiaries of the Company,  filed as Exhibit 10(b) to the Company's  Quarterly
Report on Form 10-Q for the quarter ended March 31, 2000.

     * (x) First  Amendment  to Amended  and  Restated  Revolving  and Term Loan
Agreement,  dated as of  September  29,  2000,  between  the  Company  and First
Commercial  Bank,  filed as Exhibit 10(a) to the Company's  Quarterly  Report on
Form 10-Q for the quarter ended September 30, 2000.

     * (y)  Assumption  Agreement  dated as of January 2, 1997, by and among the
Company, First Commercial Bank and certain subsidiaries of the Company, filed as
Exhibit  10(q) to the  Company's  Annual  Report on Form 10-K for the year ended
December 31, 1996.

     * (z) Assumption  Agreement among Cavalier Homes, Inc. and First Commercial
Bank,  dated June 1, 1998,  filed as Exhibit  10(c) to the  Company's  Quarterly
Report on Form 10-Q for the quarter ended June 26, 1998.

     * (aa) Commitment Letter and Addendum among Cavalier Homes, Inc.,  Cavalier
Acceptance Corporation and First Commercial Bank, dated February 29, 2000, filed
as Exhibit 10(z) to the Company's  Annual Report on Form 10-K for the year ended
December 31, 1999.

     * (bb) Guaranty Agreement between First Commercial Bank and Cavalier Homes,
Inc. dated July 15, 1997,  relating to guaranty of payments by Lamraft, LP filed
as Exhibit 10(a) to the Company's  Quarterly Report on Form 10-Q for the quarter
ended September 26, 1997. 10-K for the year ended December 31, 1998.

     * (cc) Amendment to the Limited  Credit  Guaranty  Agreement  between First
Commercial  Bank and  Cavalier  Homes,  Inc.,  executed  as of March  24,  1999,
relating to guaranty  of payments by Lamraft,  LP filed as Exhibit  10(b) to the
Company's Quarterly Report on Form 10-Q for the quarter ended April 2, 1999.
<PAGE>

     * (dd) Guaranty Agreement between First Commercial Bank and Cavalier Homes,
Inc.,  dated as of  September  1, 1999,  relating  to  guaranty  of  payments by
Lamraft,  LP, filed as Exhibit 10(a) to the Company's  Quarterly  Report on Form
10-Q for the quarter ended October 1, 1999.

     * (ee) Guaranty Agreement between First Commercial Bank and Cavalier Homes,
Inc.  dated July 15,  1997,  relating  to  guaranty  of  payments  by  Hillsboro
Manufacturing,  LP filed as Exhibit 10(b) to the Company's  Quarterly  Report on
Form 10-Q for the quarter ended September 26, 1997.

     * (ff) Amendment to the Limited  Credit  Guaranty  Agreement  between First
Commercial Bank and Cavalier Homes, Inc. executed as of March 24, 1999, relating
to guaranty of payments by Hillsboro Manufacturing, LP filed as Exhibit 10(c) to
the Company's Quarterly Report on Form 10-Q for the quarter ended April 2, 1999.

     * (gg) Guaranty Agreement between First Commercial Bank and Cavalier Homes,
Inc.  dated July 15, 1997,  relating to guaranty of payments by  Woodperfect  of
Texas, LP filed as Exhibit 10(c) to the Company's  Quarterly Report on Form 10-Q
for the quarter ended September 26, 1997.

     * (hh) Amendment to the Limited  Credit  Guaranty  Agreement  between First
Commercial Bank and Cavalier Homes,  Inc.  executed March 24, 1999,  relating to
guaranty of payments by Woodperfect  of Texas,  LP filed as Exhibit 10(d) to the
Company's Quarterly Report on Form 10-Q for the quarter ended April 2, 1999.

     * (ii)  Continuing  Guaranty  Agreement  between First  Commercial Bank and
Cavalier Homes, Inc., dated March 31, 2000,  relating to guaranty of payments of
Cavalier  Acceptance  Corporation,  filed  as  Exhibit  10(c)  to the  Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 2000.

     * (jj) Release of Guarantor  and  Amendment  to Guaranty  Agreements  among
First Commercial  Bank,  Patriot Homes,  Inc.,  Cavalier Homes,  Inc.,  Southern
Energy Homes,  Inc. and Lee Roy Jordan,  dated as of December 31, 1999, filed as
Exhibit  10(hh) to the  Company's  Annual Report on Form 10-K for the year ended
December 31, 1999.

     * (kk) Guaranty  Agreement between SouthTrust Bank and Cavalier Homes, Inc.
dated as of July 27,  1998,  relating to  guaranty  of payments by  Woodperfect,
Ltd., filed as Exhibit 10(b) to the Company's  Quarterly Report on Form 10-Q for
the quarter ended October 1, 1999.

     * (ll) Agreement dated March 10, 1998, by and between  Cavalier  Acceptance
Corporation  and Green Tree Financial  Servicing  Corporation,  filed as Exhibit
10(xx) to the Company's  Annual Report on Form 10-K for the year ended  December
31, 1997.

     * (mm) Amended and Restated Finance Agreement among Cavalier Manufacturing,
Inc.,  Cavalier  Acceptance  Corporation and certain related  entities and Green
Tree Financial Corp. and certain related entities, filed as Exhibit 10(a) to the
Company's Quarterly Report on Form 10-Q for the quarter ended March 27, 1998.

     * (nn) Manufactured Home Loan Purchase Agreement dated as of June 30, 1999,
by  and  between  Cavalier  Acceptance  Corporation  and  Green  Tree  Financial
Corporation  and  certain  of its  affiliates,  filed  as  Exhibit  10(a) to the
Company's Quarterly Report on Form 10-Q for the quarter ended July 2, 1999.

  * ** (oo) Cavalier Homes, Inc. 1988   Nonqualified Stock   Option   Plan,   as
amended, filed as Exhibit 10(a) to the Company's  Annual Report on Form 10-K for
the year ended December 31, 1993.

  * ** (pp)  Cavalier  Homes,  Inc. 1993 Amended and Restated Nonqualified Stock
Option Plan,  filed as Exhibit 10(z) to the Company's Annual Report on Form 10-K
for the year ended December 31, 1998.

  * ** (qq) Cavalier Homes, Inc. Executive Incentive Compensation Plan, filed as
an Appendix to the Company's  definitive  Proxy Statement for the Annual Meeting
of Stockholders held May 15, 1996.
<PAGE>
  * ** (rr) Amendment to Cavalier Homes,  Inc.  Executive Incentive Compensation
Plan, filed as Exhibit 10(ii) to the Company's Quarterly Report on Form 10-Q for
the quarter ended March 28, 1997.

  * ** (ss)  Cavalier  Homes,  Inc.  Employee  Stock Purchase  Plan, filed as an
Appendix to the Company's  definitive  Proxy Statement for the Annual Meeting of
Stockholders held May 15, 1996.

  * ** (tt) Cavalier Homes,  Inc. Key Employee Stock Incentive Plan, filed as an
Appendix to the Company's  definitive  Proxy Statement for the Annual Meeting of
Stockholders held May 15, 1996.

  * ** (uu) Amendment to Cavalier Homes, Inc. Key Employee Stock Incentive Plan,
filed as Exhibit  10(i) to the Company's  Quarterly  Report on Form 10-Q for the
quarter ended March 28, 1997.

  * ** (vv) Amendment to Cavalier Homes, Inc. Key Employee Stock Incentive Plan,
effective  December 30, 1997,  filed as Exhibit  10(j) to the  Company's  Annual
Report on Form 10-K for the year ended December 31, 1997.

  * ** (ww) Amendment to Cavalier Homes, Inc. Key Employee Stock Incentive Plan,
effective  January 23,  1998,  filed as Exhibit  10(k) to the  Company's  Annual
Report on Form 10-K for the year ended December 31, 1997.

  * ** (xx) Amendment to Cavalier Homes, Inc. Key Employee Stock Incentive Plan,
effective  October 20,  1998,  filed as Exhibit  10(l) to the  Company's  Annual
Report on Form 10-K for the year ended December 31, 1998.

  * ** (yy) Cavalier Homes, Inc.  Amended  and  Restated  Nonemployee  Directors
Stoc Option Plan,  filed as an Appendix  to   the   Company's  definitive  Proxy
Statement for the Annual Meeting of Stockholders held May 15, 1996.

  * ** (zz) Amendment to Cavalier  Homes, Inc. Amended and Restated  Nonemployee
Directors  Plan filed as Exhibit  10(i) to the  Company's  Annual Report on Form
10-K for the year ended December 31, 1996.

  * ** (aaa) Amendment to Cavalier Homes, Inc. Amended and Restated  Nonemployee
Directors  Plan,  filed as Exhibit 10(n) to the Company's  Annual Report on Form
10-K for the year ended December 31, 1997.

     * (bbb) Cavalier Homes,  Inc.  Amended and Restated  Dividend  Reinvestment
Plan,  filed  as  Appendix  A to  the  Prospectus  appearing  in  the  Company's
Post-Effective Amendment No. 1 to Form S-3, Registration No. 333-48111, filed on
September 29, 1998.

     * (ccc) Cavalier Homes,  Inc. Amended and Restated  Dealership Stock Option
Plan filed as Appendix A to the  Company's  Registration  Statement on Form S-3,
Amendment No. 2, Registration No. 33-62487, dated June 18, 1998.

  * ** (ddd) Cavalier Homes, Inc. Deferred Compensation Plan, effective April 1,
1998, filed as Exhibit 10(d) to  the  Quarterly  Report on  Form  10-Q  for  the
quarter ended June 26, 1998.

  * ** (eee) Cavalier  Homes, Inc. Flexible Option Plan filed as Exhibit 4(e) to
the Company's  Registration  Statement on Form S-8,  Registration No. 333-57743,
dated June 28, 1998.

  * ** (fff) Belmont Homes, Inc. 1994 Incentive Stock Plan, filed  as an Exhibit
to  the Belmont Homes,  Inc.  Registration  Statement on Form S-1,  Registration
No. 33-87868.

 * **  (ggg)  Belmont  Homes,  Inc.  1994  Non-Qualified  Stock  Option Plan for
Non-Employee  Directors,  filed  as  an  Exhibit  to  the  Belmont  Homes,  Inc.
Registration Statement on Form S-1, Registration No. 33-87868.
<PAGE>

     * (hhh) Form of Indemnification Agreement between Belmont Homes,  Inc.  and
the  Directors and Executive  Officers of Belmont Homes,  Inc., filed as Exhibit
10.2 to Belmont Homes, Inc.  Current  Report  on Form 8-K filed  on September 8,
1997.

     * (iii) Form of  Indemnification   Agreement by and between Cavalier Homes,
Inc.   and each  member  of its  Board of  Directors,  filed  as  Exhibit  10(a)
to the   Company's  Quarterly    Report on   Form 10-Q for   the  quarter  ended
September  25, 1998.

     * (jjj) Split dollar  Agreement  dated  May  15, 1998,  by  and between the
Company and Jerry F. Wilson, Jr. as Trustee of the David Allen  Roberson  Family
Trust,  filed as Exhibit  10(a) to the Company's  Quarterly  Report on Form 10-Q
for the quarter ended June 26, 1998.

  * ** (kkk)  Retention  and  Severance  Agreement,  dated August 26, 1998,   by
and between Cavalier Homes, Inc. and Barry B. Donnell, filed as Exhibit 10(b) to
the  Company's  Quarterly  Report on Form 10-Q for the quarter  ended  September
25, 1998.

  * ** (lll)  Retention  and Severance  Agreement, dated August 26, 1998, by and
between Cavalier Homes, Inc. and David A. Roberson,  originally filed as Exhibit
10(c) to the  Company's  Quarterly  Report  on Form 10-Q for the  quarter  ended
September 25, 1998 and filed as 10(ggg) to the  Company's  Annual Report on Form
10-K for the year ended  December  31, 1998 in order to correct a  typographical
error.

  * ** (mmm)  Retention  and Severance  Agreement, dated August 26, 1998, by and
between  Cavalier Homes,  Inc. and Michael R. Murphy,  filed as Exhibit 10(d) to
the Company's  Quarterly Report on Form 10-Q for the quarter ended September 25,
1998.

     * (nnn) Stock Purchase  Agreement  dated October 25, 1996,    among Belmont
Homes,    Inc.,  Bellcrest  Holding Co.,  Inc.,  G. Hiller  Spann,  Joe H. Bell,
James M.  Birdwell and Delroy  Dailey,  Jr.,  filed as an  exhibit  to   Belmont
Homes, Inc. Current   Report   on   Form 8-K filed   November 13, 1996, File No.
0-26142.

     * (ooo) First Amendment to Stock Purchase  Agreement between Belmont Homes,
Inc.    And the former  shareholders of Bellcrest  Homes,  Inc. filed as Exhibit
10.1 to    Belmont Homes, Inc. Current Report on  Form 8-K filed on September 8,
1997.

     * (ppp) The Agreement and Plan of  Merger  dated  August 14, 1997,   by and
among the Company,  Crimson  Acquisition Corp. and Belmont Homes, Inc., filed as
Exhibit 2 to the Company's Current Report on Form 8-K dated August 19, 1997.

     * (qqq)  Amendment  No. 1 to the  Agreement  and Plan of  Merger referenced
in Exhibit 10(nn) above filed as Exhibit 10(e) to the Company's Quarterly Report
on Form 10-Q for the quarter ended September 26, 1997.

(11) Statement re Computation of Per Share Earnings.

(21) Subsidiaries of the Registrant.

(23) Consent of Deloitte & Touche LLP.
 -----------------------------------------
* Incorporated by reference herein.
** Management contract or compensatory plan or arrangement.

         (b)      Reports on Form 8-K.
                  None.
<PAGE>
SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) 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.


                                       CAVALIER HOMES, INC.
                                       --------------------
                                       Registrant

                                       By: /s/ DAVID A. ROBERSON
                                          -----------------------
                                          Its President
Date: March 30, 2001


Pursuant to the requirements of Section 13 or 15(d) 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.
<TABLE>
<S>                                     <C>    <C>    <C>    <C>    <C>    <C>

Signature                                   Title                                       Date

/s/ DAVID A. ROBERSON                       Director and Principal Executive            March 30, 2001
------------------------------------        Officer


/s/ MICHAEL R. MURPHY                       Director and Principal Financial and        March 30, 2001
---------------------------                 Accounting Officer


/s/ BARRY DONNELL                           Chairman of the Board and Director          March 30, 2001
---------------------------


/s/ THOMAS A. BROUGHTON, III                Director                                    March 30, 2001
------------------------------------


/s/ JOHN W LOWE                             Director                                    March 30, 2001
 --------------------------


/s/ LEE ROY JORDAN                          Director                                    March 30, 2001
------------------------------------


/s/ GERALD W. MOORE                         Director                                    March 30, 2001
------------------------------------


/s/ A. DOUGLAS JUMPER, SR.                  Director                                    March 30, 2001
---------------------------


/s/ MIKE KENNEDY                            Director                                    March 30, 2001
---------------------------


/s/ JOHN W. ALLISON                         Director                                    March 30, 2001
------------------------------------
</TABLE>

<PAGE>



                                      INDEX

Exhibit
Number

(10)     Material Contracts

         (c)Industrial  Sublease  dated October  2, 2000,  by and among Cavalier
         Industries,  Inc.,  as successor by merger to Bellcrest   Homes,  Inc.,
         Alliance  Homes,  Inc.,  All-Span   Homes,  LLC  and G.  Hiller  Spann,
         regarding  the  sublease  of  the  manufacturing  facility  located  in
         Adrian, Georgia.

(11)     Statement Re Computation of Per Share Earnings

(21)     Subsidiaries of the Registrant

(23)     Consent of Deloitte & Touche LLP