<PAGE>
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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q


 (Mark One)

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

For the quarterly period ended    September 30, 2001
                                  ----------------------------------------------

                                       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:          0-24804
                       ---------------------------------------------------------

                               Featherlite, Inc.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

             Minnesota                                  41-1621676
--------------------------------------------------------------------------------
   (State or other jurisdiction            (I.R.S. Employer Identification No.)
 of incorporation or organization)

Highways 63 & 9, P.O. Box 320, Cresco, IA 52136
--------------------------------------------------------------------------------
(Address of principal executive offices)                (Zip Code)

                                  563/547-6000
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)


--------------------------------------------------------------------------------
   (Former name, former address and former fiscal year, if changed since last
                                    report)

     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.          [X] Yes       [ ] No


                      APPLICABLE ONLY TO CORPORATE ISSUERS:

     Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.


                    6,535,104 Shares as of November 14, 2001
<PAGE>

                                FEATHERLITE, INC.

                                      INDEX



                                                                        Page No.
                                                                        --------


Index .........................................................................2

Part I.  Financial Information:

   Item 1.  Consolidated Financial Statements (Unaudited)

      Condensed Consolidated Balance Sheets
      September 30, 2001 and December 31, 2000 ................................3

      Condensed Consolidated Statements of Income
      Three Month and Nine Month Periods Ended September 30, 2001 and 2000 ....4

      Condensed Consolidated Statements of Cash Flows
      Nine Month Periods Ended September 30, 2001 and 2000 ....................5

      Notes to Condensed Consolidated Financial Statements ....................6

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

   Item 3. Quantitative & Qualitative Disclosures about Market Risk ..........22

Part II. Other Information:

   Item 3.  Defaults Upon Senior Securities ..................................22

   Item 6.  Exhibits and Reports on Form 8-K .................................23

Signatures ...................................................................23

Exhibit Index ................................................................24


                                       2
<PAGE>
                          PART I: FINANCIAL INFORMATION


ITEM 1:

            FEATHERLITE, INC.
            CONDENSED CONSOLIDATED BALANCE SHEETS
            (UNAUDITED)
            (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                   SEPTEMBER 30,   DECEMBER 31,
                                                       2001            2000
                                                     --------        --------
<S>                                                  <C>             <C>
                       ASSETS

Current assets
  Cash                                               $    149        $    331
  Receivables                                           6,329           6,356
                                                     --------        --------
  Inventories
    Raw materials                                       7,738          11,350
    Work in process                                    10,564          20,833
    Finished trailers/motorcoaches                     23,427          31,610
    Used trailers/motorcoaches                         24,874          24,598
                                                     --------        --------
    Total inventories                                  66,603          88,391
                                                     --------        --------

  Prepaid expenses                                      2,414           2,219
  Deferred taxes                                        2,395           2,381
                                                     --------        --------
  Total current assets                                 77,890          99,678
                                                     --------        --------

Property and equipment, net                            17,650          19,958

Other assets                                            4,510           4,323
                                                     --------        --------
                                                     $100,050        $123,959
                                                     ========        ========

        LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
  Current maturities of long-term debt               $ 21,068        $  2,031
  Wholesale financing and other notes payable          26,932          30,215
  Motorcoach shell costs payable                        7,159          15,833
  Accounts payable                                     12,292          10,121
  Accrued liabilities                                   7,287           8,431
  Customer deposits                                     1,582           3,078
                                                     --------        --------
   Total current liabilities                           76,320          69,709

Long-term debt, net of current maturities               3,142          29,641

Other long term liabilities                               586             597

Commitments and contingencies (Note 7)

Shareholders' equity                                   20,002          24,012
                                                     --------        --------
                                                     $100,050        $123,959
                                                     ========        ========
</TABLE>

See notes to condensed consolidated financial statements


                                       3
<PAGE>
            FEATHERLITE, INC.
            CONDENSED CONSOLIDATED STATEMENTS OF INCOME
            (UNAUDITED)
            (IN THOUSANDS, EXCEPT FOR PER SHARE DATA)

<TABLE>
<CAPTION>
                                                   THREE MONTHS ENDED              NINE MONTHS ENDED
                                                      SEPTEMBER 30,                   SEPTEMBER 30,
                                               -------------------------       -------------------------
                                                  2001            2000            2001            2000
                                               ---------       ---------       ---------       ---------
<S>                                            <C>             <C>             <C>             <C>
Net sales                                      $  51,566       $  51,347       $ 173,659       $ 186,412
Cost of sales                                     45,137          44,690         157,812         160,779
                                               ---------       ---------       ---------       ---------
   Gross profit                                    6,429           6,657          15,847          25,633
Selling and administrative expenses                5,407           6,565          17,025          20,901
Restructuring charge                                  --              --           1,150              --
                                               ---------       ---------       ---------       ---------
   Income (loss) from operations                   1,022              92          (2,328)          4,732
Other income (expense)
  Interest                                          (882)         (1,233)         (3,342)         (3,548)
  Other, net                                           1              93             380             702
                                               ---------       ---------       ---------       ---------
  Total other expense                               (881)         (1,140)         (2,962)         (2,846)
                                               ---------       ---------       ---------       ---------
Income (loss) before income taxes                    141          (1,048)         (5,290)          1,886
Provision for (benefit from) income taxes             35            (411)         (1,323)            734
                                               ---------       ---------       ---------       ---------
Net income (loss)                              $     106       $    (637)      $  (3,967)      $   1,152
                                               =========       =========       =========       =========


Net income (loss) per share -
    basic and diluted                          $    0.01       $   (0.10)      $    (.61)      $     .17
                                               ---------       ---------       ---------       ---------

Average common shares outstanding-
    basic and diluted                              6,535           6,535           6,535           6,535
                                               ---------       ---------       ---------       ---------
</TABLE>

See notes to condensed consolidated financial statements


                                       4
<PAGE>
            FEATHERLITE, INC.
            CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
            (UNAUDITED)
            (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                 NINE MONTHS ENDED
                                                                   SEPTEMBER 30
                                                              -----------------------
                                                                2001           2000
                                                              --------       --------
<S>                                                           <C>            <C>
Cash provided by (used for) operating activities
 Net income (loss)                                            $ (3,967)      $  1,152
 Depreciation & amortization                                     1,748          2,154
 Non-cash restructure charges                                    3,400             --
 Other non-cash adjustments, net                                   117            (39)
 Decrease (increase)in working capital, net                      9,431         (5,351)
                                                              --------       --------
    Net cash provided by (used for) operating activities        10,729         (2,084)
                                                              --------       --------

Cash (used for) investing activities
 Purchases of property and equipment, net                         (415)        (2,170)
 Purchases of aircraft                                              --         (2,912)
 Proceeds from sale of aircraft and other property                 305          3,010
                                                              --------       --------
    Net cash provided by (used for) investing activities          (110)        (2,072)
                                                              --------       --------

Cash provided by (used for) financing activities
 Decrease in short-term debt                                    (3,283)         2,256
 Decrease in long-term debt                                     (7,518)         1,920
                                                              --------       --------
   Net cash used for financing activities                      (10,801)         4,176
                                                              --------       --------

   Net cash increase (decrease) for period                        (182)            20
Cash balance, beginning of period                                  331            248
                                                              --------       --------

Cash balance, end of period                                   $    149       $    268
                                                              ========       ========
</TABLE>

See notes to condensed consolidated financial statements


                                       5
<PAGE>
                                FEATHERLITE,INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1:  Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared,
without audit, in accordance with the instructions of Form 10-Q and therefore do
not include all information and footnotes necessary for a fair presentation of
financial position, results of operations and cash flows in conformity with
generally accepted accounting principles. Financial information as of December
31, 2000 has been derived from the audited financial statements of the Company,
but does not include all disclosures required by generally accepted accounting
principles.

It is the opinion of management that the unaudited condensed financial
statements include all adjustments, consisting of normal recurring accruals,
necessary to fairly state the results of operations for the three month and nine
month periods ended September 30, 2001 and 2000. The results of interim periods
may not be indicative of results to be expected for the year. For further
information refer to the consolidated financial statements and notes to
consolidated financial statements included in the Company's Form 10-K Annual
Report for the year ended December 31, 2000.

Certain prior year amounts in the accompanying condensed financial statements
have been reclassified to conform to the 2001 presentation. The
reclassifications had no effect on previously reported income or total
shareholders' equity.

Note 2.  Going Concern Basis of Presentation

The accompanying consolidated financial statements for the three month and nine
month periods ended September 30, 2001 have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. In each of the past three years
ended December 31, 2000, 1999 and 1998,the Company required cash from other
sources to fund its operations, primarily due to operating losses in the
motorcoach segment and working capital used to fund a buildup in motorcoach
inventory. The Company generated sufficient cash during the current nine month
period to fund continuing operations, to finance capital expenditures and reduce
both short and long-term borrowings. At September 30, 2001 the Company had
approximately $1.5 million available to borrow on its credit lines.

At September 30, 2001, the current order backlog for trailers and motorcoaches
has declined below levels at comparable dates a year ago. This could further
reduce the Company's liquidity until new order volume increases and/or
additional financing is secured.

The Company's continuation as a going concern is dependent upon its ability to
generate sufficient cash flow to meet its obligations on a timely basis, to
obtain additional financing or refinancing as may be required and ultimately to
attain successful operations and to comply with the terms and covenants of its
financing agreements with US Bank (formerly Firstar Bank Milwaukee, N.A.),
Deutsche Financial Services(Deutsche) and First Union National Bank (First
Union). As discussed in Note 6 below, the Company is not in compliance with
certain covenants of its financing agreements as of September 30, 2001.

Management is attempting to obtain waivers of these covenant defaults and
amendments to the covenants for the remainder of 2001 and 2002. In addition, the
Company is attempting to obtain additional funds through debt financing or
refinancing and to reduce costs and related near term working capital
requirements so the Company will meet its obligations and sustain its
operations. Despite these efforts, management cannot provide assurance that the
Company will be able to obtain additional financing or refinancing or that cash
flow from operations will be sufficient to allow it to meet its obligations as
they come due.


                                       6
<PAGE>
Note 3:  Restructuring Charge

In June, 2001, the Company adopted a plan to shut-down its Pryor, Oklahoma,
manufacturing facility and suspend development and manufacturing of the Vogue
6000 motorcoach because of unacceptable delays experienced in obtaining
materials essential to the manufacture of this coach. The Company closed this
facility on August 20, 2001 and 80 employees were either terminated or
reassigned elsewhere in the Company. An accrual in the amount of $4.1 million
was made in the financial statements at June 30, 2001 to provide for exit and
other costs related to this restructuring. Following is a summary of this
accrual, amounts used and the balance remaining at September 30,:

<TABLE>
<CAPTION>
                                                                            Remaining at
                                                   Accrued        Used     Sept. 30, 2001
                                                   -------        ----     --------------
<S>                                                <C>          <C>        <C>
         Impairment of inventory                   $ 2,950      $(2,950)      $     0
         Impairment of property and equipment          450         (450)            0
         Payroll and severance costs                   500         (500)            0
         Lease costs until subleased                   200          (92)          108
                                                   -------      -------       -------
           Total restructuring charges             $ 4,100      $ 3,992       $   108
                                                   -------      -------       -------
</TABLE>

The Company leases the Pryor facility under the terms of an operating lease that
expires in 2011 with an aggregate annual rental cost of approximately $326,000.
The Company expects to sublease this property by December 31, 2001 at no less
than the annual rental cost and has included a portion of this liability in the
restructuring amount.

Note 4:  Adoption of New Financial Accounting Standard

The Company adopted Statement of Financial Accounting Standards ("SFAS") No. 133
"Accounting for Derivative Instruments and Hedging Activities" on January 1,
2001. SFAS no. 133 establishes accounting and reporting standards for derivative
instruments and for hedging activities. SFAS No. 133 requires that all
derivative instruments be recorded on the balance sheet at fair value. Changes
in the fair value of derivatives are recorded in earnings or other comprehensive
income (loss), based on whether the instrument is designated as part of a hedge
transaction and, if so, the type of hedge transaction. The Company uses an
interest rate swap agreement to convert a portion of a variable rate bank note
to an effective fixed rate of 7.34 percent. In accordance with the transition
provisions of SFAS No. 133, upon adoption of this standard, the Company recorded
a net of tax cumulative effect adjustment of $11,000 in accumulated other
comprehensive income to recognize the fair value of the interest rate swap
designated as a cash flow hedging instrument. The derivative was also recognized
on the balance sheet as an adjustment to long-term debt by the derivative's fair
value, a $17,000 gain and deferred assets for the $6,000 income tax effect of
the gain.

Note 5:  Other Assets

There were no aircraft purchases or sales during the three and nine month
periods ended September 30, 2001. During the current nine month period, the
carrying value of the Company's aircraft was written down by $250,000, including
$60,000 in the current three month period, to reflect estimated declines in the
market value of the aircraft. During the nine month period ended September 30,
2000, an aircraft was purchased at a cost of $2.9 million and subsequently
resold for $3.0 million, with a gain of $105,000 realized on the sale.

Note 6:  Financing Arrangements

At September 30, 2001 the Company had approximately $1.5 million available to
borrow on its credit lines.


                                       7
<PAGE>
The Company's debt facilities with US Bank, Deutsche and First Union are subject
to continued compliance with certain financial covenants. Failure to comply with
these covenants constitutes an event of default under each facility, and the
existence of a default under any of the facilities results in a cross-default
under the other facilities.

The Company is not in compliance with the following covenants: US Bank's
requirement to maintain a minimum fixed charge coverage ratio of 1.3 to 1;
Deutsche's requirement to attain a tangible current ratio of 1.5 to 1; and First
Union's requirement to maintain defined funds flow coverage of 1.3 to 1. The
Company is attempting to obtain waivers of the existing defaults and amendments
of the covenants for the remainder of 2001. Although the Company expects to
obtain these default waivers, US Bank has indicated that it will require the
Company to present an acceptable capital plan to address the Company's liquidity
shortfalls. First Union has waived existing defaults pursuant to a forbearance
agreement requiring repayment of all amounts outstanding by March 30, 2002 and
has increased the annual interest rate by 300 basis points. Neither of the other
two lenders is willing to waive cross defaults resulting from defaults under the
other facility; as a result, the Company must obtain waivers from both the other
lenders for any waivers to be effective. No assurance can be provided that the
Company will be successful in its efforts to obtain the waivers and amendments
described above. Until such waivers are obtained, US Bank and Deutsche each have
the right to declare amounts outstanding under its facility immediately due and
payable, the right to proceed against the Company's assets, and rights to
exercise other remedies. Because of the foregoing, the full amount outstanding
of the US Bank and First Union notes are included in "Current maturities of
long-term debt" in the accompanying balance sheet.

On September 20, 2001, the Company was notified by US Bank that the existing
defaults give the Bank the right to demand immediate payment of all loans. The
Bank also advised the Company of, among other matters, the following: reduction
of the maximum amount of the line of credit to $17 million from $25 million; a
decrease in the Qualified Inventory advance rates of 0.5% per week beginning
September 26, 2001; and a default interest rate equal to prime plus 2% on all
obligations. The Bank is continuing to honor requests for advances of the line
of credit received from the Company in accordance with the loan agreement.

The Company is a party to an interest rate swap. During the three months ended
September 30 2001, the fair market value of this swap decreased by $112,000 to a
cumulative loss for the nine months of $173,000, including $116,000 which was
recorded as "Other expense" in the current quarter and $43,000 net of tax, which
was recorded as shown in Note 8 as a comprehensive loss and an adjustment to
notes payable and deferred tax assets. The unrealized portion of this swap will
be recognized on March 30, 2002 when the First Union note is paid in full and
the swap terminated.

Note 7:  Commitments and Contingencies.

Pursuant to dealer inventory floor plan financing arrangements, the Company may
be required, in the event of default by a financed dealer, to repurchase
products which are in saleable condition from financial institutions or to
reimburse the institutions for unpaid balances, including finance charges plus
costs and expenses. The Company was contingently liable under these arrangements
for a maximum of $9.6 million at September 30, 2001 and $12.0 million at
December 31, 2000. During the nine months ended September 30, 2001, the Company
was not required to make any repurchases under these arrangements.

The Company is partially self-insured for a portion of certain health benefit
and workers' compensation insurance claims. The Company's maximum annual claim
exposure under these programs is approximately $6.5 million, including $2.4
million accrued for estimated unpaid claims at September 30, 2001, and $2.2
million at December 31, 2000. The Company has obtained an irrevocable standby
letter of credit in the


                                       8
<PAGE>
amount of $1.8 million in favor of the workers' compensation claim administrator
to guaranty settlement of claims.

The Company has been named as a defendant in various legal actions arising in
the ordinary course of its business. Most, but not all, of such actions are
product liability or workers' compensation claims in which the Company is
covered by insurance subject to applicable deductibles. Although the ultimate
outcome of such claims cannot be ascertained at this time, it is the opinion of
management, after consulting with counsel, that the resolution of such actions
will not be material to the Company's business or financial condition.

The Company leases certain office and production facilities under various
operating leases that expire at varying dates through 2011. Rental expenses
under these operating leases are estimated to be $1.2 million for 2001. The
Company is considering its alternatives with regard to the addition of a lease
related to a new sales and service center in North Carolina.

The Company has obtained fixed price commitments from certain suppliers for
about 80 percent of its expected aluminum requirements in 2001 to reduce the
risk related to fluctuations in the cost of aluminum, the principal commodity
used in the Company's trailer segment. In certain instances there may be a
carrying charge added to the fixed price if the Company requests a deferral of a
portion of its purchase commitment to the following year.

Note 8:  Shareholders' Equity

Shareholders' equity may be further detailed as follows (in thousands):

<TABLE>
<CAPTION>
                                                      Sept. 30,    Dec. 31,
                                                        2001         2000
                                                      --------     --------
<S>                                                   <C>          <C>
Common stock - without par value;
   Authorized-  40 million shares;
   Issued-      6,535 shares at Sept.30,2001
                6,535 shares at Dec.31, 2000          $ 16,595     $ 16,595
Additional paid-in capital                               4,062        4,062
Accumulated other comprehensive loss                       (43)          --
Retained earnings (deficit)                               (612)       3,355
                                                      --------     --------
         Total Shareholders' equity                   $ 20,002     $ 24,012
                                                      ========     ========
</TABLE>

In the first nine months the Company recorded as other comprehensive income an
unrealized loss of $43,000,net of tax, in the fair market value of an interest
rate swap, including comprehensive income of $4,000, net of tax in the three
months ended September 30, 2001.

Note 9: Comprehensive Income (Loss) and Accumulated Other Comprehensive Loss

         Total comprehensive income is as follows:

<TABLE>
<CAPTION>
                                                       Three Months    Nine Months
                                                          Ended           Ended
                                                      Sept. 30, 2001   Sept.30,200
                                                      --------------   -----------
<S>                                                   <C>              <C>
         Net income (loss)                               $  (106)        $(3,967)
         Cumulative effective adjustment of
          interest rate swap agreement, net of tax            --              11
         Unrealized income(loss) on interest rate
          swap agreement, net of tax                           4             (54)
                                                         -------         -------
                           Total comprehensive loss      $  (102)        $(4,010)
                                                         -------         -------
</TABLE>

                                       9
<PAGE>
At September 30, 2001 the interest rate swap adjustment was the only component
of accumulated other comprehensive loss.

Note 10: Stock Option Plan

In accordance with the stock option plan established by the Company in July
1994, as amended in May 1998, the Board of Directors has granted options to
purchase Company common stock to certain employees and directors in the total
amount of 827,800 shares at September 30, 2001 and 475,606 at December 31,2000.
These options were granted at prices ranging from $1.85-$7.25 per share, and are
exercisable at varying dates not to exceed 10 years from the date of grant.
Options totaling 379,300 shares have been granted in 2001. Options totaling
27,106 shares were exercised or forfeited during the nine months ended September
30, 2001.

Note 11: Net Income (Loss) Per Share

Following is a reconciliation of the weighted average shares outstanding used to
determine basic and diluted net income per share for the three months and nine
months ended September 30, 2001 and 2000 (in thousands, except per share data):

<TABLE>
<CAPTION>
                                                     Three Months Ended          Nine Months Ended
                                                        September 30                September 30
                                                      2001         2000          2001          2000
                                                    -------      -------       -------       -------
<S>                                                 <C>          <C>           <C>           <C>
Net income (loss) available to common
shareholders                                        $   106      $  (637)      $(3,967)      $ 1,152
Weighted average number of shares outstanding-
basic                                                 6,535        6,535         6,535         6,535
Dilutive effect of stock options                         --           --            --            --
Weighted average number of shares outstanding-
dilutive                                              6,535        6,535         6,535         6,535
Net income(loss) per share - basic and diluted      $  0.01      $ (0.10)      $ (0.61)      $  0.17
</TABLE>

Stock options for 827,800 shares at September 30, 2001 and 475,606 shares at
September 30, 2000 were excluded from the dilutive effect of stock options
because the exercise price of the options was greater than the market value of
the stock at those dates.


Note 12: Segment Reporting

The Company has two principal business segments that manufacture and sell
trailers and luxury motorcoaches to many different markets, including
recreational, entertainment and agriculture. Management evaluates the
performance of each segment based on income before income taxes. In the third
quarter of 2001, management adopted a policy of ceasing to charging interest on
intercompany borrowing balances and to retain all interest expense related to
the US Bank line of credit in the Corporate division. Prior period results have
been restated to conform with this new policy which had no affect on
consolidated income (loss) before income taxes.

The Company's sales are not materially dependent on a single customer or small
group of customers.

Information on business segment sales, income before income taxes and assets are
as follows for the three month periods ended September 30, 2001 and 2000 (in
thousands):


                                       10
<PAGE>
<TABLE>
<CAPTION>
                                                                        Corporate
                                          Trailers     Motorcoaches     and other         Total
                                          --------     ------------     ---------         -----
<S>                                      <C>           <C>              <C>             <C>
Three Months Ended September 30:
2001
Net sales to unaffiliated customers      $  27,341      $  24,225       $      --       $  51,566
Income (loss) before income taxes            1,045           (320)           (584)            141
Identifiable assets                         31,808         61,037           7,205         100,050
2000
Net sales to unaffiliated customers      $  31,071      $  20,276       $      --       $  51,347
Income (loss) before income taxes              779         (1,040)           (787)         (1,048)
Identifiable assets                         39,409         92,030           6,893         138,332

Nine Months Ended September 30:
2001
Net sales to unaffiliated customers      $  84,757      $  88,902       $      --       $ 173,659
Income (loss) before income taxes            2,446         (5,454)         (2,282)         (5,290)
Identifiable assets                         31,808         61,037           7,205         100,050
2000
Net sales to unaffiliated customers      $ 101,037      $  85,375       $      --       $ 186,412
Income (loss) before income taxes            5,911         (2,019)         (2,006)          1,886
Identifiable assets                         39,409         92,030           6,893         138,332
</TABLE>


Item 2:

Management's Discussion and Analysis of Financial Condition and Results of
Operations

The following discussion pertains to the Company's results of operations and
financial condition for the three month and nine month periods ended September
30, 2001 and 2000.

Results of Operations

      Three months ended September 30, 2001 and 2000

On a consolidated basis, the Company's operating results for the third quarter
ended September 30, 2001, were a net income of $106,000 or $0.01 per diluted
share, compared with a net loss of $637,000 or $0.10 per diluted share, in the
third quarter of 2000. This improvement in net income of $743,000 is the result
of reduced selling and administrative expenses, including research and
development costs, compared to last year. These reductions relate to the closing
of the sales and manufacturing facility in Pryor, Oklahoma in August, 2001 as
well as the Company's efforts to reduce and control operating costs.

Net sales for the quarter remained essentially unchanged at $51.7 million in
2001 compared with $51.3 million in 2000. This included a 14.8 percent decline
in sales of specialty trailers that were down in almost all product lines.
Motorcoach segment sales were up 22.2 percent compared to last year, including
an increase of 11 percent in sales of new motorcoaches and a 43 percent increase
in sales of used coaches as certain new and used motorcoaches were sold at
lower-than-average prices.

Gross profit decreased by $228,000 to $6.4 million in the third quarter of 2001
from $6.6 million in 2000. As a percentage of sales, gross profit for the
quarter declined to 12.5 percent compared to 13.0 percent in 2000. Trailer
margins were 3.9 percentage points greater than in 2000 due to reduced costs
incurred as a result of reduced material costs and improved labor and overhead
utilization during the quarter. Motorcoach gross profit margins declined as
lower margins were realized on both new and used motorcoach sales, due to
writedowns of $177,000 in the carrying value of certain used motorcoaches and
lower-than-average prices realized on motorcoach sales.

Selling and administrative expenses decreased in the quarter ended September 30,
2001 by $1.2 million, an 18 percent decline from the same period in 2000. As a
percentage of sales, these expenses decreased to 10.5 percent in 2001 from 12.8
percent in 2000. Trailer segment expenses decreased by 14 percent due to
reductions in both advertising and promotion related expenses and reduced
personnel costs.


                                       11
<PAGE>
Motorcoach segment expenses decreased by 29 percent due to reduced marketing and
administrative expenses at the Pryor facility (which was closed in August 2001),
reduced research and development costs (due primarily to the completion of the
Vogue 6000 project in 2000), reduced intangible amortization (resulting from the
write-off of impaired goodwill at the end of 2000) and lower administrative
salaries and outside consulting costs in 2001.

Interest expense decreased by $351,000 in the third quarter of 2001 compared to
2000 due to reduced average interest rates, which were partially offset by
higher levels of debt in 2001. Other income declined by $93,000 due to
reductions in other miscellaneous income items and the accrual of a $116,000
decline the fair market value of the interest rate swap as discussed in Note 6
to condensed consolidated financial statements.

Income before taxes (IBT) increased by almost $1.1 million to $141,000 in the
current quarter of 2001 compared to a loss before taxes of $1.0 million in the
same quarter last year. As discussed above, this improvement related primarily
to the selling and administrative cost reductions from closing the Pryor,
Oklahoma facility at the end of the second quarter of 2001, as well as other
cost reductions made to reduce overall operating expenses.

The provision for income taxes was at a rate of 25 percent in 2001 compared to
an income tax provision rate of 39 percent in 2000. The current quarter's rate
reflects a reduction of the anticipated benefit from the carryback of the annual
book losses, net of permanent differences, to prior year's Federal income tax
returns for a refund. No benefit has been provided for the carryforward of
losses on state returns.


      Nine months ended September 30, 2001 and 2000

On a consolidated basis, the Company sustained a net loss of $4.0 million for
the nine months ended September 30, 2001, or $0.61 per diluted share, compared
with net income of $1.1 million, or $0.17 per diluted share, in the same period
last year. This reduction is primarily the result of restructuring charges
incurred in 2001 from closing the Pryor, Oklahoma facility together with reduced
gross profit margin resulting from lower levels of sales and gross profit margin
rates as discussed further below.

Net sales for the nine month period decreased by 6.8 percent to $173.7 million
in 2001 compared with $186.4 million in 2000. This included an 18.1 percent
decrease in sales of specialty trailers and transporters, which were down in all
categories. Motorcoach segment sales increased by 5.7 percent, including an
increase of 4.7 percent in sales of new motorcoaches and a 4.4 percent increase
in sales of used coaches.

Gross profit decreased by $9.8 million to $15.8 million in the first nine months
of 2001 from $25.6 million in the first nine months of 2000. This decrease
includes restructuring charges of $2.9 million included in cost of sales in the
second quarter of 2001, representing the losses on liquidation of inventories
due to the shutdown of the Pryor, Oklahoma facility as discussed in Note 3 to
condensed consolidated financial statements. The additional decline of $6.9
million in gross profit reflects reductions due to decreased sales volume as
well as reduced gross profit margin percentages realized on sales in both
segments. As a percentage of sales, the gross profit margin for the nine month
period was 9.1 percent (after a 1.7 percent reduction related to the
restructuring charge) compared to 13.8 percent in 2000. Trailer margins were 2.4
percentage points lower than the first nine months of 2000 due to increased
costs resulting from unfavorable labor and overhead utilization related to the
Nashua, Iowa trailer manufacturing plant closure and other inefficiencies caused
by reduced trailer production volume. Motorcoach gross profit margins (excluding
the restructuring charge) were 2.8 percentage points lower than in the same
period in 2000 as lower margins were realized on sales of new and used units
because of discounts taken on the sale of older units to reduce inventory


                                       12
<PAGE>
and due to write-downs of $541,000 in the carrying value of units in inventory.
Motorcoach margins were also adversely affected by unfavorable labor and
overhead utilization.

Selling and administrative expenses decreased in the first nine months of 2001
by $3.9 million, a 19 percent decrease from 2000 due to management's efforts to
reduce costs in all areas. As a percentage of sales, these expenses decreased to
9.8 percent in 2001 from 11.2 percent in 2000. Trailer segment expenses
decreased by 21 percent due to reductions in both advertising and promotion
related expenses, reduced personnel costs and lower professional fees.
Motorcoach segment expenses decreased by 24 percent due to reduced marketing and
selling costs, reduced research and development due to the completion of the
Vogue 6000 project in 2000 and reduced intangible amortization due to the
write-off of goodwill in the fourth quarter of 2000.

The restructuring charge of $1.2 million included in selling and administrative
costs relates to the closing of the Company's manufacturing facility in Pryor,
Oklahoma in August, 2001 as discussed in Note 3 to condensed consolidated
financial statements. This amount includes, among other items, employee payroll
and severance costs paid in connection with this closing and the losses incurred
in liquidating property and equipment items not usable elsewhere within the
Company.

Interest expense decreased by $207,000 in 2001 compared to 2000. Interest on
higher levels of debt in 2001 than in 2000 were offset by lower interest rates
in 2001. Other income declined by $321,000 as the result of decreased gains on
sales of aircraft, including a current year write-down in the aircraft carrying
value by $250,000 to reflect a decline in its estimated market value and
reductions in other miscellaneous income items.

Income before taxes (IBT) decreased by almost $7.2 million in the first nine
months of 2001 to a loss of $5.3 million compared to income before taxes of $1.9
million in the same period last year. This decrease is due in part to the $4.1
million in restructuring charges related to closing the Pryor, Oklahoma facility
and reduced gross margin of $6.9 million from lower sales volume and reduced
gross profit percentages in both segments. This decrease was partially offset by
reduced selling and administrative costs of $3.9 million for the reasons
discussed above.

A benefit from income taxes was provided at a rate of 25 percent in 2001
compared to a provision rate of 39 percent in 2000. The current year rate
reflects the carryback of certain of these losses, net of estimated permanent
differences to prior years for a refund of Federal taxes paid. No benefit has
been provided on the carryforward of losses on state income tax returns.

Liquidity and Capital Resources

The liquidity of the Company is measured primarily by its cash flow from
operations together with amounts available to borrow on its approved lines of
credit with US Bank (formerly Firstar Bank Milwaukee, N.A.), and with Deutsche
Financial Services Corporation (Deutsche), a wholesale financing company. During
the nine months ended September 30, 2001, the Company's operating activities
provided net cash of $10.7 million, including $9.4 million generated by a net
decrease in working capital. This cash, net of amounts used for capital
expenditures and net non-line of credit debt reduction, was used to decrease
amounts borrowed on the Company's lines of credit. At September 30, 2001 the
Company had approximately $1.5 million available to borrow on its credit lines
compared to $3.2 million at December 31, 2000.

The Company has two external lines of credit to supplement its internally
generated cash flow. It has a revolving loan agreement with its primary lender,
US Bank, which is subject to renewal in September 2002 and provides a working
capital line of credit equal to the lesser of $25.0 million or a defined
percentage of eligible receivables (85%) and inventories (70%). On September 20,
2001, the bank reduced the maximum amount of the line of credit to $17 million
and began reducing the


                                       13
<PAGE>

eligible inventory advance rate by 0.5% per week. At September 30, 2001, $10.9
million was available to borrow under this line and $10.9 million was
outstanding. The Company also has a wholesale finance agreement with Deutsche
that provides up to $30 million in financing for new and used motorcoaches held
in inventory. At September 30, 2001, $28.4 million was available to borrow under
this agreement and $26.9 million was outstanding.

These credit facilities are subject to continued compliance with certain
covenants, including the following: maintain a ratio of debt to tangible net
worth of 4.5:1; attain minimum annual earnings before interest, taxes,
depreciation and amortization (EBIDTA) of $10 million; achieve minimum defined
fixed charge coverage ranging from no requirement in the first quarter of 2001
to 1.0:1 in the second quarter to 1.3:1 in the third and fourth quarters, with
an annual requirement for 2001 of 1.0:1; and maintain a ratio of current
tangible assets to liabilities of 1.5:1 beginning June 30, 2001. In addition,
the Company's mortgage debt with First Union National Bank requires the Company
to maintain a minimum defined funds flow coverage based on the past four
quarters of 1.3 to 1. Failure to comply with these covenants constitutes an
event of default under each facility, and the existence of a default under any
of the facilities results in a cross-default under the other facilities.

The Company is not in compliance with the following covenants: US Bank's
requirement to maintain a minimum fixed charge coverage ratio of 1.3 to 1;
Deutsche's requirement to attain a tangible current ratio of 1.5 to 1; and First
Union's requirement to maintain defined funds flow coverage of 1.3 to 1.

The Company is attempting to obtain waivers of the existing defaults and
amendments of the covenants for the remainder of 2001 and 2002. As discussed
above, on September 20, 2001, the Company was notified by US Bank that the
existing defaults give the Bank the right to demand immediate payment of all
loans. The Bank also advised the Company of, among other matters, the following
requirements: reduction of the maximum amount of the line of credit to $17
million from $25 million; a decrease in the Qualified Inventory advance rates of
0.5% per week beginning September 26, 2001; and a default interest rate equal to
prime plus 2% on all obligations. The Bank is continuing to honor requests for
advances of the line of credit received from the Company in accordance with the
loan agreement. On October 1, 2001, First Union waived existing defaults
pursuant to a forbearance agreement requiring repayment of all amounts
outstanding to First Union by March 30, 2002 and increasing the annual interest
rate by 300 basis points. Neither US Bank nor Deutsche is willing to waive
cross-defaults resulting from defaults under the other facilities; as a result,
the Company must obtain waivers from all lenders for any waivers to be
effective. No assurance can be provided that the Company will be successful in
its efforts to obtain the waivers and amendments described above. Until such
waivers are obtained, US Bank and Deutsche each have the right to declare
amounts outstanding under its facility immediately due and payable, the right to
proceed against the Company's assets, and rights to exercise other remedies.

In any event, the Company expects that it will be necessary to secure additional
working capital financing before the end of 2001 and may seek extended repayment
terms from trade creditors as well. In addition, $4 million will be needed to
refinance the amount outstanding under the First Union mortgage loan by March
30, 2002. The Company has engaged an advisory firm to assist it in preparing a
capital plan and in arranging and negotiating financing for the capital
required. No assurance can be provided that the Company will be able to obtain
the additional financing required on a timely basis, on terms favorable to the
Company or at all.

The Company's liquidity is also reflected in changes in a number of key
indicators. The Company's ratio of current assets to current liabilities was
1.02 to 1 at September 30, 2001, compared with a ratio at December 31, 2000 of
1.45 to 1. This decrease is due to the inclusion of the US Bank and First Union
notes in current liabilities due to defaults on loan covenants related to these
facilities as discussed further above. The ratio of total debt to shareholders'
equity remained almost constant at 2.56 to 1 compared to 2.58 to 1 at December
31, 2000. During the


                                       14
<PAGE>
nine months ended September 30, 2001, total debt declined by almost $10.8
million as debt was reduced with cash provided from operating activities,
including liquidation of inventory.

The factors described above raise doubt about the Company's ability to continue
as a going concern. The Report of Independent Accountants accompanying the
Company's consolidated financial statements as of December 31, 2000 and for the
year then ended states that the Company is unable to ascertain whether it will
have sufficient liquidity available under existing lines of credit to fund
operations and whether the Company will meet various covenant requirements
contained its loan agreements with various lenders. The accompanying unaudited
condensed consolidated financial statements have been prepared assuming that
Company will continue as a going concern. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

Many of the Company's trade accounts payable are past due, and certain of its
vendors currently require cash payment upon delivery of materials and supplies.
In an effort to restructure its trade debt, the Company intends to offer a
composition plan to trade creditors of its Trailer Division with balances
outstanding as of November 15, 2001. If the plan is approved by the creditors,
the Company will pay amounts outstanding according to the payment option chosen
by each creditor. Each creditor will have the opportunity to choose to take a
significant discount in exchange for payment within a few months or to receive
full payment in installments over a period of years.

The plan is contingent upon completion of a debt or equity financing, which the
Company expects to complete early in the first quarter of 2002. Depending on the
size and nature of the transaction, additional time may be required to complete
the financing in order to obtain shareholder approval and comply with other
applicable regulatory requirements. If the plan is approved by the trade
creditors, payments will begin promptly after the Company completes this
financing. If the Company is unable to complete the equity financing and
composition plan, the Company's ability to fund continued operations and capital
requirements will be adversely affected.

The Company is continuing a number of actions to improve its liquidity,
including the following:

(1) Special sales incentives and price reductions are being offered to sell
discontinued and certain other motorcoach units. During the nine months ended
September 30, 2001, inventories of these units decreased by $6.8 million due in
part to the sale of old units at a discount. This was partially offset by
increases of $1.4 million in inventories of other new units;

(2) Reductions have been made in the production and support workforce at the
Pryor, Oklahoma and Nashua, Iowa production facilities. The Company estimates
these reductions of about 350 employees will reduce annualized payroll and other
costs by $5 to $7 million. Planned unit production has been reduced by about 15
percent;

(3) The Company has consolidated its coach conversion manufacturing operations
from Pryor, Oklahoma to Sanford, Florida. These actions should improve the
efficiency and reduce the amount of unabsorbed labor and overhead in the
production operations. These consolidations have also resulted in the reduction
of work in process inventories totaling $9.4 million in the first nine months of
2001;

(4) Expenditures are being controlled to reduce the buildup of raw materials
before needed by production. Total raw materials inventories declined by $3.6
million from December 31, 2000 to September 30, 2001; and


                                       15
<PAGE>
(5) Selling and administrative expenses have been reduced by almost $3.9 million
compared to the same nine months of last year and efforts will continue to
control these expenses. We anticipate these expenses will continue at reduced
levels throughout the remainder of 2001.

If successful, these actions are expected to improve the Company's liquidity.
The Company can make no assurances, however, that it will continue to achieve
sufficient liquidity to allow it to meet its obligations as they become due.

Following is a discussion of the principal components of the Company's cash flow
for the nine months ended September 30, 2001, as reflected in the condensed
consolidated statements of cash flows:

Operating activities provided net cash of $10.7 million. The Company's net loss
of $4.0 million was reduced by adjustments for depreciation and amortization of
$1.7 million, non-cash restructuring charges of $3.4 million and by other
non-cash items in an aggregate net amount of $117,000. Net changes in
receivables, inventories and other working capital assets provided cash of $18.5
million. Substantially all of this change resulted from decreased inventories,
in large part related to the motorcoach segment, where work in process inventory
decreased by $9.5 million and new motorcoach inventory decreased by $5.4
million. Net decreases in accounts payable, customer deposits and other current
liabilities used cash of $9.1 million. These changes include, among other
reasons, a decrease of $8.7 million in motorcoach shell payables due to a
decrease in the number of bus shells held; an increase of $1.3 million in
accounts payable due a slowdown in payments to vendors and a reduction of
$256,000 in accrued liabilities in part related to the payment of payroll costs
included in the accrued restructuring charges in the second quarter. Customer
deposits decreased by $1.5 million as deposits received on pending sales of
trailers and motorcoaches in prior periods were applied to sales completed in
the current period.

Increased expenditures for working capital items may be required to support
production levels in excess of sales from time to time. To maintain a level
production schedule, production may begin on coaches before an order has been
received from a specific buyer. As of September 30, 2001, approximately 94
percent of the coaches in production and to be completed over the next four
months have not been sold to specific customers. While it is the Company's
expectation that substantially all of these motorcoaches will be sold to
specific customers before production is completed, or shortly thereafter, there
is no assurance this will occur. Accordingly, this could further impact the
liquidity of the Company.

The shell manufacturer has financed a number of motorcoach shells acquired by
the Company for a five to six month period that approximates the time normally
required to perform the conversion process. Payment is required for these shells
at the time the shell is sold or at the end of the defined period, whichever
occurs sooner. The manufacturer has the right to demand payment or to repossess
shells at that time. At September 30, 2001, $7.2 million was owed to the shell
manufacturer, a reduction of $7.8 million since December 31, 2000. There were no
expired consignment contracts at September 30, 2001.

The Company's net capital expenditures for plant and equipment were $415,000 in
the first nine months of 2001. There were no aircraft sales or purchases during
the nine months ended September 30. The Company collected sales proceeds of
$305,000 during this period for sales of used vehicles and equipment. No
significant capital expenditure projects are anticipated in the fourth quarter
2001. On September 20, 2001 US Bank terminated the availability of capital
expenditure financing under a Capital Expenditure Term Note. The Company has
also made a commitment to the City of Cresco, Iowa to construct a hangar
facility at a cost of $300,000 as part of an airport expansion project, which
has been delayed indefinitely.

The Company leases certain office and production facilities under various leases
that expire at varying dates through fiscal year 2011. Minimum lease payments
for 2001 are expected to total $1.2 million. The Company is considering its


                                       16
<PAGE>
alternatives with regard to the lease of a new sales and service center in North
Carolina.

As discussed in Note 7 to the Condensed Consolidated Financial Statements, the
Company is contingently liable under certain dealer floor plan arrangements.
These arrangements relate to inventory financing provided to Featherlite dealers
by financial institutions. The Company would be required to repurchase inventory
if it is repossessed by the financial institution and is in saleable condition.
No reserve has been provided for this contingency because the aggregate amount
of such repurchases has historically been less than one percent of sales and
repossessed inventory has been resold to other dealers without a loss. These
contingent liabilities total approximately $9.6 million at September 30, 2001.
Also, the Company is self-insured for a portion of certain health benefit and
workers' compensation insurance claims. At September 30, 2001, the Company's
maximum annual claim exposure under these programs is approximately $6.5
million. The Company has obtained an irrevocable standby letter of credit in the
amount of $1.8 million in favor of the workers' compensation claim administrator
to guarantee payment of claims.

Assuming a favorable outcome to actions outlined above for improving the
Company's liquidity and no further weakening in orders due to the economy or
other reasons, the Company believes that its current cash balances, cash flow
generated from operations and available borrowing capacity will be sufficient to
fund continued operations and capital requirements consistent with past levels
for the next twelve months. As described above, the Company is in the process of
identifying additional sources of financing. Such financing may be in the form
of equity, equity-linked, or debt securities and those securities may have
rights, preferences or privileges senior to those of the Company's common stock.
No assurance can be given that such funding will be available to the Company on
terms satisfactory to the Company or at all. Management cannot provide assurance
that the Company's cash flow from operations will be sufficient to meet its
obligations as they become due.

For the foreseeable future, the Company does not plan to pay dividends but
instead will follow the policy of reinvesting any earnings in order to finance
the expansion and development of its business. The Company is a party to certain
loan agreements that prohibit the payment of dividends without the lender's
consent.

Forward-looking Information and Risks

Certain statements in this report, and in the Company's Form 10-K and other
filings with the SEC, are forward-looking in nature and relate to trends and
events that may affect the Company's future financial position and operating
results. The words "believe," "estimate," "expect," "intend," "may," "could,"
"will," "plan," "anticipate'" and similar words and expressions are intended to
identify forward-looking statements. These statements speak only as of the date
of this quarterly report, are based on current expectations, are inherently
uncertain, are subject to risks, and should be viewed with caution. Actual
results and experience may differ materially from the forward-looking statements
as the result of many factors, including but not limited to: product demand and
acceptance of products in each segment of the Company's markets, fluctuations in
the price of aluminum, competition, facilities utilization, the availability of
additional capital required to improve the Company's net liquidity deficiency
and certain other unanticipated events and conditions. It is not possible to
foresee or identify all such factors. The Company makes no commitment to update
any forward-looking statement or to disclose any facts, events, or circumstances
after the date hereof that may affect the accuracy of any forward-looking
statement, other than as required by law.

The Company is cautious concerning sales for the remainder of 2001, particularly
after the events of September 11. Beginning in December 2000 and at September
30, 2001, new order backlog for trailers and motorcoaches has decreased below
backlog levels at comparable dates in the prior year. At September 30, 2001,
total backlog was $14.1 million compared to $30.7 million at December 31, 2000
and $41.7 million at September 30, 2000. Management believes this decrease is
related to the


                                       17
<PAGE>
uncertainty and lack of consumer confidence that is now present in the economy.
There is continuing focus by the Company on the sales and marketing related
activities that have been effective in increasing sales in the past but there is
no assurance they will be successful in increasing order levels to maintain or
exceed last year's sales volume. Actions have been taken to consolidate certain
production facilities, to reduce staffing levels and control other costs until
the present economic trends become more favorable.

The Company believes its name recognition and close affiliation with the
motorsports industry will continue to have a positive impact on its sales of
specialty trailers, transporters and luxury motorcoaches. With more than 75
percent of its revenue from end users in motorsports and leisure and
entertainment categories, which also includes horse trailers, and with its
strong position in the livestock trailer market, the Company believes it is
strategically well-positioned to continue to benefit from these markets. The
Company introduced 70 new and enhanced models of trailers during the first nine
months of 2001 and will continue to add new models in the remainder of 2001.
Further development of the Featherlite Vogue 6000LX luxury coach model, which
was added to the Featherlite motorcoach product line in November 2000, has been
indefinitely suspended. In May 2001, the Company opened a west coast luxury
motorcoach sales facility in Coburg, Oregon. This facility is having a positive
effect on total motorcoach sales.

The Company is also focusing on cost reductions and improving manufacturing
operations. In 2001, it continues the implementation of strategic initiatives
begun in 1999 and 2000 to restructure the motorcoach division. In January 2001,
another phase of this initiative was announced with plans to move the Prevost
coach conversion manufacturing operations from its Pryor, Oklahoma facility to
its Sanford, Florida facility. This was completed by the end of the first
quarter of 2001. In August, 2001 the Company closed its Pryor facility and
indefinitely suspended production of the Featherlite Vogue series including the
Vogue 6000LX due to difficulties in obtaining quality custom materials from a
supplier on a timely basis. Management believes these actions will contribute to
greater efficiencies and could reduce the motorcoach segment overall cost
structure by $3 to $5 million on an annualized basis compared to 2000. In the
trailer segment, management believes that new manufacturing processes and
efficiencies will allow the Company to lower retail prices on certain models
without adversely affecting margins. In April, 2001, the Company closed its
Nashua, Iowa trailer production facility and consolidated some or all of this
production into the Cresco, Iowa facility. Management believes that these
reductions in workforce and other expenses could decrease overall operating
costs of the trailer segment by $1 to $2 million on an annualized basis. The
Company's first and second quarter of 2001 financial statements reflect certain
charges related to these efforts.

The Company's future operating results are subject to a number of risks,
including the following:

      1. The Company has made increased use of leverage and incurred greater
      interest and related expenses in each of the three years ended December
      31, 2000 and in the current nine months ended September 30, 2001.
      Increased debt has been incurred in connection with financing operations
      and facilities expansions at the Luxury Coach Division as well as
      financing its increased working capital requirements. As described above,
      the Company is not in compliance with certain loan covenants relating to
      its outstanding debt. If the Company is unable to obtain waivers of these
      covenant defaults and secure sufficient additional financing to fund its
      liquidity shortfalls, the Company's business will be materially adversely
      affected.

      2. Aluminum is a commodity that is traded daily on the commodity markets
      and fluctuates in price. The average Midwest delivered cash price per
      pound for ingot aluminum during the three years ended December 31, 2000,
      as reported to the Company by its suppliers was $.75 in 2000, $.66 in 1999
      and $.66 in 1998. In the first nine months of 2001, the average was $.73.
      The Company's cost of aluminum varies from these market prices due to
      vendor processing charges, timing


                                       18
<PAGE>
      of purchases, contractual commitments with suppliers for specific prices
      and other factors. The Company has obtained commitments from suppliers to
      provide, at an agreed upon fixed price, about 80 percent of its
      anticipated requirements for 2001 which reduces a portion of the risk of
      aluminum cost fluctuations for the year. If the Company is unable to
      obtain such commitments from suppliers or otherwise reduce the price risk
      related to the balance of the purchases to meet its requirements in 2001
      and in the years beyond 2001, this could have an adverse impact on the
      Company's operating results if the cost of aluminum increases
      significantly above levels committed for 2001.

      3. There is a risk related to losing a major supplier of aluminum. In the
      past this risk has been relatively nominal as there have been alternate
      sources of supply. In recent years, the number of alternate sources of
      supply has been reduced due to mergers within the aluminum industry. Also,
      additional time may be required to replace an extruded aluminum supplier
      due to the fact that dies are required and would have to be made. The
      Company routinely tries to keep at least three suppliers of each shape so
      it has a backup supplier if necessary.

      4. There is a risk related to the loss or interruption in the supply of
      bus conversion shells from the Company's sole supplier of these shells.
      The Company purchases all of its bus conversion shells from Prevost Car
      Company located in Canada. Although the Company has insurance to cover
      certain losses it may sustain due to fire or other catastrophe at
      Prevost's plant, the Company may not be able to obtain conversion shells
      from another manufacturer on favorable terms or at all.

      5. The Company uses one subcontractor to provide paint and graphic design
      work to meet customer specifications on certain custom trailers and
      specialty transporters. There is a risk to the timely delivery of these
      trailers in the event of an unforeseen interruption in the subcontractor's
      ability to provide these services or if the customer delays providing the
      specifications to the subcontractor.

      6. The Company is exposed to market risks related to changes in U.S and
      international interest rates. Substantially all of the Company's debt
      bears interest at a variable rate. To a limited extent, the Company
      manages its interest rate risk through the use of interest rate swaps. At
      September 30, 2001, the fair value of the interest rate swap with a
      notional amount of $4.0 million was a loss of approximately $173,000. This
      swap will be terminated on March 30, 2002 when the mortgage with First
      Union National Bank must be paid in full. An interest rate increase by one
      percentage point would reduce the Company's future annual net income by
      approximately $300,000 at current debt levels.

      7. The Company has available finished inventory in two models being phased
      out. In 2000, a write-down of $407,000 was taken to reduce the carrying
      value of this inventory to estimated realizable value. There is a risk
      that the sale of this inventory will not realize normal margins and there
      will be unabsorbed labor and overhead costs related to inefficiencies in
      the production of the new models which could adversely impact the
      Company's future operating results.

      8. The Company builds a significant number of luxury motorcoaches on a
      speculative basis. While it is the Company's expectation that
      substantially all of these motorcoaches will be sold to specific customers
      before production is completed, or shortly thereafter, there is no
      assurance this will occur. Failure to sell these motorcoaches on a timely
      basis at prevailing prices could further decrease the liquidity of the
      Company.

      9. The Company takes trade-ins on both new and used motorcoach sales.
      These trade-in units are marketed on a retail basis to other customers. In
      the last quarter of 2000, the Company experienced a decline in the market
      value of trade-in units and wrote-down the carrying value of the used
      inventory by $1.3 million in the fourth quarter of 2000. An additional
      write-off of $542,000 was made in


                                       19
<PAGE>
      the first nine months of 2001. There is a risk that additional write-downs
      in this inventory will occur if these trade-in units are not sold at
      current selling prices, which could adversely impact the Company's future
      operating results.

      10. The accompanying consolidated financial statements have been prepared
      assuming that the Company will continue as a going concern. However, the
      Report of Independent Accountants on the December 31, 2000 consolidated
      financial statements states that the Company has suffered losses from
      operations in its motorcoach segment and has a liquidity deficiency that
      raises substantial doubt about the Company's ability to continue as a
      going concern. The financial statements do not include any adjustments
      that might result from the outcome of this uncertainty.

      11. Estimated cost reductions and savings from plant closings and
      restructurings could be partially or fully offset by unabsorbed labor and
      overhead related to the production of other models, unanticipated
      increases in operating costs and other factors. The actual costs incurred
      by the Company in connection with such closings and restructuring activity
      may exceed the amount of restructuring charges recognized by the Company
      to date.

      12. The Company was notified by The Nasdaq Stock Market, Inc.(Nasdaq) that
      its common stock has failed to maintain the minimum market value of public
      float required for continued listing on the Nasdaq National Market . The
      Company submitted an application to transfer to The Nasdaq Smallcap
      Market, which has been accepted effective August 1, 2001. Nasdaq has also
      expressed concern that the Company may not be able to sustain compliance
      with the continued listing requirements of The Nasdaq Stock Market because
      of the "going concern" opinion expressed in the Report of Independent
      Accountants on the Company's December 31, 2000 consolidated financial
      statements. There is no assurance the Company will be able to satisfy
      Nasdaq regarding its ability to meet these continued listing requirements,
      and the Company's common stock may be delisted from Nasdaq.


Item 3.  Quantitative and Qualitative Disclosures about Market Risks

The information required by this item is incorporated by reference to
"Management Discussion and Analysis-Looking Forward and Risk Factor" section of
this Form 10-Q for the quarterly period ended September 30, 2001.



PART II. OTHER INFORMATION

Item 3.  Defaults Upon Senior Securities.

The Company's debt facilities with US Bank (formerly Firstar Bank Milwaukee,
N.A.) and Deutsche Financial Services Corporation are subject to continued
compliance with certain covenants, including the following; maintain a ratio of
debt to tangible net worth of 4.5:1; attain minimum annual earnings before
interest, taxes, depreciation and amortization (EBIDTA) of $10 million; achieve
minimum defined fixed charge coverage ranging from no requirement in the first
quarter of 2001 to 1.0:1 in the second quarter to 1.3:1 in the third and fourth
quarters, with an annual requirement for 2001 of 1.0:1; and maintain a ratio of
current tangible assets to liabilities of 1.5:1 beginning June 30, 2001. In
addition, the Company's mortgage debt with First Union National Bank requires
the Company to maintain a minimum defined funds flow coverage based on the past
four quarters of 1.3 to 1. Failure to comply with these covenants constitutes an
event of default under each facility, and the existence of a default under any
of the facilities results in a cross-default under the other facilities.

The Company is not in compliance with the following covenants: US Bank's
requirement to maintain a minimum fixed charge coverage ratio of 1.3 to 1;
Deutsche's


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requirement to attain a tangible current ratio of 1.5 to 1; and First Union's
requirement to maintain defined funds flow coverage of 1.3 to 1.

The Company has been notified by US Bank that the existing defaults give the
Bank the right to demand immediate payment of all loans. The Bank also advised
the Company of, among other matters, the following: reduction of the maximum
amount of the line of credit to $17 million from $25 million; a decrease in the
Qualified Inventory advance rates of 0.5% per week beginning September 26, 2001;
and a default interest rate equal to prime plus 2% on all obligations. The Bank
is continuing to honor requests for advances of the line of credit received from
the Company in accordance with the loan agreement.

On October 1, 2001 the Company entered into a Loan Modification and Forbearance
Agreement with First Union National Bank (First Union). This agreement
accelerated the maturity of this debt to March 30, 2002, and increased the
interest rate by 300 basis points during the forbearance period. First Union
waives the existing default during the forbearance period.


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

      (a) Exhibits. See Exhibit Index on page following signatures.

      (b) Form 8-K. The Registrant filed no Form 8-K reports during the three
months ended September 30, 2001.



                                   SIGNATURES

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

                                       FEATHERLITE, INC.
                                         (Registrant)



Date:  November 14, 2001               /S/ CONRAD D. CLEMENT
                                       ---------------------
                                       Conrad D. Clement
                                       President & CEO


Date:  November 14, 2001               S/ JEFFERY A. MASON
                                       ---------------------
                                       Jeffery A. Mason
                                       Chief Financial Officer


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                                  EXHIBIT INDEX
                                    Form 10-Q
                        Quarter Ended September 30, 2001

Exhibit No.                       Description

10.1        Loan Modification and Forbearance Agreement dated October 1, 2001
            between Featherlite, Inc. and First Union National Bank


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