<PAGE>   1
 
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                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
 
                                   FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
                                      OF 1934
                     FOR THE FISCAL YEAR ENDED MAY 31, 1997
 
                         COMMISSION FILE NUMBER 0-24210
 
                         AMERICAN HOMESTAR CORPORATION
             (Exact name of registrant as specified in its charter)
 
<TABLE>
<S>                                            <C>
                    TEXAS                                        76-0070846
         (State or other jurisdiction                         (I.R.S. Employer
      of incorporation or organization)                    Identification Number)
</TABLE>
 
        2450 SOUTH SHORE BOULEVARD, SUITE 300, LEAGUE CITY, TEXAS 77573
          (Address of principal executive offices, including zip code)
 
                                 (281) 334-9700
              (Registrant's telephone number, including area code)
 
        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None
 
                SECURITIES REGISTERED PURSUANT TO SECTION 12(g):
 
<TABLE>
<CAPTION>
           TITLE OF EACH CLASS             NAME OF EACH EXCHANGE ON WHICH REGISTERED
           -------------------             -----------------------------------------
<S>                                        <C>
      Common Stock, $0.05 par value                 Nasdaq National Market
</TABLE>
 
     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 voting stock held by non-affiliates of the
registrant on August 6, 1997 (based on the last sale price on the Nasdaq
National Market as of such date) was $153,166,622. For purposes of this
disclosure only, the registrant has assumed that its directors, executive
officers and beneficial owners of 5% or more of the registrants common stock are
affiliates of the registrant.
 
     As of August 6, 1997, the registrant had 11,430,351 shares of Common Stock
issued and outstanding.
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
     Portions of the proxy statement with respect to the 1997 annual meeting of
shareholders of the registrant are incorporated by reference into Part III of
this report.
 
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                               TABLE OF CONTENTS
 
                                     PART I
 
<TABLE>
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                                                                          PAGE
                                                                          ----
<S>        <C>                                                            <C>
Item 1.    Business....................................................     1
Item 2.    Properties..................................................     8
Item 3.    Legal Proceedings...........................................     9
Item 4.    Submission of Matters to a Vote of Security Holders.........     9
 
                                     PART II
 
Item 5.    Market for Registrant's Common Equity and Related
             Shareholder Matters.......................................    10
Item 6.    Selected Financial Data.....................................    11
Item 7.    Management's Discussion and Analysis of Financial Condition
             and Results of Operations.................................    12
Item 8.    Financial Statements and Supplementary Data.................    17
Item 9.    Changes in and Disagreements with Accountants on Accounting
             and Financial Disclosure..................................    17
 
                                     PART III
 
Item 10.   Directors and Executive Officers of the Registrant..........    17
Item 11.   Executive Compensation......................................    18
Item 12.   Security Ownership of Certain Beneficial Owners and
             Management................................................    18
Item 13.   Certain Relationships and Related Transactions..............    18
 
                                     PART IV
 
Item 14.   Exhibits, Financial Statement Schedules, and Reports on Form
             8-K.......................................................    19
</TABLE>
<PAGE>   3
 
                                     PART I
 
ITEM 1. BUSINESS
 
GENERAL
 
     American Homestar Corporation ("American Homestar" or the "Company") is one
of the nations leading vertically integrated manufacturing housing companies,
with operations in manufacturing, retail distribution, financing, insurance and
transportation. At May 31, 1997, the Company operated eight manufacturing plants
that sell homes through a network of 54 Company-owned retail sales centers and
approximately 300 independent retailers, fifteen of which are franchisees. At
May 31, 1997, the Company's manufacturing plants were located in Texas, North
Carolina, Oregon, Idaho, Nebraska and Mississippi, and Company-owned retail
sales centers were located in Texas, Louisiana, New Mexico, Oklahoma, Colorado
and Utah.
 
GROWTH STRATEGY
 
     American Homestar is committed to long-term growth through a strategy based
on vertical integration. Management believes that the integration of
manufacturing, retailing and retail financing operations provides the Company
with a competitive advantage over many others in the industry. During fiscal
1997 and the first quarter of fiscal 1998, the Company made a number of
strategic acquisitions, the most significant of which are as follows:
 
     - In September 1996, the Company exercised its option to acquire Guerdon
       Holdings, Inc. ("Guerdon") after managing Guerdon's operations under a
       management agreement since March 1996. Guerdon produces manufactured
       homes in four facilities located in Oregon, Idaho, Nebraska and
       Mississippi, and sells its homes to over 150 independent retailers
       located in 17 states in the Pacific Northwest, Rocky Mountain and South
       Central regions of the United States.
 
     - In September 1996, the Company acquired Heartland Homes, Inc.
       ("Heartland"), a single plant manufacturer of low- to medium-priced homes
       in North Carolina. Concurrent with the Heartland acquisition, the Company
       also purchased the assets of Manu-Fac Homes, Inc. ("Manu-Fac"), a
       contractually affiliated group of 15 independent retailers, which have
       since become franchisees of the Company.
 
     - In June 1997, the Company acquired Brilliant Holding Corporation
       ("Brilliant"), a manufacturer of single- and multi-section homes with
       three plants in Alabama. Brilliant sells its homes to nearly 200
       independent retailers located in 14 states.
 
     - In June 1997, the Company acquired N.C. Mobile Home Corporation ("N.C.
       Homes"), which operates 11 retail sales centers in North Carolina and one
       retail sales center in Virginia.
 
     While the Company's historical primary market area has been the Southwest,
particularly Texas and surrounding states, the Company's recent expansion has
given it a national presence with operations now encompassing the Southwest,
Pacific Northwest, Rocky Mountain, Deep South, South Central, Southeastern and
Mid-Atlantic regions of the United States. With the completion of the Brilliant
and N. C. Homes acquisitions, the Company now operates 11 manufacturing plants
and 67 Company-owned retail centers and serves over 400 independent retail
locations in 28 states.
 
     The key elements of the Company's growth strategy over the next two years
are as follows:
 
     - Expand the Company's Retail Distribution Base. Expanding the Company's
       retail distribution base, especially in the Company's new regional
       markets, is a high priority. In the first quarter of fiscal 1998, the
       Company added 15 Company-owned retail sales centers, most of which are
       located in the Company's new regional markets.
 
     - Broaden and Strengthen Independent Retailer Relationships. The Company
       intends to further develop its independent retail network and increase
       the volume of Company-manufactured homes sold by its
 
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       independent retailers. In furtherance of this strategy, the Company has
       recently introduced and will aggressively market, a retail franchise
       program. Relationships with independent retailers are particularly
       important in new regional markets in which the Company has fewer
       Company-owned retail sales centers.
 
     - Increase the Proportion of New Homes Sold by its Retail Sales Centers
       that are Manufactured by the Company. By selling homes manufactured by
       the Company at Company-owned retail sales centers, the Company earns both
       a retail profit and manufacturing profit on each new home sale. During
       fiscal 1997, 74% of the new homes sold by Company-owned retail sales
       centers were manufactured by the Company, a significant increase from 60%
       in fiscal 1996 and 51% in fiscal 1995. The Company intends to continue to
       increase this percentage, which is referred to as the internalization
       rate.
 
     - Expand Manufacturing Production and Capacity. The Company intends to
       improve margins in its recently acquired plants to bring them up to the
       levels being achieved at the Company's core Texas facilities. The Company
       also intends to add a new plant in North Carolina to support its growing
       retail base in the region as well as making substantial capital
       improvements to increase capacity at six plants in Idaho, Oregon, North
       Carolina and Alabama.
 
     - Position 21st Century as a High-Growth Finance Company. The Company
       believes that 21st Century Mortgage Corporation ("21st Century"), a 50%
       owned subsidiary of the Company which offers installment mortgage
       financing to purchasers of manufactured homes, represents an important
       element of the Company's growth strategy and vertical integration plan,
       giving the Company greater control over its business, reducing its
       dependence on third-party lenders, and providing a significant source of
       recurring revenues and earnings in the future. 21st Century provides
       financing through all Company-owned retail sales centers and is financing
       an increasing portion of the Company's business. 21st Century is also
       adding to its growing loan portfolio through its own efforts to capture
       re-finance business and through the formation of joint ventures with
       other manufactured housing producers and retailers.
 
     - Implement its Vertically Integrated Growth Strategy in New Regional
       Markets Through Acquisitions. The Company intends to seek and evaluate
       opportunities to expand its manufacturing and retail business outside its
       historical market area, initially by acquiring and, in the future, by
       opening new manufacturing facilities and Company-owned retail sales
       centers. The recent acquisitions of Guerdon, Heartland, Brilliant and
       N.C. Homes have significantly expanded the Company's operations outside
       its original seven state primary market area and provide strong platforms
       for future growth through vertical integration.
 
INDUSTRY
 
     In 1996, the United States manufactured housing industry had estimated
retail sales of $14.0 billion. A manufactured home is a complete single-family
residence that is built in a factory and transported to a site. Manufactured
homes offer most of the amenities of, and are generally built with the same
materials as, site-built homes. Manufactured homes are produced in sections,
also referred to as "floors," and finished homes may consist of one or more
sections.
 
     Because of the lower cost of construction compared to site-built homes,
manufactured housing has historically served as one of the most affordable
alternatives for the home buyer. According to the U.S. Department of Commerce,
in 1996 the average cost per square foot was $25.18 for a single-section
manufactured home and $29.56 for a multi-section manufactured home, as compared
to an average cost of $58.66 per square foot for a site-built home, each
excluding land costs. Manufactured homes have traditionally been an attractive
means for home buyers to overcome the obstacles of large down payments and high
monthly mortgage payments. Since the introduction of the first manufactured
homes, significant improvements in quality, design and amenities have been
developed, and attractive home sites have become increasingly available.
 
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<PAGE>   5
 
     In part due to the continuing cost advantage and improved quality and
appearance of manufactured homes, the manufactured housing industry has
consistently gained an increasing share of the overall housing market since
1992. In 1992, manufactured homes accounted for 25.7% of total new homes sold.
The percentage share of the overall new housing market represented by
manufactured homes increased to 32.4% in 1996.
 
     Since 1991, the manufactured housing industry has experienced a significant
increase in demand. According to the Manufactured Housing Institute ("MHI"),
industry-wide domestic shipments increased from 170,713 homes in 1991 to 363,411
in 1996. The Company believes improved economic conditions, reduced inventories
of repossessed homes, greater availability of retail financing for the home
buyer and enhanced quality of manufactured homes have contributed to improved
industry conditions. Although the manufactured housing industry has experienced
consistent growth over the past five years, the industry is cyclical and is
affected by many of the same factors that influence the housing industry
generally, including inflation, interest rates, availability of financing,
regional economic and demographic conditions and consumer confidence levels, as
well as the affordability and availability of alternative housing, such as
apartments, condominiums and conventional, site-built homes.
 
MANUFACTURING
 
     The Company produces a broad range of homes from traditional, lower-priced
homes to distinctive, higher-priced homes which compete with site-built homes,
and which retail from $15,000 to $109,000, excluding land costs. The Company
differentiates its products from competitors by emphasizing higher quality homes
and homes with more innovative architectural designs and features than are
typically offered in each product category.
 
     The following table sets forth the total homes and floors manufactured by
the Company for the periods indicated:
 
<TABLE>
<CAPTION>
                                                               YEARS ENDED MAY 31,
                                                              ----------------------
                                                              1995    1996     1997
                                                              -----   -----   ------
<S>                                                           <C>     <C>     <C>
Homes manufactured:
  Single-section............................................  1,513   1,800    2,160
  Multi-section.............................................  1,512   1,793    4,410
                                                              -----   -----   ------
Total homes manufactured....................................  3,025   3,593    6,570
                                                              =====   =====   ======
Total floors manufactured...................................  4,537   5,386   11,137
                                                              =====   =====   ======
</TABLE>
 
     The Company's manufacturing facilities generally operate on a one shift per
day, five day per week basis. At May 31, 1997, the Company's facilities had the
capacity to produce 72 floors per day, and its production rate was 54 floors per
day. Capacity figures are estimates of management.
 
     The principal materials used in the construction of the Company's homes
include lumber and lumber products, gypsum wallboard, steel, aluminum,
fiberglass, carpet, vinyl, fasteners, appliances, electrical items, windows and
doors. Generally, materials are readily available and are purchased by the
Company from numerous sources. The Company believes that the materials used in
the manufacture of its homes are readily available at competitive prices from a
wide variety of suppliers. Accordingly, the Company does not believe that the
loss of any single supplier would have a material adverse effect on its
business. The Company's direct or variable costs of operations can be
significantly affected by the availability and pricing of raw materials.
 
     The Company generally builds a home only after a specific order has been
received and financing arrangements for payment have been made. In accordance
with industry practice, dealers can cancel orders prior to the commencement of
production without penalty, and accordingly, the Company does not consider its
backlog of orders to be firm orders. Because of the seasonality of the market
for manufactured homes, the level of backlog at any time is not necessarily
indicative of the expected level of future orders. The Company's
 
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<PAGE>   6
 
backlog, as well as level of new orders, generally declines during the winter
months of December through February.
 
     The Company sells the homes it manufacturers through Company-owned retail
sales centers, through franchisees in its retail franchise system, and through
independent retail sales centers in 28 states. The following table sets forth
for the periods indicated certain data for shipments of homes manufactured by
the Company, the number of Company-owned retail sales centers and the number of
independent retail sales centers, including franchisees:
 
<TABLE>
<CAPTION>
                                                               YEARS ENDED MAY 31,
                                                              ---------------------
                                                              1995    1996    1997
                                                              -----   -----   -----
<S>                                                           <C>     <C>     <C>
Homes shipped to Company-owned retail sales centers.........  1,799   2,714   3,762
Homes shipped to independent retail sales centers, including
  franchisees...............................................  1,226     879   2,808
                                                              -----   -----   -----
          Total homes shipped...............................  3,025   3,593   6,570
                                                              =====   =====   =====
Company-owned retail sales centers..........................     34      44      54
Independent retail sales centers............................    103      84     348
</TABLE>
 
     The independent retailer network is an important part of the Company's
sales and distribution strategy. Relationships are particularly important in new
regional markets in which the Company has no existing Company-owned retail sales
centers. The Company believes its relations with its independent retailers are
excellent, however, except for franchise agreements with its franchisees, the
Company has no written agreements with its independent retailers and the
relationship may be terminated at any time by either party.
 
     The Company generally does not provide inventory financing arrangements for
independent retailer purchases, nor does it consign homes. However, as is
customary in the industry, lenders financing independent retailers require that
the Company execute repurchase agreements, which provide that, in the event of a
retailer's default under the retailer's inventory financing arrangements, the
Company will repurchase homes for the amount remaining unpaid to the lender,
excluding interest and repossession costs. During the last three fiscal years,
the Company has incurred no significant losses resulting from these contingent
obligations, however there can be no assurance that significant losses will not
occur in the future. As of May 31, 1997, the Company's contingent repurchase
liability was approximately $34.1 million.
 
RETAILING
 
     The Company emphasizes high quality, multi-section homes and a professional
approach to sales, supported by extensive sales training programs. In fiscal
1997, the Company's average new home sales price of $45,902 and its proportion
of multi-section new home sales of 54% were higher than the industry averages.
Since the beginning of fiscal 1993, the Company has increased the number of
Company-owned retail sales centers from 12 to 54 as of May 31, 1997, while the
average number of new homes sales per Company-owned retail sales center has
increased from 74 in fiscal 1993 to 93 in fiscal 1997. However, the average
number of new home sales per Company-owned retail sales center decreased from 99
in fiscal 1996 to 93 in fiscal 1997. This decrease in fiscal 1997 was partially
attributable to unusually wet weather during the past winter and spring in the
South and Southwest regions of the United States as well an increased number of
retailers, particularly in Texas and surrounding states. However, average sales
revenue in fiscal 1997 per Company-owned retail sales center remained level with
fiscal 1996 as the Company increased the percentage of multi-section homes sold
in fiscal 1997 (54%) as compared to fiscal 1996 (51%). The Company plans to open
or acquire between 20 and 30 retail sales centers each year over the next two
years. In addition to selling homes manufactured by the Company, most
Company-owned retail sales centers sell homes manufactured by other companies as
well as previously-owned manufactured homes.
 
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<PAGE>   7
 
     The following table sets forth for the periods indicated certain
information relating to homes sold by Company-owned retail sales centers:
 
<TABLE>
<CAPTION>
                                                                YEARS ENDED MAY 31,
                                                            ---------------------------
                                                             1995      1996      1997
                                                            -------   -------   -------
<S>                                                         <C>       <C>       <C>
Average new home sales price:.............................  $40,041   $43,460   $45,902
Homes sold:
  New homes...............................................    3,127     3,887     4,506
  Previously-owned homes..................................      738     1,058     1,314
Percentage of new homes sold:
  Single-section..........................................       54%       49%       46%
  Multi-section...........................................       46%       51%       54%
Percentage of new homes sold manufactured by:
  Company.................................................       51%       60%       74%
  Independent manufacturers...............................       49%       40%       26%
</TABLE>
 
     The Company has increased the percentage of new homes sold by Company-owned
retail sales centers that are manufactured by the Company from 23% in fiscal
1993 to 74% in fiscal 1997. As the Company's manufacturing facilities continue
to increase their production, the Company intends to increase this percentage.
 
     The Company emphasizes the image and professionalism of its sales
representatives and has developed an extensive professional sales training
program to support these representatives. The Company believes that its general
approach to marketing, the appearance of its sales locations and the
professionalism of its sales management and staff are among its most
distinguishing features in the marketplace.
 
RETAIL FINANCING AND INSURANCE OPERATIONS
 
     American Homestar believes 21st Century represents an important element of
its growth strategy and vertical integration plan, giving the Company greater
control over its business and providing a significant source of recurring
revenues and earnings in the future. The Company formed 21st Century together
with Clayton Homes, Inc. ("Clayton"), a leader in manufactured home financing,
and three former executive officers of Clayton and its finance subsidiary,
Vanderbilt Mortgage and Finance, Inc. ("Vanderbilt"). American Homestar, Clayton
and the management of 21st Century own 50%, 25% and 25%, respectively, of 21st
Century, and the Company has an option to purchase the stock owned by Clayton
and the management of 21st Century after September 15, 2000. As part of
Clayton's investment in 21st Century, Vanderbilt agreed to purchase 21st Century
loans under a warehouse credit facility and use its best efforts to include such
purchased loans in its securitized financings. In addition, Clayton has granted
21st Century a license to use Clayton's proprietary manufactured home financing
software. Ford Consumer Finance Company, Inc. ("Ford") has agreed to purchase,
and 21st Century has agreed to offer for purchase, at least $35 million of
qualified retail installment contracts originated by 21st Century in each of the
next two years.
 
     21st Century provides financing through all of the Company-owned retail
sales centers and is financing an increasing portion of the Company's retail
installment sales business (50% in fiscal 1997). 21st Century is also adding to
its growing portfolio through its own efforts to capture re-finance business and
through the formation of financing joint ventures with other manufactured
housing producers and retailers. The Company believes the extensive experience
of the 21st Century management team and 21st Century's strategic relationships
with Clayton and Ford will enable 21st Century to grow at a faster rate, with
lower capital requirements and with a lower cost of funds than other start-up
financing operations for manufactured housing.
 
     The Company believes its other financial service products also represent a
significant opportunity for the Company to develop additional sources of
recurring revenue from each home sale. Through its wholly-owned subsidiary,
Western Insurance Agency, Inc. ("Western"), the Company offers retail customers,
through both its Company-owned retail sales centers and certain independent
retailers, a variety of insurance products, including property/casualty
insurance, credit life insurance and extended service contracts. The Company
acts
 
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as agent and earns commissions for insurance written for purchasers of its
manufactured homes. In addition, the Company's wholly-owned subsidiary, Lifestar
Reinsurance, Ltd. ("Lifestar"), reinsures credit life policies placed by
Western. By reinsuring such policies, the Company earns underwriting fees and
investment income as well as normal sales commissions. The Company has the
obligation to reimburse the insurance carrier for credit life insurance claims.
 
TRANSPORTATION
 
     The Company has a 51% equity ownership interest in Roadmasters Transport
Company, Inc. ("Roadmasters"), a manufactured housing transportation company
with full interstate authority and intrastate transportation authority in
twenty-four states. In addition, Brilliant Carriers, Inc. ("Carriers"), a
wholly-owned subsidiary of recently acquired Brilliant, is also a manufactured
housing transportation company with full interstate authority and Alabama
intrastate transportation authority. Manufactured housing transportation
requires specially designed and equipped truck tractors. Roadmasters and
Carriers lease its equipment from independent owner-operators, which allows them
to cover a large geographic area without a significant investment in equipment.
 
     Roadmasters is the primary transporter of manufactured homes from the
Company's manufacturing facilities to Company-owned retail sales centers and
serves other manufacturers and independent retailers as well. Carriers is the
primary transporter of manufactured homes from Brilliant's manufacturing
facilities to independent retailers. In fiscal 1997, Roadmasters derived
approximately 26% of its revenues from the Company's manufacturing operations
and approximately 74% of its revenues from other manufacturers and outside
sources. Roadmasters is one of the largest transporters of manufactured homes in
the Southwest. Carriers derives all of its revenues from Brilliant. The Company
believes that its controlling ownership interests in Roadmasters and Carriers
provide it with the ability to better control the delivery of homes to its
retail sales centers and to independent retailers, especially during peak sales
and delivery periods, as well as to profit from each home shipment.
 
SIGNIFICANT SUPPLIERS
 
     In fiscal 1995, fiscal 1996 and fiscal 1997, Redman Homes, Inc. ("Redman")
supplied approximately 27%, 26% and 18%, respectively, of the homes sold by
Company-owned retail sales centers. The Company's supply relationship with
Redman is terminable at will by either party. While the Company believes that it
can replace any independent manufacturer, by substituting its own products and
the products of other manufacturers, any such loss could have an adverse effect
on the Company's results of operations.
 
COMPETITION
 
     The manufactured housing industry is highly competitive and the capital
requirements for entry are relatively small. Manufactured homes compete with new
and existing site-built homes, apartments, townhouses and condominiums.
Competition exists at both the manufacturing and retail levels and is based
primarily on price, product features, reputation for service and quality, depth
of field inventory, sales promotions, merchandising, and terms and availability
of dealer and retail customer financing. Some of the Company's competitors have
substantially greater financial, manufacturing, distribution and marketing
resources than the Company. Some of these competitors manufacture homes sold by
Company-owned retail sales centers. The Company's sales to independent retailers
could be adversely affected if such competitors purchased independent retailers
and substituted other manufactured homes for homes manufactured by the Company.
In addition, the Company's retail sales could be adversely affected, at least in
the short-term, if such competitors curtailed supplying the Company with homes
for retail sale. While the Company believes mortgage and personal property
financing have generally become more available to the manufactured housing
industry in recent years, a contraction in consumer credit could provide an
advantage to those competitors with substantial capital resources.
 
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<PAGE>   9
 
GOVERNMENT REGULATION
 
     The Company's manufactured homes are subject to a number of federal, state
and local laws and codes. Construction of manufactured homes is governed by the
National Manufactured Home Construction and Safety Standards Act of 1974 ("MHCSS
Act") and the regulations issued by the Department of Housing and Urban
Development ("HUD") thereunder, establishing comprehensive national construction
standards. These regulations cover all aspects of manufactured home
construction, including structural integrity, fire safety, wind loads, thermal
protection and ventilation. The Company's manufacturing facilities and the plans
and specifications of its manufactured homes have been approved by a
HUD-designated inspection agency. The Company's homes are regularly checked by
an independent, HUD-approved inspector for compliance during construction.
Failure to comply with applicable HUD regulations could expose the Company to a
wide variety of sanctions, including mandated closings of Company manufacturing
facilities. The Company believes its manufactured homes meet or surpass all
present HUD requirements.
 
     Manufactured, modular and site-built homes are all typically built with
particle board, paneling and other products that contain various formaldehyde
resins. HUD regulates the allowable concentration of formaldehyde in certain
products used in manufactured homes and requires warnings to purchasers
concerning formaldehyde-associated risks. Certain components of manufactured
homes are subject to regulation by the Consumer Products Safety Commission
("CPSC"), which is empowered to ban the use of component materials believed to
be hazardous to health and to require the manufacturer to repair defects in
components of its homes. The CPSC, the Environmental Protection Agency and other
governmental agencies currently are re-evaluating the allowable standards for
formaldehyde emissions. The Company currently uses materials in its manufactured
homes that meet the current HUD standards for formaldehyde emissions and
believes that it otherwise complies with HUD and other applicable government
regulations in this regard.
 
     The Company's operations are also subject to the provisions of the Texas
Manufactured Housing Act, the Consumer Credit Act and the Truth-in-Lending Act,
as well as local zoning and housing regulations. A number of states require
manufactured home producers and retailers 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 and must be complied with by the
dealer or other person installing the home. The operations of Roadmasters and
Western are subject to regulation by various federal, state and local
authorities.
 
     A variety of laws affect the financing of manufactured homes by the
Company. The Truth-in-Lending Act and Regulation Z promulgated thereunder
require written disclosure of information relating to such financing, including
the amount of the annual percentage rate and financing charge. The Fair Credit
Act also requires certain disclosures to potential customers concerning credit
information used as a basis to deny credit. The Federal Equal Credit Opportunity
Act and Regulation B promulgated thereunder prohibit discrimination against any
credit applicant based on certain specified grounds. The Federal Trade
Commission has adopted or proposed various trade regulation rules dealing with
unfair credit and collection practices and the preservation on consumers' claims
and defenses. The Federal Trade Commission regulations also require disclosure
of a manufactured home's insulation specification. Installment sales contracts
eligible for inclusion in the Government National Mortgage Association Program
are subject to the credit underwriting requirements of the Federal Housing
Administration. A variety of state laws also regulate the form of installment
sales contracts and the allowable charges pursuant to installment sales
contracts. The sale of insurance products by the Company is subject to various
state insurance laws and regulations which govern allowable charges and other
insurance products.
 
     The Company is also subject to the provisions of the Fair Debt Collection
Practices Act, which regulates the manner in which the Company collects payments
on installment sale contracts, and the Magnuson-Moss Warranty -- Federal Trade
Commission Improvement Act, which regulates the descriptions of warranties on
products. The Company's collection activities and warranties are also subject to
state laws and regulations.
 
     The transportation of manufactured homes on highways is subject to
regulation by various federal, state and local authorities. Such regulations may
prescribe size and road use limitations and impose lower than
 
                                        7
<PAGE>   10
 
normal speed limits and various other requirements. Manufactured homes are also
subject to local zoning and housing regulations.
 
     The Company's operations are also 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 is
not aware of any pending litigation to which it is a party or claims that may
result in significant contingent liabilities related to environmental pollution
or asbestos. In addition, the Company does not believe it will be required under
existing environmental laws and enforcement policies to expend amounts that will
have a material adverse effect on its results of operations or financial
condition.
 
     A significant portion of the Company's manufacturing labor force includes
persons who are not U.S. citizens, and the Company is subject to the regulations
of the Immigration and Naturalization Service ("INS"). The Company adheres to
the procedures required for the prevention of the hiring of illegal aliens, but,
nonetheless, the Company has from time to time experienced losses of a portion
of its labor force due to INS investigative operations, which losses have
temporarily decreased production at the affected manufacturing facilities.
 
     In general, legislation is proposed from time to time that, if enacted,
would significantly affect the regulatory climate for manufactured and modular
homes. At present, it is not possible to predict what, if any, changes or
legislation may be adopted or the effect any such changes or legislation may
have on the Company or the manufactured housing industry as a whole.
 
EMPLOYEES
 
     As of May 31, 1997, the Company employed 2,661 persons. The Company does
not have any collective bargaining agreements and has not experienced any work
stoppages as a result of labor disputes. The Company considers it employee
relations to be good.
 
     A significant portion of the total compensation of management of the
Company is derived from incentive bonuses based on the operating income of the
operating unit for which such management is responsible, as well as the
attainment of margin goals. Many of the Company's managers are also shareholders
and all are eligible to participate in the Company's 1994 Stock Compensation
Plan
 
ITEM 2. PROPERTIES
 
     At May 31, 1997, the Company operated eight manufacturing facilities, 54
retail sales centers and had two administrative offices. Forty-seven of the
retail sales centers and both administrative offices are leased. The Company's
retail sales centers consist of tracts of land, ranging from 2.5 to 7.0 acres,
on which manufactured homes are displayed, each with a sales office containing
approximately 2,000 square feet of office space. The Company's retail sales
centers are located in six states as follows: Texas (39), Louisiana (5), New
Mexico (3), Colorado (4), Oklahoma (2) and Utah (1). The Company believes that
all facilities are adequately maintained and suitable for their present use.
 
     The Company owns all of its manufacturing facilities and substantially all
of its manufacturing equipment, fixtures, furniture and office equipment. The
following table sets forth certain information with respect to the Company's
manufacturing facilities:
 
<TABLE>
<CAPTION>
                                                          DATE OPENED OR     BUILDING
                        LOCATION                             ACQUIRED       SQUARE FEET
                        --------                          --------------    -----------
<S>                                                       <C>               <C>
Burleson, Texas.........................................     May 1993          94,500
Fort Worth, Texas.......................................    June 1985         137,000
Lancaster, Texas........................................   December 1992       86,600
Henderson, North Carolina...............................  September 1996       70,000
Boise, Idaho............................................  September 1996       90,100
Stayton, Oregon.........................................  September 1996       97,500
Gering, Nebraska........................................  September 1996       73,000
Vicksburg, Mississippi..................................  September 1996      118,700
</TABLE>
 
                                        8
<PAGE>   11
 
ITEM 3. LEGAL PROCEEDINGS
 
     The Company is involved in routine litigation arising in the ordinary
course of business. In the opinion of the Company, such matters would not have a
material adverse affect on the financial condition or the results of operations
of the Company.
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
     None
 
                                   MANAGEMENT
 
EXECUTIVE OFFICERS
 
     Set forth below are the names, ages and positions of the executive officers
and key managers of the Company:
 
<TABLE>
<CAPTION>
              NAME                AGE                          POSITION
              ----                ---                          --------
<S>                               <C>    <C>
Finis F. Teeter(1)..............  53     Chairman of the Board and Co-Chief Executive Officer
Laurence A. Dawson, Jr.(1)......  53     President, Co-Chief Executive Officer and Director
Craig A. Reynolds...............  48     Executive Vice-President, Chief Financial Officer,
                                           Secretary and Director
Jackie H. Holland...............  50     Vice President, Treasurer and Director
Charles N. Carney, Jr. .........  42     Vice President and Director
James J. Fallon.................  57     Vice President and Director
Timothy W. Williams.............  41     President and Co-Chairman of the Board of 21st
                                           Century
Richard B. Ray..................  56     Chief Financial Officer and Co-Chairman of the Board
                                           of 21st Century
</TABLE>
 
---------------
 
(1) Member of the Executive Committee.
 
     Finis F. Teeter is a founder of the Company and served as its Chairman of
the Board and Chief Executive Officer from 1971 until August 1993. Since August
1993, Mr. Teeter has served as its Chairman of the Board and Co-Chief Executive
Officer. Prior to forming the Company, Mr. Teeter served in various sales and
sales management capacities with Teeter Mobile Homes from 1962 to 1969 and with
Mobile Home Industries from 1969 to late 1970.
 
     Laurence A. Dawson, Jr. has served as President, Co-Chief Executive Officer
and as a Director of the Company since August 1993. Mr. Dawson served as Chief
Executive Officer and Chairman of the Board of Oak Creek Homes, Inc. ("Oak
Creek") from its founding in 1983 until August 31, 1993. Mr. Dawson served as
Executive Vice President -- Chief Operating Officer and in other executive
positions with Kaufman & Broad Home Systems, Inc. from 1972 to 1983. Mr. Dawson
is a director of the Manufactured Housing Institute and the Texas Manufactured
Housing Association. Mr. Dawson holds a Master of Business Administration degree
from Harvard University.
 
     Craig A. Reynolds has served as Executive Vice President, Chief Financial
Officer and Secretary of the Company since joining the Company in 1982, and has
been a Director of the Company since 1985. Mr. Reynolds is a certified public
accountant and holds a Master of Business Administration degree from Florida
Institute of Technology.
 
     Jackie H. Holland has served as Vice President, Treasurer and as a Director
of the Company since August 1993. Mr. Holland has served as Vice President and
Chief Financial Officer of Oak Creek since 1989. Before joining Oak Creek, Mr.
Holland held various financial and general management positions with Palm
 
                                        9
<PAGE>   12
 
Harbor Homes, Inc. from 1978 to 1989 and Redman Homes, Inc. from 1970 to 1978.
Mr. Holland holds a Bachelor of Science in Accounting degree from the University
of North Alabama.
 
     Charles N. Carney, Jr. has served as Vice President of the Company since
June 1993 and as President of the Retail Division of the Company since 1987. He
has served as a Director of the Company since August 1993. Mr. Carney has served
in various sales, sales management and senior sales management capacities with
the Company since joining its predecessor in 1977. Mr. Carney holds a Bachelor
of Business Administration degree from Eastern Kentucky University.
 
     James J. Fallon has served as Vice President and as a Director of the
Company since August 31, 1993 and as President of Oak Creek since December 1993.
Prior to that time, Mr. Fallon served in various general management capacities
with Kaufman & Broad Home Systems, Inc. and Fleetwood Homes, Inc. Mr. Fallon
holds a Bachelor of Science in Electrical Engineering from Purdue University.
 
     Timothy W. Williams has served as the President and Co-Chairman of the
Board of 21st Century since its organization in September 1995. Mr. Williams
served as Executive Vice President of Clayton Homes, Inc. from 1983 until
September 1995; as President of Vanderbilt Mortgage and Finance, Inc. from
February 1993 until September 1995; and as Executive Vice President of
Vanderbilt from 1982 to February 1993. Mr. Williams holds a Masters of Business
Administration degree from the University of Tennessee.
 
     Richard B. Ray has served as the Chief Financial Officer and Co-Chairman of
the Board of 21st Century since its organization in September 1995. Mr. Ray
served as Executive Vice President and Chief Financial Officer of Clayton Homes,
Inc. from 1982 until August 1994. Mr. Ray is a certified public accountant and
holds a Bachelor of Science degree from the University of Tennessee. Mr. Ray
served as a director of Palm Harbor Homes, Inc. from October 1994 until
September 1995.
 
                                    PART II
 
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
 
PRICE RANGE OF COMMON STOCK
 
     The Company's common stock is quoted on the Nasdaq National Market under
the symbol "HSTR." The following table sets forth, for the periods indicated,
the high and low sales price per share of the Company's common stock as reported
on the Nasdaq National Market. The following share prices have been adjusted to
reflect the 5-for-4 stock splits effected on January 18, 1996 and February 7,
1997.
 
<TABLE>
<CAPTION>
                                                               HIGH      LOW
                                                              ------    ------
<S>                                                           <C>       <C>
FISCAL YEAR ENDED MAY 31, 1996:
  First quarter.............................................  $10.00    $ 6.88
  Second quarter............................................   12.80      8.88
  Third quarter.............................................   14.72     10.80
  Fourth quarter............................................   19.60     11.80
FISCAL YEAR ENDED MAY 31, 1997:
  First quarter.............................................  $22.10    $12.80
  Second quarter............................................   20.40     14.60
  Third quarter.............................................   18.75     13.00
  Fourth quarter............................................   20.75     15.00
</TABLE>
 
     As of August 6, 1997, there were 188 record holders of the Company's common
stock. On August 6, 1997, the reported last sale price of the Company's common
stock as reported by the Nasdaq National Market was $21 1/8 per share.
 
                                       10
<PAGE>   13
 
DIVIDEND POLICY
 
     The Company has not paid any dividends on the common stock since it became
a public reporting company. The Company does not anticipate paying cash
dividends on the common stock in the foreseeable future and intends to continue
its present policy of retaining earnings for reinvestment in the operations of
the Company. The terms of certain indebtedness of the Company restrict its
ability to pay dividends or make distributions.
 
ITEM 6. SELECTED FINANCIAL DATA
 
     The following table sets forth selected financial data for the Company for
the periods indicated. The financial information for each of the five fiscal
years ended May 31, 1997 was derived from the Company's audited financial
statements. The selected financial information should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and related notes included in Item 8 of
this Form 10-K.
 
<TABLE>
<CAPTION>
                                                               YEARS ENDED MAY 31,
                                               ---------------------------------------------------
                                                1993       1994       1995       1996       1997
                                               -------   --------   --------   --------   --------
                                                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                            <C>       <C>        <C>        <C>        <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
  Net sales..................................  $45,153   $109,077   $171,342   $208,745   $313,674
  Other revenues.............................    4,219     10,174     16,311     22,487     26,305
                                               -------   --------   --------   --------   --------
          Total revenues.....................   49,372    119,251    187,653    231,232    339,979
                                               -------   --------   --------   --------   --------
Costs and expenses:
  Cost of sales..............................   35,288     87,473    133,001    154,575    233,346
  Selling, general and administrative........   11,502     24,271     40,910     57,185     77,260
                                               -------   --------   --------   --------   --------
          Total costs and expenses...........   46,790    111,744    173,911    211,760    310,606
                                               -------   --------   --------   --------   --------
          Operating income...................    2,582      7,507     13,742     19,472     29,373
Interest expense.............................     (797)    (1,383)    (1,795)    (2,972)    (4,714)
Other income.................................      263        169        171        219        178
                                               -------   --------   --------   --------   --------
  Income before items shown below............    2,048      6,293     12,118     16,719     24,837
Income tax expense...........................      747      2,481      4,726      6,601     10,101
                                               -------   --------   --------   --------   --------
  Income before items shown below............    1,301      3,812      7,392     10,118     14,736
Earnings (loss) in affiliate(1)(2)...........     (456)       (89)        --        (65)       271
Minority interests(3)........................     (670)      (254)      (204)      (297)      (315)
                                               -------   --------   --------   --------   --------
  Income before items shown below............      175      3,469      7,188      9,756     14,692
Extraordinary item(4)........................      172         --         --         --         --
Cumulative effect of a change in accounting
  for income taxes...........................       --        219         --         --         --
                                               -------   --------   --------   --------   --------
          Net income.........................  $   347   $  3,688   $  7,188   $  9,756   $ 14,692
                                               =======   ========   ========   ========   ========
          Earnings per share(5)..............  $  0.13   $   0.67   $   0.79   $   0.98   $   1.31
                                               =======   ========   ========   ========   ========
BALANCE SHEET DATA (END OF YEAR):
Working capital..............................  $ 2,235   $  6,419   $ 19,380   $ 38,644   $ 23,426
Total assets.................................   23,430     50,986     78,138    109,201    193,301
Long-term debt...............................    1,448      3,133      1,159      3,663     22,519
Shareholders' equity.........................    2,553     10,209     31,311     58,014     73,215
</TABLE>
 
          See following page for Footnotes to Selected Financial Data.
 
                                       11
<PAGE>   14
 
                      FOOTNOTES TO SELECTED FINANCIAL DATA
 
(1) In October 1992, the Company and Oak Creek formed a new venture (the
    "Homestar Venture") to start-up and operate two manufacturing facilities
    (the Lancaster and Burleson, Texas facilities). The Company owned a 40%
    economic interest in the Homestar Venture prior to the combination of the
    Company, Oak Creek and the Homestar Venture in August 1993 (the
    "Combination"). The Homestar Venture incurred losses in commencing
    operations of these two manufacturing facilities. Prior to the Combination,
    the Company accounted for its interest in the Homestar Venture under the
    equity method as "loss in affiliate." Such losses included in the Company's
    historical financial statements in fiscal 1993 and fiscal 1994 were $456,000
    and $89,000, respectively.
 
(2) Represents the Company's proportionate share of 21st Century's earnings
    (losses) in fiscal 1996 and fiscal 1997.
 
(3) Since the Combination and through May 31, 1997, the Company owns 100% of all
    of its subsidiaries except Roadmasters, of which it owns 51% and 21st
    Century, of which it owns 50%. The Company's interest in 21st Century is
    accounted for as provided in footnote (2) above.
 
(4) Utilization of net operating loss carryforward.
 
(5) Earnings per common share have been adjusted to reflect the 5-for-4 stock
    splits effected on January 18, 1996 and February 7, 1997.
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
 
     This Form 10-K contains certain forward-looking statements and information
relating to the Company that are based on the beliefs of the Company's
management as well as assumptions made by and information currently available to
the Company's management. When used in this document, the words "anticipate,"
"believe," "estimate," "should," and "expect" and similar expressions as they
relate to the Company or management of the Company are intended to identify
forward-looking statements. Such statements reflect the current views of the
Company with respect to future events and are subject to certain risks,
uncertainties and assumptions, including the risk factors described in the
Company's most recently filed registration statement. Should one or more of
these risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those described herein as
anticipated, believed, estimated or expected. The Company does not intend to
update these forward-looking statements.
 
GENERAL
 
     In fiscal 1993, in response to growing demand for manufactured homes, the
Company began developing its expansion and vertical integration plan by opening
nine new retail sales centers and entering into a new venture (the "Homestar
Venture") with Oak Creek Homes, Inc. ("Oak Creek"), a long-time supplier, to
start-up and operate two manufacturing facilities. The costs associated with the
start-up of two new manufacturing facilities and the new retail sales centers
had an adverse effect on the Company's operating results in the second half of
fiscal 1993 and in the first half of fiscal 1994. By October 1993, both
manufacturing facilities had become profitable.
 
     Effective August 31, 1993, a combination was consummated with the
shareholders of Oak Creek exchanging their shares of Oak Creek common stock for
shares of the Company's common stock (the "Combination"). In connection with the
Combination, all of the retail sales management personnel and manufacturing
management personnel exchanged their shares of common stock in the Company's
subsidiaries for shares of the Company's common stock.
 
     In September 1995, the Company formed 21st Century to originate, finance,
sell and service manufactured housing sales contracts from the Company and third
parties. 21st Century is managed by two former executive officers of Clayton and
its finance subsidiary, Vanderbilt. The Company, Clayton and management of 21st
Century own 50%, 25% and 25%, respectively, of the equity capital of 21st
Century. 21st Century commenced operations in October 1995. The Company accounts
for its investment in 21st Century using the
 
                                       12
<PAGE>   15
 
equity method of accounting, showing its proportionate share of 21st Century's
earnings or losses as "earnings or loss in affiliate."
 
     In September 1996, the Company exercised its option to acquire Guerdon
after managing Guerdon's operations under a management agreement since March
1996. Guerdon produces manufactured homes in four facilities located in Oregon,
Idaho, Nebraska and Mississippi and sells its homes to over 150 independent
retailers located in 17 states in the Pacific Northwest, Rocky Mountain and
South Central regions of the United States.
 
     In September 1996, the Company acquired Heartland, a single plant
manufacturer of low- to medium-priced homes in North Carolina. Concurrent with
the Heartland acquisition, the Company also purchased the assets of Manu-Fac, a
contractually affiliated group of 15 independent retailers, which have since
become franchisees of the Company.
 
VERTICAL INTEGRATION AND INTERNALIZATION
 
     Several elements of the Company's growth strategy are based on an
increasing degree of vertical integration over time. By combining its retail and
manufacturing operations in fiscal 1994 and then developing transportation,
insurance and finance subsidiaries, the Company potentially benefits from
multiple income sources as the result of each retail sale. Increasing the degree
of vertical integration will affect the Company's revenues and margins in two
important ways:
 
     - Several elements of the Company's growth strategy center on increasing
       the rate of "internalization" of its retail sales (i.e., the proportion
       of new homes sold by Company-owned retail sales centers that are
       manufactured by the Company). This strategy enables the Company to earn
       both a manufacturing profit and a retailing profit on those home sales;
       however, only retail sales revenue is recognized. Accordingly, increasing
       the internalization rate (without otherwise affecting the Company's level
       of manufacturing and retailing activity) has the effect of increasing
       gross margins and reducing reported revenues; however, aggregate gross
       profit (in dollars) is not materially affected by changes in the
       internalization rate.
 
     - Another key element of the Company's growth strategy is to increase the
       degree of retail penetration of its financial services. As insurance
       product penetration increases, both reported revenues and earnings should
       increase without a corresponding increase in retail unit sales.
       Similarly, as 21st Century finances more of the Company's retail sales,
       the Company's earnings should increase without a corresponding increase
       in retail unit sales.
 
     The recent acquisitions of Heartland, Guerdon and Brilliant will have the
effect of adding significant revenues to the Company with little, if any,
immediate benefit from vertical integration. Those benefits should reflect
gradually, over time, as the Company executes its vertical integration strategy
in the new regional markets which these acquisitions encompass.
 
                                       13
<PAGE>   16
 
RESULTS OF OPERATIONS
 
     The following table summarizes certain operating data for the Company for
the periods indicated:
 
<TABLE>
<CAPTION>
                                                             YEARS ENDED MAY 31,
                                                        -----------------------------
                                                         1995       1996       1997
                                                        -------    -------    -------
<S>                                                     <C>        <C>        <C>
Company-manufactured new homes sold at retail........     1,586      2,344      3,319
Total new homes sold at retail.......................     3,127      3,887      4,506
Internalization rate(1)..............................        51%        60%        74%
Previously-owned homes sold at retail................       738      1,058      1,314
Average number of new homes sold per retail sale
  center.............................................       109         99         93
Average retail selling price -- new homes............   $40,041    $43,460    $45,902
Number of retail sales centers at end of period......        34         44         54
Manufacturing shipments..............................     3,025      3,593      6,570
Manufacturing shipments to independent retailers.....     1,226        879      2,808
</TABLE>
 
---------------
 
(1) The internalization rate is the proportion of new homes sold by
    Company-owned retail sales centers that are manufactured by the Company.
 
     The following table summarizes the Company's historical operating results,
expressed as a percentage of revenues, for the periods indicated:
 
<TABLE>
<CAPTION>
                                                             YEARS ENDED MAY 31,
                                                          --------------------------
                                                           1995      1996      1997
                                                          ------    ------    ------
<S>                                                       <C>       <C>       <C>
Total revenues.........................................   100.0%    100.0%    100.0%
Gross profit...........................................    29.1%     33.2%     31.4%
Selling, general and administrative expenses...........    21.8%     24.7%     22.7%
Operating income.......................................     7.3%      8.4%      8.6%
Net income.............................................     3.8%      4.2%      4.3%
</TABLE>
 
YEAR ENDED MAY 31, 1997 COMPARED TO THE YEAR ENDED MAY 31, 1996
 
     Net Sales. Net sales of manufactured homes were $313.7 million in fiscal
1997, an increase of 50% from $208.7 million in fiscal 1996. Sales from the
Company's newly acquired manufacturing operations were $72.6 million in fiscal
1997. On a basis comparable to fiscal 1996, net sales increased 16% to $241.1
million. This increase was primarily the result of an 18% increase in the number
of new and previously-owned homes sold at retail as well as a 6% increase in the
average selling price of new homes. The decline in the average new homes sold
per retail sales center from 99 in fiscal 1996 to 93 in fiscal 1997 was
attributable to unusually wet weather conditions during the past winter and
spring in the South and Southwest Regions of the United States, which delayed
the opening of several retail sales centers from the Company's third quarter to
the fourth quarter, as well as an increase in the number of retailers operating
in Texas and surrounding states. However, average sales revenue in fiscal 1997
per retail sales center remained level with fiscal 1996 as the Company increased
the percentage of multi-section homes sold in fiscal 1997 (54%) as compared to
fiscal 1996 (51%).
 
     Other Revenues. Transportation revenues for fiscal 1997 were $13.6 million,
an increase of 14% from $11.9 million in fiscal 1996. This increase was
primarily due to an increase in transportation activity in response to generally
higher demand for transportation services. Other revenues increased 20% to $12.7
million in fiscal 1997 compared to $10.5 million in fiscal 1996. This increase
was primarily due to an increase in insurance commissions and premiums generated
by the Company's insurance operations as well as revenue associated with the
Company's franchising operations acquired in connection with the purchase of
Manu-Fac in September 1996.
 
     Cost of Sales. Cost of manufactured homes sold were $222.1 million (70.8%
of net sales) in fiscal 1997, as compared to $144.7 million (69.3% of net sales)
in fiscal 1996. Cost of manufactured homes attributable to
 
                                       14
<PAGE>   17
 
the newly acquired manufacturing operations for fiscal 1997 were $60.1 million.
On a basis comparable to fiscal 1996, cost of manufactured homes increased 12%
to $162.0 million (67.2% of net sales) from $144.7 million (69.3% of net sales).
The decrease in cost of manufactured homes, expressed as percentage of net
sales, was the result of an increase in the internalization rate from 60% in
fiscal 1996 to 74% in fiscal 1997 as well as increased operating efficiencies at
the Company's three Texas manufacturing facilities. Cost of sales attributable
to transportation operations for fiscal 1997 was $11.2 million (82.3% of
transportation revenues), an increase of 13% from $9.9 million (82.7% of
transportation revenues) in fiscal 1996. This increase was due to increased
business activity.
 
     Selling, General and Administrative Expenses. Selling, general and
administrative expenses in fiscal 1997 were $77.3 million (22.7% of total
revenues), compared to $57.2 million (24.7% of total revenues) in fiscal 1996.
Selling, general and administrative expenses attributable to the Company's newly
acquired operations were $9.6 million in fiscal 1997. On a basis comparable to
fiscal 1996, selling, general and administrative expenses were $67.7 million
(25.3% of total revenues) in fiscal 1997 as compared to $57.2 million (24.7% of
total revenues) in fiscal 1996. The increase in selling, general and
administrative expenses was attributable to increased sales, manufacturing,
transportation and insurance activities as well as an increase in fixed costs
and expenses associated with new Company-owned retail sales centers and expanded
manufacturing capacity. The increase in selling, general and administrative
expenses, expressed as a percentage of total revenues, was the result of an
increase in the internalization rate from 60% in fiscal 1996 to 74% in fiscal
1997. This increase was partially offset by a decrease in warranty expenses,
expressed as a percentage of total revenues.
 
     Interest Expense. Interest expense increased 59% to $4.7 million in fiscal
1997 from $3.0 million in fiscal 1996. The increase was due to increased
borrowings of $25 million under a credit facility established with Bank One,
Texas N.A., which was used to fund the Company's growth strategy as well as fund
its acquisition of Guerdon, and an increase in floor plan debt used to support
higher levels of inventory due to the opening of new retail sales centers.
 
YEAR ENDED MAY 31, 1996 COMPARED TO THE YEAR ENDED MAY 31, 1995
 
     Net Sales. Net sales of manufactured homes were $208.7 million in fiscal
1996, an increase from $171.3 million in fiscal 1995. This increase was
primarily the result of a 28% increase in the number of new and previously-owned
homes sold at retail as well as a 9% increase in the average selling price of
new homes. The Company added ten new retail sales centers during fiscal 1996 in
response to continuing increases in demand for new manufactured homes in Texas
and surrounding states. The decline in the average new homes sold per retail
sales center was primarily attributable to a temporary change in lending
practices (among the Company's outside retail lenders) arising from the
Company's announcement of the formation of its own lending affiliate, 21st
Century, in September 1995. To a lesser degree, average new home sales per
retail sales center were also affected by a change in sales mix with a higher
proportion of multi-section homes and by certain retail management changes in
September 1995.
 
     Total manufacturing shipments for fiscal 1996 increased 19% from fiscal
1995. Consistent with the Company's vertical integration plan, however,
shipments to independent dealers declined by 28%, as more Company-manufactured
homes were directed to Company-owned retail sales centers.
 
     Other Revenues. Transportation revenues for fiscal 1996 were $11.9 million,
an increase of 18% from $10.1 million in fiscal 1995. This increase was
primarily due to an increase in transportation activity in response to generally
higher demand for transportation services. Other revenues increased 70% to $10.5
million in fiscal 1996 compared to $6.2 million in fiscal 1995. This increase
was primarily due to an increase in insurance commission income as the result of
increased home sales and increased financing participations from certain
independent lenders.
 
     Cost of Sales. Cost of manufactured homes sold were $144.7 million (69.3%
of net sales) in fiscal 1996, as compared to $124.6 million (72.7% of net sales)
in fiscal 1995. The increase in cost of sales was primarily due to higher sales
volume. The significant decrease in cost of sales, expressed as a percentage of
sales, was primarily due to greater internalization of retail sales and
increased operating efficiencies in the Company's manufacturing plants. Cost of
sales attributable to transportation operations for fiscal 1996 was $9.9 million
 
                                       15
<PAGE>   18
 
(82.7% of transportation revenues), an increase of 17% from $8.4 million (83.3%
of transportation revenues) in fiscal 1995. This increase was due to increased
business activity.
 
     Selling, General and Administrative Expenses. Selling, general and
administrative expenses in fiscal 1996 were $57.2 million (24.7% of total
revenues), compared to $40.9 million (21.8% of total revenues) in fiscal 1995.
The increase in selling, general and administrative expenses was primarily
attributable to increased sales, manufacturing, transportation and insurance
activities as well as an increase in fixed costs and expenses associated with
ten new Company-owned retail sales centers, the Company's new credit life
reinsurance company, which commenced operations in March 1995, and expanded
manufacturing capacity. The increase in selling, general and administrative
expenses, expressed as a percentage of total revenues, was primarily the result
of an increase in the internalization rate, fixed costs of new Company-owned
retail sales centers that had not yet reached normal operating efficiency,
increased warranty and service expenses, increased advertising and the addition
of administrative personnel in response to significant increases in business
activity.
 
     Interest Expense. Interest expense increased 66% to $3.0 million in fiscal
1996 from $1.8 million in fiscal 1995. The increase was primarily due to an
increase in floor plan indebtedness throughout most of the fiscal year to
support a higher level of sales and inventory and the addition of $2.7 million
in long-term debt in June 1995 used to finance the purchase of two manufacturing
plants and one retail sales center, all formerly under lease by the Company.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     Cash provided by operations of $550,000 in fiscal 1997 decreased from $8.9
million in fiscal 1996. Net income before depreciation and amortization was
offset by substantial increases in inventory required to open new Company-owned
retail sales centers. An important part of the Company's growth strategy is to
expand the number of Company-owned retail sales centers and increase its
manufacturing production. Management estimates the capital required to open a
new retail sales center to be approximately $1.0 million to $1.25 million,
primarily for inventory and working capital. Management currently plans to open
or acquire 20 to 30 retail sales centers each year for the next two years and,
in connection therewith, will use cash to purchase inventory and operating
assets and for working capital purposes. Management expects increased cash
generated by Company-owned retail sales centers and manufacturing operations to
substantially fund the working capital required to open new Company-owned retail
sales centers.
 
     In fiscal 1997, the Company paid approximately $10.6 million in cash, net
of cash acquired, to purchase Guerdon, Heartland, certain operating assets of
Manu-Fac and three retail sales centers. Total tangible assets purchased were
$23.8 million with total liabilities assumed of $43.6 million, giving rise to
$30.4 million in goodwill. In addition, the Company had capital expenditures of
$10.9 million and $8.6 million in fiscal 1997 and fiscal 1996, respectively. In
fiscal 1997, the Company financed $4.5 million to acquire five manufacturing
plants formerly under lease by the Company. The remaining expenditures were used
primarily to fund new Company-owned retail sales centers and additions to
manufacturing capacity.
 
     At May 31, 1997, the Company had a $100.0 million floor plan credit
facility with Ford Consumer Finance Company, Inc. ("Ford") with an interest rate
at prime. The facility is similar to a revolving credit facility and is used to
finance the purchase of inventory of new homes at Company-owned retail sales
centers. In order to satisfy greater working capital requirements and to fund
capital expenditures in connection with the Company's expanding operations, the
Company increased its gross borrowings under the facility by $17.8 million in
fiscal 1997. At May 31, 1997, the Company had net borrowings under the credit
facility of $46.3 million (gross borrowings of $66.7 million, less
participations of $20.4 million). The Company's participations in its floor plan
credit facility earn interest at the lender's prime rate less .375% and are
immediately available to the Company in cash. Beginning in July 1997, amounts
available to the Company under the Ford credit facility were increased to $125
million. Amounts outstanding under this credit facility will bear interest at
prime less 0.50% with the Company's participations in such credit facility
earning interest at prime less 0.75%.
 
     On July 15, 1997, the Company completed the private placement of $61
million of 8.32% senior unsecured notes with an average life of 7.5 years and a
final maturity in July 2007 (the "Senior Notes"). The Company used the net
proceeds to repay approximately $25 million in existing secured bank debt and
 
                                       16
<PAGE>   19
 
approximately $6 million in secured debt of its recently acquired subsidiary,
Brilliant Holding Corporation. The remainder of the proceeds will be used to
temporarily reduce borrowings under the Company's floor plan credit facility
with Ford.
 
     Total funded debt, including floor plan, expressed as a percentage of
equity, increased from 41% at May 31, 1996, to 101% at May 31, 1997, principally
the result of acquisitions of manufacturing facilities in several new market
regions. As the Company continues to explore strategic acquisition opportunities
in new regions, the Company's leverage may further increase. Management believes
that the proceeds from the Senior Notes, when coupled with the Company's
increased floor plan facility and cash provided by operations, will be
sufficient to satisfy working capital and capital expenditure requirements over
the next two years.
 
INFLATION AND SEASONALITY
 
     Inflation in recent years has been modest and has primarily affected the
Company's manufacturing costs in the areas of labor, manufacturing overhead and
raw materials other than lumber. The price of lumber is affected more by the
imbalances between supply and demand than by inflation. Historically, the
Company believes it has been able to minimize the effects of inflation by
increasing the selling prices of its products, improving its manufacturing
efficiency and increasing its employee productivity. In addition, the Company's
business is seasonal, with weakest demand typically occurring during the
Company's third fiscal quarter (December through February) and the strongest
demand typically occurring during the Company's last fiscal quarter (March
through May). Over the history of the Company's operations, management has not
observed any correlation between interest rate fluctuations and increases or
decreases in sales based solely on such fluctuations.
 
RECENT ACCOUNTING PRONOUNCEMENTS
 
     In February 1997, Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS 128") was issued. SFAS 128 replaces Accounting
Principles Board Opinion No. 15, "Earnings Per Share" ("APB 15") and specifies
the computation, presentation and disclosure requirements for earnings per share
("EPS"). SFAS 128 replaces the presentation of primary EPS under APB 15 with
basic EPS and fully diluted EPS under APB 15 with diluted EPS. The Company does
not believe the adoption of SFAS 128 in fiscal 1998 will have a significant
impact on reported earnings per share.
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
     The information required by this item is listed under Item 14 (a) and
begins at F-1 hereof.
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
 
     None
 
                                    PART III
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
     The information concerning the directors of the Company is set forth in the
proxy statement to be delivered to shareholders in connection with the Company's
Annual Meeting of Shareholders to be held on October 2, 1997 (the "Proxy
Statement") under the heading "Election of Directors," which information is
incorporated herein by reference. The name, age and position of each executive
officer of the Company is set forth under the heading "Management -- Executive
Officers" in Part I of this report. The information concerning disclosure of
delinquent Form 3, 4 or 5 filers is set forth in the Proxy Statement under the
heading "Section 16 Requirements," which information is incorporated herein by
reference.
 
                                       17
<PAGE>   20
 
ITEM 11. EXECUTIVE COMPENSATION
 
     The information concerning executive compensation is set forth in the Proxy
Statement under the heading "Executive Compensation," which information is
incorporated herein by reference. Information contained in the Proxy Statement
under the caption "Executive Compensation -- Report of the Board of Directors on
Executive Compensation and -- Stock Performance Chart" is not incorporated by
reference herein.
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
     The information concerning security ownership of certain beneficial owners
and management is set forth in the Proxy Statement under the heading "Principal
Shareholders and Management Ownership," which information is incorporated herein
by reference.
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
     The information concerning certain relationships and related transactions
is set forth in the Proxy Statement under the heading "Certain Transactions,"
which information is incorporated herein by reference.
 
                                       18
<PAGE>   21
 
                                    PART IV
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
 
     (a) (1) Financial Statements
 
     Report of Independent Public Accountants
 
     Consolidated Balance Sheets as of May 31, 1996 and 1997
 
     Consolidated Statements of Operations for the years ended May 31, 1995,
1996 and 1997
 
     Consolidated Statements of Shareholders' Equity for the years ended May 31,
1995, 1996 and 1997
 
     Consolidated Statements of Cash Flows for the years ended May 31, 1995,
1996 and 1997
 
     Notes to the Consolidated Financial Statements
 
        (2) Supplementary Schedule to Financial Statements
 
     Schedule II -- Valuation and Qualifying Accounts
 
        (3) Exhibits
 
     The exhibits filed as part of this report are listed under "Exhibits" at
subsection (c) of Item 14
 
     (b) Reports on Form 8-K
 
     No report on Form 8-K was filed on behalf of the Company during the last
     quarter of the Company's 1997 fiscal year
 
     (c) Exhibits
 
<TABLE>
<CAPTION>
 EXHIBIT                                                                      REPORT WITH WHICH
   NO.                            DESCRIPTION                                 EXHIBIT WAS FILED
 -------                          -----------                                 -----------------
<S>       <C>                                                            <C>
   2.1    -- Securities Purchase Agreement by and among Brilliant        July 1997, Form 8-K/A
             Holding Corporation (Brilliant), the Brilliant
             Securityholders and American Homestar Corporation.
   2.2    -- First Amendment to the Securities Purchase Agreement by     July 1997, Form 8-K/A
             and among Brilliant, the Brilliant Securityholders and
             American Homestar Corporation.
   2.3    -- Agreement and Plan of Merger between American Homestar      Filed herewith
             Corporation, Nationwide N.C. Homes, Inc., N.C. Mobile
             Home Corp., and Robert H. Sauls.
   3.1    -- Restated Articles of Incorporation of American Homestar     S-1 Registration Statement
             Corporation.                                                No. 33-78630
   3.2    -- Amended and Restated Bylaws of American Homestar            S-1 Registration Statement
             Corporation.                                                No. 33-78630
   4.1    -- Form of certificate evidencing ownership of Common Stock    S-1 Registration Statement
             of American Homestar Corporation.                           No. 33-78630
   4.2    -- Shareholders Agreement, dated as of August 31, 1993, by     S-1 Registration Statement
             and among American Homestar Corporation and certain         No. 33-78630
             shareholders of American Homestar Corporation.
   4.3    -- Form of Amendment to Shareholders Agreement.                S-1 Registration Statement
                                                                         No. 33-78630
</TABLE>

 
                                       19
<PAGE>   22
<TABLE>
<CAPTION>
 EXHIBIT                                                                      REPORT WITH WHICH
   NO.                            DESCRIPTION                                 EXHIBIT WAS FILED
 -------                          -----------                                 -----------------
<C>       <S>                                                            <C>
  10.1    -- Loan Agreement, dated September 24, 1996, among American    February 1997, Form 10-Q
             Homestar Corporation, Oak Creek Housing Corporation,
             Nationwide Housing Systems, Inc., American Homestar
             Financial Services, Inc., Heartland Homes, Inc., Guerdon
             Homes, Inc., American Homestar of Burleson, Inc.,
             American Homestar of Lancaster, Inc. and Bank One, Texas,
             N.A.
  10.2    -- $2,100,000 Term Promissory Note, dated September 24,        February 1997, Form 10-Q
             1996, by and between American Homestar Corporation, Oak
             Creek Housing Corporation and Bank One, Texas, N.A.
  10.3    -- $4,600,000 Term Promissory Note, dated September 24,        February 1997, Form 10-Q
             1996, by and between American Homestar Corporation, Oak
             Creek Housing Corporation and Bank One, Texas, N.A.
  10.4    -- $11,300,000 Term Promissory Note, dated September 24,       February 1997, Form 10-Q
             1996, by and between American Homestar Corporation, Oak
             Creek Housing Corporation and Bank One, Texas, N.A.
  10.5    -- $7,000,000 Term Promissory Note, dated September 24,        February 1997, Form 10-Q
             1996, by and between American Homestar Corporation, Oak
             Creek Housing Corporation and Bank One, Texas, N.A.
  10.6    -- Employment Agreement, dated as of November 15, 1996,        February 1997, Form 10-Q
             between Finis F. Teeter and American Homestar
             Corporation.
  10.7    -- Employment Agreement, dated as of November 15, 1996,        February 1997, Form 10-Q
             between Laurence A. Dawson, Jr. and American Homestar
             Corporation.
  10.8    -- Nonqualified Stock Option Agreement, dated November 15,     February 1997, Form 10-Q
             1996 between Finis F. Teeter and American Homestar
             Corporation.
  10.9    -- Nonqualified Stock Option Agreement, dated November 15,     February 1997, Form 10-Q
             1996 between Laurence A. Dawson, Jr. and American
             Homestar Corporation.
  10.10   -- Amendment to Life Reinsurance Contract, dated December      February 1997, Form 10-Q
             31, 1996, by and between Lifestar Reinsurance Limited and
             American Bankers Life Assurance Company of Florida
  10.11   -- Amendment to Ford Finance Company, Inc. Inventory           November 1996, Form 10-Q
             Financing Agreement
  11      -- Statement Re Computation of Per Share Earnings              Filed herewith
  12      -- None
  13      -- None
  16      -- None
  18      -- None
  21      -- List of Subsidiaries                                        Filed herewith
  22      -- None
  23      -- Consent of KPMG Peat Marwick LLP                            Filed herewith
  24      -- None
  27      -- Financial Data Schedule                                     Filed herewith
  99      -- None
</TABLE>
 
                                       20
<PAGE>   23
 
                                   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.
 
                                            AMERICAN HOMESTAR CORPORATION
 
Date: August 27, 1997                       By: /s/ LAURENCE A. DAWSON, JR.
                                              ----------------------------------
                                              Laurence A. Dawson, Jr., President
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
 
<TABLE>
<CAPTION>
                      SIGNATURE                                     TITLE                    DATE
                      ---------                                     -----                    ----
<S>                                                    <C>                              <C>
 
                 /s/ FINIS F. TEETER                   Chairman of the Board and        August 27, 1997
-----------------------------------------------------    Co-Chief Executive Officer
                   Finis F. Teeter                       (Principal Executive Officer)
 
             /s/ LAURENCE A. DAWSON, JR.               President, Co-Chief Executive    August 27, 1997
-----------------------------------------------------    Officer and Director
               Laurence A. Dawson, Jr.                   (Principal Executive Officer)
 
                /s/ CRAIG A. REYNOLDS                  Executive Vice President, Chief  August 27, 1997
-----------------------------------------------------    Financial Officer, Secretary
                  Craig A. Reynolds                      and Director (Principal
                                                         Financial and Accounting
                                                         Officer)
 
                /s/ JACKIE H. HOLLAND                  Vice President, Treasurer and    August 27, 1997
-----------------------------------------------------    Director
                  Jackie H. Holland
 
              /s/ CHARLES N. CARNEY JR.                Vice President and Director      August 27, 1997
-----------------------------------------------------
               Charles N. Carney, Jr.
 
                 /s/ JAMES J. FALLON                   Vice President and Director      August 27, 1997
-----------------------------------------------------
                   James J. Fallon
 
                 /s/ WILLIAM O. HUNT                   Director                         August 27, 1997
-----------------------------------------------------
                   William O. Hunt
 
                /s/ JACK L. MCDONALD                   Director                         August 27, 1997
-----------------------------------------------------
                  Jack L. McDonald
</TABLE>
 

                                       21
<PAGE>   24
 
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Independent Auditors' Report................................   F-2
Consolidated Balance Sheets as of May 31, 1996 and 1997.....   F-3
Consolidated Statements of Operations for the years ended
  May 31, 1995, 1996 and 1997...............................   F-4
Consolidated Statements of Shareholders' Equity for the
  years ended May 31, 1995, 1996
  and 1997..................................................   F-5
Consolidated Statements of Cash Flows for the years ended
  May 31, 1995, 1996 and 1997...............................   F-6
Notes to Consolidated Financial Statements..................   F-7
Financial Statement Schedule II -- Valuation and Qualifying
  Accounts..................................................  F-23
</TABLE>
 
                                       F-1
<PAGE>   25
 
                          INDEPENDENT AUDITORS' REPORT
 
The Board of Directors
American Homestar Corporation:
 
     We have audited the consolidated financial statements of American Homestar
Corporation and subsidiaries as listed in the accompanying index. In connection
with our audits of the consolidated financial statements, we have also audited
the financial statement schedule as listed in the accompanying index. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule based on our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. 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, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of American
Homestar Corporation and subsidiaries as of May 31, 1996 and 1997, and the
results of their operations and their cash flows for each of the years in the
three-year period ended May 31, 1997, in conformity with generally accepted
accounting principles. Also, in our opinion, the related 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.
 
                                            KPMG PEAT MARWICK LLP
 
Houston, Texas
June 26, 1997
 
                                       F-2
<PAGE>   26
 
                 AMERICAN HOMESTAR CORPORATION AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
 
                                     ASSETS
 
<TABLE>
<CAPTION>
                                                                        MAY 31,
                                                              ----------------------------
                                                                  1996            1997
                                                              ------------    ------------
<S>                                                           <C>             <C>
Current assets:
  Cash......................................................  $ 12,178,000    $ 17,161,000
  Cash in transit from financial institutions...............    22,148,000      26,139,000
                                                              ------------    ------------
          Total cash and cash equivalents...................    34,326,000      43,300,000
  Inventories...............................................    35,363,000      55,398,000
  Accounts receivable.......................................     5,229,000      11,314,000
  Manufacturer incentives receivable........................     1,143,000       1,073,000
  Deferred tax assets.......................................     1,068,000       3,749,000
  Prepaid expenses and other current assets.................     4,625,000       5,121,000
                                                              ------------    ------------
          Total current assets..............................    81,754,000     119,955,000
Property, plant and equipment, net..........................    19,569,000      39,270,000
Goodwill....................................................            --      29,949,000
Investment in affiliate.....................................     2,435,000       2,706,000
Note receivable.............................................     3,000,000              --
Other assets................................................     2,443,000       1,421,000
                                                              ------------    ------------
                                                              $109,201,000    $193,301,000
                                                              ============    ============
 
                           LIABILITIES AND SHAREHOLDERS' EQUITY
 
Current liabilities:
  Notes payable.............................................  $    263,000    $  5,454,000
  Floor plan payable........................................    19,886,000      46,282,000
  Accounts payable..........................................    10,924,000      20,228,000
  Accrued expenses..........................................    10,587,000      19,934,000
  Accrued warranty costs....................................     1,450,000       4,631,000
                                                              ------------    ------------
          Total current liabilities.........................    43,110,000      96,529,000
                                                              ------------    ------------
Notes payable, less current installments....................     3,663,000      22,519,000
Reserve for future policy benefits..........................     3,358,000              --
Deferred tax liabilities....................................       346,000          72,000
Minority interest in consolidated subsidiary................       710,000         966,000
Shareholders' equity:
  Preferred stock, no par value; authorized 5,000,000
     shares; no shares issued...............................            --              --
  Common stock, $0.05 par value; authorized 20,000,000
     shares; issued and outstanding 10,771,554 and
     10,823,084 shares at May 31, 1996 and 1997,
     respectively...........................................       539,000         541,000
  Additional paid-in capital................................    36,004,000      36,511,000
  Retained earnings.........................................    21,471,000      36,163,000
                                                              ------------    ------------
          Total shareholders' equity........................    58,014,000      73,215,000
Commitments and contingencies
                                                              ------------    ------------
                                                              $109,201,000    $193,301,000
                                                              ============    ============
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                       F-3
<PAGE>   27
 
                 AMERICAN HOMESTAR CORPORATION AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
 
<TABLE>
<CAPTION>
                                                                YEARS ENDED MAY 31,
                                                     ------------------------------------------
                                                         1995           1996           1997
                                                     ------------   ------------   ------------
<S>                                                  <C>            <C>            <C>
Revenues:
  Net sales........................................  $171,342,000   $208,745,000   $313,674,000
  Other revenues...................................    16,311,000     22,487,000     26,305,000
                                                     ------------   ------------   ------------
          Total revenues...........................   187,653,000    231,232,000    339,979,000
                                                     ------------   ------------   ------------
Costs and expenses:
  Cost of sales....................................   133,001,000    154,575,000    233,346,000
  Selling, general and administrative..............    40,910,000     57,185,000     77,260,000
                                                     ------------   ------------   ------------
          Total costs and expenses.................   173,911,000    211,760,000    310,606,000
                                                     ------------   ------------   ------------
          Operating income.........................    13,742,000     19,472,000     29,373,000
Interest expense...................................    (1,795,000)    (2,972,000)    (4,714,000)
Other income.......................................       171,000        219,000        178,000
                                                     ------------   ------------   ------------
  Income before items shown below..................    12,118,000     16,719,000     24,837,000
Income tax expense.................................     4,726,000      6,601,000     10,101,000
                                                     ------------   ------------   ------------
  Income before items shown below..................     7,392,000     10,118,000     14,736,000
Earnings (loss) in affiliate.......................            --        (65,000)       271,000
Minority interest in income of consolidated
  subsidiary.......................................      (204,000)      (297,000)      (315,000)
                                                     ------------   ------------   ------------
          Net income...............................  $  7,188,000   $  9,756,000   $ 14,692,000
                                                     ============   ============   ============
Earnings per share:
  Primary..........................................  $       0.79   $        .98   $       1.31
                                                     ============   ============   ============
  Fully diluted....................................  $       0.78   $        .97   $       1.30
                                                     ============   ============   ============
</TABLE>
 
           See accompany notes to consolidated financial statements.
 
                                       F-4
<PAGE>   28
 
                 AMERICAN HOMESTAR CORPORATION AND SUBSIDIARIES
 
                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 
<TABLE>
<CAPTION>
                                                       ADDITIONAL                        TOTAL
                                            COMMON       PAID-IN       RETAINED      SHAREHOLDERS'
                                            STOCK        CAPITAL       EARNINGS         EQUITY
                                           --------    -----------    -----------    -------------
<S>                                        <C>         <C>            <C>            <C>
BALANCES AT MAY 31, 1994.................  $315,000    $ 5,367,000    $ 4,527,000      $10,209,000
Proceeds from initial public offering....   156,000     13,753,000             --       13,909,000
Purchase of stock pool interest..........        --        (75,000)            --          (75,000)
Repurchase of common stock...............        --         (4,000)            --           (4,000)
Compensation related to sale of
  common stock...........................        --         61,000             --           61,000
Repayment of loans.......................        --         23,000             --           23,000
Net income...............................        --             --      7,188,000        7,188,000
                                           --------    -----------    -----------      -----------
BALANCES AT MAY 31, 1995.................   471,000     19,125,000     11,715,000       31,311,000
Proceeds from public offering............    67,000     16,835,000             --       16,902,000
Exercise of stock options................     1,000         45,000             --           46,000
Purchase of stock pool interest..........        --        (51,000)            --          (51,000)
Compensation related to sale of
  common stock...........................        --         60,000             --           60,000
Repurchase of common stock...............        --        (10,000)            --          (10,000)
Net income...............................        --             --      9,756,000        9,756,000
                                           --------    -----------    -----------      -----------
BALANCES AT MAY 31, 1996.................   539,000     36,004,000     21,471,000       58,014,000
Exercise of stock options................     2,000        489,000             --          491,000
Compensation related to sale of
  common stock...........................        --         23,000             --           23,000
Other....................................        --         (5,000)            --           (5,000)
Net income...............................        --             --     14,692,000       14,692,000
                                           --------    -----------    -----------      -----------
BALANCES AT MAY 31, 1997.................  $541,000    $36,511,000    $36,163,000      $73,215,000
                                           ========    ===========    ===========      ===========
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                       F-5
<PAGE>   29
 
                 AMERICAN HOMESTAR CORPORATION AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                               YEARS ENDED MAY 31,
                                                   --------------------------------------------
                                                       1995           1996            1997
                                                   ------------   -------------   -------------
<S>                                                <C>            <C>             <C>
Cash flows from operating activities:
  Net income.....................................  $  7,188,000   $   9,756,000   $  14,692,000
  Adjustments to reconcile net income to net cash
     provided by (used in) operating activities:
     Depreciation and amortization...............       724,000       1,527,000       3,416,000
     Minority interests in income of consolidated
       subsidiary................................       204,000         297,000         315,000
     Loss on disposal of property and
       equipment.................................            --          24,000              --
     Compensation expense on sale of common
       stock.....................................        61,000          60,000          23,000
     Loss (gain) in affiliate....................            --          65,000        (271,000)
     Deferred taxes..............................      (429,000)        174,000        (179,000)
     Change in assets and liabilities, net of
       acquisitions:
       Increase in receivables...................      (948,000)     (2,162,000)       (982,000)
       Increase in inventories...................   (13,106,000)     (5,365,000)    (15,106,000)
       Increase (decrease) in prepaid expenses
          and other current assets...............      (663,000)     (1,036,000)         51,000
       Decrease (increase) in other assets.......      (357,000)     (1,624,000)        946,000
       Increase in accounts payable..............     2,233,000       2,317,000       3,891,000
       Increase (decrease) in accrued expenses...     3,474,000       2,215,000      (2,888,000)
       Increase (decrease) in other
          liabilities............................       664,000       2,694,000      (3,358,000)
                                                   ------------   -------------   -------------
          Net cash provided by (used in)
            operating activities.................      (955,000)      8,942,000         550,000
                                                   ------------   -------------   -------------
Cash flows from investing activities:
  Payment for purchase of acquisitions, net of
     cash acquired...............................            --              --     (10,628,000)
  Purchases of property, plant and equipment.....    (6,977,000)     (6,560,000)     (6,364,000)
  Investment in mortgage affiliate...............            --      (2,500,000)             --
  Note receivable................................            --      (3,000,000)             --
  Proceeds from sales of property, plant
     and equipment...............................         5,000              --              --
                                                   ------------   -------------   -------------
          Net cash used in investing
            activities...........................    (6,972,000)    (12,060,000)    (16,992,000)
                                                   ------------   -------------   -------------
Cash flows from financing activities:
  Proceeds from public offering of common
     stock.......................................    13,909,000      16,902,000              --
  Participation in floor plan payable............   (15,082,000)    (14,009,000)      8,637,000
  Borrowings under floor plan payable............   103,859,000     125,466,000     154,864,000
  Repayments of floor plan payable...............   (86,755,000)   (117,487,000)   (137,105,000)
  Proceeds from long-term debt borrowings........            --         955,000      20,568,000
  Principal payments of long-term debt...........    (2,547,000)       (326,000)    (21,976,000)
  Exercise of stock options......................            --          46,000         491,000
  Purchase of common stock and interest in
     stock pool..................................       (79,000)        (61,000)             --
  Other..........................................        23,000        (108,000)        (63,000)
                                                   ------------   -------------   -------------
          Net cash provided by financing
            activities...........................    13,328,000      11,378,000      25,416,000
                                                   ------------   -------------   -------------
Net increase in cash and cash equivalents........     5,401,000       8,260,000       8,974,000
Cash and cash equivalents at beginning of year...    20,665,000      26,066,000      34,326,000
                                                   ------------   -------------   -------------
Cash and cash equivalents at end of year.........  $ 26,066,000   $  34,326,000   $  43,300,000
                                                   ============   =============   =============
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                       F-6
<PAGE>   30
 
                 AMERICAN HOMESTAR CORPORATION AND SUBSIDIARIES
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  Principles of Consolidation and General
 
     The consolidated financial statements include the accounts of American
Homestar Corporation and its majority-owned subsidiaries (the "Company"). All
significant intercompany balances and transactions have been eliminated in
consolidation.
 
     The Company owns 50% of the outstanding common stock of 21st Century
Mortgage Corporation ("21st Century") which is accounted for under the equity
method of accounting.
 
  Nature of Operations
 
     The Company is a vertically integrated manufactured housing company. The
Company manufactures a wide variety of manufactured homes from its eight
manufacturing facilities which are sold through 54 Company-owned retail sales
centers in Texas, Louisiana, New Mexico, Oklahoma, Colorado and Utah as well as
a network of independent dealers. In addition, the Company offers installment
financing to purchasers of manufactured homes from its retail sales centers. The
Company also offers retail customers, through both its Company-owned retail
sales centers and certain independent retailers, a variety of insurance
products, including property casualty insurance, credit life insurance and
extended warranty coverage.
 
  Accounting Estimates
 
     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates.
 
  Revenue Recognition
 
     Retail sales are recognized when cash payment is received, or in the case
of credit sales (which represent the majority of the Company's retail sales),
when a down payment is received and the Company and the customer enter into an
installment sales contract. The Company manufactures its homes based on dealer
orders; sales to independent dealers are recognized as revenue when title
transfers to the buyer, which is the date of shipment. Almost all the Company's
sales to dealers are financed through the dealer's floor plan financing
arrangements. Dealers are not permitted to cancel purchases without penalty once
the manufacturing process commences.
 
     The Company also maintains used manufactured home inventory owned by
outside parties for which the Company receives a sales commission when sold to
consumers.
 
     Premiums from credit life insurance policies reinsured by the Company's
credit life subsidiary, Lifestar Reinsurance, Ltd. ("Lifestar"), are recognized
as revenue over the life of the policy term. Premiums are ceded to Lifestar on
an earned basis.
 
  Inventories
 
     Newly manufactured homes are valued at the lower of cost or market, using
the specific identification method. Used manufactured homes are valued at
estimated wholesale prices, not in excess of net realizable value.
 
     Raw materials are valued at the lower of cost or market, using the
first-in, first-out method.
 
                                       F-7
<PAGE>   31
 
                 AMERICAN HOMESTAR CORPORATION AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
  Property, Plant and Equipment
 
     Property, plant and equipment are carried at cost. Depreciation on
property, plant and equipment is provided by the straight-line method over the
estimated useful lives of the related assets. Leasehold improvements are
amortized using the straight-line method over the useful lives of the
improvements or lease periods, whichever is shorter.
 
  Goodwill
 
     Goodwill, which represents the excess of purchase price over the fair value
of net assets acquired, is amortized on a straight-line basis over periods
ranging from 10 to 40 years. The Company assesses the recoverability of goodwill
by determining whether the amortization of the goodwill balance over the
remaining useful life can be recovered through undiscounted future operating
cash flows of the acquired operations.
 
  Income Taxes
 
     Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
included the enactment date.
 
  Reserves for Future Losses on Credit Sales
 
     The Company makes a current provision for estimated future losses on credit
retail sales where the Company retains risk in the event of customer nonpayment
of installment sales contracts. Typically, the Company's period of exposure to
loss does not exceed three installment payments (60 days) on an individual
contract. The amounts provided for estimated future losses on credit sales are
determined based on the Company's historical loss experience after giving
consideration to current economic conditions. Management, in assessing current
loss experience and economic conditions, may adjust the reserve for losses on
credit sales related to prior years' installment sales contracts. All
adjustments are recognized currently.
 
  Accrued Warranty and Service Costs
 
     The Company makes a current provision for future service costs associated
with homes sold and for manufacturing defects for a period of one year from the
date of sale of the home. The estimated cost of these items is accrued at the
time of sale and is reflected in selling, general and administrative expenses in
the consolidated statements of operations. For the years ended May 31, 1995,
1996 and 1997, warranty and service costs were $5,900,000, $8,000,000 and
$10,859,000, respectively.
 
  Reserves for Contingent Repurchase Agreements
 
     Reserves for contingent repurchase agreements are established for losses
based on the Company's historical loss experience, and actual losses are charged
to the reserve when incurred. Management, in assessing the loss experience,
adjusts the reserves through periodic provisions. The Company has not incurred
losses related to contingent repurchases for the years ended May 31, 1995, 1996
and 1997.
 
  Earnings per Common Share
 
     Earnings per common share are computed based on the weighted average number
of common shares outstanding during the periods presented after giving
retroactive effect to the changes in capital structure discussed in note 9.
Weighted average shares are adjusted for common stock equivalents when dilutive
and significant. Computations for primary earnings per share were based on
9,130,302 (1995), 9,932,470 (1996),
 
                                       F-8
<PAGE>   32
 
                 AMERICAN HOMESTAR CORPORATION AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
and 11,235,294 (1997) weighted average shares. Computations for fully diluted
earnings per share were based on 9,167,073 (1995), 10,107,862 (1996), and
11,314,704 (1997) weighted average shares.
 
  Financial Instruments
 
     Fair value estimates are made at discrete points in time based on relevant
market information. These estimates may be subjective in nature and involve
uncertainties and matters of significant judgment and therefore cannot be
determined with precision. The Company believes that the carrying amounts of its
current assets, current liabilities and long-term debt approximate the fair
value of such items.
 
  Cash Equivalents
 
     Cash equivalents consist of short-term investments with an original
maturity of three months or less, money market accounts and cash in transit from
financial institutions. Cash in transit from financial institutions present no
risk to the Company regarding collectibility and are collected within 90 days.
In addition, the Company has never experienced a loss because of a failure to
collect amounts due from these financial institutions. Approximately 95% of the
cash in transit from financial institutions balance at May 31, 1997 is due from
three lenders, of which 67% is due from the Company's mortgage affiliate, 21st
Century.
 
  Recent Accounting Pronouncements
 
     In February 1997, Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS 128") was issued. SFAS 128 replaces Accounting
Principles Board Opinion No. 15, "Earnings Per Share" ("APB 15") and specifies
the computation, presentation and disclosure requirements for earnings per share
("EPS"). SFAS 128 replaces the presentation of primary EPS under APB 15 with
basic EPS and fully diluted EPS under APB 15 with diluted EPS. The Company does
not believe the adoption of SFAS 128 in fiscal 1998 will have a significant
impact on reported earnings per share.
 
  Reclassifications
 
     Certain prior years' amounts have been reclassified to conform to
classifications used in 1997.
 
(2) PUBLIC OFFERING
 
     On April 2, 1996, the Company completed a public offering of 2,156,250
shares of common stock at $13.60 per share (adjusted for the 5-for-4 stock split
discussed in note 9). Of the shares offered, 1,337,500 shares were sold by the
Company and 818,750 shares were sold by certain shareholders of the Company. Net
proceeds of $17,120,000 (before offering expenses) from the offering were used
by the Company to fund its growth strategy. Supplementary earnings per share
would be $0.77 and $0.96 per share for the years ended May 31, 1995 and 1996,
respectively, based on 10,467,802 and 11,050,708 shares outstanding,
respectively. Supplementary earnings per share is calculated as if the public
offering occurred on June 1, 1994.
 
     On July 12, 1994, the Company completed an initial public offering of
3,125,000 shares of common stock at $5.12 per share (adjusted for the 5-for-4
stock splits described in note 9). The net proceeds were used to expand its
manufacturing capacity and repay long-term debt and a portion of its floor plan
credit facility (see note 6).
 
                                       F-9
<PAGE>   33
 
                 AMERICAN HOMESTAR CORPORATION AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(3) ACQUISITIONS
 
     On September 3, 1996, the Company acquired all of the common stock of
Heartland Homes, Inc. ("Heartland") and certain operating assets of Manu-Fac
Homes, Inc. ("Manu-Fac") for a combination of cash and notes totaling $8.5
million. Heartland is a single-plant manufactured housing producer in Henderson,
North Carolina. Heartland markets its homes through 65 independent retailers in
North Carolina and three surrounding states. Manu-Fac was a contractually
affiliated group of independent retailers throughout North Carolina, operating
under the CHOICENTER or WESTWOOD Homes trade names. In connection with the
acquisition of such assets of Manu-Fac, these retailers became franchisees of
Associated Retailers Group, Inc., a wholly-owned subsidiary of the Company, and
continue to operate under the CHOICENTER or WESTWOOD trade names. The results of
the acquired operations of Heartland and Manu-Fac have been included with those
of the Company from the date of acquisition. The excess purchase price over the
estimated fair value of net assets acquired as of the acquisition date of $6.2
million has been recorded as goodwill and is being amortized over 25 years. The
estimated fair value of assets acquired and liabilities assumed in these
acquisitions is summarized as follows:
 
<TABLE>
<S>                                                           <C>
Current assets..............................................  $ 2,628,000
Property, plant and equipment...............................    3,030,000
Goodwill....................................................    6,201,000
Current liabilities.........................................   (2,906,000)
Notes payable...............................................     (189,000)
                                                              -----------
                                                              $ 8,764,000
                                                              ===========
 
Consideration:
  Cash......................................................  $ 6,530,000
  Notes payable.............................................    2,000,000
  Transaction costs.........................................      234,000
                                                              -----------
                                                              $ 8,764,000
                                                              ===========
</TABLE>
 
                                      F-10
<PAGE>   34
 
                 AMERICAN HOMESTAR CORPORATION AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     On September 24, 1996, the Company completed the acquisition of Guerdon
Holdings, Inc. and its subsidiary, Guerdon Homes, Inc. (collectively "Guerdon").
Guerdon produces manufactured homes in four facilities located in Oregon, Idaho,
Nebraska and Mississippi, and sells its homes through approximately 150
independent retailers located primarily in the Pacific Northwest, Rocky
Mountain, and South Central regions of the United States. The results of the
acquired operations of Guerdon have been included with those of the Company from
the date of the acquisition. The excess purchase price over the estimated fair
value of the net assets acquired as of the acquisition date of $23.9 million has
been recorded as goodwill and is being amortized over 40 years. The estimated
fair value of assets acquired and liabilities assumed in this acquisition is
summarized as follows:
 
<TABLE>
<S>                                                             <C>
Current assets..............................................    $  6,699,000
Property, plant and equipment...............................       8,551,000
Goodwill....................................................      23,880,000
Deferred taxes..............................................       2,777,000
Current liabilities.........................................     (17,843,000)
Notes payable...............................................     (22,722,000)
                                                                ------------
                                                                $  1,342,000
                                                                ============
 
Consideration:
  Cash......................................................    $    620,000
  Transaction costs.........................................         722,000
                                                                ------------
                                                                $  1,342,000
                                                                ============
</TABLE>
 
     Unaudited pro forma results of operations of the Company for the years
ended May 31, 1996 and 1997, assuming the Guerdon, Heartland and Manu-Fac
acquisitions had been consummated at June 1, 1995, is summarized as follows:
 
<TABLE>
<CAPTION>
                                                              YEARS ENDED MAY 31,
                                                          ----------------------------
                                                              1996            1997
                                                          ------------    ------------
<S>                                                       <C>             <C>
Revenues................................................  $351,388,000    $377,518,000
Operating income........................................    18,623,000      29,719,000
Income before taxes.....................................    12,757,000      24,390,000
Net income..............................................     7,112,000      14,146,000
Earnings per common share...............................  $       0.72    $       1.26
                                                          ============    ============
</TABLE>
 
     On June 10, 1997, the Company completed the acquisition of Brilliant
Holding Corporation ("Brilliant"), which produces manufactured homes from three
plants in Alabama. Brilliant currently markets its homes through nearly 200
independent retailers in 12 states across the South Central, Deep South,
Southeastern and Mid-Atlantic regions of the United States. The Company issued
474,099 shares of common stock and options to purchase 25,901 shares of the
Company's common stock in exchange for all of Brilliant's outstanding common
stock and options to purchase Brilliant's common stock. The merger will be
accounted for as a pooling of interests.
 
     On June 19, 1997, the Company completed the acquisition of N.C. Mobile Home
Corporation, which operates 11 retail centers in North Carolina and one in
Virginia. Consideration for the purchase was 117,647 shares of the Company's
common stock and $2.5 million in cash and notes. The final determination of the
purchase price, which is subject to certain performance targets, will be made in
August 1997.
 
                                      F-11
<PAGE>   35
 
                 AMERICAN HOMESTAR CORPORATION AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(4) INVENTORIES
 
     A summary of inventories follows:
 
<TABLE>
<CAPTION>
                                                                     MAY 31,
                                                            --------------------------
                                                               1996           1997
                                                            -----------    -----------
<S>                                                         <C>            <C>
Manufactured homes:
  New.....................................................  $29,818,000    $41,229,000
  Used....................................................    1,878,000      4,715,000
Furniture and supplies....................................    1,505,000      3,374,000
Raw materials and work-in-process.........................    2,162,000      6,080,000
                                                            -----------    -----------
                                                            $35,363,000    $55,398,000
                                                            ===========    ===========
</TABLE>
 
     Substantially all the Company's new and used manufactured homes were
pledged as collateral against its floor plan credit facility (see note 6).
 
(5) PROPERTY, PLANT AND EQUIPMENT
 
     A summary of property, plant and equipment follows:
 
<TABLE>
<CAPTION>
                                                                       MAY 31,
                                                   USEFUL     -------------------------
                                                   LIVES         1996          1997
                                                 ----------   -----------   -----------
<S>                                              <C>          <C>           <C>
Land...........................................          --   $ 3,670,000   $ 4,711,000
Land improvements..............................    15 years     1,278,000     1,448,000
Buildings......................................  5-30 years     9,107,000    17,291,000
Machinery and equipment........................  5-10 years     2,877,000     4,834,000
Furniture and equipment........................     5 years     2,455,000     4,174,000
Vehicles.......................................     3 years        41,000       434,000
Leasehold improvements.........................  5-13 years     3,294,000     9,542,000
Construction in progress.......................          --       120,000        49,000
                                                              -----------   -----------
                                                               22,842,000    42,483,000
Assets to be disposed of.......................          --            --     3,263,000
Less accumulated depreciation and
  amortization.................................                (3,273,000)   (6,476,000)
                                                              -----------   -----------
                                                              $19,569,000   $39,270,000
                                                              ===========   ===========
</TABLE>
 
     The Company intends to sell two manufacturing facilities acquired in
connection with the Guerdon acquisition (see note 2). The facilities, which are
idle and not being utilized, are recorded at their estimated fair value less
estimated costs to sell the facilities. Although it is the Company's intention
to dispose of the facilities within one year, there can be no assurance that the
Company's efforts will be successful. Consequently, the carrying values of these
facilities are classified as long-term in Company's consolidated balance sheet
and "Assets to be Disposed Of" in accordance with SFAS 121.
 
(6) NOTES AND FLOOR PLAN PAYABLE
 
     The Company has a $100 million floor plan credit facility with Ford
Consumer Finance Company ("Ford") to finance a major portion of its manufactured
home inventory until such inventory is sold and contract proceeds are received.
Interest on amounts borrowed is at prime (8.50% at May 31, 1997). The floor plan
debt is secured by a portion of the Company's manufactured home inventory and
cash in transit from financial institutions. The Company's participations in its
floor plan credit facilities earn interest at prime less
 
                                      F-12
<PAGE>   36
 
                 AMERICAN HOMESTAR CORPORATION AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
0.375%. The Company may increase or decrease the participation at any time and
may require Ford to re-purchase all of its participation.
 
     Amounts due under the floor plan credit facility follows:
 
<TABLE>
<CAPTION>
                                                                    MAY 31,
                                                          ----------------------------
                                                              1996            1997
                                                          ------------    ------------
<S>                                                       <C>             <C>
Floor plan payable......................................  $ 48,976,000    $ 66,735,000
Participations in floor plan payable....................   (29,090,000)    (20,453,000)
                                                          ------------    ------------
  Net floor plan payable................................  $ 19,886,000    $ 46,282,000
                                                          ============    ============
</TABLE>
 
     In July 1997, amounts available under this floor plan credit facility were
increased to $125.0 million. Amounts outstanding under the credit facility will
bear interest at prime less 0.50% with the Company's participations in the
credit facility earning interest at prime less 0.75%.
 
                                      F-13
<PAGE>   37
 
                 AMERICAN HOMESTAR CORPORATION AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     A summary of notes payable follows:
 
<TABLE>
<CAPTION>
                                                                       MAY 31,
                                                              -------------------------
                                                                 1996          1997
                                                              ----------    -----------
<S>                                                           <C>           <C>
Note payable to a financial institution in monthly
  installments of $188,334, plus interest at LIBOR plus 2%
  (7.66% at May 31, 1997), due February 28, 2002. Paid in
  full on July 15, 1997.....................................  $       --    $10,358,000
Note payable to a financial institution in monthly
  installments of $38,889, plus interest at LIBOR plus 2%
  (7.57% at May 31, 1997), due February 28, 2002. Paid in
  full on July 15, 1997.....................................          --      6,806,000
Note payable to a financial institution in monthly
  installments of $104,762 through December 1997 and $54,762
  thereafter, plus interest at LIBOR plus 2% (7.66% at May
  31, 1997), due February 28, 2002; secured by property,
  plant and equipment. Paid in full on July 15, 1997........          --      4,112,000
Notes payable to a financial institution in quarterly
  installments of $45,334, plus interest at 8.57%, due April
  1, 2000; secured by property, plant and equipment. Paid in
  full on July 15, 1997.....................................   2,584,000      2,403,000
Note payable to a financial institution in monthly
  installments of $11,667, plus interest at LIBOR plus 2%
  (7.66% at May 31, 1997), due February 28, 2002; secured by
  property, plant and equipment. Paid in full on July 15,
  1997......................................................          --      2,018,000
Notes payable, $750,000 due on September 3, 1997 with
  quarterly installments of $187,500 thereafter, plus
  interest at 8.5%..........................................          --      1,500,000
Note payable due September 3, 1997, plus interest at 8.5%...          --        250,000
Note payable to financial institution in monthly
  installments of $9,557 including interest at prime plus
  1.5% (9.75% at May 31, 1996), due March 1999; secured by
  land and building. Paid in full on September 25, 1996.....     853,000             --
Note payable to a bank in monthly installments of $3,429,
  including interest, at 10% through July 2001; secured by
  land......................................................     168,000        138,000
Notes payable in monthly installments of $1,686, including
  interest at 10.5% due May 2002; secured by land...........      89,000         77,000
Note payable in monthly installments of $1,934, including
  interest at 10% due November, 2010; secured by land.......     177,000        171,000
Other.......................................................      55,000        140,000
                                                              ----------    -----------
          Total.............................................   3,926,000     27,973,000
Less current installments...................................     263,000      5,454,000
                                                              ----------    -----------
  Notes payable, less current installments..................  $3,663,000    $22,519,000
                                                              ==========    ===========
</TABLE>
 
     The aggregate maturities of notes payable for each of the five years
subsequent to May 31, 1997 follow:
 
<TABLE>
<S>                                                       <C>
1998....................................................  $ 5,454,000
1999....................................................    4,158,000
2000....................................................    3,791,000
2001....................................................    5,471,000
2002....................................................    8,943,000
Thereafter..............................................      156,000
                                                          -----------
                                                          $27,973,000
                                                          ===========
</TABLE>
 
                                      F-14
<PAGE>   38
 
                 AMERICAN HOMESTAR CORPORATION AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     On July 15, 1997, the Company completed the private placement of $61
million of 8.32% senior unsecured notes with an average life of 7.5 years and a
final maturity in July 2007. The Company used the net proceeds from this new
debt to repay approximately $25 million in existing secured bank indebtedness
and approximately $6 million in secured debt of its recently acquired
subsidiary, Brilliant Holding Corporation (see note 3). The remainder of the
proceeds will be used to temporarily reduce borrowings under the Company's floor
plan credit facility.
 
(7) INCOME TAXES
 
     The provision for income taxes related to operations in the consolidated
statements of operations is summarized below:
 
<TABLE>
<CAPTION>
                                                           YEARS ENDED MAY 31,
                                                  -------------------------------------
                                                     1995         1996         1997
                                                  ----------   ----------   -----------
<S>                                               <C>          <C>          <C>
Federal-current expense.........................  $4,484,000   $5,528,000   $ 8,835,000
Federal-deferred expense (benefit)..............    (371,000)     149,000      (158,000)
State-current expense...........................     671,000      899,000     1,445,000
State-deferred expense (benefit)................     (58,000)      25,000       (21,000)
                                                  ----------   ----------   -----------
          Total.................................  $4,726,000   $6,601,000   $10,101,000
                                                  ==========   ==========   ===========
</TABLE>
 
     The Company files a consolidated return for federal tax purposes;
accordingly, taxes at statutory rates are computed based on earnings before
minority interests. The provision for income taxes related to operations varied
from the amount computed by applying the U.S. federal statutory rate as a result
of the following:
 
<TABLE>
<CAPTION>
                                                           YEARS ENDED MAY 31,
                                                  -------------------------------------
                                                     1995         1996         1997
                                                  ----------   ----------   -----------
<S>                                               <C>          <C>          <C>
Computed "expected" tax expense.................  $4,120,000   $5,852,000   $ 8,693,000
State income tax, net of federal tax benefit....     404,000      600,000       926,000
Nondeductible goodwill..........................          --           --       148,000
Effect of graduated tax rates...................          --     (145,000)           --
Other, net......................................     202,000      294,000       334,000
                                                  ----------   ----------   -----------
          Total.................................  $4,726,000   $6,601,000   $10,101,000
                                                  ==========   ==========   ===========
</TABLE>
 
                                      F-15
<PAGE>   39
 
                 AMERICAN HOMESTAR CORPORATION AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below:
 
<TABLE>
<CAPTION>
                                                                      MAY 31,
                                                              ------------------------
                                                                 1996          1997
                                                              ----------    ----------
<S>                                                           <C>           <C>
Current deferred taxes:
  Inventory costs capitalized for tax purposes..............  $   73,000    $  214,000
  Amounts not deductible until paid.........................     899,000     3,417,000
  Other.....................................................      96,000       118,000
                                                              ----------    ----------
     Current deferred tax assets............................  $1,068,000    $3,749,000
                                                              ==========    ==========
Noncurrent deferred taxes:
  Noncurrent deferred tax assets:
     Plant and equipment, principally due to differences in
       depreciation and estimated costs to dispose of
       manufacturing facilities (see note 5)................  $       --    $  235,000
  Noncurrent deferred tax liabilities:
     Goodwill...............................................          --      (307,000)
     Plant and equipment, principally due to differences in
       depreciation.........................................    (346,000)           --
                                                              ----------    ----------
          Noncurrent net deferred tax liability.............  $ (346,000)   $  (72,000)
                                                              ==========    ==========
</TABLE>
 
     Management of the Company considers it more likely than not that all the
deferred tax assets will be realized due to sufficient taxable income in future
years.
 
(8) INVESTMENT IN AFFILIATED COMPANY
 
     In September 1995, the Company invested $2.5 million to provide one-half of
the initial capitalization of 21st Century, a newly formed mortgage company
which commenced operations in October 1995 and provides retail financing to
manufactured home buyers. 21st Century is 50% owned by the Company with the
remaining 50% ownership divided equally between 21st Century's management and
Clayton Homes, Inc. ("Clayton"). The Company has an option to purchase the stock
owned by Clayton and the management of 21st Century after September 15, 2000.
Summary financial information for 21st Century, derived from its audited
financial statements, from inception to May 31, 1996 and the year ended May 31,
1997 follows:
 
<TABLE>
<CAPTION>
                                                                1996          1997
                                                             ----------    -----------
<S>                                                          <C>           <C>
Total assets...............................................  $8,139,000    $28,477,000
                                                             ==========    ===========
Total liabilities..........................................  $3,269,000    $23,065,000
Shareholders' equity.......................................  $4,870,000    $ 5,412,000
                                                             ==========    ===========
Total revenues.............................................  $  501,000    $ 4,212,000
Net income (loss)..........................................  $ (130,000)   $   541,000
                                                             ==========    ===========
</TABLE>
 
(9) SHAREHOLDERS' EQUITY
 
     On December 15, 1995, the Company effected a 5-for-4 stock split effective
immediately for shareholders of record on January 5, 1996 and payable on January
18, 1996.
 
     On January 10, 1997, the Company effected a 5-for-4 stock split effective
immediately for shareholders of record on January 24, 1997 and payable on
February 7, 1997.
 
                                      F-16
<PAGE>   40
 
                 AMERICAN HOMESTAR CORPORATION AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The consolidated financial statements, including all references to the
number of shares of common stock and all per share information, have been
adjusted to reflect the common stock splits.
 
     During 1993, the Company and its principal shareholders sold common stock
to certain employees at amounts less than market value through the issuance of
notes receivable. The fair market value was determined by an independent
appraisal. Compensation expense resulting from the sale of these shares was
$61,000, $60,000, $23,000 for the years ended May 31, 1995, 1996 and 1997,
respectively.
 
     A summary of common stock sold by the Company and its principal
shareholders during the year ended May 31, 1994 follow:
 
<TABLE>
<CAPTION>
                         NUMBER                         FAIR MARKET
                        OF SHARES    PRICE PAID PER      VALUE PER
                          SOLD           SHARE             SHARE        DATE COMMON STOCK SOLD
                        ---------    --------------    -------------    ----------------------
<S>                     <C>          <C>               <C>              <C>
Common stock sold by
  the Company.........    54,344         $2.27             $2.48        September 30, 1993,
                                                                        October 31, 1993, and
                                                                        February 28, 1994
Common stock sold by
  principal
  shareholders........   140,704     $0.00 -- 1.07     $2.42 -- 2.48    June 2, 1993 and
                                                                        October 15, 1993
</TABLE>
 
(10) STOCK COMPENSATION PLAN
 
     During 1994, the Company adopted the 1994 Stock Compensation Plan (the
"Plan") whereby employees, independent directors and advisors are eligible to
receive awards under the Plan. The Plan is administered by a committee of the
Board of Directors (the "Committee"). An aggregate of 1,500,000 shares of common
stock has been authorized and reserved for issuance under the Plan pursuant to
the exercise of options or grant of restricted stock awards.
 
     Restricted stock awards will give the recipient the right to receive a
specified amount of shares of common stock contingent upon remaining a Company
employee for a specified period, as determined by the Committee.
 
     Options will become immediately exercisable and all restrictions will
immediately lapse with respect to any award of restricted stock in the event of
a change or threatened change in control of the Company and in the event of
certain mergers and reorganizations of the Company. The options will expire no
later than ten years after the date of grant. The exercise price for incentive
stock options under the Plan may not be less than the fair value of the common
stock on the date of grant. The exercise price for non-qualified options granted
under the Plan will be at the discretion of the Committee.
 
                                      F-17
<PAGE>   41
 
                 AMERICAN HOMESTAR CORPORATION AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     Option activity for the Company's 1994 Stock Compensation Plan follows:
 
<TABLE>
<CAPTION>
                                                             1994 STOCK        WEIGHTED
                                                            COMPENSATION       AVERAGE
                                                                PLAN        EXERCISE PRICE
                                                            ------------    --------------
<S>                                                         <C>             <C>
Outstanding, May 31, 1994.................................          --          $   --
  Granted.................................................     342,813            5.23
  Canceled................................................     (14,844)           5.12
                                                             ---------          ------
Outstanding, May 31, 1995.................................     327,969            5.23
  Granted.................................................     566,563            9.60
  Options exercised.......................................      (8,907)           5.12
  Canceled................................................     (50,469)           7.07
                                                             ---------          ------
Outstanding, May 31, 1996.................................     835,156            8.09
  Granted.................................................     463,125           13.89
  Options exercised.......................................     (51,884)           7.55
  Canceled................................................     (60,145)          11.65
                                                             ---------          ------
Outstanding, May 31, 1997.................................   1,186,252          $10.25
                                                             =========          ======
</TABLE>
 
     A summary of the Company's 1994 Stock Compensation Plan at May 31, 1997
follows:
 
<TABLE>
<CAPTION>
                                                            EXERCISE PRICES
                                    ---------------------------------------------------------------
                                    $5.12 -- $7.76   $8.80 -- $12.00   $12.40 -- $16.80     TOTAL
                                    --------------   ---------------   ----------------   ---------
<S>                                 <C>              <C>               <C>                <C>
Options outstanding...............      403,468          278,596            504,188       1,186,252
Weighted average exercise price --
  options outstanding.............      $  6.03          $  9.78            $ 13.89       $   10.25
Options exercisable...............      128,813           19,940             11,938         160,691
Weighted average exercise price --
  options exercisable.............      $  5.86          $ 10.54            $ 13.36       $    6.99
Weighted average remaining
  contractual life (years)........         6.73             8.34               9.11            8.12
</TABLE>
 
     During fiscal 1997, the Company granted each co-chief executive officer a
non-qualified stock option to purchase 93,750 shares of the Company's common
stock at $13.60 per share, the then fair market value of the Company's common
stock, under a Non-Qualified Stock Option Agreement (the "Option Agreements")
which remain subject to shareholder approval. The Company intends to seek
shareholder approval for the Option Agreements in connection with the Proxy
Statement for the Company's Annual Meeting of Shareholders to be held on October
2, 1997. Each option is exercisable after November 15, 2005 and terminates on
November 15, 2006. However, each option may be exercisable earlier according to
the following schedule:
 
<TABLE>
<S>              <C>
31,250 shares    If the Company's market capitalization equals or exceeds
                 $300 million at any time on or prior to November 15, 2000.
31,250 shares    If the Company's market capitalization equals or exceeds
                 $400 million at any time on or prior to November 15, 2000.
31,250 shares    If the Company's market capitalization equals or exceeds
                 $500 million at any time on or prior to November 15, 2000.
</TABLE>
 
     As permitted under statement of Financial Accounting Standards No. 123
"Accounting for Stock-Based Compensation" ("SFAS 123"), the Company accounts for
stock based compensation in accordance with Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" ("APB 25").
 
                                      F-18
<PAGE>   42
 
                 AMERICAN HOMESTAR CORPORATION AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
Accordingly, no compensation cost has been recognized in fiscal 1996 and 1997.
Had compensation cost been determined on the basis of SFAS 123, net income and
earnings per share would have been as follows:
 
<TABLE>
<CAPTION>
                                                                YEARS ENDED MAY 31,
                                                             -------------------------
                                                                1996          1997
                                                             ----------    -----------
<S>                                                          <C>           <C>
Net income:
  As reported..............................................  $9,756,000    $14,692,000
  Pro forma................................................   9,516,000     14,197,000
Primary Earnings per Share:
  As reported..............................................  $     0.98    $      1.31
  Pro forma................................................        0.96           1.26
Fully Diluted Earnings per Share:
  As reported..............................................  $     0.97    $      1.30
  Pro forma................................................        0.94           1.25
</TABLE>
 
     The fair value of each common stock option grant is estimated on the date
of the grant using the Black Scholes option-pricing model with the following
assumptions used for grants from all plans in fiscal 1996 and 1997:
 
<TABLE>
<CAPTION>
                                                          1996             1997
                                                      -------------    -------------
<S>                                                   <C>              <C>
Expected life (years)...............................      3-5 years        4-9 years
Risk-free interest rate.............................    6.32%-6.57%      6.40%-6.66%
Expected volatility.................................           .557             .557
Expected dividend yield.............................           0.0%             0.0%
</TABLE>
 
(11) EMPLOYMENT AGREEMENTS
 
     The Company entered into employment agreements, effective October 1, 1996,
with the co-chief executive officers of the Company. Each agreement specifies a
base salary of $235,000 per year plus an annual bonus of 2.25% of the Company's
after-tax consolidated net income. Pursuant to these agreements, each co-chief
executive officer was granted a stock option to purchase 62,500 shares of common
stock pursuant to the Company's 1994 Stock Compensation Plan (see note 10). In
addition, each co-chief executive officer was granted a Non-Qualified Stock
Option to purchase 93,750 shares of common stock at $13.60, the fair value of
the Company's common stock on the date of grant, under the Option Agreements
(see note 10).
 
(12) RELATED PARTY BALANCES AND TRANSACTIONS
 
     MOAMCO Properties, Inc. (MOAMCO), an entity owned by the Company's Chairman
and Co-Chief Executive Officer, and Byway Partners, Ltd. (Byways), a limited
partnership in which the Company's President and Co-Chief Executive Officer is a
limited partner and family member is a general partner, leased to the Company
two facilities used in the manufacturing operations (the Lancaster Facility and
Burleson Facility). The Company believes that the lease agreements were on terms
not less favorable than those generally available to unaffiliated parties for
comparable properties. Amounts paid to MOAMCO and Byways during the years ended
May 31, 1995 and 1996, were $300,000 and $12,500, respectively. During the year
ended May 31, 1996, the Company exercised its option to purchase the Lancaster
Facility and Burleson Facility for $1,450,000 and $1,500,000, respectively. The
purchase price was based on independent appraisals and ratified by the Company's
Board of Directors. MOAMCO purchased the Lancaster Facility in 1992 for
$1,010,000. Byways purchased the Burleson Facility in 1992 for $1,100,000.
 
     MOAMCO also owns and leases to the Company, under operating leases, land,
improvements and buildings related to three sales centers and the Company's
former corporate headquarters. During the years
 
                                      F-19
<PAGE>   43
 
                 AMERICAN HOMESTAR CORPORATION AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
ended May 31, 1995, 1996 and 1997, the Company paid MOAMCO approximately
$184,500, $144,000 and $78,000 respectively, for these operating leases (see
note 13).
 
     During fiscal 1995, the Company managed the operations of and leased
corporate office space to Coastal Insurance Agency ("Coastal"), an entity that
sold property damage insurance on manufactured homes and in which the Company's
major shareholder had an economic interest. During the year ended May 31, 1995,
the Company received commissions from Coastal of $187,000. During the year ended
May 31, 1995, the Company received management fees from Coastal of $183,000.
 
(13) COMMITMENTS AND CONTINGENCIES
 
  Repurchase agreements
 
     The Company has entered into repurchase agreements with various financial
institutions and other credit sources pursuant to which the Company has agreed,
under certain circumstances, to repurchase manufactured homes sold to
independent dealers in the event of a default by a dealer in its obligation to
such credit sources. Under the terms of such repurchase agreements, the Company
agrees to repurchase manufactured homes at declining prices over the periods of
the agreements (which generally range from 12 to 15 months). As of May 31, 1997,
the Company was at risk to repurchase approximately $34.1 million of
manufactured homes.
 
  Legal Matters
 
     The Company is involved in various legal actions arising in the ordinary
course of business. In the opinion of management, the ultimate disposition of
these matters will not have a material adverse effect on the Company's financial
condition or results of operations.
 
  Savings Plan
 
     During 1992, the Company adopted the American Homestar Corporation 401(k)
Retirement Plan (the "Savings Plan") whereby all employees of the Company are
eligible to participate in the Savings Plan who have completed one year of
service and have reached the age of twenty and one-half. The Savings Plan is
administered by a Plan Administrator appointed by the Company. Eligible
employees may contribute a portion of their annual compensation up to the legal
maximum established by the Internal Revenue Service for each plan year. The
Company's matching contributions are at the discretion of the Company and may be
made up to a maximum of 3% each plan year. Employee contributions are
immediately vested. Company contributions vest over the first six years of
employment. Amounts contributed by the Company to the Savings Plan for the years
ended May 31, 1995, 1996 and 1997 were $84,000, $120,000, and $185,000,
respectively.
 
  Workers Compensation Liability
 
     The Company has rejected the insurance coverage provided by the Texas
Workers' Compensation Act. While the Company maintains excess indemnity
insurance, the Company's portion of self-insured retention is $250,000 per
occurrence. Management, in assessing loss experience, adjusts the reserve
through periodic provisions.
 
  Leases
 
     The Company is obligated under various noncancelable operating lease
agreements with varying monthly payments and varying expiration dates through
2004. Rental expense under operating leases for the years ended May 31, 1995,
1996 and 1997 were $1,459,000, $1,509,000, and $2,644,000, respectively.
 
                                      F-20
<PAGE>   44
 
                 AMERICAN HOMESTAR CORPORATION AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     Aggregate annual rental payments, that include amounts due to related
parties, on future lease commitments at May 31, 1997 were as follows:
 
<TABLE>
<CAPTION>
                                                            TOTAL LEASE      AMOUNTS DUE
                                                            COMMITMENTS    RELATED PARTIES
                                                            -----------    ---------------
<S>                                                         <C>            <C>
1998......................................................  $2,457,000         $78,000
1999......................................................   1,807,000              --
2000......................................................   1,265,000              --
2001......................................................     655,000              --
2002......................................................     313,000              --
Thereafter................................................     865,000              --
                                                            ----------         -------
                                                            $7,362,000         $78,000
                                                            ==========         =======
</TABLE>
 
(14) CONCENTRATIONS OF CREDIT RISK
 
     For the year ended May 31, 1997, the Company had one producer that supplied
18% of the houses sold by Company-owned retail sales centers. The Company has a
credit facility with one lender to finance the majority of its new home
inventory. The loss of this lender could have a material adverse effect on the
Company's operations. A majority of the Company-owned retail sales centers are
located in Texas.
 
(15) SUPPLEMENTAL INFORMATION FOR STATEMENTS OF CASH FLOWS
 
     The Company had the following non-cash investing and financing activities:
 
<TABLE>
<CAPTION>
                                                           YEARS ENDED MAY 31,
                                                   ------------------------------------
                                                      1995         1996         1997
                                                   ----------   ----------   ----------
<S>                                                <C>          <C>          <C>
Purchase of property, plant and equipment through
  the issuance of notes payable..................          --   $2,000,000   $4,500,000
</TABLE>
 
     Supplemental disclosures of cash flow information are as follows:
 
<TABLE>
<CAPTION>
                                                           YEARS ENDED MAY 31,
                                                   ------------------------------------
                                                      1995         1996         1997
                                                   ----------   ----------   ----------
<S>                                                <C>          <C>          <C>
Income taxes paid................................  $4,838,000   $6,828,000   $9,729,000
Interest paid....................................   2,215,000    2,600,000    4,852,000
</TABLE>
 
                                      F-21
<PAGE>   45
 
                 AMERICAN HOMESTAR CORPORATION AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(16) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
 
     The following presents a summary of the unaudited quarterly financial
information for the years ended May 31, 1996 and 1997:
 
<TABLE>
<CAPTION>
                                   FIRST     SECOND      THIRD     FOURTH
                                  QUARTER    QUARTER    QUARTER    QUARTER     TOTAL
                                  -------    -------    -------    -------    --------
                                        (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                               <C>        <C>        <C>        <C>        <C>
1996
  Revenues......................  $59,656    $50,808    $53,427    $67,341    $231,232
  Operating income..............    4,435      4,421      4,194      6,422      19,472
  Net income....................    2,182      2,213      2,028      3,333       9,756
  Net income per share..........     0.23       0.23       0.21       0.31        0.98
1997
  Revenues......................  $66,706    $89,306    $84,389    $99,578    $339,979
  Operating income..............    5,644      7,268      6,696      9,765      29,373
  Net income....................    3,018      3,585      3,110      4,979      14,692
  Net income per share..........     0.27       0.32       0.28       0.44        1.31
</TABLE>
 
                                      F-22
<PAGE>   46
 
                                                                     SCHEDULE II
 
                 AMERICAN HOMESTAR CORPORATION AND SUBSIDIARIES
 
                       VALUATION AND QUALIFYING ACCOUNTS
 
<TABLE>
<CAPTION>
                                                               ADDITIONS
                                                 --------------------------------------
                                   BALANCE AT    CHARGED TO    CHARGED TO                               BALANCE AT
                                   BEGINNING      COSTS AND       OTHER                                   END OF
          DESCRIPTION               OF YEAR       EXPENSES      ACCOUNTS      OTHER(1)    DEDUCTIONS       YEAR
          -----------             ------------   -----------   -----------   ----------   -----------   ----------
<S>                               <C>            <C>           <C>           <C>          <C>           <C>
Year ended May 31, 1995
  Warranty and service..........  $   641,000    $ 5,900,000   $        --   $       --   $ 5,381,000   $1,160,000
Year ended May 31, 1996
  Warranty and service..........  $ 1,160,000    $ 8,044,000   $        --   $       --   $ 7,754,000   $1,450,000
Year ended May 31, 1997
  Warranty and service..........  $ 1,450,000    $10,859,000   $        --   $3,832,000   $11,510,000   $4,631,000
</TABLE>
 
---------------
 
(1) Amount represents acquired reserve for warranty and service costs.
 
                                      F-23
<PAGE>   47
 
                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
 EXHIBIT                                                                      REPORT WITH WHICH
   NO.                            DESCRIPTION                                 EXHIBIT WAS FILED
 -------                          -----------                                 -----------------
<C>       <S>                                                            <C>
   2.1    -- Securities Purchase Agreement by and among Brilliant        July 1997, Form 8-K/A
             Holding Corporation (Brilliant), the Brilliant
             Securityholders and American Homestar Corporation.
   2.2    -- First Amendment to the Securities Purchase Agreement by     July 1997, Form 8-K/A
             and among Brilliant, the Brilliant Securityholders and
             American Homestar Corporation.
   2.3    -- Agreement and Plan of Merger between American Homestar      Filed herewith
             Corporation, Nationwide N.C. Homes, Inc., N.C. Mobile
             Home Corp., and Robert H. Sauls.
   3.1    -- Restated Articles of Incorporation of American Homestar     S-1 Registration Statement
             Corporation.                                                No. 33-78630
   3.2    -- Amended and Restated Bylaws of American Homestar            S-1 Registration Statement
             Corporation.                                                No. 33-78630
   4.1    -- Form of certificate evidencing ownership of Common Stock    S-1 Registration Statement
             of American Homestar Corporation.                           No. 33-78630
   4.2    -- Shareholders Agreement, dated as of August 31, 1993, by     S-1 Registration Statement
             and among American Homestar Corporation and certain         No. 33-78630
             shareholders of American Homestar Corporation.
   4.3    -- Form of Amendment to Shareholders Agreement.                S-1 Registration Statement
                                                                         No. 33-78630
  10.1    -- Loan Agreement, dated September 24, 1996, among American    February 1997, Form 10-Q
             Homestar Corporation, Oak Creek Housing Corporation,
             Nationwide Housing Systems, Inc., American Homestar
             Financial Services, Inc., Heartland Homes, Inc., Guerdon
             Homes, Inc., American Homestar of Burleson, Inc.,
             American Homestar of Lancaster, Inc. and Bank One, Texas,
             N.A.
  10.2    -- $2,100,000 Term Promissory Note, dated September 24,        February 1997, Form 10-Q
             1996, by and between American Homestar Corporation, Oak
             Creek Housing Corporation and Bank One, Texas, N.A.
  10.3    -- $4,600,000 Term Promissory Note, dated September 24,        February 1997, Form 10-Q
             1996, by and between American Homestar Corporation, Oak
             Creek Housing Corporation and Bank One, Texas, N.A.
  10.4    -- $11,300,000 Term Promissory Note, dated September 24,       February 1997, Form 10-Q
             1996, by and between American Homestar Corporation, Oak
             Creek Housing Corporation and Bank One, Texas, N.A.
  10.5    -- $7,000,000 Term Promissory Note, dated September 24,        February 1997, Form 10-Q
             1996, by and between American Homestar Corporation, Oak
             Creek Housing Corporation and Bank One, Texas, N.A.
  10.6    -- Employment Agreement, dated as of November 15, 1996,        February 1997, Form 10-Q
             between Finis F. Teeter and American Homestar
             Corporation.
  10.7    -- Employment Agreement, dated as of November 15, 1996,        February 1997, Form 10-Q
             between Laurence A. Dawson, Jr. and American Homestar
             Corporation.
  10.8    -- Nonqualified Stock Option Agreement, dated November 15,     February 1997, Form 10-Q
             1996 between Finis F. Teeter and American Homestar
             Corporation.
</TABLE>
 
                                      F-24
<PAGE>   48
<TABLE>
<CAPTION>
 EXHIBIT                                                                      REPORT WITH WHICH
   NO.                            DESCRIPTION                                 EXHIBIT WAS FILED
 -------                          -----------                                 -----------------
<C>       <S>                                                            <C>
  10.9    -- Nonqualified Stock Option Agreement, dated November 15,     February 1997, Form 10-Q
             1996 between Laurence A. Dawson, Jr. and American
             Homestar Corporation.
  10.10   -- Amendment to Life Reinsurance Contract, dated December      February 1997, Form 10-Q
             31, 1996, by and between Lifestar Reinsurance Limited and
             American Bankers Life Assurance Company of Florida
  10.11   -- Amendment to Ford Finance Company, Inc. Inventory           November 1996, Form 10-Q
             Financing Agreement
  11      -- Statement Re Computation of Per Share Earnings              Filed herewith
  12      -- None
  13      -- None
  16      -- None
  18      -- None
  21      -- List of Subsidiaries                                        Filed herewith
  22      -- None
  23      -- Consent of KPMG Peat Marwick LLP                            Filed herewith
  24      -- None
  27      -- Financial Data Schedule                                     Filed herewith
  99      -- None
</TABLE>
 
                                      F-25