Exhibit 13

                           Growing Through Diversity

                   Featherlite Mfg., Inc. 1996 Annual Report

Registrar and Stock Transfer Agent
Firstar Trust Company
Milwaukee, WI

Independent Auditors
McGladrey & Pullen, LLP
Rochester, MN

General Counsel
Fredrikson & Byron, P.A.
Minneapolis, MN

Annual Meeting

The  Featherlite,  Mfg.,  Inc.  annual meeting will take place on May 7, 1997 at
Corporate Headquarters at 7 p.m. Plant tours at 4 p.m.

Availability of l0-K

A copy  of the  Company's  1996  Annual  Report  on Form  l0-K  filed  with  the
Securities  and  Exchange  Commission  will  be  made  available  to  interested
shareholders  without  charge upon written  request to the Company or by calling
Investor Relations at (319) 547-6000 or fax (319) 547-6099.

Stock Market Information

Nasdaq Stock Market: FTHR

As of February 15, 1997, there were approximately 264 shareholders of record.

<PAGE>

SELECTED FINANCIAL INFORMATION
(In thousands, except per share and stock price data)

<TABLE>
<CAPTION>

FIVE YEARS ENDED DECEMBER 31,                       1996             1995              1994             1993              1992

<S>                                             <C>               <C>              <C>               <C>               <C>    
Statement of Income Data:
     Net sales                                   $99,329          $69,159           $60,172          $39,763           $29,383
     Cost of goods sold                           84,643           58,673            47,521           31,269            23,260
                                                ------------------------------------------------------------------------------
     Gross profit                                 14,686           10,486            12,651            8,494             6,123
     Selling and administrative expenses          12,492            9,993             8,075            6,308             5,149
                                                ------------------------------------------------------------------------------
     Operating income                              2,194              493             4,576            2,186               974
     Interest expense                             (1,450)            (799)             (667)            (550)             (450)
     Other income, net                               660            1,478               344              480               270
                                                ------------------------------------------------------------------------------
     Income before taxes                           1,404            1,172             4,253            2,116               794
     Provision for Income taxes                      562              471               392               --                --
                                                ------------------------------------------------------------------------------
     Net income                                  $   842           $  701           $ 3,861          $ 2,116            $  794
                                                ------------------------------------------------------------------------------
Pro Forma Statement of Income Data
     Net income, as reported                     $    --           $   --           $ 3,861          $ 2,116            $  794
     Pro forma provision for taxes                    --               --             1,152              811               339
                                                ------------------------------------------------------------------------------
     Pro forma net income                        $    --           $   --           $ 2,709          $ 1,305            $  455
                                                ==============================================================================
     Net income per share                        $  0.13           $ 0.12           $  0.60          $  0.33            $ 0.11
                                                ==============================================================================
Cash Distributions for taxes*                    $    --           $  305           $ 1,795          $   746            $  146
                                                ==============================================================================
Weighted average number of
     common shares outstanding (000's)             6,106            5,955             4,509            4,000             4,000
                                                ==============================================================================

Balance Sheet Data (End of Period)                  1996             1995              1994             1993              1992

Working capital                                  $15,128          $15,360           $ 9,516           $  782           $ 1,794
Total assets                                      53,534           46,084            33,258           19,098            13,586
Total long-term debt,
     net current maturities                       13,356           15,194             5,282            4,230             3,559
Total shareholders' investment                    20,595           17,953            17,252            4,517             3,615

</TABLE>

<PAGE>

<TABLE>
<CAPTION>

Quarterly Financial Data (Unaudited)

                                              Operating                   Net Income
                                    Gross      Income     Net Income       (Loss)              Common Stock Price
                     Net Sales      Profit     (Loss)       (Loss)        Per Share          High               Low
<S>                   <C>           <C>       <C>           <C>             <C>             <C>                <C>
1996
First Quarter         $19,976       $3,018    $  302        $ 51            $0.01           $ 6.00             $4.63
Second Quarter         21,169        2,704        85          14              --              6.38             $4.75
Third Quarter          28,384        3,938       690         206             0.03             6.88             $5.13
Fourth Quarter         29,800        5,026     1,117         571             0.09             6.25             $4.75

1995
First Quarter         $18,214       $3,279    $  970        $912            $0.15           $11.38             $9.00
Second Quarter         17,396        2,563       224         496             0.08           $ 9.88             $7.38
Third Quarter          16,164        2,180      (381)       (332)           (0.05)          $ 8.13             $5.50
Fourth Quarter         17,385        2,464      (320)       (375)           (0.06)          $ 6.25             $4.19

</TABLE>

The Company's  common stock trades on the Nasdaq  National  Market Stock tier of
The NASDAQ Stock Market under the symbol "FTHR".  

*Represent  only  distribution  for  estimated  shareholders'  federal and state
income tax liabilities from Company's  status as S corporation  prior to initial
public stock  offering.  No other dividends were paid. The Company is restricted
from  paying  dividends.  See  Liquidity  &  Capital  Resources  in  MD&A  for a
discussion of these restrictions.

<PAGE>


Management's Discussion and Analysis

     The following  discussion  pertains to the Company's  results of operations
and financial condition for the years ended December 31, 1996, 1995 and 1994.

Results of Operations

Net Sales

     Featherlite  Mfg.,  Inc.  achieved a 43.6%  increase  in net sales to $99.3
million for the year ended  December  31, 1996  following  an increase of 15% to
$69.2 million in 1995 from $60.2 million in 1994. These gains were the result of
strong growth in all product lines in 1996 and 1995 as well as  acquisitions  in
both years. In 1996, the Company  acquired the assets of Vantare  International,
Inc., a converter of luxury  motorcoaches  and in 1995,  the assets of Diamond D
Trailer Manufacturing, Inc. which manufactures steel trailers.

Gross Profit

     Significant sales expansion combined with lower aluminum costs caused gross
profit to increase to $14.7 million in 1996 from $10.5 million in 1995 and $12.6
million in 1994. As a percentage of sales, gross profit margin was 14.8% in 1996
compared  to  15.2%  in 1995  and  21.0% in  1994.  Following  is a  summary  of
components of the change in the gross profit margin percentage, by year, for the
years 1994 through 1996:

                                                          1996

                                                 With
                                                Motor            Trailers
                                              coaches              Only
Aluminum                                         7.2%              4.9%
Other Materials                                 (9.0)             (3.8)
Labor and overhead                               1.4              (0.9)
                                                -----------------------
Gross Margin Inc(dec)                           (0.4%)            (0.2%)
                                                -----------------------

                                                 1995              1994

Aluminum                                        (2.1)%            (1.6)%
Other Materials                                 (1.2)               .3
Labor and overhead                              (2.5)               .9
                                                -----------------------
Gross Margin Inc(dec)                           (5.8)%            (0.4%)
                                                -----------------------


     The gross margin  decrease in 1996 relates  primarily to the increased cost
of luxury motorcoaches which offset the effect of aluminum cost decreases during
the year.  If  motorcoaches  are  excluded,  the gross profit margin for 1996 is
comparable to 1995. Other materials related to trailers increased due to greater
sales of utility trailers, steel horse and livestock trailers and other trailers
which have a higher  percentage  of  non-aluminum  materials.  In 1995 the gross
margin  was lower  than 1994 due to the  increased  cost of  aluminum  and other
materials as well as labor and overhead cost increases.

<PAGE>

     Aluminum  is a commodity  which is traded  daily on  commodity  markets and
fluctuates in price.  The average Midwest  delivered market cash price per pound
for ingot  aluminum  during the three years ended December 31, 1996, as reported
to the  Company  by its  suppliers,  was $.72 in 1996,  $.86 in 1995 and $.72 in
1994.  The  Company's  cost of aluminum  varies from these market  prices due to
vendor processing  charges,  timing of purchases,  contractual  commitments with
suppliers for specific  prices and other factors.  Its average cost of aluminum,
which peaked in the third and fourth quarters of 1995, was approximately 6% less
in 1996 than in 1995 and 20% greater than in 1994.

Selling, Administration and Other

     The  significant  sales growth,  coupled with expense  control also reduced
selling  and   administrative   costs  as  a  percent  of  sales.   Selling  and
administrative  expenses  decreased  as a  percentage  of sales to 12.6% in 1996
compared  with 14.5% in 1995 and 13.4% in 1994.  These costs  increased  by $2.4
million to $12.4  million in 1996 from $10.0 million in 1995 and $8.1 million in
1994.  This increase in 1996 mainly  reflects  sales and other  personnel  added
throughout 1995 and 1994 to improve product exposure and to build a larger sales
organization to support a higher sales volume and expanded  dealer network.  The
acquisition of Vantare increased selling and administrative expenses by $692,000
in 1996.

     Interest  expense  increased  in 1996 by  $650,000  to  $1.5  million  from
$799,000  in 1995 and  $667,000  in 1994 as the  result of  increased  levels of
borrowings for working capital and aircraft in 1996 and 1995. Borrowings against
the line of credit  were  reduced  in the first half of 1995 as a portion of the
proceeds from the initial public offering were available to finance 1995 working
capital  increase.  Other  income  decreased  by  $853,000  in 1996  over  1995,
substantially due to the non- recurrence in 1996 of a $750,000 development grant
received  in 1995  for  working  capital  and  operating  costs  related  to the
facilities  expansion,  and additional  sales of aircraft in 1995 which realized
gains of $525,000. Other income in 1996 also includes a litigation settlement in
the amount of approximately $245,000.

Provision for income taxes

     The  provision  for income taxes  reflects an  effective  federal and state
income  tax rate of 40% in 1996 and 1995.  In 1994,  a pro forma  provision  for
taxes was  calculated  using an  effective  rate of 36% as the  Company was an S
corporation  for  federal  and state  income tax  purposes  until its S election
terminated  in connection  with a public  offering of common stock in September,
1994.

Segment information

     The following discussion pertains to information on the Company's principal
business  segments as set forth in Note 11 to the financial  statements  for the
years ended December 31, 1996, 1995 and 1994. 

<PAGE>

Trailer Segment
                                1996             1995              1994
Net sales
 (000's)                     $80,689          $65,176           $56,835
Segment
 income
 (000's)                       5,085            2,764             6,395
Segment
 income
 percent                         6.3%             4.2%             11.3%


     Net trailer  sales  increased by 23.8% in 1996 and 14.6% in 1995.  The 1996
increase  includes a 20%  increase  in the sales of  Featherlite  and  Econolite
trailers  plus the added sales of Diamond D trailers  (which was acquired in the
4th quarter of 1995). On a product line basis,  there were significant  gains in
1996 over 1995 in sales of horse and livestock trailers,  which are each up more
than 20%,  and  increased  sales of  snowmobile  and other  recreational/utility
trailers,  which  are  each up over  60% in  1996.  Car  trailer  and  race  car
transporter sales were up about 10% compared to last year.  Commercial  trailers
were up by only 15%  reflecting the expansion of drop frame moving and specialty
van sales offset by the  discontinuation  of flatbed and drop deck semi-trailers
during 1996. The sales increase in 1995 compared to 1994 included gains in sales
in   all   product    lines   except    sales   of   livestock    trailers   and
commercial/semi-trailers which were down slightly. Other factors contributing to
the trailer  sales growth in 1995 and 1996  included:  the  introduction  of new
trailer models in existing  product lines, the introduction of new product lines
and the expanded use of specialty  trailers in activities related to hobbies and
entertainment of end user customers. A portion of the sales increase in 1996 and
1995 was the result of price  increases  ranging from 2-5%  introduced  in those
years.

     Segment  income  increased in 1996  primarily  due to higher sales  volume,
improved  margins  resulting from reduced  aluminum costs and reduced  marketing
expenses.  These  improvements  were  partially  offset  by  increases  in other
materials,  and labor and  overhead  costs.  In 1995  segment  income  decreased
primarily  due to  increased  aluminum  and  other  material  costs,  as well as
increased  labor and overhead costs which were higher than 1994 due to increased
average  labor  rates and  greater  overhead  costs  related to  expanded  plant
capacity.  Sales  and  marketing  expenses  also  increased  in 1995.  Sales and
marketing  expenses  related to this segment were 5.7% in 1996, 6.9% in 1995 and
6.0% in 1994.

Motorcoach segment

                                                 1996

Net sales (000's)                             $14,785
Segment income (000's)                            932
Segment income percent                            6.3%

     The Company began developing and manufacturing  luxury motorcoaches in 1995
and it acquired the assets of Vantare  International,  Inc., a luxury motorcoach
converter,  as of July 1,  1996.  Net  sales  for  1996  include  sales  of used
trade-ins in the amount of $5.2 million, which have a lower margin than new unit
sales.  Marketing  and  administrative  expenses  related to this  segment  were
approximately  5.7% of segment  income,  including  amortization  of intangibles
related to the acquisition of approximately $82,000 in 1996.

<PAGE>

Looking Forward

     The statements made in this annual report which are forward looking in time
involve risks and uncertainties discussed here and in the Company's Form 10K and
other  filings with the SEC,  including but not limited to:  product  demand and
acceptance  of  new  products  in  each  segment  of  the   Company's   markets,
fluctuations in the price of aluminum,  competition,  facilities utilization and
aircraft purchases and sales.

     Sales are  expected  to  continue  to remain  strong in 1997 in all product
groups.  The Vantare  acquisition in 1996 will add significant luxury motorcoach
sales volume as they expect to sell 42 new  motorcoaches  in 1997.  Increases in
livestock trailer sales are expected to continue as cattle prices have improved.
Significant  additional  sales  are  expected  from  the sale of  private  label
snowmobile  trailers to Polaris  dealers.  Continued  growth is expected in drop
frame  delivery and moving van sales which the Company  introduced in late 1995.
These  sales are  expected  to  substantially  replace  sales of  semi-flat  bed
trailers which the Company has discontinued  due to lower profit margins.  These
expectations  may not be met if there are changes in the  general  economy or in
the market for particular  types of trailers or  motorcoaches.  Price  increases
ranging from 2 to 5%  announced  in midyear  1996 will be effective  for all new
orders  received in 1997. The total sales order backlog at December 31, 1996 was
approximately  $28 million,  including $16 million in Vantare  orders,  compared
with $7.2 million at December 31, 1995. All of this backlog will be delivered in
1997.

     Continued decreases in the average cost of aluminum,  which are expected to
be  approximately  10% less than the 1996  average  cost,  will have a  positive
impact on gross margins.  The Company has obtained commitments from suppliers to
provide,  at an agreed  upon  fixed  price,  substantial  portions  of its total
aluminum  requirements  for much of 1997.  However,  the  overall  gross  margin
percentage may not improve  significantly  as future Vantare sales may include a
significant  amount of used coach sales  which have a low gross  margin and will
hold down  improvement in the Company's  overall gross margin percent.  However,
the effect of this on overall  operating  income should be partially  reduced by
lower  than  average  sales and  administration  costs  related  to the  Vantare
operation.

     There is a risk to  future  operating  results  related  to  losing a major
supplier of aluminum.  This risk is  relatively  nominal as there are  alternate
sources of supply.  It may take a little longer to replace an extruded  aluminum
supplier due to the fact that dies are  required and would have to be made.  The
Company routinely tries to keep at least two suppliers of each shape so it has a
backup supplier, if necessary. Many of these suppliers have multiple plants that
can be used to produce the material the Company requires.

     There  is also a risk if the  Company  were to lose its  sole  supplier  of
motorcoach  conversion shells,  Prevost Car Company,  although the Company could
purchase certain shells from other manufacturers. The Company does have business
interruption insurance to cover all or a portion of the losses it may sustain if
Prevost's plant is destroyed by fire or certain other catastrophies.

     Sales and administration  expenses are expected to increase at a lower rate
than sales  growth as much of the  organizational  growth  occurred  in 1996 and
1995. Also, the addition of Vantare will not result in a significant increase in
sales and  administration  expense,  except for  amortization  of intangibles as
discussed in Note 10 to the financial  statements.  Interest expense will likely
remain  higher in 1997 as the average level of debt is expected to be greater in
1997 than 1996. No significant amount of grant income will be realized in 1997.

<PAGE>

     The  Company has made  increased  use of leverage  and  incurred  increased
interest  and  related  expenses in the three years  ended  December  31,  1996.
Increased  debt was incurred in  connection  with the  acquisition  of Diamond D
(fourth  quarter of 1995),  financing  operations of Vantare  (third  quarter of
1996) and financing  additional working capital. The Company temporarily was out
of compliance  with certain  covenants in its loan agreements in 1996 but is now
in compliance and has extended its bank line of credit.  Increased  leverage and
related expenses create a risk to future operating results of the Company.

Liquidity and Capital Resources

     Operating activities used net cash of $214,000 for the year 1996, primarily
for  investment in working  capital.  Net income for the year ended December 31,
1996 provided cash of $842,000.  This amount was  increased by  adjustments  for
depreciation of $1.5 million and reduced by other non-cash items in a net amount
of $185,000.  Increases in receivables and inventories and other working capital
items used cash of $2.3 million, excluding the effect of the Vantare acquisition
which  increased  receivables,  inventories  and  prepaids  by $5.8  million and
accounts  payable  and  accruals by $6.1  million.  These  increases  in working
capital reflect the Company's increased volume of sales and additional increases
may be required in the future to support higher sales levels throughout the next
year.

     Investing  activities in the year ended  December 31, 1996 provided cash of
$1.6 million,  net of $1.5 million used for plant and other improvements.  Sales
of aircraft provided $2.8 million, which will be reinvested in aircraft in 1997.
The  Company  also  made  a  non-cash  acquisition  of  the  assets  of  Vantare
International,  Inc. as of July 1, 1996. In connection  with this purchase which
is described in Note 10 to financial  statements,  the Company received cash and
cash  equivalents  in the amount of $231,000 and equipment  with a fair value of
$330,000.

     Financing  activities  used net cash of $1.9  million  after  borrowing  an
additional $6.1 million and repaying $8.2 million of aircraft and other debt. In
connection  with the purchase of the assets of Vantare  International,  Inc. the
Company issued 300,000 shares of common stock with an approximate  value of $1.8
million and assumed debt in the amount of $1.7 million.  An  additional  100,000
shares of stock may be issued over the next four years if defined  levels of net
income are achieved by the Vantare operation.

     The Company has a working  capital line of credit with its primary  lender.
This  line has a  borrowing  limit of equal to the  lessor of $12  million  or a
defined percentage of eligible receivables and inventory and an interest rate of
prime.  The maturity date of this line is July 31, 1998,  subject to renewal and
extension.  The Company is required by the lender to maintain  defined levels of
working  capital,  tangible  net worth and cash flow and to limit  leverage  and
capital expenditures. Borrowings under the line are secured by substantially all
the assets of the Company.  There was $9.1 million borrowed against this line as
of December 31, 1996.

<PAGE>

     The  Company  also has a  wholesale  floor  plan  agreement  with a finance
company to borrow up to $3.5  million for  financing  new and used  motorcoaches
held in inventory.  At December 31, 1996, $1.8 million was borrowed against this
line.

     The Company  believes that its current cash  balances,  cash flow generated
from  operations  and  available  borrowing  capacity will be sufficient to fund
operations  and  capital  requirements  for the next  year  and the  foreseeable
future.

     As discussed in Note 6 to financial statements, the Company is contingently
liable under certain dealer floor plans and retail  financing  arrangements  and
has  guaranteed  certain  notes payable to  Featherlite  Credit  Corporation,  a
related company.  These contingent  liabilities total approximately $6.1 million
at December 31, 1996. Also, the Company is self-insured for a portion of certain
health benefit and workers' compensation insurance claims. At December 31, 1996,
the  Company's   maximum   annual  claim   exposure   under  these  programs  is
approximately  $2.2  million.  The Company has obtained an  irrevocable  standby
letter  of  credit  in the  amount  of  $1,225,000  in  favor  of  the  workers'
compensation claim administrator.

     The Company is expanding its production facility in Sanford,  Florida. Upon
completion,  this  expansion  project  will be sold,  at its  completed  cost of
approximately $855,000, to the Seminole County Port Authority, the present owner
of the facility.  The facility will then be leased back to the Company under the
terms of a ten year  capitalizable  lease.  During the  construction  period the
Company will provide financing for the construction  using funds obtained from a
bank. The cost of this financing will be included in the total project cost. The
Company  has made a  commitment  to the City of  Cresco  to  construct  a hangar
facility at a cost of  approximately  $300,000  as part of an airport  expansion
project in 1997 or 1998.

     For the foreseeable  future, the Company does not plan to pay dividends but
instead will follow the policy of  reinvesting  earnings in order to finance the
expansion and  development of its business.  As discussed in Note 5 to financial
statements, the Company is a party to certain loan agreements which prohibit the
payment of dividends without the lender's consent.

<PAGE>

Featherlite Mfg., Inc.
Consolidated Balance Sheets
December 31, 1996 and 1995

<TABLE>
<CAPTION>

                                                                                             1996                      1995
<S>                                                                                    <C>                       <C>    
ASSETS

CURRENT ASSETS:
     Cash                                                                              $  256,128                $  810,708
     Trade accounts receivable                                                          6,782,898                 5,501,045
     Refundable income taxes                                                                   --                   466,411
     Inventories                                                                       25,235,331                19,461,509
     Prepaid expenses                                                                   1,093,463                   787,657
     Deferred taxes                                                                       481,410                   430,410
                                                                                       ----------                ----------
         Total current assets                                                          33,849,230                27,457,740
                                                                                       ----------                ----------
PROPERTY AND EQUIPMENT:
     Land and improvements                                                              1,111,212                 1,071,100
     Building and improvements                                                          7,300,025                 7,110,754
     Machinery and equipment                                                            9,275,861                 7,932,603
     Accumulated depreciation                                                          (4,914,212)               (3,780,835)
                                                                                       ----------                ----------
         Net property and equipment                                                    12,772,886                12,333,622
                                                                                       ----------                ----------
GOODWILL AND OTHER ASSETS                                                               6,911,416                 6,292,854
                                                                                       ----------                ----------
                                                                                      $53,533,532               $46,084,216
                                                                                       ==========                ==========
LIABILITIES AND SHAREHOLDERS' INVESTMENT

CURRENT LIABILITIES:
     Current maturities of long-term debt                                             $ 1,145,465               $ 1,094,769
     Other notes payable                                                                2,254,641                   656,571
     Trade accounts payable                                                             9,776,106                 8,418,101
     Accrued liabilities                                                                3,110,187                 1,811,954
     Customer deposits                                                                  2,157,412                   116,395
     Income taxes payable                                                                 240,298                        --
                                                                                       ----------                ----------
         Total current liabilities                                                     18,684,109                12,097,790
                                                                                       ----------                ----------
LONG-TERM DEBT:
     Bank line of credit                                                                9,100,000                 7,600,000
     Other debt, net of current maturities                                              4,245,592                 7,594,173
                                                                                       ----------                ----------
         Total long term debt                                                          13,345,592                15,194,173
                                                                                       ----------                ----------
DEFERRED GRANT INCOME                                                                     310,170                   383,362
DEFERRED INCOME TAXES                                                                     598,743                   455,743
CONTINGENCIES AND COMMITMENTS (Note 6)                                                 ----------                ----------
SHAREHOLDERS' INVESTMENT
     Common stock                                                                      14,220,355                12,420,355
     Additional paid-in capital                                                         4,061,500                 4,061,500
     Retained earnings                                                                  2,313,063                 1,471,293
                                                                                       ----------                ----------
         Total shareholders' investment                                                20,594,918                17,953,148
                                                                                       ----------                ----------

                                                                                      $53,533,532               $46,084,216
                                                                                       ==========                ==========
</TABLE>

See Notes to Consolidated Financial Statements.

<PAGE>

Featherlite Mfg., Inc.
Consolidated Statements of Operations
For the years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>

                                                                      1996                  1995                  1994
<S>                                                               <C>                   <C>                   <C>   
Net sales                                                         $99,328,995           $69,159,149           $60,171,843
Cost of sales                                                      84,642,699            58,672,720            47,521,014
                                                                   ----------            ----------            ----------    
     Gross profit                                                  14,686,296            10,486,429            12,650,829
Selling, general and administrative expenses                       12,372,360             9,979,389             8,008,036
Amortization of intangibles                                           119,610                14,462                66,407
                                                                   ----------            ----------            ----------
     Income from operations                                         2,194,326               492,578             4,576,386
                                                                   ----------            ----------            ----------
Other income (expense):
     Interest expense                                              (1,450,265)             (798,530)             (667,212)
     Grant income                                                      73,192               823,192                88,646
     Gain on aircraft and other sales                                  59,648               534,092               128,688
     Other income, net                                                526,869               120,333               126,348
                                                                   ----------            ----------            ----------
         Total other income (expense)                                (790,556)              679,087              (323,530)
                                                                   ----------            ----------            ----------
     Income before taxes                                            1,403,770             1,171,665             4,252,856
     Provision for income taxes                                       562,000               471,000               392,000
                                                                   ----------            ----------            ----------
         Net income                                               $   841,770           $   700,665           $ 3,860,856
                                                                   ==========            ==========            ==========
Pro forma data
     Net income as reported                                       $        --           $        --           $ 3,860,856
     Pro forma provision for income taxes                                  --                    --             1,152,000
                                                                   ----------            ----------            ----------
         Pro forma net income                                     $        --           $        --           $ 2,708,856
                                                                   ==========            ==========            ==========
Net income per share (Pro forma in 1994)                          $      0.13           $      0.12           $      0.60
                                                                   ==========            ==========            ==========
Weighted average number of common
     shares outstanding                                             6,106,072             5,955,000             4,508,836
                                                                   ==========            ==========            ==========

</TABLE>

Consolidated Statements of Shareholders' Investment 
For the years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>

                                                          --Common Stock--
                                                    Outstanding                          Additional              Retained
                                                      Shares            Amount         Paid in Capital           Earnings
<S>                                                 <C>             <C>                 <C>                      <C>    
Balance December 31, 1993                           4,000,000       $ 2,000,000                                  $2,516,802

     Net income for the period                                                                                    3,860,856
     Distributions for shareholders' taxes                                                                       (1,545,530)
     Sale of common stock, net                      1,955,000        10,420,355
     Reclassify undistributed previously
         taxed S corporation earnings                                                    4,061,500               (4,061,500)
                                                    ---------        ----------          ---------                ---------
Balance December 31, 1994                           5,955,000       $12,420,355         $4,061,500               $  770,628

     Net income for the period                                                                                      700,665
                                                    ---------        ----------          ----------               ---------
Balance December 31, 1995                           5,955,000       $12,420,355         $4,061,500               $1,471,293

     Net income for the period                                                                                      841,770
     Issue of common stock                            300,000         1,800,000
                                                    ---------        ----------          ----------               ---------
Balance December 31, 1996                           6,255,000       $14,220,355         $4,061,500               $2,313,063
                                                    =========        ==========          =========                =========

</TABLE>

See Notes to Consolidated Financial Statements.

<PAGE>

<TABLE>
<CAPTION>

Featherlite Mfg., Inc.
Consolidated Statements of Cash Flows
For the years ended December 31, 1996, 1995 and 1994
                                                                             1996                 1995                   1994
<S>                                                                    <C>                   <C>                     <C>    
CASH FLOWS FROM (USED FOR) OPERATING ACTIVITIES:
     Net income                                                         $  841,770           $  700,665              $3,860,856
     Adjustments to reconcile net income to net cash
         from (used for) operating activities
         Depreciation and amortization                                   1,454,271            1,244,495                 925,739
         Trailers exchanged for advertising and related amortization      (143,953)              98,546                  38,487
         Grant income                                                      (73,192)            (823,192)                (88,646)
         Deferred taxes                                                     92,000              190,333                (165,000)
         (Gain) on sales of aircraft and other property                    (59,648)            (534,092)               (128,688)
         Changes in current operating items, net of effect of
           business acquisitions
            Trade accounts receivable                                   (1,150,027)          (1,657,627)               (920,605)
            Refundable income taxes                                        466,411             (466,411)                     --
            Inventories                                                   (285,297)          (6,763,671)             (5,009,675)
            Prepaid expense                                               (147,755)            (127,543)                 92,381
            Trade accounts payable                                      (1,999,439)           1,895,513               2,684,551
            Accrued liabilities                                          1,305,557              149,222                 889,945
            Customer deposits                                             (755,080)            (199,866)                (35,948)
            Income taxes payable                                           240,298                   --                      --
                                                                         ---------            ---------               ---------
     Net cash from (used for) operations                                  (214,084)          (6,293,628)              2,143,397
                                                                         ---------            ---------               ---------
CASH FLOWS FROM (USED FOR) INVESTING ACTIVITIES:
     Acquisition of business                                               231,365           (2,005,708)                     --
     Purchases of property and equipment                                (1,542,899)          (2,941,669)             (3,811,728)
     Proceeds from sale of equipment                                        78,868              123,087                 159,347
     Purchase of airplanes for resale                                           --           (5,513,773)             (2,975,500)
     Proceeds from sale of airplanes                                     2,788,500            4,225,000               1,240,000
                                                                         ---------            ---------               ---------
     Net cash (used for) investing activities                            1,555,834           (6,113,063)             (5,387,881)
                                                                         ---------            ---------               ---------
CASH FLOWS FROM (USED FOR) FINANCING ACTIVITIES
     Distribution for shareholder taxes                                         --             (305,000)             (1,795,051)
     Short-term debt increase (decrease)                                   140,313              523,627              (2,198,962)
     Proceeds from long-term debt and grants                             6,106,387           16,412,183               4,844,227
     Repayment of long-term debt                                        (8,143,030)          (6,212,223)             (4,289,779)
     Net proceeds from issuance of common stock                                 --                   --              10,420,355
     Checks issued not yet presented increase (decrease)                        --                   --                (937,494)
                                                                         ---------            ---------              ----------
         Net cash from (used for) financing activities                  (1,896,330)          10,418,587               6,043,296
                                                                         ---------           ----------               ---------
         Net cash increase (decrease) for period                          (554,580)          (1,988,104)              2,798,812
Cash, beginning of the period                                              810,708            2,798,812                      --
                                                                         ---------            ---------               ---------
Cash, end of the period                                                 $  256,128           $  810,708              $2,798,812
                                                                         =========            =========               =========
</TABLE>

<PAGE>

Featherlite Mfg., Inc.
Notes To Consolidated Financial Statements

Note 1. Nature of Business

     Featherlite  Mfg.,  Inc. (the Company) is engaged in the  manufacturing  of
various types of specialty  trailers and luxury  motorcoaches as well as related
parts  and  accessories.  The  trailers  are  primarily  sold  at  wholesale  to
authorized  dealers  throughout  the United States and Canada.  Dealer terms and
conditions for business are defined by standard  agreements with each authorized
dealer.  The luxury  motorcoaches  are sold  directly by the Company to end user
customers. The Company is also involved in the purchase and resale of commercial
type aircraft used for business purposes.

Note 2. Summary of Significant Accounting Policies

     Principles of Consolidation:  The consolidated financial statements include
the  accounts  of the  Company  and its  wholly  owned  subsidiary,  Featherlite
Aviation  Company.  All  material  intercompany  accounts and  transactions  are
eliminated in consolidation.

     Fair Values of Financial Instruments: The carrying values of cash, accounts
receivable and payable, short-term debt and accrued liabilities approximate fair
value due to the  short-term  maturities  of these assets and  liabilities.  The
carrying amount of long term debt,  including current  maturities,  approximates
the fair value of  long-term  debt  because the related  interest  rates  either
fluctuate  with the lending  bank's  current prime rate or  approximate  current
interest rates for debt of a similar nature and maturity.

     Financial Statement  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 disclosures of contingent  assets and liabilities at the date of
the  financial  statements  and the  reported  amounts of revenues  and expenses
during the reporting period. Actual results could differ from these estimates.

     Cash: At December 31, 1996 and 1995,  the Company had cash with a financial
institution in excess of the Federal  Deposit  Insurance  Corporation  insurance
coverage.  The  Company has  performed  an  evaluation  of the  relative  credit
standing of this  financial  institution  and believes it has limited its credit
exposure accordingly.

     Inventories.  Inventories are stated at lower of first-in, first-out (FIFO)
cost or market and include materials, labor and overhead costs. Inventories were
as follows:

                                 1996                      1995

Raw Materials              $ 8,053,000               $ 6,886,000
Work in Progress             8,410,000                 3,329,000
Finished Trailers
  & Motorcoaches             8,772,000                 9,247,000
                            ----------                ----------
  Total                    $25,235,000               $19,462,000
                            ==========                ==========

<PAGE>

     Aircraft  Held for  Resale:  Aircraft  held by the  Company  for resale are
stated  at  cost.  Charges  for  depreciation  are not  taken,  but the  Company
periodically  evaluates the aircraft's  net realizable  value and, if necessary,
adjusts the carrying value by charges to operations. Gain or loss on the sale of
aircraft is included in  operations  during the period in which the aircraft are
sold.  Aircraft  held by the Company for resale are  classified as noncurrent as
prior history indicates that the aircraft may not be sold within the next twelve
months.

     Property and  Equipment:  Property and equipment are  capitalized  at cost,
while  repair  and  maintenance   items  are  charged  to  current   operations.
Depreciation is provided for financial  reporting  purposes using  straight-line
and  accelerated  methods  over  estimated  useful  lives of 31 to 39 years  for
building and improvements and 5 to 7 years for machinery and equipment.

     Product Warranty:  The Company's products are covered by product warranties
ranging  from one to six years after date of purchase  by the  consumer.  At the
time of sale, the Company  recognizes  estimated  warranty cost,  based on prior
history and expected future claims, by a charge to operations.

     Goodwill and Long-lived Assets: The Company assesses  long-lived assets for
impairment  under FASB  Statement  No. 121,  "Accounting  for the  Impairment of
Long-Lived  Assets and for  Long-Lived  Assets to Be  Disposed  Of." Under those
rules,  property and equipment,  goodwill  associated  with assets acquired in a
purchase  business  combination,  idle  facilities  held for sale and any  other
long-lived  assets  are  included  in  impairment  evaluations  when  events  or
circumstances exist that indicate the carrying amount of those assets may not be
recoverable.

<PAGE>

     Cash Flow Information: Cash payments for interest were $1,461,000, $770,000
and  $662,000  for  the  years  ended   December  31,  1996,   1995,  and  1994,
respectively.  Cash payments for income taxes were $143,000 in 1996 and $825,000
in 1995. Cash provided by (used for)  acquisition of businesses in 1996 and 1995
was as follows:

                                        1996                      1995

Fair Value of Assets
  Acquired                        $ 9,412,000               $ 2,414,000
Liabilities Assumed                (7,843,000)                 (408,000)
Issuance of Common
  Stock                            (1,800,000)                       --
                                    ---------                 ---------
Cash provided (used)               $  231,000               $(2,006,000)
                                    =========                 =========

     Revenue Recognition: The Company recognizes revenue, net of all anticipated
discounts,  when the title to the trailer or  motorcoach  passes,  normally upon
completion  of  production  and  issuance of an invoice  and the  Manufacturer's
Statement of Origin.

     Deferred Grant Income:  The Company  recognizes  revenue  related to grants
received  from various  governmental  units over the life of the assets to which
the funding  relates or during the period in which the expense  occurs for which
grants  were  received.  Revenue  recognition  begins  when there is  reasonable
assurance that all  conditions of the grants,  principally  job creation  goals,
have been met.

     Income Taxes:  Deferred  taxes are provided on a liability  method  whereby
deferred tax assets are  recognized  for deductible  temporary  differences  and
deferred tax  liabilities  are  recognized  for taxable  temporary  differences.
Temporary differences are the differences between the reported amounts of assets
and  liabilities  and their tax bases.  Deferred  tax  assets  are  reduced by a
valuation  allowance when, in the opinion of management,  it is more likely than
not that some  portion or all of the  deferred  tax assets will not be realized.
Deferred tax assets and  liabilities  are adjusted for the effects of changes in
tax laws and rates on the date of enactment.

     Net Income Per Common Share:  Net income per common share is computed based
upon the weighted average number of common shares  outstanding during each year.
The  dilutive  effect  of the stock  options  is not  material  and has not been
included in the computation of weighted average earnings per share.

<PAGE>

Note 3. Goodwill and Other Assets

Goodwill and Other assets consist of the following:

                                         1996                      1995

Goodwill, net                      $3,536,000                $  220,000
Aircraft held for resale            2,815,000                 5,514,000
Idle Facilities                       522,000                   522,000
Advertising and Other                  39,000                    37,000
                                    ---------                 ---------
     Total                         $6,912,000                $6,293,000
                                    =========                 =========

     Goodwill: As discussed in Note 10, the excess of the total acquisition cost
of Vantare International,  Inc. and Diamond D Trailer  Manufacturing,  Inc. over
the fair value of the net assets  acquired of $3,648,000 is being amortized on a
straight-line basis over periods of up to 20 years. Amortization was $108,000 in
1996 and $4,000 in 1995 and accumulated  amortization  was $112,000 and $4000 at
December 31, 1996 and 1995, respectively.

     Idle  Facilities:  The Company  owns land and  buildings  in Grand  Meadow,
Minnesota  that  was  previously   used  as  its  corporate   headquarters   and
delivery/maintenance  facility.  The net book value of the facilities  have been
reclassified  from  property and  equipment to other assets and a provision  has
been made to reduce the facility to its expected  realizable value.  Portions of
these  facilities are being rented under operating leases to cover costs related
to holding these properties while they are being marketed for resale.

     Advertising  and  Other:  In 1996,  1995 and 1994,  the  Company  exchanged
trailers and coaches (total sales value  $276,000 in 1996,  $155,000 in 1995 and
$193,000 in 1994) for future personal  appearances and specific  promotional and
advertising  services of an equivalent  value.  These contracts were capitalized
and are  being  amortized  over  the  period  the  services  will  be  rendered.
Amortization  of these  agreements to advertising  expense was $315,000 in 1996,
$254,000 in 1995 and $231,000 in 1994.  Advertising  expense was  $1,299,000  in
1996, $1,116,000 in 1995 and $955,000 in 1994.

<PAGE>

Note 4. Income Tax Matters

     Prior to the completion of the sale of 1,955,000 shares of its common stock
to the public,  as described in Note 9, the income and deductions of the Company
were reported in the  individual  income tax returns of the  shareholders  under
provision of Subchapter S of the Internal Revenue Code.  Periodic  distributions
have been made to the Company's  shareholders  representing the estimated income
tax liability on the S corporation earnings which were the responsibility of the
individual  shareholders.   Final  distributions  for  shareholders  taxes  were
$305,000, which were accrued at December 31, 1994, were paid in 1995.

     The pro forma  adjustments  for the year ended December 31, 1994 to reflect
income taxes in the  accompanying  statements of  operations is for  information
purposes only and has been calculated based on the estimated  effective tax rate
in each year assuming the Company had been subject to corporate income taxes.

     The  components of the income tax provision  charged to operations in 1996,
1995 and 1994, after the sale of common stock, are as follows:

<TABLE>
<CAPTION>

                                                          1996                      1995                       1994
     <S>                                              <C>                       <C>                        <C>    
     Current
       Federal                                        $425,000                  $259,000                   $412,000
       State                                            45,000                    22,000                     64,000
                                                       -------                   -------                    -------
                                                      $470,000                  $281,000                    476,000
                                                       -------                   -------                    -------
     Deferred
       Federal                                          82,000                  $171,000                    (75,600)
       State                                            10,000                    19,000                     (8,400)
                                                       -------                   -------                    -------
                                                        92,000                  $190,000                   $(84,000)
                                                       -------                   -------                    -------
     Total                                            $562,000                  $471,000                   $392,000
                                                       =======                   =======                    =======
</TABLE>

     A reconciliation of the provision for income taxes at the federal statutory
rate to the provision for income taxes in the financial statement is as follows:
<TABLE>
<CAPTION>

                                                          1996                      1995                       1994
     <S>                                              <C>                       <C>                        <C>    
     Provision at
       statutory rate                                 $478,000                  $421,000                   $409,000
     State income taxes,
       net of Federal
       income tax benefit                               60,000                    38,000                     37,000
     Change in valuation
       allowance                                            --                        --                    (40,000)
     Other                                              24,000                    12,000                    (14,000)
                                                       -------                   -------                    -------
     Total                                            $562,000                  $471,000                   $392,000
                                                       =======                   =======                    =======
</TABLE>

<PAGE>

     Net deferred tax assets and liabilities consist of the following components
as of December 31, 1996 and 1995:

<TABLE>
<CAPTION>


                                                                                    1996                       1995
     <S>                                                                        <C>                        <C>    
     Deferred Tax Liabilities:
         Depreciation                                                           $599,000                   $456,000
                                                                                 -------                    ------- 
     Deferred Tax Assets:
         Accrued expenses                                                       $270,000                   $245,000
         Accrued warranty reserve                                                100,000                     48,000
         Inventory allowances                                                     64,000                    100,000
         Receivable allowances                                                    48,000                     38,000
                                                                                 -------                    -------
                                                                                $482,000                   $431,000
                                                                                 =======                    =======
         Net deferred tax
         (liabilities)                                                         $(117,000)                  $(25,000)
                                                                                 =======                    =======
</TABLE>

<PAGE>

Note 5. Financing Arrangements

     Other Notes  Payable:  At December 31, 1996 and 1995,  other notes  payable
consisted of the following:
<TABLE>
<CAPTION>

                                                                                    1996                       1995
     <S>                                                                      <C>                         <C>   
     Wholesale floor plan line
      of credit*                                                              $1,817,000                         --
     Insurance premiums;
      interest at 6.0%, payable
      in monthly installments                                                    438,000                    657,000
                                                                               ---------                    -------
                                                                              $2,255,000                   $657,000
                                                                               =========                    =======
</TABLE>

     *The Company has a wholesale  finance  agreement with a financial  services
company  for a $3.5  million  line of credit to finance  completed  new and used
motorcoaches  held  in  inventory.  Amounts  borrowed  are  subject  to  defined
percentages of eligible  inventory.  Borrowings bear interest at prime plus .25%
(8.5% at December 31, 1996) and are secured by the motorcoach financed and other
assets of the Company. The agreement includes covenants requiring maintenance of
defined  levels of  tangible  net  worth,  leverage  and  working  capital.  The
agreement is subject to renewal on October 31, 1999.

     Bank line of credit:  The Company has a Credit  Agreement  with a bank that
provides  for a working  line of credit to provide  for  borrowing  equal to the
lesser of  $12,000,000  or a  defined  percentage  of  eligible  trade  accounts
receivable and inventory. Borrowings under this arrangement, which bear interest
at prime (8.25% at December 31, 1996 and 1995), are secured by substantially all
assets of the Company,  and are guaranteed by certain shareholders under defined
circumstances. The agreement includes covenants requiring maintenance of defined
levels of  working  capital,  tangible  net worth,  leverage,  and cash flow and
prohibits  the payment of  dividends  without  approval of the bank.  Borrowings
against this line of credit were  $9,100,000 and $7,600,000 at December 31, 1996
and 1995, respectively. These borrowings are classified as long-term debt as the
Credit Agreement matures and is subject to renewal on July 31, 1998.

Long-term debt: (In thousands)                    1996              1995

     Bank notes payable; interest
     at 8.75%, payable in varying monthly
     installments plus interest through
     2000; contains same collateral and
     covenant provisions as bank
     line of credit                             $2,176            $2,696

     Bank notes  payable;  interest at
     prime plus 1%, (9.25% at December
     31, 1996 and 1995) adjusted  
     quarterly;  payable in varying 
     monthly  installments  with interest
     through October, 2006; collateralized
     by aircraft                                1,559             4,144

     Notes and capitalized leases to banks
     and others,  interest to 11.5%,  payable
     in varying monthly  installments through
     2003;  collateralized by real estate
     and partial shareholder and
     other guarantees.                          1,656             1,849
                                                -----             -----
     Total                                      5,391             8,689
     Less current maturities                   (1,145)           (1,095)
                                                -----             -----
                                               $4,246            $7,594
                                                =====             =====

     Annual  maturities  during the five years  subsequent  to December 31, 1996
are: (in thousands) 1997 - $1,145;  1998 - $2,222; 1999 - $712; 2000 - $802; and
2001 - $116.

<PAGE>

Note 6. Commitments and Contingencies

     Pursuant to dealer inventory floor plan financing arrangements, the Company
may be required,  in the event of default by a financed  dealer,  to  repurchase
products from the financial  institutions or to reimburse the  institutions  for
unpaid balances including finance charges, plus costs and expenses.  The Company
was  contingently  liable  under  these  arrangements  for a  maximum  amount of
$6,059,000 at December 31, 1996.

     The  Company  has  two  separate  agreements  which  provide  approximately
$620,000 for job training purposes. The amounts are to be repaid,  together with
interest,  over a ten year period from state  withholding  taxes on employees at
the Company's Iowa facilities.  The Company may be required to provide funds for
the repayment of these  training  credits if sufficient  withholding  and unused
training funds are not available.

     The  Company is  partially  self-insured  for a portion  of certain  health
benefit and workers' compensation insurance claims. The Company's maximum annual
claim  exposure under these programs is  approximately  $2.2 million,  including
$634,000  accrued for estimated  unpaid claims at December 31, 1996. The Company
has obtained an irrevocable standby letter of credit in the amount of $1,225,000
in favor of the workers compensation claim administrator.

     The Company is expanding its production facility in Sanford,  Florida. Upon
completion,  this  expansion  project  will be sold,  at its  completed  cost of
approximately $855,000, to the Seminole County Port Authority, the present owner
of the facility.  The facility will then be leased back to the Company under the
terms of a ten year  capitalized  lease.  During  the  construction  period  the
Company will provide financing for the construction  using funds borrowed from a
bank. The cost of this financing will be included in the total project cost.

     There is a risk related to losing  Prevost Car Company,  the company's sole
supplier of motorcoaches, although the Company could purchase certain motorcoach
shells from other  manufacturers.  The Company does have  business  interruption
insurance  to cover all or a portion of the losses it may  sustain if  Prevost's
plant was destroyed by fire or certain other catastrophes.

Note 7. Deferred Grant Income

     Deferred grant income consists of forgivable loans (grants) in an aggregate
amount of $2,030,000  provided to the Company by various  governmental  units to
assist with the  establishment  of the  Company's  headquarters  and  production
facility in Cresco, Iowa and its Nashua, Iowa production  facility.  These loans
are wholly or partially  forgivable  based on  fulfillment  and retention of job
creation goals through June,  1999.  These grants are being recognized as income
as  they  are  earned.  Accumulated  income  recognized  for  these  grants  was
$1,719,000 at December 31, 1996, $1,646,000 at December 31, 1995 and $823,000 at
December 31, 1994.  On January 2, 1997, a loan  originated in 1991 in the amount
of $375,000 was forgiven.

Note 8. Related Party Transactions

     The  Company   recorded  sales  to  authorized   Featherlite   dealers  and
Featherlite  Credit,  that are  related  entities  under  common  ownership,  of
$3,154,000, $1,276,000, and $1,633,000, in 1996, 1995, and 1994, respectively.

     The  Company  has leased  various  buildings  and  equipment  and  received
interest  bearing  advances from certain  shareholders  during current and prior
periods. Payments related to these leases and interest on these advances totaled
$91,000 in 1996, $91,000 in 1995 and $135,000 in 1994.

     In 1996 and 1995,  the Company  entered into  agreements  with  Featherlite
Credit Corporation, related under common ownership, to compensate it for various
credit related  services it provided for the Company,  including the development
of the Featherlite  Master Lease program.  Expenses under this agreement totaled
$100,000 in 1996 and $170,000 in 1995.  Also under the terms of this  agreement,
Featherlite  Credit reimbursed the Company $116,000 and $88,000 for salaries and
other costs paid by the Company in 1996 and 1995, respectively.

<PAGE>

Note 9. Shareholders' Investment

     Capitalization: The Company's authorized capital is 40,000,000 shares of no
par Common Stock and  10,000,000  shares of  undesignated  stock.  In 1994,  the
Company completed an initial public offering of 1,955,000 shares of Common Stock
including an over-allotment  option to the underwriter for an additional 255,000
shares at a price of $6.00 per share.

     Upon the closing of the public stock offering,  the Company's S corporation
election terminated.  At that time, the retained earnings balance of $4,061,500,
representing  undistributed  earnings on which income taxes have been paid,  was
reclassified  to  paid-in   capital  as  a  constructive   distribution  to  the
shareholders followed by a contribution by them to the capital of the Company.

     Stock  option Plan:  At December  31, 1996,  the Company has a stock option
plan  which  reserves  up to  550,000  shares of Common  Stock for  issuance  as
options.  These  options  may be  granted  to  employees  and  directors  at the
discretion of the Board of  Directors,  which may grant either  incentive  stock
options or non-statutory stock options. All incentive options must be granted at
no less than 100  percent of the fair  market  value of the stock on the date of
grant,  (110  percent for  employees  owning more than 10 percent of fair market
value on the date of grant.) The options  expire at varying dates  generally not
to exceed ten years from date of grant and are non-transferable.

     Grants  under  this plan are  accounted  for using APB  Opinion  No. 25 and
related interpretations.  Accordingly,  no compensation cost has been recognized
for grants  under the stock  option plan.  Had  compensation  cost for the stock
option  plan been  based on the grant  date fair  values of awards  (the  method
described in FASB Statement No. 123), reported net income and earnings per share
would have been reduced to the pro forma amounts shown below.

                                                     1996             1995
Net income (000's)
  As reported                                        $842             $701
  Pro forma                                           728              701
                                                      ---              ---
Primary earnings per share
  As reported                                        $.13             $.12
  Pro forma                                           .12              .12
                                                      ---              ---
Fully diluted earnings per share
  As reported                                        $.13             $.12
  Pro forma                                           .12              .12
                                                      ---              ---

     The fair value of each  option has been  estimated  at the grant date using
the  Black-Scholes  option-pricing  model  with the  following  weighted-average
assumptions for grants in 1996 and 1995,  respectively:  dividend rate of 0% for
all years; price volatility of 48.5% and 50.2%, risk-free interest rates of 6.3%
and 6.6% for the  five  year  options  and  6.8%  for the ten year  options  and
expected lives of 5 and 10 years for the five and ten year options respectively.

<PAGE>

     A summary of the status of the stock option plan at December 31, 1996, 1995
and 1994 and changes during the years ended on those dates is as follows:

1996                                                                Weighted
                                                                     Average
                                          Shares                 Exercise Price

Outstanding, beginning of year           159,168                     $6.28
Granted                                   90,212                      5.54
Exercised/forfeited                            -                         -
                                         -------                      ----
Outstanding, end of year                 249,380                     $6.02
                                         =======                      ====
Exercisable at end of year               158,755
                                         =======               
Weighted-average fair value
per share of options granted
during the year                            $3.73
                                        ========

1995                                                              Weighted
                                                                   Average
                                         Shares                 Exercise Price

Outstanding, beginning of year          152,500                     $6.16
Granted                                   6,668                      9.00
Exercised/forfeited                           -                         -
                                        -------                      ----
Outstanding, end of year                159,168                     $6.28
                                        =======                      ====
Exercisable at end of year               97,918
                                        =======                
Weighted-average fair value
per share of options granted
during the year                           $4.68
                                        =======

1994                                                              Weighted
                                                                   Average
                                         Shares                 Exercise Price

Outstanding, beginning of year                -                         -
Granted                                 152,500                     $6.16
Exercised/forfeited                           -                         -
                                        -------                      ----
Outstanding, end of year                152,500                     $6.16
                                        =======                      ====
Exercisable at end of year               60,525
                                        =======

     At December 31, 1996, the options  outstanding have exercise prices ranging
from $5.50 to $9.00 and a weighted  average  remaining  contractual  life of 7.9
years.  All but 6,668  shares are  exercisable  at prices  ranging from $5.50 to
$7.25. All of the non-vested options are expected to eventually vest.

<PAGE>

Note 10. Business Combination

     In  July,   1996,   the  Company   acquired   all  the  assets  of  Vantare
International,  Inc., a  privately-held  converter of purchased  bus shells into
luxury motorcoaches,  in exchange for 300,000 restricted shares of the Company's
common stock with a value of  approximately  $1.8 million and the  assumption of
certain  liabilities.  An additional  100,000  shares may be issued  pending the
attainment of certain  defined net earnings,  as  determined  annually,  through
December  31,  2000.  This  acquisition  was  accounted  for as a  purchase  and
accordingly,  results  of  operations  of  Vantare  have  been  included  in the
accompanying  statement of operations since July 1, 1996, the acquisition  date.
The Company  recorded  intangible  assets of $3.2 million,  including  goodwill,
tradename and certain other rights which are being amortized over 20 years.  The
following  unaudited  pro forma  summary  presents the  consolidated  results of
operations  of the  Company  for the  year  ended  December  31,  1996 as if the
business  combination had occurred on January 1, 1995 (in thousands,  except for
per share data):

                                                 1996                       1995

Revenue                                      $111,509                    $88,980
Net Earnings                                      583                        497
Earnings per share                                .09                        .08
                                              =======                     ======

     In October,  1995, the Company acquired all the assets of Diamond D Trailer
Manufacturing,  Inc.,  a  privately-held  manufacturer  of steel  trailers,  for
approximately  $2.4  million,  including  cash  and the  assumption  of  certain
liabilities.  This  acquisition was accounted for as a purchase and accordingly,
results of operations of the acquired company,  which are not significant to the
Company's  operations,  have  been  included  in the  accompanying  consolidated
financial  statements  since  the  acquisition  date.  The  purchase  price  was
allocated  on the  basis of the  estimated  fair  value of assets  acquired  and
liabilities  assumed with the remaining  excess purchase price of $356,000 to be
amortized over 15 years.

<PAGE>

Note 11. Segment Reporting

     In 1996, the Company began  operating in two principal  business  segments:
trailers and  motorcoaches.  Prior to 1996,  the Company only  manufactured  and
distributed trailers.  Sales to customers outside of the United States represent
less than 10% of consolidated sales.

<TABLE>
<CAPTION>

     Information on business segments was as follows:

(in thousands)                                            1996              1995             1994
<S>                                                    <C>               <C>              <C>   
Net sales
 Trailers                                              $80,689           $65,176          $56,836
 Motorcoaches                                           14,785                --               --
 All other segments                                      3,855             3,983            3,336
                                                        ------            ------           ------
 Total net sales                                       $99,329           $69,159          $60,172
                                                        ======            ======           ======
Income from operations
 Trailers                                               $5,085            $2,764           $6,395
 Motorcoaches                                              932                --               --
 All other segments                                        438             1,513            1,369
 General corporate expenses                             (4,221)           (3,784)          (3,188)
 Other income/(expense)                                   (830)              679             (323)
                                                         -----             -----            -----
Income before income taxes                              $1,404            $1,172           $4,253
                                                         =====             =====            =====
Identifiable assets
 Trailers                                              $31,327           $35,715          $23,603
 Motorcoaches                                           13,646               968               --
 All other segments                                        381               166              144
 General corporate assets                                8,180             9,235            8,914
                                                        ------            ------           ------
 Total assets as reported                              $53,534           $46,084          $32,661
                                                        ======            ======           ======
Capital Expenditures
 Trailers                                                $ 725            $2,004           $3,213
 Motorcoaches                                               18                --               --
 All other segments                                        309                62               --
 Corporate                                                 491               876              599
                                                         -----             -----            -----
 Total capital expenditures                             $1,543            $2,942           $3,812
                                                         =====             =====            =====
Depreciation and Amortization
 Trailers                                                $ 850             $ 848            $ 583
 Motorcoaches                                              106                --               --
 All other segments                                         95                63               58
 Corporate                                                 403               333              285
                                                          ----              ----             ----
 Total Depreciation and
  Amortization                                          $1,454            $1,244            $ 926
                                                         =====             =====             ====

</TABLE>


<PAGE>

To the Board of Directors
Featherlite Mfg. Inc.
Cresco, Iowa

     We have audited the accompanying consolidated balance sheets of Featherlite
Mfg.  Inc.  as of  December  31,  1996 and 1995,  and the  related  consolidated
statements of operations,  changes in shareholders'  investment,  and cash flows
for each of the  three  years in the  period  ended  December  31,  1996.  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements 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 Featherlite Mfg.
Inc. as of December 31, 1996 and 1995, and the results of its operations and its
cash flows for each of the three years in the period ended  December 31, 1996 in
conformity with generally accepted accounting principles.


                                        /s/ McGLADREY & PULLEN, LLP

Rochester, Minnesota
February 19, 1997