American Homestar to Consolidate Production in North Carolina; Move Improves Capacity Utilization as Part of Plan to Improve Profitability.

Business Editors

HOUSTON--(BUSINESS WIRE)--May 26, 2000

American Homestar Corporation (Nasdaq/NM:HSTR) today announced plans to consolidate production in its North Carolina manufacturing facilities. The plant in Henderson, North Carolina, will be temporarily idled, and production of the Henderson products will be shifted to the Company's plant in Cherryville, North Carolina. The transition will be seamless for retailers, who will receive the same products and be served by the same sales team.

The Cherryville facility, at 250,000 square feet, is the largest and has the greatest production capacity of the Company's plants. It will manufacture the product lines of both the Cherryville and Henderson plants until market demand is sufficient to once again utilize the capacity of both plants. Most Henderson employees will be offered transfers to the Cherryville plant. The Company also operates two plants in Denver, North Carolina, which are currently operating at solid production rates and will remain open.

Commenting on the plant consolidation, Chief Executive Officer Laurence Dawson, Jr. said, "We have seen some encouraging signs in this region during the last several months, particularly in the Company's retail units. However, order input and production rates have not yet reached levels that support all of the regional plants at desired levels. This consolidation will allow us to improve capacity utilization rates and improve the performance of our two remaining plants in Denver and our two-line plant in Cherryville. This action is part of our plan to ensure profitable results in all our operating units in fiscal 2001, beginning July 1."

The Company indicated that it will incur one-time charges in the fourth quarter ending June 30, 2000, to recognize certain restructuring expenses and other non-cash reserves in connection with the consolidation. Specific amounts of such charges are not yet available.

American Homestar is one of the leading vertically integrated manufactured housing companies. The Company currently operates 12 manufacturing plants, 117 Company-owned retail sales centers, 11 joint venture retail sales centers and serves 79 retail franchisees and over 300 independent retail locations in 28 states. The Company also provides retail financing through its finance affiliate, 21st Century Mortgage, and provides insurance and transportation services to its customers.

This press release may contain certain forward-looking statements and information based on the beliefs of the Company's management as well as assumptions made by, and information currently available to, the Company's management. Words like "anticipate," "believe," "estimate," "should," "expect," and similar expressions used in this press release 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 and Form 10-K. Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, actual events or results may vary from those described herein as anticipated, expected, believed, or estimated.

For more information about the Company, visit its Website at www.americanhomestar.com.