Cavalier Reports Second Quarter 2008 Net Income of $1,238,000 or $0.07 Per Share

ADDISON, Ala.--(Business Wire)--
Cavalier Homes, Inc. (Amex: CAV) today announced results for the
second quarter ended June 28, 2008, highlighted by net income of
$1,238,000 or $0.07 per diluted share versus a net loss of $869,000 or
$0.05 per diluted share in the year-earlier period. A summary of the
Company's report follows (in thousands, except per share amounts):

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Second Quarter Ended Six Months Ended
---------------------- --------------------
June 28, June 30, June 28, June 30,
2008 2007 2008 2007
----------- ---------- --------- ----------
Revenue $ 51,090 $ 62,809 $ 100,606 $ 105,711
=========== ========== ========= ==========
Income (loss) before
income taxes and equity
in earnings of equity-
method investees 1,244 (1,077) 1,328 (5,104)
Income tax provision 84 34 95 56
Equity in earnings of
equity-method investees 78 242 123 400
----------- ---------- --------- ----------
Net income (loss) $ 1,238 $ (869) $ 1,356 $ (4,760)
=========== ========== ========= ==========

Diluted net income (loss)
per share $ 0.07 $ (0.05) $ 0.07 $ (0.26)
=========== ========== ========= ==========

Weighted average diluted
shares outstanding 18,409 18,377 18,407 18,373
=========== ========== ========= ==========

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Commenting on the results, David Roberson, President and Chief
Executive Officer, said, "We are pleased to announce a profitable
second quarter. These results, which represent a $2,107,000
improvement in net income over the same period last year, reflect the
positive impact from the strategy we implemented in the last half of
2007 to improve liquidity and gross margins, reduce costs, rationalize
capacity to demand levels, and return to profitability. These efforts
have shown a steady improvement in our results during the last three
quarters.

"However, economic issues related to the high price of oil and
escalating commodity prices, as well as the current credit crisis, all
point to continuing weakness in the manufactured housing market, and
therefore, providing limited visibility with regard to near-term
outlook," Roberson continued. "In this very challenging market
environment, we will remain focused on operational improvements to
enhance the value of our homes to our end customers, helping combat
the effects of escalating material and delivery costs."

Total floor shipments for the second quarter increased 4%
sequentially from the first quarter of 2008, but declined 26% to 1,897
from 2,560 floors in the same period last year. This reflected a 24%
decline in HUD-Code floor shipments to 1,817 from 2,382 in the
year-earlier quarter and included 121 shipments to the Mississippi
Emergency Management Agency (MEMA) in the second quarter of 2008,
while no such shipments occurred in the year-earlier quarter.
Shipments in the first half of the year were down 12% to 3,719 floors
compared with 4,218 floors in the first six months of 2007 as HUD-Code
floor shipments declined 8%. MEMA shipments in the first half of 2008
totaled 291 floors; there were no MEMA shipments in the first half of
2007. With the shipment of one unit in early July, the Company has now
completed all the units ordered by MEMA.

Revenue for the second quarter of 2008 declined 19% to $51,090,000
from $62,809,000 in the year-earlier period and declined 5% to
$100,606,000 in the first half of 2008 compared with $105,711,000 in
the first half of 2007. These declines were attributable primarily to
lower manufactured home sales. Sales to MEMA totaled $5,835,000 and
$13,905,000 in the three months and six months ended June 28, 2008,
respectively.

Gross profit for the second quarter improved 12% to $9,643,000
compared with the year-earlier period and increased 23% to $17,943,000
in the first half of 2008 compared with the first half of 2007. Both
improvements were due primarily to unit price increases and higher
plant utilization following steps implemented last fall to reduce the
Company's overall cost structure, which has offset the impact of lower
floor shipments.

Selling, general and administrative expenses decreased $1,320,000
to $8,422,000 in the second quarter of 2008 and declined $2,858,000 in
the first half of 2008 to $16,699,000 compared with the same 2007
periods. These declines resulted from workforce reductions over the
past year and the effect of other cost-control measures.

Commenting on the Company's financial position, Mike Murphy,
Cavalier's Chief Financial Officer, said, "Cavalier ended the second
quarter with cash totaling $20,898,000, up from $6,846,000 at the same
time last year, which reflects our focus on improving liquidity by
reducing inventory and our installment loan portfolio held for
investment." He noted that inventory totaled $18,677,000 at the end of
the second quarter, which decreased $5,607,000 from the year-earlier
level, and that the installment loan portfolio at June 28, 2008,
declined $5,721,000 from the same time last year. Accounts receivable
at June 28, 2008, also declined $1,375,000 to $13,366,000 from a year
ago.

Cavalier Homes, Inc. and its subsidiaries produce, sell, and
finance manufactured housing. The Company markets its homes primarily
through independent dealers, including exclusive dealers that carry
only Cavalier products, and provides financial services primarily to
retail purchasers of manufactured homes.

A public, listen-only simulcast of Cavalier Homes' second quarter
conference call will begin at 9:30 a.m. Eastern Daylight Time tomorrow
(July 23, 2008) and may be accessed via the Company's web site,
www.cavhomesinc.com, or at www.viavid.com. Investors are invited to
access the simulcast at least 10 minutes before the start time in
order to complete a brief registration form. A replay of this call
will be available shortly after the call using this same link and will
continue until August 23, 2008.

With the exception of historical information, the statements made
in this press release, including those containing the words "expects,"
"anticipates," "thinks" and "believes," and words of similar import,
and those relating to industry trends and conditions, Cavalier's
expectations for its results of operations during the most recent
fiscal quarter and in future periods, the financial impact of the
contract with MEMA (Mississippi Emergency Management Agency),
acceptance of Cavalier's new product initiatives and the effect of
these and other steps taken in the last several years on Cavalier's
future sales and earnings, and Cavalier's plans and expectations for
addressing current and future industry and business conditions,
constitute forward-looking statements, are based upon current
expectations, and are made pursuant to the "Safe Harbor" provisions of
the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve certain known and unknown
assumptions, risks and uncertainties that could cause actual results
to differ materially from those included in or contemplated by the
statements, including among other matters, significant competitive
activity, including promotional and price competition; interest rates;
increases in raw material and energy costs; changes in customer demand
for Cavalier's products; inherent risks in the market place associated
with new products and new product lines; and other risk factors listed
from time to time in Cavalier's reports filed with the Securities and
Exchange Commission, including, but not limited to, those discussed or
indicated in Cavalier's Annual Report on Form 10-K for the period
ended December 31, 2007, under the heading "Item 1. Business-Risk
Factors," and its Quarterly Report on Form 10-Q for the period ended
March 29, 2008, under the heading "Safe Harbor Statement under the
Private Litigation Reform Act of 1995," as filed with the Securities
and Exchange Commission. Cavalier disclaims any obligation to update
any forward-looking statements as a result of developments occurring
after the issuance of this press release.

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Cavalier Homes, Inc.
Data Sheet - Unaudited
(in thousands, except per share amounts)

Second Quarter Ended Six Months Ended
---------------------- -------------------
June June June
STATEMENT OF OPERATIONS June 28, 30, 28, 30,
SUMMARY 2008 2007 2008 2007
------------- -------- --------- ---------
Home manufacturing net
sales $ 50,353 $61,765 $ 99,034 $103,810
Financial services 737 1,044 1,572 1,901
------------- -------- --------- ---------
Total revenue 51,090 62,809 100,606 105,711
Cost of sales 41,447 54,172 82,663 91,094
------------- -------- --------- ---------
Gross profit 9,643 8,637 17,943 14,617
Selling, general and
administrative 8,422 9,742 16,699 19,557
------------- -------- --------- ---------

Operating income (loss) 1,221 (1,105) 1,244 (4,940)
------------- -------- --------- ---------
Other income (expense):
Interest expense (112) (146) (236) (310)
Other, net 135 174 320 146
------------- -------- --------- ---------
23 28 84 (164)
------------- -------- --------- ---------
Income (loss) before income
taxes and equity in
earnings of equity-method
investees 1,244 (1,077) 1,328 (5,104)
Income tax provision 84 34 95 56
Equity in earnings of
equity-method investees 78 242 123 400
------------- -------- --------- ---------
Net income (loss) $ 1,238 $ (869) $ 1,356 $ (4,760)
============= ======== ========= =========

Basic net income (loss) per
share $ 0.07 $ (0.05) $ 0.07 $ (0.26)
============= ======== ========= =========

Diluted net income (loss)
per share $ 0.07 $ (0.05) $ 0.07 $ (0.26)
============= ======== ========= =========

Weighted average shares
outstanding:
Basic 18,406 18,377 18,397 18,373
============= ======== ========= =========
Diluted 18,409 18,377 18,407 18,373
============= ======== ========= =========

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Cavalier Homes, Inc.
Data Sheet - Unaudited (Continued)
(dollars in thousands)

Second Quarter Ended Six Months Ended
---------------------- ---------------------
June 28, June 30, June 28, June 30,
OPERATING DATA SUMMARY 2008 2007 2008 2007
----------- ---------- ---------- ----------
Home manufacturing sales:
Floor shipments:
HUD-Code 1,817 2,382 3,562 3,862
Modular 80 178 157 356
----------- ---------- ---------- ----------
Total floor shipments 1,897 2,560 3,719 4,218
=========== ========== ========== ==========

Home shipments:
Single-section 490 382 985 657
Multi-section 701 1,085 1,363 1,770
----------- ---------- ---------- ----------
Wholesale home
shipments 1,191 1,467 2,348 2,427
Shipments to company-
owned retail locations (6) (8) (9) (29)
MEMA shipments (all
single-section) (121) -- (291) --
----------- ---------- ---------- ----------
Shipments to independent
retailers 1,064 1,459 2,048 2,398
Retail home shipments 6 4 11 32
----------- ---------- ---------- ----------
Home shipments other than
to MEMA 1,070 1,463 2,059 2,430
=========== ========== ========== ==========

Installment loan
purchases $ 9,512 $ 16,610 $ 18,279 $ 28,367
Capital expenditures $ 182 $ 909 $ 252 $ 1,515
Home manufacturing
facilities - operating 5 7 5 7
Independent exclusive
dealer locations 56 64 56 64
Average home net
wholesale prices
(excludes MEMA) $ 41,000 $ 41,600 $ 40,400 $ 41,000

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Cavalier Homes, Inc.
Data Sheet - Unaudited (Continued)
(in thousands, except ratios and per share amounts)

June 28, June 30,
2008 2007
--------- ---------
BALANCE SHEET SUMMARY
Cash and cash equivalents $ 20,898 $ 6,846
Accounts receivable, less allowance for losses 13,366 14,741
Notes and installment contracts receivable, net 6,505 8,689
Inventories 18,677 24,284
Other current assets 1,104 1,682
--------- ---------
Total current assets 60,550 56,242
Property, plant and equipment, net 26,970 28,359
Other assets 3,130 9,373
--------- ---------
Total assets $ 90,650 $ 93,974
========= =========

Current portion of long-term debt and capital lease
obligation $ 890 $ 1,072
Notes payable 792 366
Accounts payable 6,141 4,720
Amounts payable under dealer incentive programs 3,153 3,619
Estimated warranties 11,690 11,720
Other current liabilities 13,383 14,764
--------- ---------
Total current liabilities 36,049 36,261
Long-term debt and capital lease obligation, less
current portion 2,920 3,786
Other long-term liabilities 251 298
Stockholders' equity 51,430 53,629
--------- ---------
Total liabilities and stockholders' equity $ 90,650 $ 93,974
========= =========

OTHER INFORMATION
Working capital $ 24,501 $ 19,981
Current ratio 1.7 to 1 1.6 to 1
Ratio of long-term debt to equity 0.1 to 1 0.1 to 1
CIS installment loan portfolio $ 8,399 $ 14,120
Number of shares outstanding 18,430 18,430
Stockholders' equity per share $ 2.79 $ 2.91
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CAVALIER HOMES, INC.
Mike Murphy, 256-747-9800

Copyright Business Wire 2008