FORM 10-K

UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

(Mark One)

NATIONAL R.V. HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

(951) 943-6007

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:  None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  ý         No  o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

Yes  ý         No  o

Aggregate market value (based upon the closing sale price) of the voting stock held by nonaffiliated stockholders of Registrant as of June 30, 2004 was approximately $142,200,709.

The number of shares outstanding of the Registrant’s common stock, as of September 22, 2005, were 10,339,484.

Documents Incorporated By Reference:  None.

EXPLANATORY NOTE

RESTATEMENT OF PRIOR PERIODS

In addition to providing financial statements and other required information for the fiscal year ended December 31, 2004, this Annual Report on Form 10-K also includes restated consolidated financial statements for the fiscal years ended December 31, 2003 and 2002, as discussed in Note 2 to the Company’s consolidated financial statements. The Company’s previously issued financial statements for each of these periods should not be relied upon.

The Company is restating the consolidated financial statements for the fiscal years ended December 31, 2003 and 2002 in this Form 10-K for the following items:

•                  Correction of accounting for dealer sales incentives

•                  Correction of allowance for doubtful accounts methodology

•                  Correction of workers’ compensation reserve methodology

As of a result of these restatements, the disclosures in the following items related to the years ended December 31, 2003 and 2002 have likewise been updated:

Part II – Item 6 – Selected Financial Data

Part II – Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations

Part II – Item 8 – Financial Statements and Supplementary Data

The restatement of the quarterly periods for 2004 and 2003 are included in Note 18 (Quarterly Consolidated Financial Data) to the Company’s consolidated financial statements.

Concurrently with filing this Form 10-K, the Company is filing with the SEC the Form 10-Q/A for the third quarter of 2004 to reflect the correction of accounting for dealer sales incentives, to correctly recognize revenue for a limited number of motorhomes sold in the third quarter of 2004, and to correctly state the gain on the sale of the Company’s travel trailer business at the end of the third quarter of 2004. The Company will include these restatements for the first and second quarters of 2004 with the filing of its Quarterly Reports on Form 10-Q for the first and second quarters of 2005. No amendments have been made to the Company’s previously filed Quarterly Reports on Form 10-Q for the quarters ended March 31, 2004 and June 30, 2004, and therefore they should not be relied upon.

2

TABLE OF CONTENTS

3

PART I

Item 1. Business

General

National R.V. Holdings, Inc. (the “Company”) through its two wholly-owned subsidiaries, National RV, Inc. (“NRV”) and Country Coach, Inc. (“CCI”), is one of the nation’s leading producers of motorized recreational vehicles, often referred to as RVs or motorhomes. The Company’s product line consists of 11 models of motorhomes with 59 floorplans across numerous price ranges. From its Perris, California facility, NRV designs, manufactures and markets Class A gas and diesel motorhomes under model names Dolphin, Sea Breeze, Islander, Tradewinds and Tropi-Cal. From its Junction City, Oregon facility, CCI designs, manufactures and markets high-end (Highline) Class A diesel motorhomes under the model names Affinity, Allure, Inspire, Intrigue, and Magna, and bus conversions under the Country Coach Prevost brand. NRV began manufacturing RVs in 1964 and CCI has been manufacturing RVs since 1973. Based upon retail registrations in 2004, the Company, through its subsidiaries, is the sixth largest domestic manufacturer of Class A motorhomes selling motorhomes through a network of approximately 98 dealer locations in 32 states and 3 Canadian provinces.

The Company was incorporated in Delaware in 1988. As used herein, the term “Company” refers to National R.V. Holdings, Inc., NRV and CCI unless the context otherwise requires.

The Company’s headquarters are located at 3411 N. Perris Blvd., Perris, California 92571, and its telephone number is (951) 943-6007. National R.V. Holdings, Inc.’s Internet website address is www.nrvh.com. The Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to section 13(a) or 15(d) of the Exchange Act are available free of charge through the Company’s website as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission.

Motorized Recreational Vehicle Industry Overview

Products

Motorhomes are self-powered RVs built on a motor vehicle chassis. The interior typically includes a driver’s area and kitchen, bathroom, dining and sleeping areas. Motorhomes are self-contained, with their own power generation, heating, cooking, refrigeration, sewage holding and water storage facilities, so that they can be lived in without being attached to utilities. Motorhomes are generally categorized into, A, B and C classes based upon standards established by the Recreational Vehicle Industry Association (the “RVIA”). Class A motorhomes are constructed on a medium-duty to heavy-duty truck chassis, which includes the engine, drive train and other operating components. Retail prices for Class A motorhomes range from $40,000 to $1,400,000, with the majority in the $40,000 to $250,000 range. Highline motorhomes, which are a subset of Class A motorhomes, generally range in retail price from $250,000 to $1,400,000. Class C motorhomes are built on a van or pick-up truck chassis, which includes an engine, drive-train components and a finished cab section, and generally range in retail price from $40,000 to $70,000. Class B motorhomes are van campers, which generally contain fewer features than Class A or Class C motorhomes.

The Company, on September 24, 2004, sold its travel trailer business assets to Weekend Warrior, a privately owned, California-based ramp-trailer manufacturer. The sale was designed to allow the Company to further concentrate its efforts and resources on its growing motorhome business.

Trends and Demographics

According to the RVIA’s wholesale statistics, total Class A motorhome industry unit sales in 2004 increased 11.6% to 46,300 from 41,500 in 2003. The aggregate wholesale value of the Class A motorhome industry’s 2004 shipments was approximately $5.7 billion. The average wholesale price of Class A motorhomes increased 7.2% in 2004 to $123,406 from $115,067 in 2003.

While overall unit shipments have increased over the past five years, the RV industry’s manufacturing base has remained relatively constant. Between 1998 and 2004, the number of Class A motorhome manufacturers decreased from 27 to 24. In addition, during this period, the aggregate retail market share of the ten largest Class A motorhome manufacturers increased from 92.5% to 94.5%.

RVs are purchased for a variety of purposes, including camping, visiting family and friends, sightseeing, vacationing and enjoying outdoor activities and sporting events. According to a 2001 University of Michigan study, approximately 6.9

4

million households (or 7.6% of all households) in the United States owned RVs in 2001, up from 6.4 million in 1997, 5.8 million in 1993 and 5.8 million in 1988. In addition, the study indicated that 59% of all current RV owners and 31% of all former RV owners plan to purchase another RV in the future. This study further indicated that 67% of all future RV purchases will be used RVs (RVIA and market share statistics reflect new product sales only) with 32% of these used RVs older than 15 years.

Based on the study done by the University of Michigan, ownership of RVs reaches its highest level among those Americans aged 55 to 64, with 13.7% of households in this category owning RVs. According to the University of Michigan study, the number of households in this group, which constitutes the Company’s primary target market, is projected to grow by 6.4 million households, or 45% from 2001 to 2010 as compared to total growth of 10.5 million households, or 10.0%. Baby Boomers are defined as those born between the years 1946 and 1964, and thus the leading edge of the Baby Boomer generation began turning 50 in 1996. This generation is expected to be more affluent and retire earlier than past generations. As Baby Boomers enter and travel through the important 50 to 65 age group for RV sales, the Company believes that they represent the potential for a secular uptrend in the RV industry. Additionally, the RVIA’s “Go RVing” campaign has been successful in bringing in new and younger buyers.

As motorhomes have increased in popularity due, in part, to the entry of the Baby Boomer generation into the target market, the purchasers of these products have grown more sophisticated in their tastes. The Company believes that as a result, customers have demanded more value for their money, and brand recognition and loyalty have become increasingly important. These trends have favored companies that can deliver quality, value and reliability on a sustained basis.

Recent Developments

During the past three years, the Company has experienced net losses.  These losses, combined with a build-up in inventory, which are primarily the result of lower sales volumes related to recent market declines in the RV industry, have negatively impacted the Company’s liquidity.  In response to these conditions, the Company has implemented initiatives to increase sales volumes through new product and floorplan introductions and the addition of new dealers, to reduce all categories of inventory, to re-balance head counts to current retail sales-supported production levels, to improve manufacturing efficiencies, and to further reduce manufacturing and other overhead costs.

The Company has incurred net losses of $9.3 million, $8.4 million and $19.9 million for the years ended December 31, 2004, 2003 and 2002, respectively.  The Company has used cash from operating activities of $15.8 million and $4.8 million for the years ended December 31, 2004 and 2002, respectively, and provided cash from operating activities of $8.1 million for the year ended December 31, 2003.  The Company’s 2004 results give effect to the establishment of a full valuation allowance in the amount of $11.1 million against the Company’s net deferred tax asset as of the end of 2004.  Recent cumulative losses, the downturn in current market conditions and its impact on near term earnings outweighed other factors including the long carryforward periods and led the Company to conclude that it was more likely than not that its recorded net deferred tax assets will not be realized resulting in the full valuation allowance against the net deferred tax asset as of December 31, 2004.

Business Development and Strategy

The Company’s business development and operating strategy is to deliver high quality, innovative products that offer superior value to enhance the Company’s position as one of the nation’s leading manufacturers of RVs. This strategy focuses on the following key elements: (i) building upon and promoting recognition of the Company’s brand names; (ii) offering the highest value products at multiple price points to appeal to first time and repeat buyers; (iii) utilizing vertically integrated manufacturing processes; and (iv) capitalizing on the Company’s reputation to expand its presence in the Highline market.

Building upon and Promoting Recognition of the Company’s Brand Names

The Company believes that its brand names and historical reputation for manufacturing quality products with excellent value have fostered strong consumer awareness of the Company’s products and have contributed to its overall growth during the past decade. The Company intends to capitalize on its brand name recognition in order to increase its sales and market share, facilitate the introduction of new products and enhance its dealer network.

Offering the Highest Value Products at Multiple Price Points to Appeal to First Time and Repeat Buyers

The Company currently offers 11 distinct models of RVs with 59 floor plans, which are available in a variety of lengths, color schemes and interior designs and range in suggested retail price from $96,000 to $1,339,000. Each model is

5

intended to attract customers seeking an RV within their price range by offering value superior to competitive products from other manufacturers. RVIA data indicates that most new motorhome purchasers have previously owned a recreational vehicle, and the Company’s models are positioned to address the demands of these repeat customers as well as first time buyers.

Utilizing Vertically Integrated Manufacturing Processes

The Company designs and manufactures a significant number of the components used in the assembly of its products, rather than purchasing them from third parties. The Company believes that its vertically integrated manufacturing processes allow it to achieve cost savings and better quality control. The Company’s in-house research and development staff and on-site component manufacturing departments enable the Company to ensure a timely supply of necessary products and to respond rapidly to market changes.

Capitalizing on the Company’s Reputation to Expand its Presence in the Market

The Company’s NRV product offerings compete in the most common and competitive price points in the RV industry. Through continued product development, a focus on quality and strategic pricing, NRV has maintained demand for its products in 2004 and seeks to increase demand for its products with the reintroduction of the popular Tradewinds and Islander diesel products in early 2005, as well as through targeting the expansion of its dealer body. The Company’s CCI product offerings focus exclusively on the Highline segment of the Class A motorhome market. According to the 2004 year-end Statistical Surveys publication, a provider of industry information concerning retail sales, the Company’s Highline market share increased to 8.7% in 2004 from 5.7% in 2003. The Highline market segment of the industry, which represents all motorhomes with a retail price starting at $250,000 or above, includes more models than in previous years. The re-design of the entire CCI product line during the past two years contributed to increases in turn rates and demand for CCI’s products. The Company is actively seeking to expand its share of this market by capitalizing on its established reputation, developing new products of superior quality while reducing its costs, expanding its production capacity in order to target the market’s growing population, expanding its dealer network, and satisfying the desire of many current RV owners to purchase more upscale vehicles.

Products

The Company’s product strategy is to offer the highest value RVs across a wide range of retail prices in order to appeal to a broad range of potential customers and to capture the business of brand-loyal repeat purchasers who tend to trade up with each new purchase. NRV currently manufactures Class A motorhomes under the Dolphin, Sea Breeze, Islander, Tradewinds and Tropi-Cal brand names. CCI currently manufactures Highline Class A motorhomes under the brand names including Affinity, Allure, Intrigue, Inspire, and Magna, all of which are built on the CCI manufactured DynoMax chassis. CCI also manufactures bus conversions under the Country Coach Prevost name.

The Company’s motorhomes are designed to offer all the comforts of home within a 281 to 440 square foot area. Accordingly, the interior of the recreational vehicle is designed to maximize use of available space. The Company’s products are designed with six general areas, which are integrated to form comfortable and practical mobile accommodations. The six areas are the driver’s compartment, living room, kitchen, dining room, bathroom and bedroom. In many models, the Company offers up to four “slide-outs”, which compartments can be expanded to create additional living space when the motorhome is parked. For each model, the Company offers a variety of interior layouts and designs, as well as exterior graphic and paint schemes.

The Company’s products are offered with a wide range of accessories and options and manufactured with high-quality materials and components. Certain of the Company’s Highline motorhomes can be customized to a purchaser’s specifications. Each vehicle is equipped with a wide range of kitchen and bathroom appliances, audio and video electronics, communication and systems monitoring devices, furniture, climate control systems and storage spaces.

Country Coach Prevost XLII Conversion

This completely customized bus is built on the 45’ LeMirage XLII Prevost chassis. Fully custom interiors on this coach are complemented by multi-color custom exterior graphics with clear coat. The coach offers custom modifications, state-of-the-art customized Crestron electronics, in-motion satellite dish, GPS navigation system, concealable color back-up monitor, computerized touch pad switching, computerized air leveling, and large, often concealable LCD high definition television monitors. Slide room floorplans expand the interior living space. Suggested retail prices for the Country Coach Prevost XLII Conversion double-slide start at $1,310,000. The Country Coach Prevost Conversion was introduced in 1983.

6

Affinity

The Affinity is available in 40’, 42’ and 45’ lengths with up to four modular floorplans and is powered by the Caterpillar C-13 525 HP engine teamed with Allison’s 4000MH transmission. Sleek body styling, a one-piece windshield, 84-inch interior height and many state-of-the-art entertainment and convenience features characterize this product. The Affinity is built on the DynoMax chassis manufactured by CCI, and features independent front suspension, Anti-lock Braking System (ABS) brakes, front disc brakes, sway bar and liftable tag axle. The Affinity is available in two models, the 730 and the 770LX, and offers varying degrees of customization, including floorplan modification and custom interior/exterior schemes. Modular slide-out floorplan combinations with up to four slide rooms offer significant opportunities for personalization. Suggested retail prices for the Affinity start at $650,000. The Affinity was introduced in 1990.

Magna

The Magna is available in 40’, 42’ and 45’ lengths with three floorplans, each offering up to four slide rooms. The Magna is built on the DynoMax chassis and features independent front suspension and a Caterpillar C-13 525 HP diesel engine teamed with Allison’s 4000MH transmission. Six designer coordinated interior packages or the optional custom interior package complement the fiberglass exterior with six exterior paint color packages. Suggested retail prices for the Magna start at $554,000. The Magna was introduced in 1991.

Intrigue

The Intrigue features a one piece windshield, taller interior height, and sleek euro body styling. This coach is built on the DynoMax chassis and features independent front suspension, ABS brakes, and a sway bar. It is available in 40’, 42’ and 45’ lengths. This diesel pusher is powered by the 400 HP Cummins ISL diesel engine, or the optional Caterpillar C–13 525 HP diesel engine. The fiberglass exterior features painted exterior graphics including full body paint with complete clear coat protection. Custom crafted cabinetry is standard in each of the floorplans, and up to four modular slide rooms are available with each floorplan. Suggested retail prices for the Intrigue start at $422,000. The Intrigue was introduced in 1994.

Allure

The Allure is available in 34’, 37’, 40’ and 42’ lengths, is built on the DynoMax chassis and is powered by a Caterpillar 400 HP C-9 diesel engine teamed with Allison’s 3000MH transmission. The fiberglass exterior, with its painted graphics, including full body paint, complete clear coat protection and bus-style aerodynamics, is complemented by four designer coordinated interior packages. Four slide-out arrangements are available on most floorplans. Suggested retail prices for the Allure start at $297,000. The Allure was introduced in 1995.

Inspire

The Inspire is available in 36’ and 40’ lengths with up to four slide rooms in certain configurations, is built on the DynoMax chassis and is powered by the Caterpillar 400 HP C-9 diesel engine paired with an Allison 3000MH transmission. The Inspire offers an 85” interior height, and features high-end diesel coach elements like independent front suspension. Suggested retail prices for the Inspire start at $255,000. The Inspire was introduced in 2003.

Islander

The 40’ Islander is a bus-style diesel pusher built on the Spartan Mountain Master GT chassis, offering considerable strength in addition to features like a 400 HP Cummins ISL diesel engine, independent front suspension, and a new higher 85” ceiling. The Islander features large triple and quad slide models that add to the living space. This motorhome receives intricate full exterior paint designs, in addition to interior appointments like OptimaLeather™, upgraded electronics and several interior upgrades. Suggested retail prices for the Islander start at $269,000. The Islander debuted in 1999, but was not built for model-year 2005. It is being reintroduced in 2005 for model-year 2006.

Tradewinds

The 40’ Tradewinds is a bus-style diesel pusher built on the Freightliner XC raised rail chassis, offering considerable strength in addition to features like a 370 HP Cummins ISL diesel engine, Allison MH3000 transmission, and a new higher 85” ceiling. The Tradewinds features large three and four slide rooms that add to the already spacious living space. This motorhome receives intricate full exterior paint designs, in addition to interior appointments like OptimaLeather™, upgraded electronics and several interior upgrades. Suggested retail prices for the Tradewinds start at $237,000. The Tradewinds debuted in 1997, but was not built for model-year 2005. It is being reintroduced in 2005 for model-year 2006.

Tropi-Cal

The Tropi-Cal is a competitively priced diesel pusher built on the Freightliner XC-Series Chassis. The 35’, 37’, and 39’ Tropi-Cal floorplans feature two, three, and four slide-outs and include expansive basement storage, excellent cargo

7

carrying capacities and comfortable, convenient layouts. The Tropi-Cal offers a distinctive vinyl graphics package and a partial and full paint option. The Tropi-Cal capitalizes on brand loyalty earned since the original nameplate introduction in the early 1990s. Suggested retail prices for the Tropi-Cal start at $168,000. The Tropi-Cal was originally introduced as a gasoline motorhome in 1994 and made its debut as a diesel pusher in 2002.

Dolphin

The Dolphin is available in five floorplans, and was built exclusively on Workhorse’s W-22 and W-24 gas-powered chassis in 2004, although versions will be available on Ford chassis in 2005. These models are full-basement, bus-style motorhomes with up to three slides. The Dolphin LX is an upgraded Dolphin, offering certain distinct features, exterior styling and floorplans often reserved for higher-priced diesel motorhomes. Many optional Dolphin features become standard on the Dolphin LX, and the LX features many items not available on the standard Dolphin. The Dolphin products are produced in 32’ to 38’ lengths. Suggested retail prices for the Dolphin start at $123,000. The Class A Dolphin motorhome was first introduced in 1985. However, the Dolphin brand dates back to 1963.

Sea Breeze

The Sea Breeze is a moderately priced, bus-style motorhome, offered on a Ford gas-powered chassis. A full-height motorhome, the Sea Breeze offers considerable basement storage. The Sea Breeze features Corian® countertops, power heated side-view mirrors, deluxe trim and heated water and waste holding tanks. The Sea Breeze offers floorplans ranging from 30’ to 35’ in length. Also offered under the Sea Breeze name is the Sea Breeze LX built on the Workhorse W-22 chassis. The Sea Breeze LX offers many upgrades not available in the standard Sea Breeze. The Sea Breeze LX models are produced in 31’ to 35’ lengths. Suggested retail prices for the Sea Breeze start at $96,000. The Class A Sea Breeze product was introduced in 1992.

Planned Product Introductions

During 2005, the Company plans to introduce new floorplans in its existing products to target certain market niches not previously represented. The Company unveiled a brand new re-designed Dolphin product early this summer. The Dolphin was re-designed from the ground up, incorporating several innovative industry trends such as the “big box” house and aggressive new front and rear caps. In addition, the Company plans to introduce an entry-level gas motorhome in the fall.  The product will target first time Class A motorhome buyers. In addition, the Company launched a completely re-designed Intrigue motorcoach in March 2005. This re-design features new exterior styling, large quad-slide floorplans, taller interiors and upgraded appointments. Throughout much of the Company’s product offerings, model change will herald new and updated interior and exterior color schemes, and new floorplans will be debuted throughout the calendar year.

Distribution and Marketing

The Company markets NRV products through a network of approximately 72 Class A dealer locations in 30 states and 3 Canadian provinces. These dealers generally carry all or a portion of NRV’s product lines along with competitors’ products. The Company markets CCI products through 30 dealer locations in 17 states. Overall, the Company markets its NRV and CCI products through a network of approximately 98 dealer locations in 32 states and 3 Canadian provinces. CCI utilizes a limited dealer network for its Highline motorhomes due to the high level of knowledge needed by the dealer sales people and the tendency of Highline customers to make destination-type purchases at shows and rallies. The Company believes that each of the CCI dealers has significant experience with top-of-the-line products and has outstanding facilities and service programs.

The Company generally promotes its products through product support at dealer locations, product brochures, plant tours and product walk-throughs on DVD, attendance at trade and consumer shows, direct mail promotions, company web sites, live plant tours, corporate newsletters, press releases, promotional appearances, trade and consumer magazine advertising, RV owner rallies that include limited free service, and its in-house magazine publications. From time to time, the Company also offers dealer incentives. In addition, to help promote customer satisfaction and brand loyalty, the Company sponsors NRV and CCI clubs for owners of the Company’s products. The clubs publish newsletters on a monthly or quarterly basis and organize RV rallies and other activities. The Company continually seeks consumer preference input from several sources, including dealers, RV owners and the Company’s sales representatives and, in response, the Company implements changes in the design, decor and features of its products. The Company’s website also offers an extensive listing of the Company’s models, floor plans and features, including “virtual tours” of some models.

Most of the Company’s motorhome sales are made on terms requiring payment within 15 business days or less of the dealer’s receipt of the unit. Most dealers finance all, or substantially all, of the purchase price of their inventory under floor plan arrangements with banks or finance companies under which the lender pays the Company directly. Dealers typically are not required to commence loan repayments to such lenders for a period of at least six months. The loan is

8

collateralized by a lien on the vehicle. Consistent with industry practice, the Company has entered into repurchase agreements with these lenders. In general, the repurchase agreements require the Company to repurchase a unit if the dealer defaults on the financed unit. Upon a dealer default, the agreements generally require the Company to repurchase RVs at the election of the lender provided certain conditions are met, such as repossession of the RV by the lender, the RV being new and unused and the time elapsed between invoice date and demand for repurchase being no longer than a specified period which is typically 18 months or less. At December 31, 2004, the Company’s maximum potential repurchase obligation under these agreements was approximately $132 million. The risk of loss under such agreements is spread over numerous dealers and lenders and is further reduced by the resale value of the motorhomes the Company would be required to repurchase. The Company’s losses under these agreements have not been material in the past and management does not believe that any future losses under such agreements will have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows.

Many finance companies and banks provide retail financing to purchasers of RVs. Certain provisions of the U.S. tax laws applicable to second residences, including the deductibility of mortgage interest and the exclusion of gain on a qualifying sale, currently apply to motorhomes used as qualifying residences.

Manufacturing Facilities and Production

The Company owns and operates manufacturing and customer service facilities in Perris, California and Junction City, Oregon. NRV products are designed and manufactured in facilities encompassing 607,000 square feet located on approximately 49 acres in Perris. In addition, NRV leases 97,000 square feet of the total 607,000 square feet to Weekend Warrior, a privately owned, California-based ramp trailer manufacturer, as part of the September 2004 sale of the Towables division. This lease is expected to continue for twelve months from the effective date of the agreement. CCI products are designed and manufactured in facilities encompassing 436,000 square feet located on approximately 71 acres in Junction City.

The Company’s vehicles are built by integrating manufacturing and assembly line processes. The Company generally operates one production shift for most assembly activities. The Company believes that the vertically integrated manufacturing systems and processes it has developed enable it to efficiently and consistently produce high-quality products.

Among other items, the Company fabricates, molds and finishes fiberglass to produce its front-end and rear-end caps, manufactures its own walls and roofs, assembles sub-floors and molds plastic components. In addition to assembling its vehicles and installing various options and accessories, the Company manufactures the majority of the installed amenities such as cabinetry, draperies, showers and bathtubs. After purchasing the basic chair and sofa frames, the Company also fabricates much of the furniture used in its motorhomes. The Company believes that by manufacturing these components on site, rather than purchasing them from third parties, it achieves cost savings, better quality control and timely supply of necessary components. Chassis for certain of the Company’s coaches, plumbing fixtures, floor coverings, hardware and appliances are purchased in finished form from various suppliers.

The Company purchases the principal raw materials and certain other components used in the production of its RVs from third parties. Other than the chassis and chassis components, these components and raw materials typically have short delivery lead times. All materials are generally available from numerous sources, and the Company has not experienced any significant shortages of raw materials or components.

Arrangements with Chassis Suppliers

The Company’s NRV subsidiary purchases gasoline-powered chassis that are manufactured by Ford Motor Company and Workhorse Custom Chassis, and rear engine diesel-powered chassis from Freightliner Custom Chassis Corporation and Spartan Motor Corporation. The Company’s CCI subsidiary manufactures its own chassis, the DynoMax, which is used as the base upon which all CCI motorhomes are built, except for the Country Coach Prevost bus conversions, which utilize a Prevost bus shell. The Company generally maintains a one to two month production supply of a chassis in inventory. If any of the Company’s present chassis manufacturers were to cease manufacturing or otherwise reduce the availability of their chassis, the business of the Company could be materially and adversely affected. The industry, as a whole, from time to time, experiences short-term shortages of chassis.

Product Development

The Company utilizes research and development staff that concentrates on product development and enhancements. New ideas are presented to the staff from management and are derived from a variety of sources, including sales representatives, dealers and consumers. The staff utilizes computer-aided design equipment and techniques to assist in the

9

development of new products and floor plans and to analyze suggested modifications of existing products and features. After the initial step of development, prototype models for new products are constructed and refined. In the case of modifications to certain features, new molds for various parts, such as front-end caps, storage doors, and dashes are produced and tested. New product prototypes are produced both off-line as well as directly on the production line. The Company believes that the maintenance of an in-house research and development staff enables the Company to respond rapidly to ongoing shifts in consumer tastes and demands. Total research, development and engineering expenses were $7.8 million, $6.7 million and $5.4 million for the years ended December 31, 2004, 2003 and 2002, respectively, of which research and development expenses alone were $1.5 million, $2.1 million and $1.4 million, respectively.

Backlog

The Company’s backlog of orders was $135 million as of December 31, 2004 and $119 million as of December 31, 2003. Backlog orders are those orders with either a dealer purchase order or some other form of dealer commitment to purchase a unit. All backlog orders are subject to cancellation or postponement at the option of the dealer without penalty, and therefore, backlog should not be used as a measure of future sales. To the extent not canceled or postponed, the Company expects its backlog to be filled within 75 to 100 days.

Competition

The motorhome market is intensely competitive, with a number of other manufacturers selling products that compete with those of the Company. According to Statistical Surveys, Inc., the three leading manufacturers accounted for approximately 55.8% and 55.7% of total retail units sold in the Class A motorhome market during 2004 and 2003, respectively. These companies and certain other competitors have substantially greater financial and other resources than the Company. Sales of used motorhomes also compete with the Company’s products. The Company competes on the basis of value, quality, price and design. According to Statistical Surveys, Inc., the Company’s Class A retail market share of new product unit sales was 6.6%, 6.1%, and 5.5% in 2004, 2003, and 2002, respectively.

Regulation

The Company is subject to federal, state and local regulations governing the manufacture and sale of its products, including the provisions of the National Traffic and Motor Vehicle Safety Act (the “Motor Vehicle Act”), the Transportation Recall Enhancement, Accountability and Documentation Act (the “TREAD” Act) and the Federal Motor Vehicle Safety Standards (“FMVSS”). Certain states require approval of coach designs and provide certification tags proving compliance before coaches can be sold into that state. The Motor Vehicle Act authorizes the National Highway Traffic Safety Administration (“NHTSA”) to require a manufacturer to recall and repair vehicles that contain safety defects or fail to comply with the FMVSS. In addition, the Company has, from time to time, instituted voluntary recalls of certain motorhomes. Future recalls of the Company’s products, if any, could have a material adverse effect on the Company. The Company is also subject to some federal and state consumer protection and unfair trade practice laws and regulations relating to the sale, transportation and marketing of motor vehicles, including so-called “Lemon Laws.” Federal and state laws and regulations also impose upon vehicle operators various restrictions on the weight, length and width of motor vehicles, including trucks and motorhomes, that may be operated in certain jurisdictions or on certain roadways. Certain jurisdictions also prohibit the sale of vehicles exceeding length restrictions. Amendments and changes in enforcement with respect to these laws and regulations and the implementation of new laws and regulations could significantly increase the costs of manufacturing, purchasing, operating or selling the Company’s products and could have a material adverse effect on the Company’s business, results of operations and financial condition.

The Company relies upon certifications from chassis manufacturers with respect to compliance of the Company’s vehicles with all applicable emission control standards. The RVIA, of which the Company is a member, has promulgated stringent standards for quality and safety. Each of the units manufactured by the Company has a RVIA seal placed upon it to certify that such standards have been met.

Federal and state authorities have various environmental control standards relating to air, water, and noise pollution and hazardous waste generation and disposal that affect the business and operations of the Company. The Company believes that its facilities and products comply in all material respects with applicable environmental regulations and standards. The Company is also subject to the regulations promulgated by the Occupational Safety and Health Administration (“OSHA”), which regulate workplace health and safety. Representatives of OSHA and the RVIA periodically inspect the Company’s plants.

Product Warranty

The Company provides retail purchasers of its motorhomes with a limited warranty against defects in materials and workmanship. Excluded from the Company’s warranties are chassis manufactured by third parties and other components,

10

typically those that are warranted by the Company’s suppliers of these items. Service covered by warranty must be performed at either the Company’s in-house service facilities or any of its dealers or other authorized service centers. The basic warranty terms are as follows:

•                  CCI motorhomes – One year basic, five years structural

•                  NRV motorhomes – One year basic, five years structural

•                  DynoMax chassis – Two years basic, five years structural

Trademarks and Patents

The Company has registered NRV’s Dolphin, DuraFrame, Duraslide, Islander, Marlin, Palisades, Sea Breeze, Sea View National R.V. (Logo), Sea View, Surf Side, Tradewinds, and Tropi-Cal trademarks, and CCI’s Affinity, Allure, Concept, Country Camper, Country Coach, Country Coach Destinations, DynoMax, Great Room, Inspire, Intrigue, Magna, and Max trademarks and believes they are material to the Company’s business. The Company has additional trademarks filed and pending registration. In addition, the Company has four patents covering RV sub-floors, exterior doors, and stow-away beds.

Employees

As of December 31, 2004, the Company employed a total of 2,844 people, of which 2,275 were involved in manufacturing, 208 in service, 145 in administration, 143 in research, development and engineering, and 73 in sales and marketing. None of the Company’s personnel are represented by labor unions. The Company considers its relations with its personnel to be good.

Item 2. Properties

The Company owns and operates manufacturing facilities in Perris, California and Junction City, Oregon. NRV products are designed and manufactured in facilities encompassing 607,000 square feet located on approximately 49 acres in Perris. In addition, NRV leases 97,000 square feet, of the total 607,000 square feet, to Weekend Warrior, a privately owned, California-based ramp trailer manufacturer, as part of the September 2004 sale of the Towables division. This lease is expected to continue for twelve months from the effective date of the agreement. CCI products are designed and manufactured in facilities encompassing 436,000 square feet located on approximately 71 acres in Junction City. A portion of CCI’s facilities representing 325,000 square feet is being leased under an agreement expiring in October 2005. The Company has the option to extend the CCI lease agreement for an additional five-year period. In addition, the building where CCI’s bus conversions are manufactured representing 27,000 square feet is being leased under a one-year agreement expiring in November 2005. The Company has the option to renew the lease at the end of each lease year. In March 2004, the Company sold a 10-bay service and parts distribution center in Lakeland, Florida and subsequently moved this service and parts center to a new facility in the same general area to minimize its invested capital.

The Company believes that present facilities are well maintained and in good condition. While the Perris, California facilities are sufficient to meet the NRV production needs, management is currently evaluating the need to expand its CCI capacity. As a result, in August 2004, the Company entered into an agreement to acquire for $3.0 million approximately 73 acres of land adjacent to the CCI facility. The closing of the purchase is subject to customary closing conditions and is expected to occur in 2006.

Item 3. Legal Proceedings

The Company is involved in legal proceedings in the ordinary course of business, including a variety of warranty, “lemon law” and product liability claims typical in the recreation vehicle industry. With respect to product liability claims, the Company’s insurance policies cover, in whole or in part, defense costs and liability costs for personal injury or property damage (excluding damage to Company motorhomes). While it is impossible to estimate with certainty the ultimate legal and financial liability with respect to this litigation, management is of the opinion that while the final resolution of any such litigation may have an impact on the Company’s consolidated results for a particular reporting period, the ultimate disposition of such litigation will not have any material adverse effect on the Company’s financial position, results of operations or liquidity.

Item 4. Submission of Matters to a Vote of Security Holders

None.

11

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The Company’s Common Stock, par value $.01 per share (the “Common Stock”), has been trading on the New York Stock Exchange under the symbol NVH since December 14, 1998. For more than four years prior to that the Company’s Common Stock traded on the NASDAQ National Market under the symbol NRVH.

On September 22, 2005, the last reported sales price for the Common Stock quoted on the New York Stock Exchange was $5.49 per share. As of September 22, 2005, there were approximately 61 record holders of Common Stock. Such number does not include persons whose shares are held of record by a bank, brokerage house or clearing agency, but does include such banks, brokerage houses and clearing agencies.

Dividends

The Company has not paid any cash dividends or distributions on its Common Stock and has no intention to do so in the foreseeable future. The Company presently intends to retain earnings for general corporate purposes, including business expansion, capital expenditures and possible acquisitions. The declaration and payment of future dividends will be at the sole discretion of the Board of Directors and will depend on the Company’s profitability, financial condition, capital needs, future prospects and other factors deemed relevant by the Board of Directors. The Company’s current credit agreement with UPS Capital Corporation restricts the declaration and payment of dividends. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources.”

Issuer Purchases of Equity Securities

There were no purchases by the Company of its Common Stock during the quarter ended December 31, 2004 nor does the Company have outstanding any publicly announced repurchase program.

Unregistered Sales of Equity Securities

During the fiscal year ended December 31, 2004, the Company sold no equity securities of the Company, which were not registered under the Securities Act of 1933, as amended.

Item 6. Selected Financial Data

The following selected consolidated financial data should be read in conjunction with the Company’s consolidated financial statements and the notes thereto, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained elsewhere herein. The selected financial data of all prior periods have been restated to reclassify revenues and expenses of the travel trailer business as a discontinued operation, as further discussed in Note 16 to the accompanying consolidated financial statements, and to correct other errors discussed below in Note 3 to the selected consolidated financial information table.

12

SELECTED CONSOLIDATED FINANCIAL INFORMATION

(In thousands, except per share and unit amounts)

(1) The impairment of goodwill was attributable to the adoption of Statement of Financial Accounting Standards No. 142, effective January 1, 2002.

(2) The cumulative effect of change in accounting principle was attributable to the adoption of Staff Accounting Bulletin No. 101, effective January 1, 2000.

(3) The prior period selected financial data presented in the table above have been restated for three correcting adjustments described below. These adjustments are also discussed below and under “Restatement Due to Correction of Errors” in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

13

Correction of accounting for dealer sales incentives

The financial statements reflect the restatement of certain dealer sales incentives, which include rebates and floorplan interest reimbursement paid to dealers to promote the sale of the product and retail incentives paid directly to dealer retail salespersons to promote the sale of the product and the return of sale and warranty information. The 2003, 2002, 2001 and 2000 selected financial data presented in this Form 10-K have been restated to reclassify these retail sales incentives from selling expenses to a reduction of revenue as required by Emerging Issues Task Force (“EITF”) Issue No. 01-09, “Accounting for Consideration Given by a Vendor to a Customer (including a Reseller) of the Vendor’s Products”. Net sales, gross profit and selling expenses were reduced by $1.7 million in 2003, $2.5 million in 2002, $2.6 million in 2001 and $2.5 million in 2000. This adjustment had no impact on net (loss) income as previously reported.

Correction of allowance for doubtful accounts methodology

During 2003, the Company changed its methodology for calculating its allowance for doubtful accounts from a method of providing an allowance for the estimated cost of one motorhome at each of its divisions to a specific reserve methodology that reserves 100% of invoices greater than 120 days past due and all other accounts not considered collectible. The total reduction to the reserve of $0.15 million resulting from this change in methodology was initially recorded in 2003 as a change in estimate, but should have been recorded as a correction of an error. Accounting Principles Board Opinion No. 20, Accounting Changes, states that a change from an accounting principle that is not generally accepted to one that is generally accepted is a correction of an error. The allowance for doubtful accounts methodology used by the Company prior to 2003 is not a generally accepted method and as such, the Company now believes the 2002 financial statements should have been restated at the time the Company changed its methodology. General and administrative expenses were increased by $0.15 million in 2003 and decreased by the same amount in 2002 as a result of this restatement.

Correction of workers’ compensation reserve methodology

The 2002 financial statements have been restated to correct an error related to the workers’ compensation self-insurance reserve. During 2002, the Company changed its methodology for calculating workers’ compensation self-insurance reserves to an actuarial based method involving an incurred but not reported (IBNR) claims analysis from the specific reserve method previously recorded in 2001 and prior years. The total charge to increase the reserve of $4.2 million was initially recorded in 2002. The Company treated the charge as a revision of an estimate, but should have treated it as a correction of an error, and restated prior years. The restated cost of goods sold was reduced by $1.8 million in 2002 and increased by $1.2 million and $0.3 million in 2001 and 2000, respectively. The loss from discontinued operations was reduced by $0.5 million in 2002 and was increased by $0.4 million and $0.1 million in 2001 and 2000, respectively. Additionally, stockholders’ equity at January 1, 2000 was reduced by $0.2 million as a result of this restatement.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements

This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that forward-looking statements are inherently uncertain. Actual performance and results may differ materially from that projected or suggested herein due to certain risks and uncertainties including, without limitation, potential fluctuations in the Company’s operating results; any material weaknesses in the Company’s internal control over financial reporting or any failure to implement required new or improved controls; resumption of losses; seasonality and economic conditions; dependence on certain dealers and concentration of dealers in certain regions; dependence on chassis suppliers; potential liabilities under repurchase agreements; competition; government regulation; warranty claims; and product liability claims. Certain risks and uncertainties that could cause actual results to differ materially from that projected or suggested are set forth below under “Factors That May Affect Future Operating Performance” and in the Company’s filings with the Securities and Exchange Commission (the “SEC”) and the Company’s public announcements, copies of which are available from the SEC or from the Company upon request. The Company undertakes no obligation to revise or update publicly any forward looking statements for any reason.

14

Executive Overview

During the past three years, the Company has experienced net losses.  These losses, combined with a build-up in inventory, which are primarily the result of lower sales volumes related to recent market declines in the RV industry, have negatively impacted the Company’s liquidity.  In response to these conditions, the Company has implemented initiatives to increase sales volumes through new product and floorplan introductions and the addition of new dealers, to reduce all categories of inventory, to re-balance head counts to current retail sales-supported production levels, to improve manufacturing efficiencies, and to further reduce manufacturing and other overhead costs.

In 2004 the Company had a net loss of $9.3 million or $0.91 per share, compared to its net loss of $8.4 million or $0.85 per share in 2003. The Company’s 2004 results give effect to the establishment of a full valuation allowance in the amount of $11.1 million against the Company’s net deferred tax asset as of the end of 2004. Recent cumulative losses, the downturn in current market conditions and its impact on near term earnings outweighed other factors including the long carryforward periods and the Company’s forecasted long-term profitability and led the Company to conclude that it was more likely than not that its recorded net deferred tax assets will not be realized resulting in the full valuation allowance against the net deferred tax asset as of December 31, 2004.

In 2004, the Company improved its gross margins by 510 basis points from 2.0% in 2003 to 7.1% in 2004. The Company also finished the year with a 9.4% increase in market share, the third largest annual market share percent increase of the top ten Class A manufacturers as reported by Statistical Surveys, Inc. Key to the Company’s improvement in 2004 were new and enhanced product offerings, and improving profit margins driven by various cost-reduction and efficiency initiatives with reduced workers’ compensation and warranty costs being two of the most significant cost-reduction areas. Additionally, 2004 had the benefit of a full year of the new Inspire product sales which was a significant factor in the Company’s overall increase in sales over 2003.

In addition, during the third quarter, the Company sold its Travel Trailer business, which it recorded as a discontinued operation. The sale was designed to allow the Company to further concentrate its efforts and resources on its growing motorhome business. For the years ended December 31, 2004, 2003 and 2002, the Company recorded net losses from discontinued operations of $1.1 million, $1.4 million and $1.4 million, respectively. The net loss on discontinued operations for the year ended December 31, 2004 included a pre-tax gain on the sale of the Travel Trailer business of $0.3 million.

Product Development

Both NRV and CCI released re-designed products in 2004. At NRV, the Tradewinds and the Islander, which were introduced in December 2004, are diesel products efficiently built on the same production line as the gas products. At CCI, the re-designed Magna and Affinity were introduced in the spring of 2004.

In evaluating existing products at CCI, the Company set to work revitalizing its Highline products. These efforts resulted in a significant improvement in CCI’s motorhome product turn and a significant annual increase in its overall market share. NRV experienced a market share increase in its Tropi-Cal and Sea Breeze products.

New floorplans with triple and quad slides together with interior and exterior product enhancements have proven very successful in the marketplace. Management believes that focusing on the customer and providing great products that support the customer’s lifestyle will drive future growth for the Company.

Operating Performance

Continual effort to improve the safety of the workforce and decrease its workers’ compensation costs resulted in an approximate $3.0 million reduction in workers’ compensation costs for the year ended 2004 compared to 2003. The Company has undertaken significant safety programs to address these costs and the Company is being more proactive in the handling of its claims. In addition to these measures, which are helping, the Company believes that its workers’ compensation costs should be further reduced by recent state reforms. Other factors leading to the improvement in gross profit margin percentage from last year include higher sales, increased production levels at both NRV and CCI, price increases, and reduced discounting, partially offset by production inefficiencies.

As the Company has introduced new and revitalized products it has seen a rise in wholesale deliveries and an improvement in Class A retail market share, to 6.6% in 2004 from 6.1% in 2003. Both the industry and the Company have experienced a shift to the more profitable diesel versus gas product lines. Stronger product offerings and the resulting

15

increase in demand have reduced the need to discount many of the Company’s products through most of 2004 though there can be no assurance that future demand and competitive conditions will not cause the Company to increase discounts in future periods.

Looking Ahead

Many of the same objectives the Company addressed last year remain in place for the current year, including aggressive product development, cost containment, and increased customer satisfaction. In addition, the Company will focus on increasing its dealer body in 2005 with particular emphasis on the midwest, northeast, and east coast.

The 2004 fourth quarter saw the release of the remaining 2005 model year offerings. NRV introduced the re-designed Tradewinds and Islander diesel-powered products at the industry’s annual tradeshow in early December 2004. These two diesel products, which began to hit the market in meaningful numbers in the second quarter of 2005, represent significant additions to the Company’s offerings given the relative strength of the Class A motorhome diesel segment.

Cost containment remains a high priority, specifically in the manufacturing cost areas, warranty, and workers’ compensation. The Company continues to focus on improving the quality of its motorhomes resulting in decreased warranty costs as a percentage of net sales. Also, the Company has instituted a number of safety programs, which have resulted in measurably reduced workers’ compensation costs. The Company expects further progress in containing its costs as it continues to implement lean manufacturing concepts. Both NRV and CCI have recently staffed full-time manufacturing engineers to assist in driving efficiency gains.

The Company is continually striving to increase its customer support by improving club support, telephone support for owners and dealers, and parts fulfillment. The Company utilizes various techniques such as surveys and focus groups to ensure that it is improving in the area of customer satisfaction.

A renewed focus on dealer acquisition and enhanced training programs for the Company’s workforce, service centers, dealers, and consumers are also key initiatives. The Company has already undertaken efforts in the areas of safety; with new distance learning capabilities, the Company is looking forward to broadcasting its service training programs directly to dealers and service providers, driving the movement for increased customer satisfaction in areas of technical maintenance. In addition, factory-training programs are providing the Company’s customers a basis for self-diagnostics and a better understanding of the equipment they are operating.

The Recreational Vehicle Industry Association’s (RVIA) market expansion campaign, GO RVing, now in its eighth year, is fostering greater awareness and garnering media attention. Though RVIA expects substantial growth for the industry in the long-term or decade ahead, RVIA expects a decline in the industry in the near term or each of the years 2005 and 2006.

This analysis of the Company’s financial condition and operating results should be read in conjunction with the accompanying consolidated financial statements including the notes thereto.

Critical Accounting Policies

The Company’s discussion and analysis of its financial condition and results of operations are based upon its consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.  The Company has performed an evaluation of its ability to continue as a going concern and believes it has sufficient financial resources to fund its operations through at least December 31, 2005. Accordingly, the consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of the assets and the satisfaction of liabilities in the normal course of business.  The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses for each period.

The following represents a summary of the Company’s critical accounting policies, defined as those policies that the Company believes are: i) the most important to the portrayal of the Company’s financial condition and results of operations, and ii) that require the Company’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain.

16

Valuation of Long-Lived Assets

Effective the first quarter of fiscal 2003, the Company adopted SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” In accordance with SFAS No. 144, the Company assesses the fair value and recoverability of its long-lived assets whenever events and circumstances indicate the carrying value of an asset may not be recoverable from estimated future cash flows expected to result from its use and eventual disposition. In doing so, the Company makes assumptions and estimates regarding future cash flows and other factors. The fair value of the long-lived assets is dependent upon the forecasted performance of the Company’s business and the overall economic environment. When the Company determines that the carrying value of the long-lived assets may not be recoverable, it measures impairment based upon a forecasted discounted cash flow method. The following table provides the estimated useful lives used for each asset type:

Warranty Reserve

The Company’s warranty reserve is established based on its best estimate of the amounts necessary to settle future and existing claims on products sold as of the balance sheet date. The Company records an estimate for future warranty-related costs based on recent actual warranty claims and historical experience. Also, the Company’s recall reserve is established, as necessary, based on management’s estimate of the cost per unit to remedy a recall problem and the estimated number of units that will ultimately be brought in for the repair. In addition, from time to time, the Company is involved in warranty or “lemon law” litigation arising out of its operations in the normal course of business. To date, the number of such matters as a percentage of sales is low and the aggregate cost to the Company for these actions have not been material. While the Company’s warranty costs have historically been within its expectations and the provisions established, the Company cannot guarantee that it will continue to experience the same warranty costs that it has in the past. A significant increase in dealer shop rates, the cost of parts or the frequency of claims could have a material adverse impact on the Company’s operating results for the period or periods in which such claims or additional costs materialize.

Revenue Recognition

The Company recognizes revenue in accordance with SEC Staff Accounting Bulletin No. 104, Revenue Recognition in Financial Statements, or SAB 104. SAB 104 requires that four basic criteria must be met before revenue can be recognized: i) persuasive evidence of an arrangement exists, ii) delivery has occurred and title and the risks and rewards of ownership have been transferred to the customer, iii) the price is fixed and determinable, and iv) collectibility is reasonably assured. During the fourth quarter of 2004, NRV began delivering motorhomes to its customers through independent third party carriers. Title and risks of rewards of ownership are transferred to a customer upon delivery of a motorhome to a third party carrier. When all of the above criteria are satisfied, motorhome sales are generally recorded by NRV at the time the motorhomes are delivered to an independent third party carrier and are recorded by CCI, which does not deliver its motorhomes through an independent third party carrier, when accepted by the dealer.

In addition, as is common throughout the RV industry, the Company offers incentives to its dealers in the form of discounts and floorplan interest reimbursement programs, rebate and holdback programs, and retail sales incentives paid to dealer retail salespersons. The Company recognizes and records the costs of these incentives in accordance with Emerging Issue Task Force (EITF) No. 01-09, “Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products)”.

Discounts and floorplan interest reimbursement programs are offered to dealers on purchases of certain units during dealer or other trade show events. The Company will occasionally also offer these programs to its dealers to sell slower-moving units. The Company recognizes the cost of these programs as a reduction of revenue and generally records the cost of discounts when the associated revenue is recognized.

Rebate and holdback programs involve payments by the Company to the dealer based on either a percentage of the net invoice price or a predetermined amount based on the model of the coach sold by the dealer. The dealer incentive program varies by dealer. Not all dealers participate. The purpose of the program is to provide an additional incentive to the dealer to promote sales of the product. The dealers earn the incentive upon the wholesale purchase of the unit from the Company. The Company recognizes these incentives as a reduction of revenue and records the cost of these incentives when the associated revenue is recognized.

17

The Company often pays retail sales incentives directly to dealer retail salespersons to promote the sale of the product and the return of sale and warranty information. This information assists in providing sales and marketing data to the Company. The Company recognizes the cost of such retail sales incentives as a reduction of revenue and records the cost of such retail sales incentives when the associated revenue is recognized.

Cooperative advertising arrangements exist through which dealers receive a certain allowance of the total purchases from the Company if certain qualitative advertising criteria are met and if specified amounts are spent on the advertisements. A dealer must maintain documentation of all advertising performed that includes the Company’s products and provide that documentation to the Company upon request. Because the Company receives an identifiable advertising benefit from the dealer, the Company recognizes the cost of cooperative advertising as a selling expense and records the cost of cooperative advertising when the units are sold to the dealers.

Legal Proceedings

The Company is involved in legal proceedings in the ordinary course of business, including a variety of warranty, “lemon law” and product liability claims typical in the recreation vehicle industry. With respect to product liability claims, the Company’s insurance policies cover, in whole or in part, defense costs and liability costs for personal injury or property damage (excluding damage to Company motorhomes). While it is impossible to estimate with certainty the ultimate legal and financial liability with respect to this litigation, management is of the opinion that while the final resolution of any such litigation may have an impact on the Company’s consolidated results for a particular reporting period, the ultimate disposition of such litigation will not have any material adverse effect on the Company’s financial position, results of operations or liquidity.

Income Taxes

As part of the process of preparing its consolidated financial statements, the Company estimates its income taxes in each of the taxing jurisdictions in which the Company operates. This process involves estimating actual current tax expense together with assessing any temporary differences resulting from the different treatment of certain items, such as the timing for recognizing revenues and expenses, for tax and financial reporting purposes. These differences may result in deferred tax assets and liabilities, which are included in the consolidated balance sheet. The Company is required to assess the likelihood that its net deferred tax assets, which include net operating loss carryforwards and temporary differences that are expected to be deductible in future years, will be recoverable from future taxable income or other tax planning strategies. Statement of Financial Accounting Standards (“SFAS”) No. 109 “Accounting for Income Taxes” (“SFAS 109”) requires that a valuation allowance be established when it is more likely than not that its recorded net deferred tax assets will not be realized.  In determining whether a valuation allowance is necessary, the Company is required to take into account all positive and negative evidence with regard to the utilization of a deferred tax asset, including the Company’s past earnings history, market conditions, management profitability forecasts, the character and jurisdiction of such earnings, unsettled circumstances that, if unfavorably resolved, would adversely affect utilization of a deferred tax asset, carryback and carryforward periods, and tax strategies that could potentially enhance the likelihood of realization of a net deferred tax asset.  SFAS No. 109 further states that it is difficult to conclude that a valuation allowance is not needed when there is negative evidence such as cumulative losses in recent years. Recent cumulative losses, the downturn in current market conditions and its impact on near term earnings outweighed other factors including the long carryforward periods and lead the Company to conclude that it was more likely than not that its recorded net deferred tax assets will not be realized resulting in the full valuation allowance against the net deferred tax asset as of December 31, 2004.    As a result, the Company has recorded a non-cash charge of $11.1 million to establish a full valuation allowance against its December 31, 2004 net deferred tax asset.  The Company expects to record a full valuation allowance on future tax benefits until it can sustain an appropriate level of profitability and until such time, the Company would not expect to recognize any significant tax benefits in its future results of operations. During 2004, the Company’s income tax expense was $12.3 million ($13.0 million for continuing operations partially offset by a $0.7 million income tax benefit for discontinued operations) as a result of the Company’s full valuation allowance.

The provision for tax liabilities involves evaluations and judgments of uncertainties in the interpretation of complex tax regulations by various taxing authorities. In situations involving tax related uncertainties, the Company provides for tax liabilities when it determines it is probable and estimable that additional taxes may be due. As additional information becomes available, or these uncertainties are resolved with the taxing authorities, revisions to these liabilities may be required, resulting in additional provision for or benefit from income taxes in the consolidated statement of operations in the period such determination is made.

18

Valuation of Inventory

Inventory is valued at the lower of cost (estimated using the first-in, first-out method) or market. The Company periodically evaluates the carrying value of inventories and maintains a reserve for excess and obsolescence to adjust the carrying value as necessary to the lower of cost or market or to amounts on hand to meet expected demand in the near term. Specifically, service and slow-moving parts not being used in the manufacture of current model year motorhomes are reviewed by the Company to determine which can be used in production, which can be used for future service and warranty repairs of customer-owned motorhomes, and which can be returned to suppliers for full or partial credit. In addition, prior model year finished good motorhomes are evaluated by the Company and the value of those motorhomes is adjusted to an estimated market value based on a combination of the National Automobile Dealers Association Guide and the Company’s general industry knowledge. The inventory reserves are reviewed each fiscal quarter and revisions are made as necessary. Unfavorable changes in obsolete inventory estimates would result in an increase in the inventory reserve and a decrease in gross profit.

Workers’ Compensation Reserve

The Company’s workers’ compensation reserve is established based on its best estimate of the amounts necessary to settle future and existing employee workers’ compensation claims incurred as of the balance sheet date. The Company records a reserve estimate for future workers’ compensation related costs based on the Company’s historical workers’ compensation claims paid history using an actuarial incurred but not reported (IBNR) approach. Even though the Company’s workers’ compensation costs declined during 2004, the Company cannot provide assurance that these costs will continue at these levels, increase or decrease, in the near term. A significant change in California workers’ compensation legislation, the cost of claims or the frequency of claims could have a material adverse impact on the Company’s operating results for the period or periods in which such claims or additional costs materialize.

Allowance for Doubtful Accounts

The Company provides an allowance for doubtful accounts on its accounts receivable for estimated losses resulting from the inability of its dealers to make required payments. The current methodology takes into consideration the dealer financing arrangement, where payment on motorhomes is pre-approved prior to shipment with payment made directly from the dealer’s third party finance source to the Company within 15 business days from the date of shipment. This arrangement significantly reduces the risk of loss from the sale of motorhomes. Parts receivables represent a minimal portion of the total accounts receivable. The Company uses a specific reserve methodology and currently reserves 100% of invoices greater than 120 days old. Additionally, the Company reviews all other accounts for collectibility and those not considered collectible are reserved for as deemed appropriate. There is no expectation that this methodology will change in the near term; however, to the extent any of the assumptions should change in the future, the Company will reassess the methodology and make any necessary adjustments.

Restatement Due to Correction of Errors

The prior period financial statements presented in this Annual Report on Form 10-K have been restated for three correcting adjustments. These adjustments are discussed in more detail below. (See also Note 2 of Notes to Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data.”)

Correction of accounting for dealer sales incentives

The financial statements reflect the restatement of certain dealer sales incentives, which include rebates and floorplan interest reimbursement paid to dealers to promote the sale of the product and retail incentives paid directly to dealer retail salespersons to promote the sale of the product and the return of sale and warranty information. The 2003 and 2002 statements of operations have been restated to reclassify these sales incentives from selling expenses to a reduction of revenue, as required by Emerging Issues Task Force (“EITF”) Issue No. 01-09, “Accounting for Consideration Given by a Vendor to a Customer (including a Reseller) of the Vendor’s Products”. Net sales, gross profit and selling expenses were reduced by $1.7 million in 2003 and $2.5 million in 2002. This adjustment had no impact on net (loss) income as previously reported.

Correction of allowance for doubtful accounts methodology

During 2003, the Company changed its methodology for calculating its allowance for doubtful accounts from a method of providing an allowance for the estimated cost of one motorhome at each of its divisions to a specific reserve methodology that reserves 100% of invoices greater than 120 days past due and all other accounts not considered collectible. The total reduction to the reserve of $0.15 million resulting from this change in methodology was initially recorded in 2003 as a change in estimate, but should have been recorded as a correction of an error. Accounting Principles Board Opinion No. 20, Accounting Changes, states that a change from an accounting principle that is not generally accepted to one that is generally accepted is a correction of an error. The allowance for doubtful accounts methodology used by the Company

19

prior to 2003 is not a generally accepted method and as such, the Company now believes the 2002 financial statements should have been restated at the time the Company changed its methodology. General and administrative expenses were increased by $0.15 million in 2003 and decreased by the same amount in 2002 as a result of this restatement.

Correction of workers’ compensation reserve methodology

The 2002 financial statements have been restated to correct an error related to the workers’ compensation self-insurance reserve. During 2002, the Company changed its methodology for calculating workers’ compensation self-insurance reserves to an actuarial based method involving an incurred but not reported (IBNR) claims analysis from the specific reserve method previously recorded in 2001 and prior years. The total charge to increase the reserve of $4.2 million was initially recorded in 2002. The Company treated the charge as a revision of an estimate, but should have treated it as a correction of an error, and restated prior years. The restated 2002 cost of goods sold was reduced by $1.8 million and the loss from discontinued operations was reduced by $0.5 million to allocate these workers’ compensation costs to the appropriate years.

The above noted restatements did not result in a restatement of the consolidated balance sheet as of December 31, 2003.  The consolidated statements of operations and cash flows for the years ended December 31, 2003 and 2002 have been restated as follows (in thousands, except per share amounts):

20

Results of Operations

The following table sets forth for the periods indicated the percentage of net sales represented by certain items reflected in the Company’s Consolidated Statement of Operations, prior periods have been restated to reclassify revenues and expenses of the travel trailer business as a discontinued operation, as further discussed in Note 16 to the accompanying financial statements:

(1) The information in the table with respect to the fiscal years ended December 31, 2003 and December 31, 2002 reflects the restatement described in  “Restatement Due to Correction of Errors” on page 19 of Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and in Note 2 of Notes to Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data”.

Year Ended December 31, 2004 Compared to Year Ended December 31, 2003

Amounts in tables are in thousands, except percentages

The discussion below comparing the results for the fiscal years ended December 31, 2004 and 2003 reflects the restatement described in “Restatement Due to Correction of Errors” on page 19 of Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and in Note 2 of Notes to Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data”.

Net sales

21

Net sales of $436.8 million for the year ended December 31, 2004 represent an increase of $124.3 million, or 39.8%, from the same period last year. Annual wholesale unit shipments of diesel motorhomes were 1,380, up 33.3% from 1,035 units during the same period last year. Annual shipments of gas motorhomes were 1,588, up 14.9% from 1,382 units during the same period last year.

The increase in net sales is mainly attributable to strong sales of CCI’s Inspire and Magna product lines and NRV’s Tropi-Cal, as well as an overall increase in the demand for the Company’s Highline and other products. The Company also benefited from a healthy economy and an 11.6% increase in the industry-wide wholesale Class A motorhome sales in 2004.

Gross profit margin

The gross profit margin for 2004 was 7.1% (or a $31.0 million gross profit) compared to a 2.0% gross margin (or a $6.3 million gross profit) for the same period last year. The primary factors that led to the improved gross margins were higher production levels, reduced workers’ compensation costs, product price increases and reduced discounting, partially offset by production inefficiencies.

Selling expenses

Selling expenses increased $2.1 million, or 22.3%, for the year 2004 over the same period last year. Selling expenses for 2004 increased mainly due to increased sales commissions, marketing, and rally and show expenses resulting from higher sales. However, as a percentage of net sales, selling expenses decreased due to higher sales over which to spread the fixed selling expenses.

General and administrative expenses

General and administrative expenses totaling $13.6 million for 2004 were up $6.2 million, or 82.5%, compared to the same period last year. The increase in general and administrative expenses is due to increased expenses related to compliance with the Sarbanes-Oxley Act, higher audit fees, increased personnel expenses, and an employee bonus program. The cost for outside consultants and fees from the independent registered public accounting firm to comply with the Sarbanes-Oxley Act was approximately $1.8 million of the total increase in general and administrative expenses for 2004.

22

Other expense

Other expense for 2004 was primarily the loss on the sale of the real property in Florida totaling $0.3 million and the impairment of an emissions control system totaling $0.3 million.

Interest expense

Interest expense for 2004 totaling $0.3 million decreased over last year due to reduced average borrowings on the line-of-credit. As a percentage of net sales, interest expense for 2004 remained unchanged at 0.1% compared to 2003. Interest expense represents the interest and fees paid on the Company’s credit facility.

Other income

The individual components of other income during 2004 and 2003 are immaterial.

Provision (benefit) for income taxes

The overall effective tax rate for 2004 was 404.9%, compared to 37.1% for the same period last year. The 2004 effective tax rate gives effect to a charge to establish a full valuation allowance in the amount of $11.1 million against the Company’s net deferred tax asset as of the end of 2004. SFAS No. 109 requires that a valuation allowance be established when it is more likely than not that its recorded net deferred tax asset will not be realized.  In determining whether a valuation allowance is required, the Company must take into account all positive and negative evidence with regard to the utilization of a deferred tax asset. SFAS No. 109 further states that it is difficult to conclude that a valuation allowance is not needed when there is negative evidence such as cumulative losses in recent years. Recent cumulative losses, the downturn in current market conditions and its impact on near term earnings outweighed other factors including the long carryforward periods and led the Company to conclude that it was more likely than not that its recorded net deferred tax

23

assets will not be realized resulting in the full valuation allowance against the net deferred tax asset as of December 31, 2004. As a result, the Company has recorded a non-cash charge of $11.1 million to establish a full valuation allowance against its December 31, 2004 net deferred tax asset.  The Company expects to record a full valuation allowance on future tax benefits until it can sustain an appropriate level of profitability and until such time, the Company would not expect to recognize any significant tax benefits in its future results of operations. During 2004, the Company’s income tax expense was $13.0 million as a result of the Company’s full valuation allowance.

Net loss from discontinued operations

On September 24, 2004, the Company sold its Travel Trailer business assets to Weekend Warrior, a privately owned, California-based ramp-trailer manufacturer. The net loss from discontinued operations for 2004 totaled $1.1 million compared to a net loss of $1.4 million for the same period last year. The net loss from discontinued operations for the year ended December 31, 2004 included a pre-tax gain on the sale of $0.3 million.

Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

Amounts in tables are in thousands, except percentages

The discussion below comparing the results for the fiscal years ended December 31, 2003 and 2002 reflects the restatement described in “Restatement Due to a Correction of Errors” on page 19 of Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and in Note 2 of Notes to Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data”.

Net sales

Net sales of $312.5 million for the year ended December 31, 2003 represent an increase of $44.6 million, or 16.7%, from 2002. Annual wholesale unit shipments of diesel motorhomes were 1,035, up 6.3% from 974 units sold during 2002. Annual shipments of gas motorhomes were 1,382, up 46.2% from 945 units sold during 2002.

Gross profit (loss) margin

The primary factors, that led to a 2.0% gross profit margin (or a $6.3 million gross profit) for 2003 compared to a (0.7)% gross loss (or a $1.9 million gross loss) for 2002, were reduced warranty costs, reduced discounting, higher production and sales volumes, and reduced workers’ compensation costs. The Company improved the quality of its products resulting

24

in reduced warranty costs of approximately $4.4 million. The Company significantly reduced inventory levels during 2003, which allowed management to reduce the amounts of discounts given to its dealers.

Selling expenses

Selling expenses totaled  $9.5 million or 3.0% of net sales for 2003 compared to $10.9 million or 4.1% of net sales for 2002. Additionally for 2003, selling expenses, as a percentage of net sales decreased in 2003 to 3.0% from 4.1% in 2002. Sales costs decreased due to concerted efforts by management to reduce advertising, giveaways and sales commissions.

General and administrative expenses

General and administrative expenses totaling $7.5 million during 2003 declined by 0.5% compared to $7.4 million during 2002. As a percentage of net sales, general and administrative expenses decreased in 2003 to 2.4% from 2.8% in 2002 as a result of improved sales during 2003. In addition, 2002 reflected the $0.6 million impact of an employment related legal settlement reached in that year, which settlement was the primary reason for the reduction in general and administrative expenses from 2002 to 2003.

Impairment of goodwill

The Company recognized the complete impairment of goodwill during the year 2002.

As of December 31, 2001, the Company had a net goodwill balance of $6.1 million related to the 1996 acquisition of its subsidiary CCI. The Company adopted SFAS 142 effective January 1, 2002. In connection with this adoption, the Company completed its transitional goodwill impairment test that resulted in no goodwill impairment as of January 1, 2002. However, as of September 30, 2002, certain factors and events pertaining to the Company, triggered the need for the Company to perform another goodwill impairment test. These factors and events included a relatively sudden decline in the Company’s retail demand, a severe drop in the profitability of the Company’s products, and a severe drop in the Company’s stock price resulting from a third quarter pre-announcement of the Company’s expectation of a significant third quarter loss. The critical factors the Company considered in its September 30, 2002 goodwill impairment testing were the severe drop in the Company’s three-week average stock price following the announcement of the Company’s expected third quarter loss and the significant decline in the fair value of CCI based on poor third quarter results and a resulting drop in expected future CCI operating results and thus a significant decline in the fair value of CCI. Based on these factors, combined with management’s belief that there was significant value in unrecognized intangible assets, management concluded that the implied fair value of the goodwill was zero. Accordingly, an impairment loss was recognized for the amount of the goodwill during the quarter ended September 30, 2002.

25

Interest expense

Interest expense for 2003 totaling $0.4 million was flat compared to 2002. As a percentage of net sales, interest expense for 2003 remained unchanged at 0.1% compared to 2002. Interest expense represents the interest and fees paid on the Company’s credit facility.

Other income

Other income in 2003 is mainly comprised of interest income earned on cash in the Company’s general bank account. As a percentage of net sales the amount is not material. Other income during 2002 is primarily the result of the sale of the Company’s airplane.

Benefit for income taxes

The benefits for income taxes for the years ended 2003 and 2002 were $4.1 million and $7.7 million, respectively. The benefits for income taxes on a percentage of sales basis for the years ended 2003 and 2002 were (1.3)% and (2.9)% respectively. The effective tax rate for 2003 was 37.1%, while the effective tax rate for 2002, excluding the impairment of goodwill was 38.3%. The federal rate used to adjust the deferred taxes decreased by 1% in 2003 compared to 2002.

Net loss from discontinued operations

The net loss from discontinued operations for 2003 totaled $1.4 million compared to a net loss of $1.4 million for 2002. The loss represents the loss from the towables operations during 2003 and 2002.

26

Liquidity and Capital Resources

The Company has incurred net losses of $9.3 million, $8.4 million and $19.9 million for the years ended December 31, 2004, 2003 and 2002, respectively.  The Company has used cash from operating activities of $15.8 million and $4.8 million for the years ended December 31, 2004 and 2002, respectively, and provided cash from operating activities of $8.1 million for the year ended December 31, 2003.  The RV industry has been historically cyclical and subject to downturns during periods of weak economic conditions.  With rising fuel prices and continued economic uncertainty, the Company experienced a further decline in demand for products in 2005.  These conditions lead the Company to assess its short-term liquidity needs and plans to achieve profitability.

During 2004, the Company financed its operations primarily through its existing working capital and its line-of-credit with UPS Capital Corporation (UPSC). On December 31, 2004, the Company had working capital of $49.1 million compared to $49.7 million at December 31, 2003. Cash and cash equivalents was $0.01 million at December 31, 2004. This decrease of $0.6 million was primarily due to line of credit borrowings of $12.7 million, a $6.7 million reduction in current deferred income taxes, a $2.5 million increase in accounts payable, a $2.0 million decrease in cash, and a $1.5 million increase in current accrued expenses, mostly offset by a $23.2 million increase in inventory and a $2.2 million increase in note receivable. During 2004, the Company used cash in its operations of $15.8 million which was due primarily to a $27.3 million increase in inventories ($2.8 million of which was sold to Weekend Warrior as part of the Travel Trailer business sales) and a $9.3 million net loss, partially offset by an $11.8 million deferred income tax provision, which is primarily due to the Company recording an $11.1 million valuation allowance against deferred tax assets, $3.8 million in depreciation, a $2.5 million increase in accounts payable, and a $1.3 million inventory write-down.  For the year ended December 31, 2004, net cash used in investing activities was $0.4 million, which reflects $4.9 million of capital expenditures, with the single largest expenditure being the purchase of the Florida service center totaling $0.8 million. These expenditures were mostly offset by the proceeds from the sale of assets totaling $3.6 million, with the largest single sale of assets being the sale of the Florida property totaling $1.9 million, by the proceeds from the sale of discontinued operations totaling $0.5 million, and by the note receivable repayments of $0.5 million. Net cash provided by financing activities was $14.2 million, mainly due to the advances on the line of credit totaling $12.7 million, an increase in book overdraft of $0.8 million and $0.7 million in proceeds from issuance of common stock through the exercise of stock options.

At December 31, 2004, the Company had an asset-based revolving credit facility of $15 million with UPSC which was scheduled to expire in August 2005.  At December 31, 2004, the Company had outstanding loans under the line-of-credit totaling $12.7 million and the Company was not in default with any covenants as of this date.  On August 12, 2005, the original facility was replaced by a new three-year asset-based revolving credit facility with UPSC and Wells Fargo Bank for $25 million, with the Company having the option, subject to certain conditions, of increasing the revolver in $5 million increments up to a total credit facility of $40 million.   On September 29, 2005, the Company effected such an increase in the amount of the credit facility from $25 million to $30 million.  The new credit facility is collateralized by all of the Company’s assets other than real estate.  Borrowing availability is based on eligible accounts receivable and inventory.  The facility also includes a requirement to maintain a blocked account arrangement, whereby remittances from the Company’s customers reduce the debt outstanding.  The new credit facility contains, among other provisions, certain financial covenants, including funded debt to EBITDA, and a fixed charge coverage ratio. If these financial covenants are not met, the Company’s availability under the credit facility will be reduced.  The Company did not meet these financial covenants as of August 31, 2005 and currently does not expect to meet them until September 30, 2006.  Until these covenants are met, the Company’s borrowing availability under its $40 million facility will be limited to an amount between $27 to $32 million, depending on eligible inventory and accounts receivable.  Initial amounts borrowed under the revolving credit facility bear interest at the prime rate listed in the Wall Street Journal plus 0.50 percentage points and may be subsequently adjusted down based on a trailing twelve month funded debt to EBITDA calculation.  At December 31, 2004 the interest rate on the outstanding borrowings under the line-of-credit was 6.00%. The weighted average interest rate for the borrowings under the line-of-credit during the year ended December 31, 2004 was 5.49%. The weighted average interest rate for the borrowings on the line-of-credit during the year ended December 31, 2003 was 4.96%.

Management’s plan to achieve operational profitability includes continuing or starting a variety of initiatives to improve its earnings and working capital position, including: i) new product introductions in the fourth quarter of 2005 with additional new product and floor plan introductions in the first half of 2006, ii) new dealer additions to fill open market areas or replace under-performing dealers, iii) reductions in all categories of inventory, iv) head count re-balancings to current retail sales-supported production levels, v) engineering reviews of material components for the removal of non-value added items to reduce both material and assembly costs, vi) continued thorough motorhome inspections to improve quality and to more timely report failures, and vii) manufacturing cost reductions resulting from the continued implementation of lean manufacturing concepts.

27

In order to fund on-going operations through at least December 31, 2005, the Company remains dependent upon its ability to utilize outside financing through borrowings on its line-of-credit until it achieves sustained operational profitability through a combination of increased sales, cost reductions and improved product margins.  After consideration of the restrictions of the borrowing capacity noted above, the Company believes it has sufficient financial resources to fund its operations through at least December 31, 2005.  However, the Company’s ability to meet its obligations beyond 2005 is dependent on its ability to generate positive cash flows from operations and is dependent on continued borrowings under its line of credit.  If management is unable to achieve its operational profitability plan or unforeseen events occur and its existing line of credit is insufficient to allow the Company to meet its obligations, the Company may need to implement alternative plans that could include long-term financing collateralized by real estate (which is presently unencumbered) or obtaining additional debt financing, additional reductions in operating costs, deferral of capital expenditures, and further reductions in working capital.  While the Company believes that it could successfully complete the alternative plans, if necessary, there can be no assurance that such alternatives would be available on acceptable terms and conditions or that the Company would be successful in its implementation of such plans.

The following is a schedule at December 31, 2004 of the Company’s known contractual obligations: